Subject: [NEXTEL-1] Car Manufacturers Rev Up Deployment Of Commercial Vehicle Telematic Systems

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Date: Mon, 11 Nov 2002 18:14:10 -0500

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Car Manufacturers Rev Up Deployment Of Commercial Vehicle Telematic Systems

Published: Thursday, 7 November 2002
As the automotive industry sits on the cusp between the industrial age and the information age, telematics will play an increasingly pivotal role in the integration of mobile, in-vehicle computing and wireless technologies.

A new study by Frost & Sullivan, the international marketing consulting company, believes telematics - the fusion of telecommunications and information technology in the automotive space - will be the primary battleground in the fight for the hearts, minds and Euros of commercial vehicle users.

In their quest for leadership, vehicle manufacturers are launching an aggressive push into the commercial vehicle telematics market. In response to mounting competition, auto makers are revamping their strategy for further development of the technology and its commercial application.

"A rising number of new vehicles will come ready fitted with telematic systems or fleet management systems (FMS) interfaces to enable the implementation of value-added features," explains Tif Awan, Research Analyst at Frost & Sullivan.

The promise of harnessing the power of telematics as a key competitive differentiator entices a growing number of automotive manufactures to enter this marketplace. However, the study cautions that the use of telematics to establish any degree of competitive edge is likely to be unsustainable in the longer term when a glut of system introductions will be diminishing competitive advantage.

Another key objective for auto makers' foray into telematics is to unleash downstream revenues from services complementing the existing core business and counteracting the declining margins from vehicle sales.

Furthermore, greater presence in the telematics market will help companies to improve profits through customer focus. The potential of effective customer relationship management (CRM) through the provision of an enhanced value proposition is enormous. Individualised attention will help car companies gain a better understanding of customer perception and requirements, optimising overall value exchanges with customers in the longer term.

The replacement of older vehicles will result in higher systems penetration, providing key stimulus for expansion of the commercial vehicle telematics market, set to grow from €169.5 million in 2001 to revenues of around €4.7 billion by 2009.

As the parc of commercial vehicles with telematics grows, Frost & Sullivan expects the market focus to shift to the high value and higher margin services market, with services delivering 68 percent of revenues in 2009. The study expects the number of vehicles fitted with telematics systems to rise from a base year figure of 75,550 in 2001 to over 5.4 million in 2009.

Frost & Sullivan's study cites standardisation of systems architecture as a major force stimulating volume growth for telematic systems and services. The ubiquity of GSM across Europe will support the development and provision of commercial vehicle telematic services, such as messaging.

"The growth of just-in-time logistics systems and the popularity of express delivery services have ramped up the cost of vehicle downtime to vehicle operators. Thus, technology that reduces downtime is becoming increasingly valuable. As such, commercial vehicle telematics systems can be an effective productivity tool," Mr Awan adds.

Intelligent transportation systems (ITS) and telematics form an integral part of European national government initiatives to curb congestion and move towards an integrated transport policy. The study highlights government initiatives such as electronic toll collection as another factor invigorate growth in commercial vehicle telematics.

"Companies involved in providing telematics services, be it vehicle manufacturers portals like Volvo Dynafleet and Scania Infotronics, wireless telecom operators such as Vodafone and T-Mobile or dynamic retrofit application service providers like Minorplanet Systems and Gedas Logiweb, are set to reap the benefits from the increasing buoyancy of the commercial vehicle telematics market. Those players failing to respond effectively to the changing competitive landscape will lose out on exciting market opportunities," warns Mr Awan.

Volvo Dynafleet, Scania Infotronics, DaimlerChrysler FleetBoard, NavTech, TeleAtlas, SiemensVDO Automotive, Bosch, Motorola, Magneti Marelli, Vodafone, Webraska, ProSyst, IBM, Acunia, Gedas and Minorplanet Systems are all expected to strengthen their foothold in the industry.

The value of commercial vehicle telematics is explicit for the companies operating in the industry. However, potential end-users are faced with a choice of substitute technologies and products and it should not be forgotten that value is in the eye of the buyer. The availability of substitute technologies will hamper unit and revenue growth in the commercial vehicle telematics market.

Drivers' distrust of 'big brother' style monitoring poses a further stumbling block to accelerated uptake of systems. "However, the impact of this restraint is expected to regress with time as drivers become more at ease with the technology. Also, increasingly widespread availability of new vehicles equipped with advanced systems enhancing driver comfort will heighten the appeal of the technology," the study concludes.

Frost & Sullivan's Analysis Of The European Commercial Vehicle Telematics Market

Publication Date: November 2002

Report Code: B042

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