Frost: Telematics Set to Gain Major Market Share by Losing 'Luxury' Tag
April 23, 2007 // Published as a news service by IHS
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With automobile giants deciding to install telematics as a standard in all models sold in North America in 2007, and increasing the initial free telematics subscription period from one year to four years, the North American telematics market is poised for significant growth.
According to Frost & Sullivan, as the unit shipment of telematics-enabled vehicles increases, the number of first-time subscribers also grows, thereby escalating the demand for cellular minutes, telematics hardware and services.
New analysis from Frost & Sullivan of the North American passenger vehicle telematics markets found earned revenues of $2.05B in 2006, with estimates to reach $4.84B in 2013.
"Since automakers constantly strive to distinguish their vehicles from others, the tactic of using telematics as a unique selling point (USP) can significantly promote their brands," said Frost & Sullivan research analyst K. Sathyanarayana.
"This would induce other participants to reenter the fray with their own telematics offerings, consequently boosting demand."
While the new strategies would undoubtedly increase the demand for telematics-equipped vehicles, analysts said customers will hesitate to pay additional monthly bills once the initial free subscription period ends and therefore may not renew service.
"In this scenario, a 'lifetime subscription' model with pay-per-use charges would be a better option since this would retain customers for life and also generate revenues from those that might not renew subscriptions otherwise," said Sathyanarayana.
Telematics is still considered a premium feature and those who can afford it accept the current offering of service packages. Analysts said these rarely-used service packages restrain success in the mass market. For the real value of telematics services to be fully realized, they must lose their "luxury" tag and be commonly used.
Analysts said customizing the current packaged services and allowing customers to choose only features they desire - such as the highly useful turn-by-turn, voice-activated off-board navigation and traffic updates - is guaranteed to attract customers and ensure renewals.
Source: Frost & Sullivan.