Original Equipment Market for Telematics and Infotainment - Frost & Sullivan Press Release
Vehicle Manufacturers Look for Ways to Increase Penetration Rates of Telematics and Infotainment Systems London, UK, 30 August 2005…Telematics and infotainment systems entered the European automotive industry with a bang, but subsequently failed to live up to vehicle manufacturers’ and suppliers’ expectations. Penetration rates and consumer acceptance are yet to reach projected levels, even in the case of navigation systems that were positioned as a key market segment at the time of their introduction. Original Equipment (OE) telematics systems such as remote vehicle diagnostics (RVD) and safety and security systems currently have penetration rates of only 7 and 19 per cent respectively. The penetration rate of navigation systems stands at 23 per cent but is expected to decline at a rate of 3 per cent till 2010. “Consumer awareness of the features and benefits of these systems is relatively low and could be a key reason for their negligible uptake,” observes Frost & Sullivan (http://transportation.frost.com) Research Analyst Praveen Chandrasekar. “There is still a huge perception among consumers that they are complex to handle and do not provide enough value for money.” These negative perceptions could perhaps be attributed to the failure of vehicle manufacturers and suppliers to develop a strong business case for these systems. Since cost is an inhibiting factor, there is a critical need to demonstrate a compelling value proposition to potential consumers. For this, they need to identify exactly what consumers are looking for when installing these systems in their vehicles. New European Union (EU) safety regulations stipulating that e-call be made a compulsory feature in all vehicles and all segments by 2009 may provide just the opportunity to structure an effective business case, especially for safety and security systems. In fact, legislative enforcements are likely to be the main driving force for the increased uptake and penetration of these systems. Interestingly, RVD and safety and security systems share the same basic hardware requirements. This being the case, manufacturers could consider packaging and selling these systems together. Combined with favourable pricing, this strategy could drive the uptake of RVD systems as well. In fact, both RVD and safety and security systems will benefit from integration, since the products would bring considerable value addition to consumers. To this end, Frost & Sullivan recommends that vehicle manufacturers and suppliers multiply their marketing and sales efforts. Conducting training programmes at distribution centres on the technical aspects and benefits of these systems is likely to be an important step in this direction. The other rising trend of integrated systems offering the consumer a mix of telematics and infotainment applications as well as essential vehicle functions will be another major contributor to the total penetration levels of these systems by 2010. Increasingly, consumers look for the integration of a variety of features and applications in a single product to justify the money spent on it. “This means that if integrated systems are designed to combine telematics and infotainment applications such as navigation and e-call and vehicle functions such as park aid and climate control, they could increase overall market penetration,” says Chandrasekar. “However, a key point to remember is that the design, pricing and packaging of such systems must be in line with the needs of the particular vehicle segment.” For instance, consumers in the mass-market vehicle segment are daunted by the steep costs of telematics and infotainment systems compared to the value of the vehicle itself. Targeting this segment with cost-effective, integrated systems would make immense business sense since these high-volume segments hold the maximum opportunities for vehicle manufacturers to generate high revenues. “By focusing on designing and developing telematics and infotainment systems for the low vehicle segments, the OE market can tap the strong potential that exists for generating increased revenues,” says Chandrasekar. Integrated systems, therefore have a critical role to play in driving overall penetration, especially in the mass-market vehicle segment. By 2010, these systems will contribute an estimated 40 per cent of total market revenues. 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