Declining System Prices Fuelling Growth of the EU Telematics and Infotainment Aftermarket

LONDON--The European telematics and infotainment aftermarket remains predominantly in its growth stage, with the exception of some of the mature segments in traditional navigation, such as turn-by-turn navigation and map-based navigation systems. Despite the presence of well-entrenched participants in this market, there is good scope for investments by financial institutions, including private equity (PE), venture capital (VC) firms and asset management companies.

New analysis from Frost & Sullivan (http://www.financialservices.frost.com), EU Telematics and Infotainment Aftermarket – Investment Analysis, reveals that this market earned revenues of $5.02 billion in 2006 and estimates this to 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.

If you are interested in a virtual brochure, which provides manufacturers, end users, and other industry participants with an overview of the latest investment analysis of the EU Telematics and Infotainment Aftermarket, then send an e-mail to Vanessa Quezada, Corporate Communications, at vanessa.quezada@frost.com with your full name, company name, title, telephone number, and e-mail address. An overview will be sent to you via e-mail upon receipt of the above information.

“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.”

The rise in the total distance travelled by light vehicles, year on year, indicates a growing trend towards increased business, including commuting, and leisure travel. In the light of this development, telematics and navigation devices are proving increasingly invaluable. Infotainment products, such as rear-seat entertainment systems, can also help to overcome the boredom factor associated with long-distance travel.

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.

“Although prices for telematics and infotainment devices have been falling over the years, the penetration rate of these systems in light vehicles is still quite low, given the huge number of light vehicles already on the roads in Europe,” says Sethuraman. “Mass market consumers continue to perceive many of these products as high-priced luxury goods.”

In the face of declining operating margins, telematics and infotainment companies in the European aftermarket are likely to acquire some of their regional counterparts in order to take benefit from lower manufacturing costs, as well as from economies of scale. They are also expected to carry out forward integration with sales and distribution companies and backward integration with technology and software companies. This should help them to achieve operational synergies and savings on margins which would otherwise have been shared with middlemen involved in the sales and distribution process.

EU Telematics and Infotainment Aftermarket – Investment Analysis is part of the Financial Benchmarking in the Automotive Industry Subscription. It provides analysis of the market using segment opportunity scorecard, company scorecard, M&As in the European telematics and infotainment aftermarket and valuation multiples for select telematics and infotainment aftermarket companies. The study also includes a growth monitor that ranks companies based on prospective revenue growth. Interviews with the press are available.

Frost & Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years. The company's industry expertise integrates growth consulting, growth partnership services, and corporate management training to identify and develop opportunities. Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies, and the investment community by providing comprehensive industry coverage that reflects a unique global perspective, and combines ongoing analysis of markets, technologies, econometrics, and demographics. For more information, visit http://www.frost.com.

EU Telematics and Infotainment Aftermarket – Investment Analysis