For a couple of years now, radio frequency identification has been touted as the next big thing in retail technology, allowing the wireless tracking of products. But to see where the technology -- commonly referred to as RFID -- has enjoyed its greatest penetration so far, look in the pocket where you keep your car keys.

The auto industry represents 46 per cent of the market for RFID technology today, says a study released in June by Allied Business Intelligence.

Car manufacturers will spend around $600-million (U.S.) on RFID technology this year -- about 30 times as much as retailers are investing.

An RFID tag is a chip that can transmit a unique identifying code and sometimes other information using radio waves. The chips can be used like bar codes printed on packaged goods.

But they offer added advantages in that they can carry more information and can be read without having to pass a scanner directly over them.

On the negative side, they cost more than bar codes, typically a couple of dollars each, though Frank Viquez, an analyst at Oyster Bay, N.Y., market research firm Allied Business, says prices are set to drop as volumes increase.

Auto makers' RFID spending will top $1-billion by 2008, Mr. Viquez says, although increasing RFID use in other sectors will reduce the industry's share of the RFID market to about 28 per cent by then.

RFID has begun to play a major role behind the scenes in the auto industry. The chips are used to track parts and partly built cars through the manufacturing process.

"It's a key integral part of the just-in-time inventory process," Mr. Viquez says.

At General Motors of Canada Ltd. plants in Oshawa, Ont., a 25-kilometre monorail system delivers parts to the assembly line. Each of the roughly 2,000 cars on the monorail has an RFID tag. Jan Szott, a former plant engineer who now works in desktop computing at GM, says the system lets GM track every part on the monorail, which allows more flexible scheduling.

Ford Motor Co. in Dearborn, Mich., puts an RFID tag on each vehicle early in the manufacturing process. The tag is associated with a customer order, says David Decker, vehicle operations information technology manager at Ford, so as the car moves along the assembly line, quick scans of the RFID tag determine what options to attach and even what colour to paint it.

Ford also hangs transponders with built-in RFID tags on the rear-view mirrors of cars waiting for shipping. Using a system that triangulates through multiple receivers, the company can find a particular car instantly, Mr. Decker says.

The auto industry's widest and most conspicuous use of RFID is in electronic car keys. Many of these look ordinary, but when a driver inserts the key in the car's ignition, a scanner in the car looks for the RFID transponder embedded in the key or key fob, and the car doesn't start unless it is found. Some keys or fobs enable the driver to open the car door by pressing a button -- the RFID chip sends a signal to an electronic lock.

"I can't think of an auto maker that doesn't offer a keyless entry device," says John McGowan, senior marketing manager in the U.S. operations of Munich-based Infineon Technologies AG, a supplier of RFID chips. Though some European auto makers used infrared technology for these devices at first, RFID has become the standard, he says.

The newest automotive use of RFID is monitoring tire pressure. In November, 2000, the U.S. government passed the Transportation Recall Enhancement, Accountability and Documentation (TREAD) Act.

Arising out of hearings on the safety of Firestone tires after a widely reported string of accidents, it includes a requirement that new passenger vehicles have a way of alerting the driver when tire pressure is too low.

Mr. McGowan says such devices can take two forms. One uses wheel speed sensors that are part of antilock braking systems. An underinflated tire causes a wheel to turn slightly faster than the others. The other, generally considered more accurate, uses RFID. The law requires 10 per cent of new vehicles to have tire-pressure sensing by this fall, increasing gradually to 100 per cent over the next three years. GM has the technology on its current Corvette and Cadillac XLR models, Mr. Odell says.

Although the auto industry leads in RFID, the retail sector is moving forward. Wal-Mart Stores Inc.'s top 100 suppliers already attach RFID tags to shipping pallets so the chain can track shipments, says Tom Williams, a Wal-Mart spokesman in Bentonville, Ark., and the company wants all suppliers doing so by 2006.