Automotive Telematics Industry Maturing Poised for Growth.

Automotive telematics (including systems that combine global positioning satellite (GPS) technology and other wireless communication systems for automatic roadside assistance and remote diagnostics) are poised for a rapid market expansion by 2005, according to a new report.

The report, "Telematics Paradigm Shift: Industry Strategies Mature as Business Model Realities Sink In," released by The Strategis Group predicts that growth in the automotive telematics market will occur as auto companies and wireless operators partner to introduce more sophisticated hands-free voice solutions into cars. Counter to a perceived lull in market demand, a new generation of emerging technologies offers opportunity for the mass penetration of telematics services, the report stated.

"We have seen a 250 percent increase in our subscriber base this year alone, and anticipate ending the calendar year 2001 with almost two million subscribers," said Chet Huber, President of OnStar, a wholly owned subsidiary of General Motors and a leading telematics provider in the U.S.

The Strategis Group believes that telematics will become a competitive differentiator of automobiles and will increasingly help sell cars to safety-conscious and connectivity-oriented car buyers. In the near term, automakers will continue to struggle to develop highly profitable businesses revolving around safety-based embedded systems alone, and the investment-intensive platforms for advanced customer relationship management and vehicle relationship management will continue to be slow to develop.

"Voice services have already emerged as a profitable application in the vehicle. The next logical step is to improve the quality and the level of integration of voice into mass-market vehicles," said Aldo Morri, a senior consultant with The Strategis Group. "Operators and auto OEMs are realizing that by utilizing up-and-coming technologies like Bluetooth and speech recognition, telematics is primed to reach the next level."

The report predicts that U.S. telematics adoption rates will reach about 49 percent of U.S. new car sales by 2005. Approximately 85 percent of new U.S. vehicles sold by 2005 will offer telematics as a factory or dealer-installed option Nearly 17 million telematics subscribers will be on the road in the U.S. by 2005, assuming 75 percent re-subscription rates. Telematics equipment revenues will total about $2.5 billion annually by 2005, while telematics service revenue will increase to $2.8 billion per year by the same time (not including non emergency-related wireless phone airtime, or application use fees).

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