The global telematics market has witnessed a radical transformation since its early days in 1990s due to the rapid evolution of the telecommunication industry.
The word ‘Telematics’ originates from the German word 'telematik', a hybrid of the words telekommunikation (telecommunication) and informatik (information science). Telematics has contributed towards enhancing lifestyle and has redefined the automobile driving experience by making it safer, more enjoyable, and productive. The original premise is that telematics products enable drivers to avoid traffic jams, monitor traffic flows, facilitate road rescues, and transform automobiles into moving offices or infotainment centers. Generally telematics have three main value propositions -Traffic and Point of Interest Information, Safety and Security, and Entertainment and Productivity.
When telematics was first introduced during the tech boom in 1990s, automotive experts were extremely optimistic about the future of this enabling technology. However, in reality, telematics products have encountered delayed launches and low penetration levels. The low penetration can be attributed to inadequate telecommunication infrastructure, lack of standardisation, and low value perception.
The global telematics system and services market was worth US$26.5 billion in 2005 with the system market taking up US$18 billion and the telematics services market size around US$8.5 billion. The major markets for telematics in the world include North America, which is focused on safety and security features, Europe and East Asia which focus on navigation features. In Asia, Japan is by far the largest telematics market but South Korea and Taiwan’s telematics market are also growing rapidly.
The rate of telematics usage is increasing globally and more number of vehicles are being fitted with these systems everyday. The telematics market includes the navigation, the in-car infotainment and features for security and remote diagnostics. Advanced telematics systems are in place in countries like Japan and Korea. The telematics market globally has not yet reached its potential and is expected to increase with the rising automobile sales.
The last two decades witnessed a radical transformation of the automotive industry and it is increasingly becoming digitized with computer-based control systems heading this change. With advanced technologies such as the sensor-based intelligent vehicle functions and in-vehicle digital systems entering the market, the resulting scenario is expected to increase the market demand for telematics during 2007-2009.
The global telematics market has witnessed a radical transformation since its early days in 1990s due to the rapid evolution of the telecommunication industry. While the wireless technology market was initially dominated by the first generation analogue networks, the third generation digital networks such as 3G and 4G are expected to dominate the market during 2007-2011.
In Asia, traditionally most of the telematics market is driven by navigation and its associated services as well as infotainment. Honda was the first to introduce a navigation system based on electronic sensors in 1981; future developments that introduced CD-based maps encouraged the integration of infotainment with navigation. The year 1996 saw the development of Vehicle and Information Communication System (VICS) which further integrated telecommunication technologies to retrieve real-time traffic information.
Increased demand on safety and security in Japan saw the introduction of HELPNET services. Other countries followed suit. For example in Taiwan, Yulon Motor Company, the assembler of Nissan vehicles has introduced their TOBE telematics service in 2002. In addition to tie-ups with various agencies providing news, weather, and traffic information, they also provide speed warnings, emergency assistance, anti-theft features and service to identify car location in the case of any unauthorised entry.
Most other countries in Asia find it hard to follow Japan’s lead in telematics development. Active navigation system is not available due to the lack of infrastructure to support such services. This is the case for almost all Asian countries except Japan, Korea and to some extent Taiwan.
Most countries in Asia still do not have the adequate infrastructure to support features like real-time traffic for navigation systems, both in terms of traffic data collection and telecommunication infrastructure. The availability of the traffic data is one of the biggest barriers to greater adoption of telematics system. Traffic data collection and aggregation require initiatives from the government as it is the case with Japan’s Vehicle and Information Communication System (VICS) and Korea’s Telematics Information Center (TELIC). The Chinese Government is aware of the situation and is actively evaluating different systems to provide the information for its telematics industry.
The telecommunication world is divided into two camps, GSM and CDMA. Most of the countries in the Asia Pacific region, with the exception of Korea and Japan, predominantly use GSM networks.
