How Much Business is Left for Telematics Suppliers and Service Providers in the US?

There is still money on the table, but it’s dwindling quickly.

While most of the opportunity in the automotive telematics business for suppliers and service providers has been sewn up, there remain significant openings for enterprising companies—but not for long, according to the automotive electronics research firm iSuppli Corp.

Among the 10 major automakers in the United States., nearly all have a vehicle telematics platform in progress; an announced and soon-to-be launched program running; or an unannounced, still confidential effort that is in development. Although not all consumers buy cars from these brands, a majority of motorists do.

In the United Stated in 2009, the 10 major automakers, represented nearly 94 percent of total market sales, leaving just 6 percent for smaller automakers including Mazda, Mitsubishi, Subaru and Suzuki. However, the remaining 6 percent represents nearly 700,000 in annual sales, offering rich potential for additional telematics sales and services revenues.

U.S. Auto Sales

Potential for New Business
In short, there is still money being left on the table, if these automakers are not claimed. Which automakers are left? According to iSuppli market intelligence, Porsche and Jaguar/Land Rover are the only two luxury OEMs left to finalize a decision, and rumor has it that Saab’s new management is open to pursuing systems outside of OnStar from its former owner General Motors.

As for the volume brands, Mitsubishi, Subaru, Mazda, and Suzuki are notable automakers that are seemingly committed to staying in the U.S. market for a while and still have yet to fully lay down their telematics cards.

For the niche luxury brands like Maserati, Ferrari, Lamborghini and Bugatti, those represent such a small portion of the U.S. telematics available market, in iSuppli’s opinion, that they likely will pick up any decided-upon solution that may come from their respective controlling automakers. This is exactly how embedded phone telematics came to be in the Rolls-Royce (BMW Assist) and Maybach (Mercedes-Benz mbrace) product lines. Porsche might even go that direction with Volkswagen or Audi’s upcoming solution.

Furthermore, even if the ultra-luxury and supercar brands do not pick up a full telematics solution, stolen vehicle tracking would likely be implemented, even if on the aftermarket level. Stolen-vehicle tracking is already widely available for these brands in Europe.

Potential Business Models
Embedded telematics has outlasted the criticism of the media, the public and the automotive industry value chain. OnStar did not get to where it is today by resting on its laurels, and GM has reinvented OnStar services or hardware at every turn since 1996. Add to that successful programs from BMW and Mercedes, a host of aftermarket players and new solutions from the likes of Toyota and Lexus, and embedded telematics has seemingly found a permanent place in the market.

Nonetheless, embedded telematics doesn’t come cheap, as GM, BMW, Daimler, and Toyota officials will tell you. As opposed to simply putting the feature into the product lines, the embedded telematics approach requires a firm investment in time, money and engineering to make it work—and an automaker might see revenue only after some years of effort.

So, naturally, all of the smaller OEMs referenced above should shy away from the embedded approach, right?

Not necessarily.

The embedded approach gives both the automaker and end consumer a distinct value-add that cannot be replicated with mobile devices. Simply put, an embedded solution will offer a more secure connection in times of crisis, as well as provide a host of remote telemetry that just cannot be achieved when the communications device leaves the car with the consumer.

Telematics Soon to be a Must-Have
Although the market is not collectively clamoring for connectivity in vehicles today, the day is coming when communications like emails, vehicle tracking, apps, Internet radio and much more will be a major factor separating the winning OEMs from the losing ones. To say that mobile is better than embedded, or vice versa, would be meaningless, as the technology should fit both the buyer and the automaker simultaneously.
Adding connectivity and telematics could one day lure buyers away from larger, more developed automakers, as well as help to distinguish the remaining few from the incoming products arriving from China and India. Brand loyalty is on the line here, and telematics—though unable to create brand loyalty on its own—can act as a brand pillar to a perfect product. The remaining 6 percent of automakers in the United States would do well to give telematics a serious look.