Startup Automatic wants to make your iPhone your car's cerebral cortex.

By Kurt Wagner, reporter

Automatic's iPhone app.

FORTUNE -- You will never forget where you parked your car again. Well, you may forget, but now your phone will keep you from aimlessly wandering the parking lot. Helping drivers remember where they parked is just one feature of Automatic, a new device users can plug into their car, enabling it to talk to their smartphone to extract all sorts of useful information. The San Francisco-based startup wants its $70-device to replace the much more costly dashboard infotainment units that are increasingly becoming the star of the show in new cars.

In an accident? Automatic alerts the authorities instantaneously. Wondering why your warning light has turned on? Automatic can tell you that, too, before a costly trip to the mechanic. By plugging the Automatic device under the steering wheel, users are treated to a wealth of information already stored by their car. "It bothered us that the most expensive computer that you own is your car and you don't have access to it," explains Thejo Kote, Automatic CEO and co-founder. "It's a black box." Kote, alongside co-founder Jerry Jariyasunant, have not only popped the lid to this box of information, they are pulling out data they say can save drivers money. The company is funded by backers including Andreessen Horowitz and Founders Fund.

Much of what Automatic offers is aimed at maximizing fuel efficiency, and Kote believes that simple changes in driving behavior can save users close to 30% of their annual automotive spending. A 2012 report by AAA found that car ownership costs anywhere from $7,000 (small car) to $11,600 (four-wheel-drive SUV) per year. With Automatic, your smartphone connects automatically to your car when you come within range, and drivers are alerted with an audible beep when their driving behavior is causing them to waste gas. Slam on the brakes, accelerate too quickly or drive over the speed limit, and your phone will give you a subtle reminder (beep) to change your driving behavior. Driving even 10 miles-per-hour over the speed limit on the highway can cause drivers to lose close to 15% in fuel efficiency, according to the California Energy Commission.

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Automatic's $70 device plugs into a vehicle under the wheel.

Of course, benefits only come to drivers who are willing to nickel-and dime their way to savings, but Kote isn't worried about that. "We think it could be the easiest $500-$1,000 people save in a year," says Kote. "People spend so much time optimizing small things like cutting coupons. [With your car] you don't get any feedback, and that's what we're trying to fix." Some Americans have already adopted these strategies -- along with other, more extreme methods -- in order to save money on gas. Known as hypermilers, these drivers often alter their car's appearance to cut down on wind resistance, turn off their engine when possible, and even coast behind larger vehicles to maximize pull (similar to cycling). Automatic is intended for the average driver, not the hypermiler, but the end goal remains the same: cut down on spending.

For Kote, who was born in Mysore, India, a three-hour drive southwest of Bangalore, the high cost of car ownership in the United States was alarming. His first job out of college with Indian IT giant Infosys (INFY) paid only $4,000 a year. As early as high school, Kote, 30, dreamed of founding a technology startup in Silicon Valley. He read every essay written by Paul Graham (founder of the successful startup incubator Y Combinator) that he could get his hands on. "If you're serious about doing a technology startup that has any kind of impact on the world, you have to come to Silicon Valley," says Kote, who enrolled in Y Combinator himself in summer of 2011. "Here is where it all happens." After Automatic's co-founders met in graduate school at the University of California, Berkeley, Kote got his wish: He is a tech entrepreneur in every sense of the word, complete with little pay, a small cramped office in downtown San Francisco, and an exciting product.

Cars with built-in screens and connected dashboards, called infotainment units, may very well accommodate many, if not all, of the features Automatic brings to the table. By 2020 close to 80% of new vehicles are expected to have built-in infotainment units, up from just 40% today, predicts Gartner analyst Thilo Koslowski. To Automatic, those numbers simply mean that the majority of cars manufactured today are still potential customers. "We think this is a good middle ground," says Kote. "You get a lot of the benefits of connectivity just by buying Automatic." It is yet to be determined whether or not Kote's theory will hold true. Automatic is slated to ship its first set of orders in May (figures were not disclosed), with a second batch of orders expected in July. Foreseeing competition from the world's largest automakers hasn't dampened the small company's expectations. "It blows my mind," says Kote, "that half a dozen people can sit in a room and have an impact on millions of people."