Auto Industry Analyst from UBS Warburg LLC Predicts Worldwide Telematics About to Explode
17 October 2000
Auto Industry Analyst from UBS Warburg LLC Predicts Worldwide Telematics About to Explode
DETROIT, Oct. 17 In a press briefing today at the
Convergence 2000 International Congress on Transportation Electronics, auto
industry analyst Saul Rubin predicted that the telematics segment of the
market is going to grow very big and very fast. Rubin is the chief auto
analyst for UBS Warburg LLC, a global financial services company.
According to Rubin, "We believe telematics is set to explode due to the
confluence of growing consumer demand and advances in wireless communications.
We estimate telematics revenues will grow to $47.2 billion in 2010. We expect
telematics to emerge as a critical customer relationship management (CRM)
opportunity for the OEMs, and for the OEM brand to remain king within the
vehicle.
"However, we believe most of the value created from telematics will be
distributed among content providers, wireless companies, and component
suppliers, rather than the OEMs," he added.
Rubin's conclusions are detailed in a new study called "The Worldwide
Telematics Industry: Eyes on the Road and Hands on the Wheel," published last
month by his automotive technology team at UBS Warburg. According to Rubin:
* Telematics refers to the provision of two-way voice and data
communication between the vehicle and information service providers.
The move to 3G broadband wireless should boost growth substantially.
We estimate the total end-user revenues in the global telematics market
(hardware and services) will grow from $4.2bn in 2000 to more than $24
billion in 2005 and $47 billion in 2010. As a result, we expect
aggregators and service providers to be generating close to $2 billion
in earnings in 2005 and close to $7 billion in 2010. We estimate that
the present value of cash flows to all content providers and aggregators
is around $46 billion.
* We have drawn information from Europe, Japan, and the US. Each market
has its own unique issues and has contributed to our understanding of a
future for telematics. In each region, we have detailed and assessed
the efforts of those companies we believe are either the key players now
or will most likely be the key players in the future.
* We believe that telematics will move to an open architecture system (by
which we mean the standardization of software development protocols) to
allow consumers maximum access to content and services. In the
terminology of SmartMove, a leading Belgian telematics software
developer and integrator, a communication control center (CCC) will act
as the conduit between the vehicle and service providers, offering
billing and security systems, and software protocols. The CCC will
control access to services and access to vehicle information. We
believe the OEM will ultimately want either to run the CCC or act as the
principal authority over its operation.
* Many automotive, telecommunications, consumer electronics, and other
companies are working to develop telematics technology and content.
Some companies, such as GM's OnStar in the United States, currently
enjoy sizable leads in their respective fields and markets, but we
expect competition to grow increasingly fierce in the near future. We
believe there will be a convergence of telematics subscription prices by
region, and that those prices will be somewhat lower than current
levels.
* We believe that telematics ultimately will become a CRM tool, and as
such all OEMs will ultimately insist on products fully branded in their
names; the OEM brand will remain king within the vehicle. Under such a
scenario, wannabe branded aggregators such as OnStar and Wingcast would
have to evolve. We see them potentially becoming anonymous operators
longer term, following an example set in Europe by Tegaron.
* Telematics offers the OEMs another mechanism to promote and enhance
their brands. Ultimately, telematics may become a price of doing
business for the OEMs. On the other hand, it will likely be a boon for
providers of content, wireless services, and technology, and for the
suppliers of electronic hardware, in that order.
About SmartMove:
SmartMove NV, a privately held company, was founded in 1996 and received
funding from several European venture capitalists. SmartMove holds several
international patents in the field of vehicle telematics, and employs 90
people, most of them engineers. Based in Leuven, Belgium, the company's U.S.
subsidiary, SmartMove USA (http://www.smartmove-us.com ), is located in Cambridge,
Mass.
About UBS Warburg:
UBS Warburg is a business group of UBS AG -- one of the world's leading
global financial services firms -- a broad-based investment bank serving
corporate, institutional and private clients. A global organization, UBS
Warburg offers market-leading advice, research, transaction execution and
distribution across all regions and time zones.