Europe News: Plenty of opportunities in telematics aftermarket

Europe News:  Plenty of opportunities in telematics aftermarket

According to a new Frost & Sullivan report, “EU Telematics and Infotainment Aftermarket – Investment Analysis”, there is good scope for investments in this market despite the presence of well-entrenched participants.

The European telematics and infotainment market remains predominantly in its growth stage, with the exception of some of the mature segments in traditional navigation, such as TBT and map-based navigation systems.

This market earned revenues of $5.02 billion in 2006, and Frost & Sullivan estimates that this will reach $14.98 billion in 2011.

In future, the market is likely to see very attractive growth rates, and has ample scope for further consolidation.

“The European telematics and infotainment aftermarket is likely to benefit from a variety of factors such as a continued decline in system prices and mounting consumer demand for telematics and infotainment in the wake of increasing daily average travel times,” notes Frost & Sullivan research analyst A. Sethuraman. “In addition, the legal ban imposed by several European countries on the use of hand-held mobile devices while driving is set to boost demand for Bluetooth, in-vehicle, telephony car kits.”

However, a major challenge faced by companies in the telematics and infotainment aftermarket is to bring out systems with the most advanced and attractive features at prices acceptable to customers. Equally, there has been intense pressure on operating margins due to increasing competition, in combination with the threat of low-cost Asian imports, especially from China.

According to Sethuraman, although prices have dropped over the years, the penetration rate of these systems in light vehicles is still quite low, due to mass market consumers’ perception that many of these products are high-priced luxury goods.

In the face of declining operating margins, Frost & Sullivan believes that growth will be achieved through acquisitions and strategic alliances, with larger firms buying up regional companies to reduce manufacturing costs, integration with technology and software companies to achieve operational synergies and integration with sales and distribution companies to eliminate the middleman.

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