European Transportation Industry In Top Gear, Says Frost & Sullivan; Automotive Sector Vibrant with Numerous Technological Advancements

LONDON--Oct. 2, 20034, 2003--Frost & Sullivan (www.frost.com) is continuing its in-depth research of the European transportation industry with a singular focus of unearthing emerging opportunities and potential growth areas. The ongoing research process examines the original equipment market as well as the aftermarket, providing up-to-date information on industry trends.

The information age is bringing about a significant change in the European transportation industry. This is evident from the market-wide adoption of state-of-the-art technologies. Industry participants are developing intelligent transportation systems (ITS) and incorporating emerging technologies such as telematics to enhance safety features.

These systems are enriching the driving experience by providing the right combination of entertainment and information. Besides this, the drive toward global harmonisation of technical requirements to reduce high manufacturing costs and avoid duplication of administrative procedures is setting the stage for explosive growth.

Car manufacturers across Europe are offering integrated infotainment functions, transforming the humble dashboard into a lively hub for next-generation car information, navigation and entertainment systems. They are also developing modular system architectures with 'plug-and-play' facilities that will enable adding of new equipment in future.

Prominent automakers such as Audi, BMW and Mercedes-Benz have introduced the 'cockpit-of-the-future' by embedding multimedia functionality in their cars. The 'iDrive' on BMW's 7 Series is capable of over 700 functions and is a prime example of cabin comfort being enhanced by digital technology.

Latest research by Frost & Sullivan estimates that the European market for in-car infotainment technologies, currently worth EUR 2.6 billion, is likely to fetch revenues worth EUR 9.2 billion in 2010, chiefly because of the emerging crop of technologies such as off-board navigation, satellite radio systems, S-DAB and embryonic T-DAB systems.

With the pressure to establish 'green credentials' mounting on vehicle manufacturers, hybrid electric vehicles (HEVs) -- one of the most effective ways to reduce CO2 emissions -- are finding top priority on their agenda. The race is on to break the Japanese stranglehold on this nascent industry as many European automakers turn to hybrid powertrains to attain market supremacy. At present, the Toyota Prius, launched in 2000, is the only full hybrid powertrain commercially available in Europe.

The PSA Group is considering the progressive introduction of three levels of HEVs (mini, mild and full), while Toyota Motor Corporation is expected to target the market mainly with full hybrids. Renault, Fiat Auto, Ford and Volkswagen AG are focusing on the development of mild hybrids. Adam Opel AG and DaimlerChrysler are also developing hybrid configurations and are set to launch their models during the second half of the decade.

Currently, Honda Motor Corporation is the only vehicle manufacturer to have commercialised mild hybrids in Europe and -- supported by the launch of its Civic Hybrid in spring 2003 -- is poised to lead the European mild HEV market until 2005. Surprisingly, BMW is expected to choose the hydrogen path and is not likely to commit to HEVs.

The HEVs market is likely to witness a flurry of strategic alliances and partnerships that hold the key to success in this market. Original equipment manufacturers (OEMs) and suppliers are expected to join forces and embark on a long-term partnership with a strict focus on core competencies.

Frost & Sullivan estimates that HEVs are likely to have a 3 percent market share by the end of the decade with the mild HEV segment accounting for the lion's share of sales. The UK is being singled out as the most potent force in the market adoption of HEVs and France is close on its heels, with growth being triggered by regional participants such as PSA. Germany is likely to emerge as one of the leading HEV markets in Europe by 2010.

Meanwhile, driver assistance systems (DAS) such as ultrasonic park assist (UPA), adaptive cruise control (ACC), night vision (NV), lane management, adaptive front lighting and head-up display (HUD) technologies are propelling driving experience to a new level in terms of convenience, comfort and safety. By 2010, the total European market for DAS is estimated to be worth EUR 1.4 billion.

The ACC, expected to be a key component of ITS in future, is likely to significantly advance the development process of an automated highway system. Top vehicle manufacturers (VMs) such as BMW, DaimlerChrysler, Fiat Group, the Ford Group (mainly Jaguar), Renault (mainly Nissan) and the Volkswagen Group are already offering ACC on some of their models. UPA technology is being offered by companies such as GM's Saab, Daewoo, MG, Peugeot and Citroen.

Frost & Sullivan research indicates that identification and exploitation of synergies between DAS and other ITS, advanced telematics services and x-by-wire technologies are likely to create multiple market opportunities.

As the automotive industry sits on the cusp between the industrial and the information age, commercial vehicle telematic systems are increasingly playing a pivotal role in the integration of mobile, in-vehicle computing and wireless technologies.

Standardization of systems architecture and the proliferation of GSM across Europe are also likely to stimulate market growth.

ITS and telematics form an integral part of the initiatives of the national governments across Europe to curb congestion and implement an integrated transport policy. Frost & Sullivan research points toward a significant increase in the vehicle base fitted with telematics systems by 2009. Total market revenues are likely to reach EUR 4.7 billion.

Remote vehicle diagnostics (RVD) is gradually emerging as the next inevitable step in the technological progression of the automotive industry. RVD is likely to be bundled with other telematics services and is expected to enable vehicle manufacturers to step into their distribution and after-sales value chain, thus developing closer relationships with their customer base.

Automotive manufacturers' retention of control over their after-sales service value chain is of strategic importance in view of the implementation of the new competition laws in Europe. The simultaneous launch by BMW, Fiat, Volvo and PSA has already begun to drive greater market acceptance of RVD.

With all these exciting technological developments, the automotive industry is expected to kindle growth in the supercapacitors market. Greater demand for supercapacitors is likely from truck companies, bus manufacturers -- the first vehicle segment to adopt supercapacitor technology -- as well as companies involved in the design and testing of 42V vehicles and HEVs.

Even as these technological advancements propel market growth, auto manufacturers are striving to reduce escalating production costs and time-to-market. In this scenario, enterprise resource planning (ERP) solutions are set to retain their firm grip on the industry.

Supply chain management (SCM) applications are stirring up greater attention with potential cost savings through reduction of on-site stock and automation of supply processes whereas business intelligence (BI) and e-procurement solutions, though attracting interest, are evoking a cautious industry response in terms of investment. Interestingly, auto manufacturers are treating SCM solutions as an additional functionality to complement their ERP application and prefer to work with their existing ERP vendor rather than opting for a supply chain specialist.

Frost & Sullivan, an international growth consultancy, has been supporting clients' expansion for more than four decades. Our market expertise covers a broad spectrum of industries, while our portfolio of advisory competencies include custom strategic consulting, market intelligence and management training. Our mission is to forge partnerships with our clients' management teams to deliver market insights and to create value and drive growth through innovative approaches. Frost & Sullivan's network of consultants, industry experts, corporate trainers and support staff, spans the globe with offices in every major country.