BriefCASE: Steering into the future - Telematics is the wheel deal

The new cars rolling out of assembly lines today have more telematics features than five years ago. This is because automakers globally seek to generate new and recurring revenue streams by offering subscription-based connected services in a range of vehicles across all segments. The integration of telematics is becoming a standard feature in many new vehicles, reflecting its growing importance.

For automotive original equipment manufacturers (OEMs) the efficacy of these services will be one of the key constituents of building and maintaining brand perception and loyalty. According to S&P Global Mobility's 2024 Connected Car Consumer Survey, over 80% of the respondents said they are either "very likely" or "likely" to recommend their connected services brands.

This vast potential of data monetization solutions throughout the lifecycle of a vehicle is driving OEMs to expand their telematics offerings. Some are deploying global platforms while others are pursuing regional strategies. This year General Motors made some popular features—such as automatic crash response and remote vehicle commands—of OnStar, a subscription-based service, standard on all its US models, starting with the 2025 model year.

The expansion of connected services has had a positive impact on the vehicle telematics hardware and software industry. This year suppliers such as Harman, Qualcomm, Marelli, Ambarella and Octo Telematics have unveiled new solutions for in-vehicle telematics applications. Also, new patents have been granted to companies such as Calamp Corp and Zonar Systems in areas such as crash determination, driver scoring and remote vehicle diagnosis.

What will also contribute to growth of vehicle telematics is increasing focus of governments in various countries on deployment of technologies that enable road safety. The United States took a big step in this direction last week by releasing a national deployment plan for vehicle-to-everything (V2X) technologies. Commenting on the plan, U.S. Secretary of Transportation Pete Buttigieg said, "The Department recognizes the potential safety benefits of V2X, and this plan will move us closer to nationwide adoption of this technology."

Adoption of hybrid telematics systems on the rise

S&P Global Mobility forecasts global demand for automotive telematics systems to rise gradually from about 56 million units in 2023 to nearly 78 million units by 2029, at a compound annual growth rate (CAGR) of about 6%. Embedded telematics control units (TCUs) made up nearly 18% of the total telematics demand in 2023, and this proportion will likely grow to nearly 21% by 2029. Hybrid telematics systems, which support both embedded TCUs and consumer electronics (CE) modules, hold the largest share of the overall market.

Hybrid telematic systems offer increased flexibility as they are capable of multiple connections across a variety of applications and services. While particularly evident in the luxury segment, adoption is expected to spread to other segments of the market, albeit at a pace below that of the overall market.

While V2X connectivity has long been discussed as the ultimate enabler of connected mobility ecosystems, its availability in light vehicles remains very niche today with just over 1% of light vehicles thus equipped. Moving forward, penetration will increase markedly but will remain short of the near ubiquity that telematics represent.

Greater China is the largest telematics market

With Greater China further ahead in deployment of all things CASE (connected, autonomous, sharing and electrification) related, unsurprisingly the region is ahead of North America and Europe in terms of telematics deployment in new light vehicles. The growth in new-energy vehicles will drive the telematics market in this region, as these systems are crucial in managing and monitoring EV performance, enhancing optimization and efficiency of the driving experience.

Vehicular telematics system growth is the result of a near-perfect storm of market, technological and regulatory forces combining to provide a benevolent environment for growth. With those forces including the aforementioned CASE, OEMs wanting to bolster alternative revenue streams, growing demand for usage-based insurance, and rapid technological advancement (6G connectivity arrives this decade) unlikely to subside any time soon, the long-term future for telematics and V2X seems assured.

Authored by: Vivek Beriwal, Senior Research Analyst

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