Connected Car is one of the most perspective hi-tech directions. This topic was also widely discussed on. «Connected Cars»

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1 On October 16, 2013 J son & Partners Consulting representatives together with JSON TV group participated in the Motorola Solutions Analysts Day event that had been held by Motorola Solutions 1 in the technical center Caterham FI in Oxfordshire UK and organized specially for analytical agencies. The participants overviewed the highly-technological solutions that have the concept of Connected Car (for example: the prototype of police car was presented). Full video about the event can be seen on JSON TV portal: Link 1 and Link 2). Connected Car is one of the most perspective hi-tech directions. This topic was also widely discussed on the Mobile World Congress in Barcelona (please, visit for more information an example of the information-entertaining automobile system). J son & Partners Consulting presents main results of the research Connected Car: automotive telematics and information-entertaining automobile systems, «Connected Cars» Each year automobiles becomes more and more complicated with highly technological elements. New quality standards, ecological norms, high requirements for safety and comfort are being discussed. Cars should possess new functions apart from the general ones. In th times growth of solutions for the passengers cars is expecting in the consumer sector according to consulting company SVD Embedded systems. Wide range of new services and programs is waiting for the car users. Solution structure for passengers cars include: Embedded systems: include embedded communication modules, SIM and entertaining systems. Most of solutions are oriented for the safety, traffic management, payments for the ride etc. Systems, connecting to the mobile phone (tethering 2 ): telephones are being used as a chain between a car and network. Solutions mostly oriented for navigation and entertainment. 1 Motorola Solutions company one of the leading providers of goods and services, such as provision of the critically important communications for commercial buyers and government institutions. J son & Partners [registered trade mark]. 1

2 Integrated systems: necessary applications integrated in a car. Solutions oriented for navigation and entertainment. Monitoring systems supporting the drivers management, could solve several tasks, such as cars monitoring, logistics management in companies, increase the safety level and also cut the costs for car operation. The following instruments help to cut the costs: Drivers identification an opportunity to track the style of driving and compare the economic efficiency (time of driving/completed way/following the pre-confirmed way etc); Targeted car use analysis and style of driving of each driver. Help to optimize costs for repair and car maintenance; Management of routes and geozones; Fuel/Gaz control; Driving history. The necessity to produce and mass installation of embedded modems with a special SIM-card is constraining the development of embedded systems. Such problem for tethering can be solved easily on a base of general IP-address. Advantages of tethering: Use of less expensive equipment (in comparison with embedded systems). Direct costs for connection and use of services for the end customers. Positive impact on the external modems. Due to the short period for mobile devices update, external modems will be more appropriate in comparison with embedded modems. Nevertheless even the tethering fans admit that this technology is enough only for some options and cannot provide distance management of a car, following routes in case a car had been stolen etc. Development of tethering technology includes: Use of different opportunities (for example: increasing the level of Bluetooth PAN/DUN, improving the pairing process); Establishment of agreement for work principles of new generation of devices for tethering (including WifiDirect). Smartphone is becoming a component of automobile system. Integration of smartphones, Tablet PCs and operational car system provide an opportunity to listen music online, receive access to the web-data, broadcasting video for passengers etc. A lot of car manufacturers prefer the development of Connected Car (using new services of smarphones and Tablet PCs) rather than to install any embedded devices. According to Juniper Research estimates the share of cars connected to smartphone in 2017 will reach 20% of the total number of consumer cars in North America and West Europe. In the next five years 90 mln. of connected cars will be produced. Step by step world car manufacturers are transforming a car to be compatible with smartphone. Last year Toyota added to its models the wireless smartphone charger, Nokia announced an integration of its map services and Google is developing self-propelled vehicles, all these actions provide new business opportunities. 2 Tethering (to tie/band) - use of mobile phone as an access spot for other devices to the networks services of data transfer via mobile operators. J son & Partners [registered trade mark]. 2

