Microsoft and Toyota Team Up To Develop 'Smart Cars'

Microsoft (News - Alert) Corp., the world's biggest software company, and Toyota Motor Corp., the world’s largest automaker, announced on April 6 that together they will invest about $12 million (1 billion yen) to develop and deploy telematic services, such as turn-by-turn navigation, for customers in 170 countries by 2015.

Toyota and Microsoft have worked together for about a decade, but this initiative is the most high-profile to date. Through the agreement, Toyota Media Service Co.—the Toyota subsidiary that provides digital information systems to Toyota automotive—will develop apps and data services based on Microsoft’s Azure “cloud computing” platform. Toyota will then be able to offer Internet-delivered services to customers in all the markets in which it sells, rather than having to set up networks and data centers in each country.

Toyota wants to use the technology to give customers navigational and diagnostic services, much like General Motors' (News - Alert) OnStar service. Toyota also envisions scenarios in which drivers would be able to turn on heaters or air conditioning at their homes with voice commands from their cars. "We'll boost the value of today's vehicles by making them information terminals," Toyota president Akio Toyoda said at a press conference at Microsoft’s headquarters near Seattle.

If work on the new initiative goes as scheduled, Toyota could provide energy management technology for its electric and plug-in hybrid vehicles as early as 2012. Using it, drivers will be able to choose to charge those cars when energy consumption is lowest and prices are cheapest. "We must find a planet-friendly way of using energy," Toyoda said.  A more advanced platform that will offer a wider variety of applications globally is slated to be rolled out by 2015.

The new technology will be tested as part of the Toyota Smart Center pilot program, currently running in Japan. The trial gives consumers detailed information about energy consumption in their cars and homes so they can manage usage more efficiently. Toyota has said it believes such smart-grid systems can help reduce carbon dioxide emissions by 75 percent.

For Microsoft, the deal offers three major advantages:

•  First, it provides Microsoft with a marquee customer for its Azure technology.
•  Second, it moves the company further into the automotive business. The software giant has already partnered with Ford for its Sync in-car connectivity system, which enables drivers to access their phone and music device with voice commands.
•  And third, it helps Microsoft expand its drive into smart-grid technology. Earlier this week, Microsoft's Chief Environmental Strategist Rob Bernard stated that the company is increasing focus on electric-vehicle charging.

Why focus on electric cars for this new venture, when that’s such a small market at this point? That was Toyota's decision, as it sees the need for new tools to manage charging. Ballmer also said that's the place where they can do something new. "You have to shoot ahead of what the customer is interested in today," he said. "There are all kinds of ways to redo yesterday's vehicles and IT technologies, but yet if you think of tomorrow and the next day's number-one challenge that is unique to the mobile environments, it certainly has to do with the use of power and electricity in the next generation of vehicle."

General Motors is coming out with its own electric car, the Volt, this year, and it has smartphone apps that it says will offer some of the features Toyota and Ballmer described, such as managing charging and remotely turning on the heat or air conditioning. BMW also said it's creating a $100 million venture fund to invest in mobile apps, tying that effort to the company's new BMWi brand under which it plans to build electric cars.