Telematics Trends: 2008 to 2015

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The growth of the North American automotive telematics market is due largely to OnStar's determination and growing success. Telematics is also important in Japan and will emerge in China in 2009.

Despite prior setbacks in Europe, telematics is growing and slowly gaining importance to become a mainstream technology in Europe after 2010.

Telematics trends

Telematics technologies and applications have already expanded substantially and will continue to impact other segments of the auto industry. The table summarises telematics-related trends that are likely to happen in the next seven years, including core telematics and related segments such as navigation, entertainment and driver assist functionality.

The basis of telematics systems is the communication technologies that link auto systems with the content and services for the driver and passengers.

The most important near-term trend is the transition to and growth of 3G cellular communication. 3G cellular systems will allow a rapid burst of important data needed for telematics, navigation and communication applications such as email and web access. Examples of navigation applications are map updates, traffic information and mobile search.

However, many existing telematics applications will continue with the existing 2.5G cellular networks due to cost issues, and because the auto manufacturer pays for the communication costs of many telematics services.

3G cellular systems will be prevalent for telematics systems that use the driver's mobile phone because the customer will adopt 3G mobile phones and pay for the communication usage costs. 3G cellular systems will not become a pipe for entertainment content in the vehicle for another three to five years, when broadband communication links become prevalent with the deployment of WiMax and LTE technologies.

Driven by GM and OnStar, automotive telematics has now reached the stage where telematics will become standard on all models. The telematics advantages for many aspects of GM's business operation are being recognised by competing OEMs, and this has started a race to deploy telematics systems.

Telematics Research Group believes all major OEMs will deploy telematics systems in the next few years. BMW and Mercedes-Benz will continue to grow existing telematics systems, and Chrysler will enter the market in 2009. TRG believes Japanese and Korean OEMs in North America will add telematics systems in the next two to four years as well.

Ford currently uses a unique strategy by quickly adding a non-monitored telematics or HFI telematics system. The Ford Sync system uses the driver's phone for communication with a Bluetooth system connected to the auto systems. This strategy has been used for many years, but Ford is also adding services that are part of monitored telematics systems, such as automatic collision notification (ACN) and remote diagnostics. Ford will add these services in the next year to better compete with OnStar.

In-vehicle navigation systems have been overshadowed by portable navigation devices lately, and this is likely to continue. However, low-cost embedded navigation systems with entry price points well below $1,000 will soon appear and be much more competitive. So-called eco-friendly navigation systems that help the driver save fuel may also provide reasons to use in-vehicle navigation systems.

Post-2010 advance driver assist systems (ADAS) that integrate driver assist and navigation systems will also give embedded navigation system advantages that warrant a premium price over portable devices.

The exceptional growth of PNDs has been the main navigation story for several years, but such growth can only last a few years. PNDs are becoming commodity products with low profit margins and fierce competition.

Market segmentation into different multifunction devices will be required, but will only delay the real battle with navigation-based mobile phones and Smartphones.

TRG believes connected PNDs will become a large and profitable niche market because it is a service business instead of a commodity device business. The size of the connected PND market is equal to a significant portion of daily commuters in the major cities with severe congestion.

There is little doubt that the mobile phone will soon become the largest volume navigation device, and will stunt PND growth and possibly reduce annual PND sales. TRG believes it is likely that many navigation users will have multiple navigation devices depending on usage, such as one for pedestrian navigation and one for auto navigation.

Auto entertainment systems currently have primarily broadcast or one-way digital communication links, such as satellite radio, FM sideband (TMC-RDS) and HD radio. These one-way digital links are already used for traffic information, and will grow in importance as data pipes to telematics and navigation systems.

Digital in-car entertainment content is growing rapidly, but is mostly acquired via PC side-loading using removable memory such as USB and SD cards or via portable media players. Digital broadcast content via satellite and HD radio is also growing strongly. TRG believes HD radio sales will exceed satellite radio before 2015.

Most driver assist systems will remain niche markets in the next five years, unless mandates are implemented to reduce the tremendous cost of auto accidents. Only park assist systems will be in volume production in the next five years.

Market potential

The market potential of telematics and related systems is very promising. The next figure shows Telematics Research Group's estimate of yearly sales of OEM telematics systems, the four navigation segments, and driver assist systems. Park assist includes both camera and ultrasonic systems. Other driver assist includes adaptive cruise control (ACC), lane departure warning (LDW) and blind spot detection (BSD).

The PND segment is the clear leader in 2008, with nearly 16 million units or about one PND for every car sold. By 2013, the cell-phone with navigation functionality is projected to be the leader with more than 24 million units. Also by 2013, the two telematics segments will top auto sales since many autos will have both monitored and HFI telematics systems.

Dr Egil Juliussen is principal analyst and co-founder of Telematics Research Group. He has spent more than thirty years in market and technology analysis, and IT, wireless communications and telematics-related market forecasting. Prior to TRG, he co-founded several PC market research companies, including Future Computing, StoreBoard, Computer Industry Almanac and eTForecasts. He was also a strategic and product planner for Texas Instruments' microprocessors, minicomputers and PCs, and designed graphics systems for Norden, a division of United Technologies.


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