For many years, cars have been as much to do with the microprocessor as the internal combustion engine. Today, even in a mid-range car there is at least as much investment in the electronics underneath the bonnet as in the mechanics.

But the innovations of the past few years are as nothing compared with what is to come. We are entering the age of the wired vehicle, in which a new generation of (auto-)mobile services transforms the automobile into what the computer industry would call a "mobile thin client".

Telematics, an umbrella term for vehicle- and transport-related IT that is underpinned by technologies such as mobile telecommunications, satellite positioning systems and high performance computers, is being deployed or planned by carmakers worldwide in an attempt to lift automotive pleasures to new heights.

According to UBS Warburg, the securities house, the world market for automotive telematics is set to grow to $47.2bn a year by 2010, from $4.2bn last year. "Telematics is set to explode," says Xavier Gunner, analyst on the global autos team. "We see telematics emerging as a critical customer relationship management tool for the [automotive] OEM."

For Europe, a report last month by Germany's Commerzbank Securites predicts the telematics market could be worth E4.5bn by 2005, compared with an estimated E550m this year, implying a compound annual growth rate (CAGR) of 68 per cent for 2001-2005.

Commerzbank splits the market between business-to-business (B2B) services for commercial fleet providers and logistics companies, and the mass market business-to-consumer (B2C) side, where it predicts dynamic growth and a market of E2.5bn by 2005.

"Telematics services make it possible for the consumer - while driving in his car - to access a new generation of services, including, for example, e-mail, entertainment, security services, and more. Telematics can make driving more productive, comfortable, and safer," say Markus Bar and Thomas Effler, authors of the Commerzbank report.

To date, the use of IT in cars has mostly involved embedded devices, from computer controlled fuel injection to anti-lock brake systems. They have undoubtedly contributed to the increased performance, safety and environmental economy of cars. New embedded systems will include anti-collision control, active noise reduction and electronic clutches.

Automotive operating systems

But the next generation of devices will appear above the dashboard. The ultimate goal is the development and adoption of an automotive operating system, a bundle of standards and software that will enable drivers to plug and play new gizmos to their hearts' content, and give car manufacturers and their partners several years worth of applications to keep the industry moving forward.

The big question for the automotive industry, however, is what will the customer be prepared to pay for? "Significant growth in the market should create valuable opportunities for all the companies in the telematics value chain," says Tif Awan, automotive analyst at Frost & Sullivan, the market research group.

"However, there are also numerous challenges for players, principally in unlocking the value of telematics for end users in terms of desirable applications and services. For example, the safety and security applications favoured by US consumers do not appear to have gone down well in Europe where the navigation applications seem to have a higher value proposition," says Mr Awan.

Already, several million navigation systems are sold every year. Basic facilities provide warning beeps via a mobile phone if there is traffic congestion ahead. More advanced services, just coming online, combine GPS, voice-enabled interfaces and dashboard displays to steer the driver to his or her destination every step of the way. "Until now the only way to receive turn-by-turn driving instructions was to spend thousands of pounds on in-vehicle satellite navigation systems," says Vincent Geake, chief technology officer with Yeoman, Uk-based navigation specialists.

"We have developed a technology that can deliver valuable navigation services to location-enabled mobile phones or to a vehicle whose position can be tracked by a central server." Consumers will be able to buy the product by the turn of the year.

It is not only inside the car that investment will be needed to turn the telmatics vision into reality. "Outside the car, much more investment in infrastructure will need to be made to stimulate further growth in this market and enable the delivery of services to in-car multimedia terminals," says Mike Williams of Gartner, the IT analysts.

"There is too much uncertainty to predict which type of solution will dominate, but one thing is certain: competition will be tough and the sure winner will be the consumer, as well as semiconductor makers."

Navigation systems and other devices exploiting interactive and near-broadband wireless technology are but one step to the real goal, however: the automotive operating system. It is here that competition is at its fiercest as automotive manufacturers select their favourite technology partners and the major software vendors, notably Microsoft, angle for their own solutions to become the de facto standard.

The wired vehicle - applications and technologies
Security	Vehicle functions	Navigation & traffic	Information and m-commerce	Entertainment
Automatic emergency call	Remote diagnostics	Dynamic navigation	News	On-demand content
Assistance	Software update	Traffic information	Weather	- Audio
Concierge service	Maintenance	Location-based services	Stock exchange	- Video
Access control	Brake-by-GPS	H	Mobile internet	- Games
Burglar alarm	Headlights-by-GPS	H	Mobile office (e-mail, voicemail)	H
H	Suspension-by-GPS	H	H	H

Telephone, positioning, handsfree kit, in-car networking, Bluetooth, voice recognition, text-to-speech, mobile computing, multimedia storage, MP3 player

For example, Ford Motor established ConsumerConnect Europe (CCE) in June last year to promote a range of online initiatives in Europe. On the telematics front CCE's current ventures are focused on Wingcast, a platform through which a range of devices, including safety and security, information and entertainment systems, can be knitted together.

Vodafone, the UK-based mobile phone operator, is providing an extra piece in the shape of voice activation technology. In the UK, for example, Wingcast comes as an optional extra on the Ford Focus, a family saloon, for about £500.

"Wingcast is Ford's vehicle for redefining the future of mobile communications," says Jac Nasser, Ford president and chief executive. "We are not only transforming the automobile into the next mobile portal, but also are creating a new company that will develop and deliver a collection of leading-edge technologies and services."

Telematics revolution

The idea is both that Ford cars will be able to communicate seamlessly with mobile devices, and that Ford will be able to sell on its technology to other automotive brands.

It does not have the field to itself, however. General Motors has a similar initiative called OnStar. Chet Huber, OnStar president, reports that in April it crossed the threshold of more than 1m subscribers. It is now available on 32 of GM's 54 vehicle models sold in the US and Canada, with plans for partners to sell similar services in Europe later this year.

GM is pumping R&D money into ongoing development at all levels. For example, a recent link up with Carnegie Mellon University's graduate program in computer engineering is seeking to solve interference problems between different mobile radio bands. "These problems are likely to increase as more devices, and more diverse systems continue to proliferate in these bands," explains Prof Jon Peha at Carnegie Mellon.

The ramifications of automotive telematics investment spin off into other parts of the high technology industry, too. For example, Philips Semiconductors is on the verge of launching the "Hello IC" chip, a low-cost, high-performance processor designed for speech recognition technology in cars.

And UK-based ARM is working closely with Intel to develop the XScale wireless internet microprocessor. Working in turn with Bosch, this is linked to an advanced electronic braking systems that transmits data from each road wheel to allow a central unit to calculate optimum braking forces.

Despite the growth predictions for telematics, however, enthusiasm is not universal. "Fuel cell technology is going to make more of an impact on the travelling experience than having the dashboard look like Windows 2000," says Ian Lynch, director of research at Butler Group. It would take only a few accidents for governments to introduce legislation restricting the use of in-car entertainment systems, he says.

And many of the office utilities being suggested can only actually be used in a car park, he notes. "So while the automotive industry is certainly pushing it, the real demand for non-embedded devices will be set by the consumer and how much extra they are prepared to pay for what are really only marginal improvements."

Whatever the future holds, the promised developments in automotive telematics raise some intriguing philosophical questions: a navigation system for Dad, a mobile for Mum, and DVD for the kids might be an attractive package of extras for many, but is not the point of the car that it takes us to the cinema or office, not that it is the cinema or office?

Can the car really be thought of as a road-top computer? Maybe it is heading that way fast.

Additional reporting by Andrew Baxter