New Toyota Telematics System to Battle GMs OnStar?

The Opportunity to Develop a More Constant Revenue Stream than New Vehicle Sales Too Tempting to Pass Up?

OnStar has been a runaway success for General Motors, while other automakers, such as Mercedes-Benz have developed their own proprietary telematics systems. Toyota Motor Corp., on track to take over top spot in the global automotive feeding chain within the decade, wants to improve its satellite-based communications system to take on the best in the business, and in the process take care of its customers.

The Japanese automaker unveiled its new G-Book Alpha service, a system that will go far to enhance safety applications while also delivering real-time information on road conditions, traffic, weather, and restaurants. The new system will also allow occupants to download audio, video and games.

"When you look at services in the West, they have features that automatically inform emergency authorities of the cars location in case of an accident," commented Akio Toyoda, senior managing director overseeing the telematics division, speaking to a media scrum assembled for a news conference. "There are more possibilities for telematics other than utility and entertainment." The similarities in Mr. Toyodas name and the company he works for are not coincidental, by the way, as Akio is son of Toyota Honorary Chairman and founder Shoichiro Toyoda, and is also deemed a future president.

G-Book Alpha, in conjunction with Toyotas navigation system, lets occupants speak to a live operator by touching the LCD monitor, whether the need is emergency related or merely a request for directions to the nearest shopping mall.

The system can be optimized to automatically contact occupants of a vehicle if an airbag is deployed, via a 24-hour operation

center. If no-one responds, an ambulance would be dispatched to the accident site.

This might not seem like anything particularly new, at least for those who already enjoy the same security through OnStar. Like the GM-developed system, G-Book Alpha can unlock a door when the keys are locked inside a vehicle, or assist authorities in finding a stolen vehicle.

GM has been promoting OnStar with an effective series of multimedia ads, the first series featuring actual conversations between users and the systems call centre and the most recent targeting guilt-ridden parents, who would never think of putting their kids in a car without the safety feature; or so the ad assumes.

GM plans on making OnStar standard across its entire lineup by 2007, a cost it will easily be able to recoup from selling the monthly charge necessary to take advantages of all the services.

New vehicle buyers of cars featuring OnStar get free service for a predetermined period of time, so that they can test it out and hopefully, for GM, realize that life is not as good without it. The OnStar service is a more constant revenue stream than new car sales, and therefore critical to an automakers bottom line.

Such are reasons enough for Toyota to get into the game, and it will start by fitting its G-Book Alpha system into a variety of new or significantly updated models this month in its Japanese home market. While Toyota didnt say if the new service would be sold outside of Japan, it only makes sense that it eventually will.

When a reporter asked Toyoda if the new telematics system would become a standard feature across the automakers lineup of vehicles, he responded, "If Im allowed to dream, then yes, I would like for that to happen one day. But Im not sure it will."

At the very least Toyoda would like to see the G-Book Alpha system do better than the automakers first telematics system, which has only managed to find 80,000 subscribers since it became available in October of 2002. Considering Toyota sold 1.76 million new vehicles in Japan last year alone, this is a small number.

While Toyota might sell more cars than Japans number two automaker Nissan Motor Co. or third-ranked Honda Motor Co., its rivals sell more telematics systems. Nissan has pulled in over 100,000 Carwings users while Honda has more than doubled this with 216,000 InterNavi subscribers.

While the Nissan and Honda services are cost their respective subscribers nothing, Toyota charges an annual fee of 12,000 yen ($112) after the first year of "Helpnet" emergency service ends.

GM charges its 2-million plus OnStar user base too, a total of $200 per year after the initial year of free service runs out. The automaker is targeting another million users by 2006, which would increase its yearly OnStar revenues from about $400,000,000 to $600,000,000; nothing to sneeze at.

GM has increased the use of OnStar by offering it to competitive brands, reducing its proprietary advantage, which can help to sell new GM vehicles, but increasing its user base which grows OnStar revenues.

Toyota is starting to do the same with G-Book in Japan, repackaging the system for the Daihatsu Motor Co., Subaru-builder Fuji Heavy Industries Ltd., Mitsubishi Motors Corp. and Mazda Motor Corp. Incidentally, Suzuki Motor Corp. uses Nissans Carwings.

Interestingly, Toyotas Lexus luxury division previously licensed GMs OnStar system, rebranded as Lexus Link, for use in 2001 model year LS 430s. At a cost of $1,215 for the factory-installed option, there were few takers.

Lexus Group vice president and general manager Denney Clements gave GMs OnStar system two thumbs up when the cooperative relationship was announced on September 5, 2000, saying, "Lexus customers deserve and expect to have the latest safety and convenience features incorporated into the LS 430. By working with OnStar, Lexus is showing that we will use the best technology and capability available from around the globe to satisfy our customers needs."

The basic service package cost owners $215 annually back in 2001, and included theft notification and roadside assistance. Those wanting the Lexus Link premium package needed to buck up $413 per year, but it added concierge services and directions. It should also be noted that GM put together a similar deal with Honda, offering an OnStar branded system in the 2002 Acura RL Sedan.

Lexus Link, despite high hopes, has been dropped, opening up an opportunity for a North American-specification version of G-Book Alpha to take its place. Just when that will happen is not known, but Toyota is expected to eventually offer its telematics system to the worlds most lucrative market and in so doing, go up against its old strategic partner, OnStar.