3 Telematics and car industry M2M system is a crucial factor for telematics 3 development. Key factors for creation are principles of data gathering, analysis of information and provision of services, connecting to information. According to J'son & Partners Consulting the global M2M market volume was 108 mln.usd in In 2015 it is expected to reach mln.usd. M2M market will have 6% share of the total subscribers base of mobile operators in 3 years (18.4 mln. devices). Russian market will reach 107,5 bln.rub in Telematics will develop on developing markets very fast (excl. China). Insurance telematics is a very prospective market that can bring profit to users and population in general. Users will be able to identify their style of driving and cut the costs for insurance premium if they use a safe driving method. The world market of insurance telematics will grow in 2013 averagely for 81% (from 5.5, mln. people that will use these services) and will reach 107 mln. users in As a result, the market of new IT insurance services will grow in 20 th times for the next 5 years. Fig.1. Global premium forecast in car insurance (calculated with a help of telematics) bln. USD Source: J son & Partners Consulting The volume of Russian market was 10 bln. RUB in 2011 and 12 bln. RUB in Last years the annual growth rate of number of cars where navigation equipment is installed is around 38 40%. 3 Telematics sphere of informatics that include the telecommunication sphere J son & Partners [registered trade mark]. 3

4 Fig.2. Russian market of transport telematics and satellite navigation Source: М2М telematics, 3S-Telematics OEM-manufacturer produce telematics by OEM-approach 4. Product is being sold under the original brand to the retail customers and at the same time this product is being produced with a typical or customized component. OEM-manufacturer is a company that collects an end product, OEM-supplier is a company that supplies the typical components (or customized). OEM-manufacturers revenues from equipment sales in 2012 were 0.8 bln. EUR and will reach 1.7 bln. EUR in The forecasting average annual growth is 16%. The average annual rates of equipment sales will be higher than the average growth rate of revenues from resale (8%). Fig. 3. Dynamics of OEM-manufacturers revenues bln. EUR 1,8 1,6 1,4 1,2 1 0,8 0,6 0,4 0,2 0 1,7 1,6 1,4 1,2 1,0 0, Продажи оборудования Sales of equipment Source: GSMA For 2017 the revenues structure is the following: 12.7% - direct sales of equipment (in the total revenue structure of OEM-manufacturers); 66.7% - providing services, 13.6% - resales (CRM etc) and 8.1% - data transfer. Sales of equipment will be one of the most dynamic segment (average yearly growth rates of revenues for will be 16%, and 8% for resale). 4 OEM abbreviation for Original equipment manufacturer and relate to any product that had been produced by OEM approach J son & Partners [registered trade mark]. 4

5 A lot of market players are actively participating in the automotive telematics development and are trying to make an impact in the development of connected cars. Intel announced a launch of investment projects in the automobile industry. The key goal will be the development of new solution for cars with communication opportunities. Microsoft provides an embedded operational system based on Windows CE for car use (Windows Embedded Automative). Government and local authorities are also interested in the development of Connected Car. Real time management of traffic flow will help to decrease the number of stops for 40%, time for traffic for 25% and gas use for 10% and all of this is possible thanks to Connected Car technology. All these costs savings are crucial especially for the future when the number of passengers cars will reach 1.7 bln. in 2035 (data of International energy agency). The penetration rate of cars in China will grow from 50 cars per 1000 persons to 300 cars per 1000 persons in Mobile connection operators gain profit from the increasing data traffic, increasing penetration rate of mobile phones and embedded devices on the automobile market. Operators could develop new business concentrating on M2M services. Automotive telematics is a perspective field for Big Data use. Gathering information via intellectual analysis of data, using the experience in particular industries (for example, experience of drivers, providing services for the interested parties only etc.). Drivers data (profile and interests/preferences). Car manufacturers, insurance companies etc. can use these data and develop services and goods on a base of drivers personal information. This field of market is already taken by the largest market players and providers of telecom services. According to SBD, from the global market of Connected Car will grow 3 times and will be over 40 bln. EUR. Segment of associated services is still the large (traffic jam info, call-centers, entertaining web-services etc). In 2018 it will reach 24.5 bln. EUR in comparison with 9.3 bln. EUR in And even faster it will grow other segments of Connected Car market: sales of equipment (for ex. telematics devices) 5.75 times increase (from 1.2 bln. EUR to 6.9 bln. EUR); connection services (for ex. mobile data transfer) 5 times growth (from 814 mln. EUR to 4.1 bln. EUR). Telematics services market will grow from 1.8 bln.eur to 4.5 bln.eur in the timeline. (2,5 times) Fig.4. Global market of Connected Car, Source: GSMA, SBD, May 2013 J son & Partners [registered trade mark]. 5

