In the public relations battle between The New York Times and Tesla over the paper’s poor review of Tesla’s Model S electric car, the real story may be the serious privacy issues the whole imbroglio demonstrated.  After The Times’ John Bruder wrote a less-than-flattering portrayal of his time with the Model S, Tesla Motors CEO Elon Musk challenged the review using information provided from the vehicle’s data recorders.  In the process, Mr. Musk revealed that “our cars can know a lot about us,” writes Forbes’ Kashmir Hill. For example, Mr. Musk was able to access detailed information about the car’s exact speed and location throughout Bruder’s trip, his driving habits, and even whether cruise control had been set as claimed.

“My biggest takeaway was ‘the frickin’ car company knows when I’m running the heater?’ That’s a bigger story than the bad review,” gasped one PR specialist. Indeed, our cars are rapidly becoming another rich source of personal information about us, and this presents a new consideration for drivers who may be unaware of how “smart” their cars are becoming. Connected cars present a bountiful set of bullet points for marketers, but whether consumers are being provided with the necessary information needed to understand the capabilities of these vehicles remains an open question.

And it is not just car companies that will possess this wealth of information. Progressive Insurance currently offers Snapshot, a tracking device that reports on drivers’ braking habits, how far they drive, and whether they are driving at night. Progressive insists the Snapshot program is neither designed to track how fast a car is driven nor where it is being driven, and the Snapshot device contains no GPS technology, but the technological writing is on the wall. A host of marketers, telcos, insurers, and content providers will soon have access to this data.

In the very near future, parents will easily be able to track their teenagers driving in connected cars. Assuming cars permit their drivers to violate traffic rules, it may be impossible to actually get away with risky driving habits. Telcos increasingly find cars to be a lucrative growth opportunities. “[Cars are] basically smartphones on wheels,” AT&T’s Glenn Lurie explains, and indeed, many automakers see smartphones as an integral part of creating connected cars.

While we continue to grasp with the privacy challenges and data opportunities presented by smartphones, we have only just begun to address the similar sorts of concerns posed by connected cars.  In fact, privacy concerns have largely taken a backseat to practical hurdles like keeping drivers’ eyes on the road and more pressing legal concerns such as liability or data ownership. Indeed, at the last DC Mobile Monday event, the general consensus among technologists and industry was that consumers would willingly trade privacy if they could have a “safer,” more controlled driving experience. Content providers were even quicker (perhaps too quick) to suggest that privacy concerns were merely a generational problem, and that younger drivers simply do “not think deeply about privacy.”

That may be true, but while industry may wish to treat our vehicles as analogous to our phones, it also remains true that the average consumer sees her car as an extension of her home.  While the law may not recognize this conception, industry would be wise to tread carefully. OnStar’s attempt to change its privacy policy in 2011 proves illustrative. OnStar gave itself permission to continue to track subscribers after they had cancelled the service, and to sell anonymized customer data to anyone at anytime for any purpose. The customer backlash was brutal: “My vehicle’s location is my life, it’s where I go on a daily basis. It’s private. It’s mine,” went one common sentiment.

A recent article in The L.A. Times wondered whether car black boxes were the beginning of a “privacy nightmare” or just a simple safety measure.  The answer likely falls somewhere in between, and if the Tesla episode reveals anything, it is that the striking the proper balance may be more difficult than either privacy advocates or industry expect.While Mr. Musk had a wealth of data at his disposal and Mr. Bruder had only a book of observations to counter that data, neither party has been able to provide a clear account of Mr. Bruder’s behavior behind the wheel.  For example, what Mr. Musk termed “driving in circles for over half a mile,” Mr. Bruder claimed was looking for a charging station that was poorly marked.  Technologist Bruce Schneier cautions that the inability of intense electronic surveillance to provide “an unambiguous record of what happened . . . will increasingly be a problem as we are judged by our data.”

Most everyday scenarios presented by connected cars will not produce a weeks long dispute between a CEO and a major newspaper. Instead, Schneier notes, neither side will be able to spend the sort of time and effort trying to figure out what really happened. Certainly, consumers may find themselves at an informational disadvantage. In the long term, drivers may be willing to trade their privacy for the benefits of an always connected car, but these benefits need to be clearly communicated. That is a discussion that has yet to be had in full.