Navigation systems after more than 20 years of development have a greater penetration and acceptance in the Japanese market. Over this period the speed of communication has jumped from 9,600bps to 2.4Mbps or 2.4 million bps, allowing the features to be delivered more intuitively through streaming traffic updates and voice communication. In this regard, most countries in Asia Pacific are lagging behind on delivery mechanism; however this is quickly being normalised.
High initial investment and delayed returns often act as barriers for prospective investors. Telematics is not merely a device with hardware, software, and communications network. It also involves the setting up and maintenance of a service centre to ensure consistent customer support. This requires considerable investment in product, market development, and management of the service centre operations.
Like any other market in a development stage, the telematics market in Malaysia is characterised by low customer awareness and its benefits. With availability of only partial telematics services in Malaysia, even the vehicle owners who have acquired certain telematics functions are not completely aware of the convenience and advantages of using complete telematics systems. Hence, telematics is not perceived as a “must have”. This restricts consumer adoption and hampers market development.
In Taiwan, one of the major issues that need to be addressed for triggering growth is to educate the customer about the convenience and advantages of using telematics systems. Automakers have a crucial role to play in this, since they are in close proximity to car buyers. They must make sustained efforts to educate vehicle buyers about telematics systems and the advantages they offer so that presence of telematics becomes a factor in vehicle choice. Automakers can take a lead by providing telematics services free of cost until customers are adequately educated about the benefits, convenience, and necessity of using telematics systems. This is likely to lead to growth in demand for telematics in Taiwan.
Customer education is expected to remain a high impact challenge over the next few years as the market evolves from infancy. Innovative and technologically upgraded products are likely to require customer education to become a continuous process.
The excellent support for the telematics industry received from the Japanese government mandated the creation of infrastructure for the Vehicle Information and Communication Systems (VICS) in 1996. This enabled car navigation system users to access and view real-time traffic and routing information on their navigation screens through Frequency Modulation (FM) multiplex broadcasts, radio beacons, and infrared beacons. Over 5 million Vehicle and Information Communication System (VICS)-compliant navigation systems have been sold, allowing drivers to access and view traffic and routing information on their systems.
South Korea is emulating Japan’s VICS initiative by establishing their own Telematics Information Center (TELIC) that provides maps, traffic, accidents and weather information to the telematics system providers.
Vehicle manufacturers and their associated suppliers in South Korea are currently streamlining their focus into developing standardised platforms and also integrating solutions for telematics and infotainment systems with the encouragement from the Government. Both these developments are expected to deliver cost effective solutions they have been long waiting to unleash. The key to unlocking the huge revenue potential is to prioritise the umbrella of telematics and infotainment applications across the different vehicle segments and also the needs of the consumers in those segments.
In China, limited service network coverage across the provinces is the major restraint for telematics to take off. The service network for telematics is not interconnected; and this impedes the reception of information when user travels across different cities. Original Equipment (OE) participants’ reluctance to introduce telematics is largely due to the lack of unified standard for service operators. There are many demonstration projects being carried out by Asian countries such as DYNASTY in Beijing using Traffic Management Channel (TMC) standard from Europe and also Vehicle Information and Communication Systems (VICS) from Japan. However, telematics will take a back seat in the original equipment market until 2008 until a sound service platform is established.
Similar initiatives are happening in Australia through the Australian Telematics Services Hub (ATSH) project, which aims to create a standard platform for content providers, auto manufacturers and system builders. However, other countries in the Asian region are yet to start collaboration at this level.
Telematics providers have easier time selling the benefits of such system to commercial vehicle fleet owners. For example, Honda developed their Intelligent Community Vehicle System in Singapore creating a successfully car-sharing business using a fleet of hybrid cars called Honda Diracc and The Intelligent Transport Management System (ITMS) developed by TEE-InfoComm for the 16,000 Comfort Transportation taxi fleet in Singapore.
