vehicle-enabled information & communication services- market outlook and real business...

© copyright 2004 by OSGi Alliance All rights reserved.

Vehicle-enabled Information & Communication Services:Market Outlook and Real Business Opportunities

Thilo Koslowski - VP & Lead Analyst - GartnerG2

These materials can be reproduced only with Gartner’s written approval.Such approvals must be requested via e-mail—[email protected].

© copyright 2004 by OSGi Alliance. All rights reserved.

Who is Gartner?

Gartner, Inc. is the leading provider of research and analysis on the globalIT industry. Our goal is to support enterprises as they drive innovation andgrowth through the use of technology. We help clients make informedtechnology and business decisions by providing in-depth analysis andactionable advice on virtually all aspects of technology.

This year marks the 25th anniversary of Gartner and the founding of ourindustry.

We take pride in our pioneering work to assist our clients and our industryin benefiting from the use of technology. Gartner clients trust in ourrigorous standards that safeguard the independence and objectivity of ourresearch and advice. With $858 million in revenue in 2003, and more than10,000 clients and 75 locations worldwide, we are the clear market leader.


• Telematics industry’s expectations become morerealistic – dreamers are finally waking up.

• Companies wanting to succeed current marketconsolidation must develop a bullet proof marketstrategy immediately.

• Telematics vendors must understand the needs ofthe end customers to provide automakers withsuccessful applications.

• Industry must think “outside” the vehicle toput telematics into overdrive.

Gartner’s Viewpointon the Telematics Market


Advent ofthe Internetand mobilecomputing

Reduced investment activity

Wingcast dissolutionNon-automotive contentand app. providers see

telematics as a newchannel opportunity

New telematicsservice providersenter the market

OnStar launch

Growing interest andinvestments from

automakers,suppliers and

technology providers

Search for new “second-tier”telematics marketopportunities/segments

Growing marketconsolidation andcompany closures

Realization oftrue potentialof telematics

Developmentof applicationsthat meetconsumers’needs

Integration oftelematicsservices intobroader mobileservice offerings

1994-2000 2001 2002-2003 2004-2006 2007-2012

ActualDemand

Telematics Hype Cycle - History

Trough ofDisillusionment

Slope ofEnlightenment

Plateau ofProductivity

Maturity

TechnologyTrigger

Peak of InflatedExpectations

Visibility


Telematics Hype Cycle -Today’s Positions

Trough ofDisillusionment

Slope ofEnlightenment

Plateau ofProductivity

Maturity

TechnologyTrigger

Peak of InflatedExpectations

Key: Time to “Plateau”

2–5 years

5–10 years

Visibility

ConsumerTelematics

CommercialTelematics

PublicTelematics

In-Car Hands-Free Input

RemoteDiagnostics

AdvancedCollisionAvoidanceSystems

Bluetooth inAutomotive

In-Car Digital/Satellite Radio


Market size

Commercial

Challenge

Competition

Short- to mid-termSuccessful marketpenetration

= Very significant = Less significant

Consumer

Long-term

Public/Government

Mid-term

Our View on the Opportunity


Industry’s View ofTelematics Opportunity

Potential of Telematicson a scale from Low to High opportunity

High

Low

Mid

Consumer NewVehicle Market

ConsumerAftermarket

Commercial/FleetNew Vehicle

Market

Commercial/FleetAftermarket

Public/Goverment

By 2006

During 2004

WorldwideUnited StatesEurope


What’s Holding Telematics Back?How important do you think the following factors are for accelerating market adoption fortelematics solutions in all market segments in Europe?

Cost reductions in technology hardware and softwareFlexible Pricing Options (e.g. choice pay-per-use or subscription) Better education on benefits for target customersEstablishment of industry consortiums (e.g. create open platforms)Telematics embedded onto new models of vehiclesPartnerships/JVs between vehicle makers and TSPsGovernment Regulations (e.g. restriction on in-car phone use)Market rollout of telematics solutions by Network CarriersConsumer focussed telematics promotions by DealershipsTelematics offerings accessible outside the vehicle (e.g home, office)Commitment to telematics by Software CompaniesWidespread adoption of Bluetooth

Impo

rtan

ce


Different Priorities Creating a DisconnectIm

port

ance

• Catch 22 - Vehicle manufacturers and TSPs want lowercost hardware and software - suppliers want telematicsembedded in new models.

