Microsoft teams with Toyota to power smart cars

NEW YORK (CNNMoney) -- Microsoft and Toyota on Wednesday announced a $12 million partnership through which the companies will create an advanced digital information and communication system for the Japanese automaker's cars.

The joint-venture will deploy "telematics" in Toyota (TM) vehicles. That's the catch-all term for car communication technology, including GPS, multimedia, and telecommunications services.

Telematics is a crowded space, and most competitors offer similar services and options. The best-known telematics service is OnStar, a General Motors (GM) subsidiary, which allows customers to make calls, remotely unlock their vehicles and receive turn-by-turn navigation.

The system that Toyota and Microsoft plan to deploy will be unique in at least one respect: For electric and plug-in hybrid electric cars, the partnership's telematics will provide energy management services, in which plug-in cars "talk" to one another. The cars will also be able to communicate with the electric grid and arrange to charge themselves in the most environmentally friendly and cost-efficient manner.

As plug-in electric cars grow in number, the demands on the electric grid are going to be substantial. If everyone decides to plug in their cars when they get home from work, that could easily overwhelm a city or town's system.

Microsoft (MSFT, Fortune 500) has been working on embedded connectivity technology that will allow plug-in vehicles to communicate with one another and the grid itself to find the best time for each car to charge. If cars learn their owners' typical driving patterns, they might be able to, for instance, make arrangements like: "My owner typically picks her daughter up from soccer practice on Thursday afternoons at 6:30, so I need to have charging priority after I get plugged in at 5:00."

Toyota said that it is launching a "smart center" pilot program in Japan. The program will link people, cars and homes to achieve this kind of integrated energy consumption control.

"This new partnership between Microsoft and Toyota is an important step in developing greater future mobility and energy management for consumers around the world," said Akio Toyoda, Toyota's president, in a prepared statement.

Toyota already has a telematics unit called Toyota Media Service, which is available mainly for Lexus customers. After Toyota's new partnership with Microsoft takes hold, those services will be transferred to Microsoft's cloud-based Azure platform, and by 2015, the companies plan to provide "affordable and advanced" telematics services to most Toyota customers.

Toyota and Microsoft plan to let users monitor their electric vehicles using smartphones. Customers will be able to see how much battery life and driving range the car has left, and get information about the location of the nearest charging stations. They will also be able to control the car's battery charger and other components like air conditioning, windows and locks via their handsets.

Microsoft's Azure platform allows clients to operate large, intricate operations on the Internet, hosted and managed through Microsoft's data centers. Since Microsoft's servers are shared by a number of other clients, Azure can be an inexpensive way for companies to access the massive amount of computing power needed to host a system as complex as telematics.

Other services that could be part of the joint-venture include Bing Maps and Microsoft's "Tellme" voice application, which the company currently provides to some automotive clients.

Microsoft CEO Steve Ballmer also took the time to point out that his company continues to invest in consumer technology. Microsoft has come under fire lately for a consumer strategy that has led to a decidedly mixed bag of successes and misses.

"Our partnership with Toyota is a great example of how we continue to invest in the automotive industry and of our commitment to power the services that are important to consumers," Ballmer said.