Even in a developed market like Japan, consumers are not fully convinced that telematics is necessary. While consumers understand the importance of map and traffic update, they are less convinced about the safety and security function, especially benchmarked against other safety devices such as multi-stage airbags.
Asia could take lessons from Europe and North America. The frequent cross border travel within a relatively small geographical space with a variety of highway systems, regulations and not to mention languages has made navigation systems the most popular telematics application in Europe. GPS could potentially be the next big thing for tourism in Asia.
There is a big growth opportunity for the telematics market in Asia given the growth of 3G subscribers in the telecommunications sector in these countries.
In addition to having one of the highest per square kilometre population of automobiles in the world at 241 vehicles per square kilometre, Taiwan also has a high density of mobile phone usage, of which 91% are post-paid subscribers who are comfortable with the idea of a monthly subscription service. While the telematics market is still under developed in Taiwan and Thailand, there is great initiative from the governments in both countries to push for e-services. Besides market support for both W-CDMA and CDMA 1xEV-DO, both countries also have numerous telecommunication service providers whom the automakers could partner with.
For commercial vehicle telematics, Thailand which is the second largest manufacturer and market for pickup truck presents a major opportunity for the original equipment and aftermarket sectors. The telecommunication network in Thailand is still in the growth stage with 46.9% penetration in 2005; while the 3G network is not yet fully developed. Thailand is also expected to roll out CDMA 1xEV-DO and W-CDMA network by end of this year.
The Chinese telematics and infotainment markets are likely to see considerable growth and development over the next five years. Contributing to this upsurge will be continued growth in both demand and production of passenger cars, increasing disposable incomes, growing acknowledgment of the benefits of telematics and infotainment, the 2008 Olympic Games and the 2010 World Trade Exhibition.
Overall, uptake of the markets will also get a boost with newer telematics and infotainment systems becoming more affordable and the incorporation of navigation systems as a standard offering for many car companies. Recent analysis from Frost & Sullivan of the Chinese telematics and infotainment markets found revenues totalled US$422.3 million in 2005, with estimates to reach US$3.89 billion in 2012.
Australia has been a pioneer in the field of Intelligent Transport Systems (ITS), and associated benefits of ITS are being reaped in developed nations. Intelematics Australia, the joint venture between Royal Automotive Club of Victoria (RACV) and National Roads and Motorists’ Association (NRMA cater to the safety and security aftermarket through their Carcom subsidiary.
The intensely competitive Australian trucking industry is becoming a lucrative segment for the commercial vehicle telematics systems market. Major participants in the trucking industry will lead the way in the application of telematics, while the smaller market participants anticipate adopting telematics in a phased manner.
Demand for telematics should increase as manufacturing and retail sectors implement just-in-time (JIT) practices, which require real-time information on cargo delivery status. The use of telematics will also help trucking firms distinguish themselves from other market participants.
Source: Frost & SullivanThe Malaysian government’s move to identify telematics as one of the new growth areas for the auto industry in the Third Industrial Malaysia Plan is likely to spur further growth in the sector.
Despite fabulous economic performance and technology support, Malaysian passenger vehicle telematics market still remain at a preliminary stage with minimal market penetration. With the increasing popularity and awareness of telematics globally, the telematics market in Malaysia has started to see some changes. This year, several companies include those which were initially involved in vehicle security system and digital mapping, are making an attempt into the market. The telematics system is currently offered only in the aftermarket segment. Besides return on investment, another possible restraint for these products to kick-off in the original equipment market could be due to the heavy investment cost to put the system in place. Telematics is likely to be introduced initially on high-end marques, in which volumes for these segment is relatively low. It would be expensive for a single automaker to bear the cost of setting up the services. Another factor could be the complicated procedure to get approval from the authorities. The original equipment market for telematics is anticipated to start within two years.
Lessons that can be learned from other markets:
Keywords: Asia Pacific Telematics Market, Telematics, Global Telematics Market, Vehicle and Information Communication System (VICS), Telematics Information Center (TELIC)
