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GM’s 4G connection to boost consumer features, revenue

Melissa Burden and Henry Payne
The Detroit News

Later this year, some Chevrolets will be able to alert drivers if the battery is going to fail. Drivers of some General Motors Co. vehicles will be able to get insurance discounts if they allow driving habits to be monitored. And the automaker may soon start pushing over-the-air software updates, saving customers time and money.

All are possible with GM’s 4G LTE pipeline, an embedded high-speed Internet connection already on the road in half a million cars.

The carmaker says OnStar 4G LTE connections could be worth $350 million in profits by 2018, with the Internet connection creating business opportunities. It enables future possibilities such as car sharing and autonomous driving.

GM President Dan Ammann said hotel reservations already are being made for drivers through GM’s OnStar safety, security and connectivity subsidiary. The company also is working with Progressive Insurance to collect data on driving habits — if approved by customers — to lower insurance costs. That feature is expected to launch next month.

“Those things are just sort of scratching the surface of what we can do with that 4G capability. People like the fact they have a Wi-Fi hotspot in the car,” he told The Detroit News in in a recent interview. “But that’s really just a starting point of what’s possible — over-the-air software re-flashes and updates, monitoring your car’s health over the air.”

GM is rolling out OnStar and 4G LTE in Europe this summer, with China slated to get 4G LTE later in the year. Ammann said GM will grow 4G into other markets such as South America.

Last summer, GM began offering 4G LTE. It gave customers a three-month trial when they bought or leased new vehicles. Monthly data plans begin at $5 for OnStar subscribers. The automaker has more than 30 vehicles in the U.S. that offer 4G.

GM said 99 percent of customers are opting to have the Internet connection turned on in their vehicles. In early results, more than 20 percent of owners of large SUVs are buying subscriptions; truck owners are renewing at rates in the low-to-mid teens. For vehicles typically used by one person, renewal rates are lower, which John McFarland, director of brand and consumer insights for GM Global Connected Customer Experience, said GM expected. Family sedan renewal rates also are close to that of trucks, GM said.

The Chevrolet Suburban so far tops the list of most data use per subscriber, followed by the Cadillac Escalade, GMC Yukon, Chevrolet Malibu and Chevrolet Impala.

“The biggest take rates by far are with the big SUVs, so you see really big with, Tahoe, Escalade, Yukon and Suburban,” McFarland said. “You also see our truck owners are using it a lot as well.”

Egil Juliussen, director of research and principal analyst for IHS Automotive technology group, estimates GM will have 130,000 4G LTE subscribers in the U.S. by the end of the year and 1.9 million by the end of 2018. He estimates U.S. data subscriptions alone could be worth $394 million in revenue to GM by 2018.

New GM vehicles come with a free five-year OnStar Basic Plan that includes vehicle diagnostic email and dealer maintenance notifications. RemoteLink key fob services allow drivers to lock or unlock doors. Cars can be started remotely start from a smartphone app.

GM one day could update vehicle systems through the over-the-air connection, something that Tesla Motors Inc. does today. OnStar has used over-the-air software updates in the past for OnStar hardware and service.

“It’s something that we’re still working on,” McFarland said. “When we do them, we want to make sure they’re meaningful and we do them right.”

GM is likely to reap cost savings from over-the-air updates, some $100 to $150 per vehicle over its lifetime, Juliussen said. Customers could choose to pay for functional updates, perhaps at $20 to $30, for software that could boost gas mileage, he said.

Researcher Gartner Inc. predicts that by 2020, 250 million connected vehicles will be on the road. GM says three-quarters of its vehicles globally will have connectivity by 2020.

GM will debut proactive alerts later this year on certain 2016 Chevrolets; the alerts can tell when something is going to fail before it happens. For example, it will send a text message that a battery is going to die within 10 starts, or that a starter will fail within a month. It also can predict fuel pump problems. The alerts, part of the OnStar basic plan, should make maintenance easier for customers, McFarland said.

OnStar also has launched AtYourService, connecting drivers with information and deals at businesses along their routes. It has partners such as Dunkin’ Donuts and

Earlier this year, OnStar, which has more than 7 million subscribers in the U.S., Canada and Mexico, rolled out three new paid subscription plans.

Itay Michaeli, a Citi Research analyst, has pegged OnStar’s value at $7 billion to $9 billion. Juliussen estimates OnStar had revenue of $2.2 billion last year in North America, a figure he projects will grow to $2.8 billion by 2018.

OnStar plans

Protection: $19.99 monthly/$199.90 annually. Automatic crash response, roadside assistance, adviser services.

Security: $24.99 monthly/$249.90 annually. Includes above, plus stolen vehicle assistance, theft alarm notification.

Guidance: $34.99 monthly/$349.90 annually. Includes services above plus navigation, OnStar at YourService and 30 hands-free calling minutes.

Source: General Motors Co.