Europe News: The difficulty with industry forecasts

Europe News: The difficulty with industry forecasts

According to a new research report from Berg Insight, the number of fleet management units deployed in commercial fleets in Europe next year will exceed one million. However, as with all market projections, the numbers have to be looked at twice.

Berg says that even though the overall penetration level is just a few percent, some segments such as road transport will attain adoption rates above 30%. The report cites customer awareness of the benefits of telematics as the main driver behind growth.

“Today, managers generally know that fleet management technology can help their businesses reduce costs and improve efficiency,” said Berg Insight senior analyst, Tobias Ryberg. “The main challenge for the industry now is to come up with solutions tailored for specific customer needs and to implement those in a timely manner.”

New regulations related to road transport activities also have a major impact on the market environment.

The introduction of digital tachographs in the EU from May 2006 has added new reporting duties for truck fleet owners. Currently, tachograph data about driving times must be collected from vehicles using physical media. However, from 2008, a new standard will make it possible to automatically download this data remotely using any fleet management system installed on the vehicle.

Berg Insight’s study of the European fleet management market was conducted in October-November 2007. Data on the reported number of systems/clients and turnover was compiled for a total of fifty providers of GSM/GPRS or satellite-based systems on one or several EU27+2 markets, using primary and secondary sources of information.

Preliminary figures have been benchmarked against financial reports, fiscal records and industry peers. Accumulated industry-wide figures have also been checked against wireless industry data on M2M device shipments and mobile data subscriptions.

The estimated total number of systems for companies that were surveyed is 725,000, plus an estimated 75,000 systems for minor players not included in the survey, for a total of 800,000 active systems by end-2007. This is forecast to increase to more than one million by end-2008.

However, Berg’s figures need a second look, in that the total number of units IN USE is likely to be somewhat lower than the total number of units SHIPPED. An unknown percentage of units are shipped but not necessarily deployed. Some units may still be unsold, others may have been used initially but then abandoned or replaced by newer units; and some suppliers do tend to over-report their sales.

Furthermore, forecasts are also based on company revenues. This presents one glaring problem, in that companies sometimes get their own predictions wrong.

For example, Punch Telematix originally forecast a 42% increase in sales for 2007, but sales dropped 23% in the first six months, and the company conceded it was unlikely to achieve its target for the full year.

Steve Kremer, telematics analyst at TRN Ltd, says: “Quantifying the European market in any detail is an inherently difficult task due to the relative immaturity of the industry structure and the resulting absence of reliable standardised industry data.”

Despite fundamental problems in trying to predict market growth with any degree of accuracy, manufacturers, suppliers and institutional investors use forecasts provided by industry-respected analysts.

But if companies choose to pump funds into the industry based on market and future growth data that cannot possibly be accurately estimated, they can’t really blame the source of the data if things go wrong.

“If we had a Telematics association of some sort, maybe it would help the industry to understand itself a bit better,” concludes Telematics Update director, Thomas Hallauer.

As Kremer points out: “Any analysis that aims to quantify the ‘known unknowns’ is to be welcomed.”

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