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INSIGHTS

A UTOMOTIVE , A EROSPACE & I NDUSTRIALS G ROUP V OL . 3 I SSUE 2

Automotive Telematics: Driving Toward the Wireless World

T

he automobile industry is in the midst of a dramatic transformation. Telematics has the potential to convert automobiles from a mere mode of transportation into mobile information stations and Original Equipment Manufacturers (OEM) from a mere producer of automobiles into providers of recurring, high-margin telematics service, while propelling traditional suppliers into the high-tech world of wireless communications, high-end digital hardware, and service provision. Projected revenue opportunities are large — $9 billion by 2004 — and expected to grow to $20-$40 billion within the next ten years.

Overview

Automotive players continue their march toward increasing customer intimacy and capturing vehicle post-purchase sources of revenue. As the conduit through which electronic services are delivered to the car, telematics provides one nascent and potentially huge opportunity for high-margin revenue. However, telematics also presents a unique set of challenges. Automotive players must raise their understanding of consumers’ expectations from wireless products and services that broadly fall outside the traditional automotive experience. Additionally, they must also learn to drive their business at the fast pace of innovation that characterizes consumer electronics and telecommunications. Finally, market success will be achieved through far-reaching partnerships that combine partners’ capabilities to deliver seamless experience to users of the service. This Insights provides Booz•Allen’s perspective on the nascent telematics market, as well as the critical capabilities and partnerships required to successfully build future competitive advantage.

U.S. TELEMATICS MARKET (EXHIBIT 1)

$10 $9 BILLIONS OF DOLLARS $8 $7 $6 $5 $4 $3 $2 $1 $0 $3

$9

$6.2

$4.7

$3.2 $1.5 $.7 2000

$.3 $.4 $.7 $.8 $1.6 $3.2 $1.6 $4.3

2001...