Telematics market emerging in China

by Hua Jinglei

Shanghai. May 21. INTERFAX-CHINA - A telematics market is emerging in China, which will provide telecom operators, software developers and content providers with a new revenue source, an industry analyst told Interfax on May 21.

Telematics, by the industry's definition, refers to the combination of global positioning satellite (GPS) tracking and other wireless communications for use in automobiles, allowing automatic navigation, roadside assistance and remote diagnostics.

"China, the largest automobile producer in the world, has also grown into a large automobile consumer, with annual automobile consumption growth of over 7 percent," Jason Huang, industry analyst with consulting firm Frost & Sullivan, said.

According to Huang, the fast-growing automobile market is stimulating the telematics market in China, with an increasing number of automobile manufacturers planning the launch of telematic services in the country.

"In March this year, Toyota Motor Corp. became the first automobile company to launch a telematics service in China with its 'G-Book' telematics system, which comes pre-installed in its Lexus RX350. More automobile manufacturers will follow suit in China over the next two years, such as General Motors China and Nissan Motor Co.," Huang said.

Telecom operators, software developers and content providers will play an increasingly important role in the development of a telematics market in China, although the market will initially be led by automobile manufacturers, according to Huang.

Traffic information service providers are emerging in China. Companies such as NavInfo Co. Ltd., AutoNavi Software Co. Ltd. and China TransInfo Technology Corp. (CTFO) are exploring the market by either cooperating with automobile manufacturers or seeking partnerships with telecom operators.

NavInfo and AutoNavi have so far cooperated with Toyota to provide the latter with navigation maps and real-time traffic data for its telematics services in Beijing, Shanghai, Guangzhou and Shenzhen, while CTFO is talking with China Telecom and China Unicom over the provision of real-time traffic data.

Nevertheless, the market is in its early stages, with the concept of telematics still new to Chinese companies.

"A mature telematics market will constitute three groups of market players in terms of their functions in the industry chain. The primary tier will consist of software and digital map developers and content providers. Telecom operators and telematics service providers will form the secondary tier," Huang said.

"The first-tier market players will provide content-integrated software to the secondary-tier players, who will generate the services. Automobile manufacturers will form the third tier, integrating telematics services into their automobiles with the help of telecom operators and service providers, which will be sold to end consumers," Huang continued.

Huang said that during the preliminary stages of China's telematics market development, there will be competition between automobile manufacturers and telecom operators over control of the industry chain. However, he said the two parties will eventually negotiate a reasonable split of revenues and control, as each party is essential to the development of a telematics market.
"The most likely business model of telematics in China will see telematics service providers responsible for user management and billing, while they will share revenues with the other participants in the industry chain," Huang said.

Interfax commentary: Although Chinese telecom operators are well aware of the emerging telematics market, they have been distracted by the development of 3G services, though they are bound to enter the telematics field with gusto sooner or later. Although the analyst believes that the most likely business model for telematics in China will see telematics services providers taking care of user management and billing, as systems become more complex, it will be telecom operators who have the expertise to manage the consumer end of the market.

http://tmt.interfaxchina.com/news/1745