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The road ahead for telematics
The new on-board communications technologies known as telematics are transforming the automobile industry. These include vehicle applications such as navigation and traffic information systems, collision avoidance systems, and mobile communications gear—plus far more sophisticated devices that lie on the horizon. Projected revenue from the telematics market ranges from $13 billion to $100 billion, depending on the optimism of the forecaster. The big question for carmakers is how much of this revenue they can capture, since most of it will come not from hardware sales but from the provision of recurring services, such as information for drivers and rear-seat "infotainment," which most carmakers are ill placed to deliver.
The take-away: Shorter product cycles and dissimilar consumer demands mean that the telematics business moves at a pace different from that of the car business. Carmakers are unlikely to win much of the revenue from this expanding market unless they change the way they operate and work closely with other players along the value chain.
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© 1992-2003 McKinsey & Company, Inc
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