• Vehicle manufacturers realize the importance of jointventures and partnerships, but are unwilling to releasetheir control over projects.

• Network carriers, fleet operators and suppliers understandthe importance of educating the end customer - vehiclemakers see this as less of an issue (sadly).

• Telematics Industry is STILL not connected.


Three Year Business Outlook

AutomobileManufacturersAutomotiveSuppliersTelematicsProviders (TSP)HardwareVendorsSoftwareVendorsNetworkCarriersCommercial/Fleet OperatorsConsultanciesand Research

Createbusinesswith new

customers

Increasemarket

awarenessof offerings

Createpartner-

ships

Betterunderstand

needs ofmarket

LowerCosts

1

11

Growbusiness

with existingcustomers

1

11

11

2 3

Improveoffering or

developnew one

42 3 42 3 4

2 3 42 3 42 3 4

32 42

5

4 3

5

5

5

5

5

5

5


Your Business OpportunitiesCompared to the telematics markets overall, how do you assessthe prospects for your company in particular?

5.78

5.79

6.00

5.54

5.86

5.64

5.74

5.52

5.14

5.08

5.04

5.02

4.89

4.85

4.84

4.76

Software Vendor

Hardware Vendor

Commercial/Fleet Operator

Consultants and Research

Telematics-related Service Provider

Automobile/Truck Manufacturer

Automobile Supplier

Network Carrier

Average level of optimism on a scale of 1 to 7

Optimism rating for 2004 Optimism rating for 2005-6


Existing Telematicsand Future Plans

65

48

39

23

19

16

16

13

13

20

23

16

29

16

10

6

Already Deployed Expected to be deployed in Existing Fleet

35

16

0

19

13

29

35

16

23

29

26

26

6

10

6

6

Satellite or cellular basedterminal communication

Real-time vehicleposition tracking

Stolen vehicletrackingRemote

diagnosticsHands-free voice-activated

cellphone connectionIn-vehicle

Internet accessAutomated Sat-Nav

GPS route guidanceElectronic client/order

information accessRadar-based collision

avoidance system

Largest Fleets (100+) Smallest Fleets (<10)

Source:GartnerG2 and American Transportation Research Institute

% of fleets


Telematics Planned For New Vehicles

1. Remote diagnostic system

2. Automatic collision notification

3. Radar-based collision warning systems

4. Load stability sensors

5. Lane departure warning systems

6. Stolen vehicle tracking

7. In-vehicle Internet access

8. Electronic client/order info access

In order of expectation

Source:GartnerG2 and American Transportation Research Institute

Safety

Cost

Business Needs


• Understand your target audience’s changing demand forcommercial technologies and applications.

– Fleet operators’ current interests lie in communication-centredtracking and routing applications.

– In the future, fleet operators will expect basic communicationtechnologies as standard features and look for advanced datatransferability and safety features as optional technologies.

• Develop universal solutions that provide data exchangebetween all parties associated with delivering goods.

– Most technology providers will focus on delivering telematicssolutions that are limited to the driver and fleet operator. The ultimatesuccess from commercial telematics lies in sharing relevantinformation in real time with fleet dispatchers, customers, merchants,suppliers and formal transportation agencies.

Recommendations - Commercial Sector


Europe: A Tale Of Two Targets

Private New Car Buyers-

Average Age:

3942

45

4547

48

49

“Sellingtechnology to theover 40s?”

Company Car Driversand their employers

3.3

4.7

2.0

0.7

0.8

3.3

0.3

No. of company cars on the road (m)

“But who is thecustomer?”


Overview of Consumer Survey

• 3,000 adults (aged 16-70) were interviewed by panelsurvey across France, Germany and the UnitedKingdom.

• Questions on a wide range of issues including…– Telematics - interest in services,willingness to pay, etc

– Preferred interactions with dealers and manufacturers.

• Due to poor customer awareness of Telematics, wedid not use the word “telematics” in this survey, buttalked about services available in the car.


Problems of Targeting -Example U.K.

Interest in Telematics

Young Age Old

Willingness to Pay

Young Age Old

Ability to Pay

Young Age Old

Likely to Buy a NEW car

Young Age Old

Under-25s are mostinterested in all in-carservices, except seat-back entertainment andremote immobilisation(35-44s), and automatedtoll-payment (45-54s).

Under 35s say theywould pay twice asmuch for a device asover 45s.