6 Video from Mobile World Congress, MWC (feat. J son & Partners Consulting analysts and JSON TV) about automobile informationentertaining system is available here: Demonstration of technical features of intellectual system police car was presented on Motorola Solutions Analysts Day event (October 16, 2013), video link: Other videos from Motorola Solutions Analysts Day event (feat. J son & Partners Consulting analysts and JSON TV) is presenting here: interview with David Perry (Director for marketing solutions for government and public security systems, Motorola Solutions) about the perspectives of LTE use in the sphere of public security Detailed results of the report are presented in the full version of the Report: Connected Car: automotive telematics and informationentertaining automobile systems, (114 p) Content Resume 1. Connected car and automobile M2M business 1.1. Introduction 1.2. Automotive telematics market structure Telematics and M2M М2М-ecosystem Telematics: users and applications Consumer sector Information-entertaining automobile systems Insurance telematics Recovering of a stolen car Commercial telematics Tracking of transport and cargo Drivers management Engineering services and management Vehicle-to-infrastructure systems, V2X Definition and current state Examples of V2X use Tests Dedicated Short-Range Communications, DSRC Barriers 1.3. Telematics and automobile industry Regional markets characteristics Attention to the developing markets 1.4. Main trends, drivers and restrictions Trends «Green» initiatives Development of mobile internet and apps for smartphones Telematics services provided by large automobile producers Drivers J son & Partners [registered trade mark]. 6

7 Good awareness and knowledge of telematics services Government regulations and orders New standards and technologies Restrictions and barriers Expectation of highly specialized services for low prices Long terms for deployment Fragmented market Informational security 1.5. Role of smartphones and Tablet PCs 2. Key market players, business-models and approaches 2.1. Introduction 2.2. Market structure Perception of values Mobile apps for automobiles and Big Data Meaning of tethering Approaches and strategies OEM and telematics of resale market Preferences in telematics 2.3. Groups of influence Car manufacturers Audi Connect BMW Cadillac FordSync Hyundai Lexus Mercedesmbrace Toyota Entune Others Manufacturers of microschemes and modules Communications operators 2.4. Standardization of approaches Sectoral and other initiatives which are supporting software with an open source code Tize CarConnectivityConsortium 2.5. Conclusions 3. Current market volume and forecasts of consumer automotive telematics 3.1. Introduction 3.2. Integrated telematics Forecasting methods Subscribers base Revenues of consumer telematics OEM-telematics Revenues from end customers Revenues from OEM-manufacturers Revenues on resale market Combined revenues (OEM and secondary market) 3.3. Tethering(connecting) of smartphone and direct integration with application J son & Partners [registered trade mark]. 7

8 Long-term perspectives for apps integration Smartphones tethering forecasting methodology Revenues from apps integration and tethering 3.4. Insurance telematics Concept of insurance telematics Concept of Pay as you drive, PAYD 3.5. Forecasts for insurance telematics Methodology Insurance telematics subscribers Revenues of insurance telematics Incomes of insurance telematics Equipment and installation Total revenues from insurance, equipment and installation 3.6. Conclusion 4. Commercial telematics market size and forecasts 4.1. Introduction 4.2. Market sophistication and range if services 4.3. Commercial telematics market forecasts Forecasting methods in the commercial telematics Revenues of commercial telematics OEM-manufactures revenues Revenues from resale Combined revenues (OEM and resale) 4.4. Conclusion 5. Commercial telematics: market players profiles and positioning on the market 5.1. Introduction 5.2. Evaluation of vendors Methodology of vendors evaluation Restrictions and interpretation Matrix of positioning results Grouping of vendors Strategic decisions corporate actions 5.3. Profiles of market players Daimler Fleet Board FleetMatics Hughes Telematics (Verizon) MiXTelematics Masternaut OctoTelematics OnStar TelenorConnexion Telogis TomTom Trimble 5.4. Conclusion Annex 1. List of companies mentioned in the report J son & Partners [registered trade mark]. 8

