Someone needs to take the microphone away from Google (Nasdaq: GOOG).#-ad_banner-#

The company has been courting the press with its autonomous (aka driverless) car of the future, even though such a vehicle may never find mainstream demand from consumers. You would think that only Google has an eye on the road ahead.

Yet behind the scenes, a handful of other companies are developing leading-edge technologies that surely will be in your car in the years to come. And far-sighted investors still have a chance to build positions in these firms before these technologies hit showrooms.

From Outside To Inside
In recent years, consumers have seen a series of profound enhancements in terms of vehicle control. Sensors and cameras can help a car stay in its lane, signal when an adjacent car is in a blind spot, maintain a fixed distance from cars ahead through adaptive cruise control, and even place a car perfectly in a parking space. Look for the number of fatalities on U.S. roads to drop as more cars adopt these technologies.

Yet it’s the car’s interior that represents the next frontier of technology. And it all comes from a niche known as telematics, which is the merging of telecommunications and informatics in cars. At the recent Consumer Telematics Show 2014, several companies unveiled products and technologies that will likely end up in showrooms in just a few years.

A key theme as this trade show was an industry push to deliver high-speed wireless Internet connections to cars and trucks. This obviously opens up the door to streaming video and audio into the car, while making vehicles into productivity hubs for road warriors (who have presumably pulled into a parking lot to get their work done).

	YouTube/DelphiInnovation
	Delphi’s DelphiConnect app can provide real-time vehicle diagnostics, location sensing (for worried parents), act as a key to start your car, and other features.

While companies such as Google, Apple (Nasdaq: AAPL) and others jockey over which operating system (OS) will host the telematics platforms, Gartner analyst Thilo Koslowski frames the opportunity differently.

As Koslowski recently told TelematicsUpdate.com: “It’s not going to be on the feature side, it’s not going to be on the app side, I don’t think it’s even going to be on the OS side. It’s going to be about how you really create a different experience for your customers.” 

Automakers have thus far approached in-car technology in an ad hoc fashion, delivering navigation systems or music-streaming integration as widgets on the dashboard. In the future, telematics will:

• Notify a restaurant you’re running late.
• Allow your kids to Skype with their friends while cruising down the highway.
• Alert you to an engine component that is wearing out or may soon fail.
• Locate the cheapest gas station in your vicinity. 

Gartner’s Koslowski thinks consumers will be thrilled: “I actually believe that in 10 to 15 years, automobiles will become the coolest mobile device — cooler than smartphones and even tablets — because cars have so much more computing power, they have so much more real estate for displays and sensors, you know exactly where people are because they are sitting in their seat and really can’t get up while they are driving, so they are a captive audience. I believe that the car industry has a huge opportunity to be at the top of all mobile devices.” 

Perhaps the single best use of built-in high-speed Internet connections: Cars will soon talk to one another and to the road, creating reams of information to help smooth out traffic flows. The National Highway Traffic Safety Administration has been working with industry to boost vehicle-to-vehicle communications, and regulations are coming into place. 

David Leiker, who covers auto parts suppliers for Baird & Co., predicts that advanced telematics systems will be in every car sold in a decade, with the premium automakers rolling out systems much sooner than that. In the context of this theme, he rates several auto suppliers with an “overweight” rating: Delphi Automotive (Nasdaq: DLPH), Gentex (Nasdaq: GNTX), Harman International (NYSE: HAR) and Johnson Controls (NYSE: JCI).

Delphi, which is a leading provider of automotive electronics and safety systems, appears to be leveraging its technology to go straight to the consumer. Its DelphiConnect app can provide real-time vehicle diagnostics, location sensing (for worried parents), act as a key to start your car, and many other features. The push to move provide more advanced technology (to both automakers and consumers) is helping to expand profit margins. As a result, profits are expected to rise at a low-teens clip in 2014 and 2015, and the expanded use of telematics should help sustain that level of profit growth. 

Harman is mostly known as a provider of high-end car stereos, both as an original equipment manufacturer (OEM) to automakers, and under its own brands such as JBL, Mark Levinson and Harman/Kardon. At the recent consumer telematics show, the company revealed plans to go beyond audio and deliver a unit that can also serve as a sort of app manager for third-party apps. “Our next-generation infotainment platform will be the first to introduce an automotive-grade app environment in infotainment,” Harman’s Sachin Kawande told Just-Auto.com.

Harman recently reported fiscal second-quarter results and boosted its full-year forecast, anticipating 19% annual sales growth in fiscal (June) 2014. “Demand for a connected car is becoming more of a mainstream. And as a result, we have experienced higher take rates of our infotainment and car audio systems,” noted CEO Dinesh Paliwal. 

Risks to Consider: These auto parts suppliers are heavily dependent on U.S. auto sales, which have been steadily rising in recent years. Any pullback in auto sales would lead investors to grow cautious about this deeply cyclical industry.

Action to Take –> In a bid to differentiate their products, automakers are increasingly focusing on the consumer experience, with plans to boost the average sales price through higher technology content. That should provide a solid tailwind to auto parts suppliers, especially those that are focused on electronics components such as telematics systems.

P.S. If the potential of telematics has you excited, wait until you see what StreetAuthority’s Andy Obermueller has been working on. Andy has identified five “game-changing” trends with the potential to revolutionize the way we live our lives — and make early investors a killing. Among other things, these technological developments: robots that perform surgery with microscopic precision… machines that can “replicate” objects seemingly out of thin air… and a pair of technologies that will change the face of transportation forever. To learn more about these developing technologies — and the companies behind them — follow this link.