MISMATCH


Learn from the Past -3 Success Criteria

PurchaseMotivation

ChurnReduction

AdditionalRevenue

Customer TargetingCustomer EducationCustomer SegmentationPricing Strategies

Overcoming TechnophobiaEncouraging UsageCRM implication of ChurnSupplementary ServicesPricing Strategies

Niche Services (Infotainment)Web-based Preferred Partners

1

2

3


Preferred Telematics Provider

75

45

55

37

63

37

15

22

31

18

16

13

13

3

9

3

11

9

18

10

23

17

2618

1

1

1

8

2

Device Itself

Services + Billing

Device Itself

Services + Billing

Device Itself

Services + Billing

Car Manufacturer Car Dealer Mobile Operator Motoring Club OtherBase: All Car Drivers

France

Germany

UnitedKingdom

Other includes general retailers, petrol stations chains, insurance companies, and others


5148

2922

3226

212321

4

9

3333

3541

3133

3833

32292019

56

9

21

Remote immobilisation, stolen car trackingAccident/breakdown emergency button

Personalised car and radio settingsInstant location-specific traffic news

Drive thru-instant toll/parking paymentHands-free voice-activated mobile phone

Navigation read-out servicePay-as-u-drive car insurance

Automated car service bookingAccess to operator "find-me" services

Voice activated Email/SMS readoutSeat-back entertainment (games/video)

Share price alertsAudible sports score alerts

% of car drivers...

Already HaveVery InterestedQuite Interested

Base: All Car Drivers in France

“Which of these services would you be interestedin having available in your car?”

Interest in Telematics -Example France


The Car Purchase and Ownership Cycle

Get facts

Get advice

Compare models

Compareprices

Configureoptions

Test drive

Agree terms

Arrangefinance

Delivery Trade-inWarranty

Service

Enhance

Problemresolution

Brandexperience

Happymotoring A. Browsing

PURCHASE

B. Negotiating

INTERESTIN NEW

CAR

C. Ownership


Why Is CRM So Important?

EU

BlockExemption

Oct 2003

Old Rules For Selling Cars

• Single-brand dealerships

• Exclusive sales territories

• Sales channel isservice channel

• Dealer holds key tocustomer relationships

Manufacturer’s priority:-Build good cars

ules For Selling Cars

• Multi-brand possible

• Dealers compete forsales

• Sales channel losesservice obligation

• Dealer NOT the key tocustomer relationships

New R

Manufacturer’s priority:-Customer Experience


Willingness to PayFor a Telematics Device

0102030405060708090

100

0 250 500 750 1000 1250 1500 1750 2000 2250 2500 2750 3000Base: All Car Drivers

% of car drivers that would pay at least...

Cost of Device - Euros

% would pay Mean

France 70% €710Germany 72% €1160U.K. 66% €740

Device offers all the services they wereinterested, or very interested in


0 250 500 750 1000 1250 1500 1750 2000 2250 2500 2750 3000

Peak= €1270

Base: All Car Drivers in GermanyCost of Device - Euros

Measured as the product of the numberof customers willing to pay at aparticular price by the price point

80% potential €750-€1650

Device offers all the services they wereinterested, or very interested in

Profit

Volume

CRM

Revenue

Potential Revenue - Example Germany


Preferred Telematics Billing Scheme

Base: All Car Drivers

31

22

32

12

3

42

23

18

13

4

37

19

27

9

8

Not willing topay

Included incost of device

Pay-per-use

Monthlysubscription

Undecided

FranceGermanyUnited Kingdom

“How would you prefer to pay for the on-going use of theseservices in your car?”


Telematics as Part of a Broad Offering

Content and

serviceaggregator

Office

Vehicle/mobile

Home


• Identify consumers’ telematics preferences first and leverageflexible technologies to satisfy their needs. Don’t do it the otherway around.

– In the short-term, develop flexible telematics solutions thatrequire minimum resources but provide the ability to upgradeto more comprehensive services in the future.

– Expand your target group by including the vehicle passengers, notjust the driver.

• Make telematics services available beyond the vehicleand integrate them into a broader mobile service offering.

– Develop collaboration between companies from various industries,such as automotive, media and telecommunications.

• Pure-breed telematics service and technology providers:Expand into new markets to ensure short-term survival andprosper from telematics offerings in the long-term.

Recommendations - Consumer Sector


For More Information

Thilo KoslowskiVP and Lead AnalystAutomotive

Office: 408-468-8247Mobile: [email protected]