9 List of Figures Fig. 1. Evaluation of the annual revenues from use of Connected Car per 1 passengers car Fig. 2. Global forecast of number of M2M connections Fig. 3. Demand for different type of services Fig. 4. Forecast of global sales of solutions for passengers vechicals Fig. 5. Forecast of global sales dynamics (embedded systems) by countries Fig. 6. Forecast of global sales dynamics (systems connected to the mobile phones) by countries Fig. 7. Forecast of global sales dynamics (integrated systems) by countries Fig. 8. Dynamics of smartphones penetration rate Fig. 9. Forecast of OEM-telematics penetration rate among new cars by segments, 2015 Fig. 10. Forecast of sales (OEM consumer embedded telematics) thousand pcs. Fig. 11. Forecast of sales (consumer embedded telematics) on the resale market, thousand pcs. Fig. 12. Forecast of device price (consumer telematics) on the resale market, USD Fig. 13. Forecast of device price (OEM consumer telematics) on the resale market, USD Fig. 14. Forecast of revenues level (OEM consumer telematics), mln. USD Fig. 15. Forecast of revenues level (consumer embedded telematics) on the resale market, mln.usd Fig. 16. Market structure of the consumer embedded telematics, $ Fig. 17. Forecast of revenues level (consumer embedded telematics), mln.usd Fig. 18. Forecast of global sales dynamics (tethering systems) by countries Fig. 19. Scheme of insurance telematics Fig. 20. The significance of various consumer information Fig. 21. Dynamics of number of subscribers (insurance telematics) Fig. 22. Forecast of insurance premium (counted with a help of telematics), in USA and Europe Fig. 23. Forecast of insurance premium (counted with a help of telematics) in the world Fig. 24. Forecast of revenues (sales and installation of equipment for insurance telematics) in the world Fig. 25. Forecast of total revenues (insurance premium, equipment and installation) in the world Fig. 26. Russian market of automotive telematics and satellite navigation Fig. 27. Forecast of revenues (sales of telematics) in Europe Fig. 28. Forecast of revenues (sales of telematics) in Europe by countries, 2015, mln.eur Fig. 29. Dynamics of OEM-manufacturers revenues Fig. 30. Dynamics of sales structure (telematics systems) in Japan Fig. 31. Forecast of sales dynamics (telematics systems) in Japan Fig. 32. Dynamics of resales Fig. 33. Dynamics of total revenues List of Tables Table 1. Car manufacturers key directions of operations Table 2. Creation of added value of Connected Car by different market players Table 3. Overview of challenges and opportunities that face the car manufacturers Table 4. Overview of offers and strategies of some car manufacturers in the sphere of Connected Car Table 5. Options overview, provided by Audi Table 6. Options overview, provided by BMW Table 7. Options overview, provided by Hyundai Table 8. Options overview, provided by Mercedes Table 9. Overview of the challenges and opportunities that face the suppliers Table 10. Overview of the challenges and opportunities that face the operators Table 11. Forecast of sales of cars, including light trucks, thousand pcs. Table 12. SWOT-analysis of development of tethering technology (with embedded modem for example) Table 13. Assessing the impact of the insurance telematics on the value chain of insurance companies Table 14. Matrix of results of vendors positioning on commercial telematics market Table15. Group of vendors matrix on the available opportunities. J son & Partners [registered trade mark]. 9

10 Table16. Profile of Daimler FleetBoard company Table 17. Profile of FleetMatics company Table18. Profile of Hughes Telematics (Verizon) company Table19. Profile of MiXTelematics company Table20. Profile of Masternaut company Table21. Profile of OctoTelematics company Table 22. Profile of OnStar company Table23. Profile of Telenor Connexion company Table 24. Profile of Telogis company Table 25. Profile of TomTom company Table 26. Profile of Trimble company List of companies mentioned in the report «M2M telematica» 3S-Telematica ABI Research Apple Audi BMW Bosch Bug Labs Car Connectivity Consortium Cisco Cohda Componentality Continental Daimler Deutsche Telekom Ericsson FleetMatics Ford Frost&Sullivan Gazmobil GeneralMotors Google Hyundai IHS Intel Juniper Research KIA Machina Research Masternaut MBtech Consulting GmbH Microsoft Mix Telematics Nissan Nokia Nvidia NXP Octo Telemativs OnStar Opel Pandora Qualcomm Roland Berger SBD Skoda StarLine Telenor Telogis TomTom Toyota Trimble Verizon Volkswagen Volkswagen Volvo General Motors Mega-F «Glonass» «Ingosstrakh» Caesar Sattelit The newsletter was prepared by the J'son & Partners Consulting Company. We exert every effort to provide actual and forecasting data representing the situation in full and available at the time of the publication of the material. J'son & Partners Consulting reserves the right of revising the data after publication of some new official information by individual players. CONTACT FOR MORE INFORMATION: Pavel Ermolich Commercial Director J son & Partners [registered trade mark]. 10