While the North American light vehicle market is expected to see rapid growth in the installation of high-tech in-vehicle electronics, the majority of this growth will come from OE-installed telematics systems.
Automakers are changing strategies toward telematics systems that allow integration with a user’s mobile device, and due to the expansion of this market, consumers are expected to flock to these in-car connectivity solutions in the near future. If aftermarket manufacturers of high-tech electronics continue to be relevant players in the market, they must adjust their product strategy to deal with the new OE threat.
Aftermarket manufacturers should focus their product development efforts on the vehicle segment gaps not covered by OEM technology, namely those of older and entry-level vehicles. These segments are not generally equipped with advanced telematics systems, and both offer potentially excellent market prospects. The sale of small, entry-level vehicles has risen since the recession of 2008, and should continue to increase as consumers become more fuel-conscious and automakers share global vehicle platforms with the North American market. With average vehicle age rising, the number of vehicles in use in North America is expected to grow through 2016. This creates potential for the aftermarket telematics systems market, especially since the mobile device industry is expected to continue to grow at an accelerated pace, leaving many consumers searching for a connectivity solution that is compatible with their vehicle.
Aftermarket devices must compete with OE devices in functionality, compatibility, adaptability, and affordability. For maximum market potential, aftermarket devices should be compatible with smart phones, personal media players, and standard mobile phones. Due to the differences in capability between these devices, a strategically powerful solution would be a tiered approach to device functionality, ideally leveraged through a single device; for example, a device could offer voice control of personal media players, integrated Bluetooth for standard mobile phones, and a more extensive offering of applications for smart phones. This would allow the device to adapt and maintain relevance if the consumer wants to move up a tier in functionality, while reducing development costs for the manufacturer.
To maintain a competitive suite of features, device manufacturers are encouraged to relegate the bulk of the hardware to the in-vehicle device. This would allow the majority of the control software to be moved to proprietary mobile-device applications. Allowing consumers to use a type of cafeteria plan to purchase their desired applications would strike a balance between maintaining affordability and competitiveness, while allowing consumer response to dictate the product mix. The use of existing mobile device application stores would reduce infrastructure costs, to protect manufacturer margins. An application-based model would also permit the development of an “inkjet printer business model,” in which the main in-vehicle device is sold at a loss, and margins are recovered through the sale of device applications. This would ensure initial affordability to the consumer, making it relevant to its targeted demographic and speeding market adoption.
