CONNECTED CARS: WORLDWIDE TRENDS AND FORECASTS

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1 RESEARCH FORECAST REPORT CONNECTED CARS: WORLDWIDE TRENDS AND FORECASTS MICHELE MACKENZIE AND TOM REBBECK Analysys Mason Limited 2016 analysysmason.com

2 About this report This report analyses the connected car market during and includes the number of connections and connectivity revenue for: embedded devices, which are installed in passenger cars 1 during the manufacturing process aftermarket devices, which are installed in passenger cars at any time after the manufacturing process. The report also provides the number of tethered connections, where in-car connectivity is provided using a tethered smartphone. The data in this report is based on several sources, including research interviews with industry players. GEOGRAPHICAL COVERAGE Central and Eastern Europe (CEE) Developed Asia Pacific (DVAP) Emerging Asia Pacific (EMAP) Latin America (LATAM) Middle East and North Africa (MENA) North America (NA) Sub-Saharan Africa (SSA) Western Europe (WE) KEY METRICS Connected car device connections Connected car connectivityrelated average revenue per connection (ARPC) Connected car connectivityrelated revenue Three types of connectivity within the Automotive sector Aftermarket Embedded Tethered WHO SHOULD READ THIS REPORT Mobile network operators (MNOs) Market analysts focussing on the connected car market Market analysts responsible for M2M market sizing Executives focussing on the connected car market Connected car suppliers Automotive original equipment manufacturers (OEMs) 1 For a definition of passenger car, see Figure 24 in the Appendix. Analysys Mason Limited

3 Contents 6. Worldwide trends 7. Worldwide: There will be more than 700 million connected cars in 2025, most of which will have embedded connectivity 8. Worldwide: Embedded and aftermarket connections constitute new growth areas for IoT network owners 9. Worldwide: The percentage of new cars sold with embedded connections will increase dramatically, reaching 94% in Worldwide: Emerging Asia Pacific will be the largest cellular automotive market with 287 million connections in Worldwide: Connectivity revenue from connected cars will grow to USD12 billion by 2025, driven by embedded connectivity 12. Worldwide: More than half of passenger cars worldwide will be connected by Western Europe 14. Western Europe: There will be more than 120 million connections by 2025, the majority of which will be embedded 15. Western Europe: Connected car connectivity revenue is expected to grow to over USD3 billion in Central and Eastern Europe 17. Central and Eastern Europe: Connected car connections will increase more than four-fold to 42 million during Central and Eastern Europe: Connected car connectivity revenue will reach more than USD700 million in Middle East and North Africa 20. Middle East and North Africa: Connected car connections will increase substantially at a CAGR of 39% 21. Middle East and North Africa: Connected car revenue is initially negligible, but grows significantly after Sub-Saharan Africa 23. Sub-Saharan Africa: Connections will reach 11 million in 2025, with a significant share of these being aftermarket devices 24. Sub-Saharan Africa: Connectivity revenue growth is significant, but the total will remain small USD149 million in Emerging Asia Pacific 26. Emerging Asia Pacific: The region will be the largest connected car market by 2025 with 287 million connections 27. Emerging Asia Pacific: Connected car connectivity revenue will grow to almost USD2.7 billion in 2025, despite low ARPC 28. Developed Asia Pacific 29. Developed Asia Pacific: Connected car connections will grow to just over 66 million in Developed Asia Pacific: Connected car connectivity revenue will reach USD1.7 billion in North America 32. North America: The number of connections will continue to grow significantly from a relatively mature state Analysys Mason Limited

4 Contents 33. North America: Connected car connectivity revenue is expected to grow to over USD2.8 billion in Latin America 35. Latin America: Connected car connections will experience moderate growth, reaching over 46 million in Latin America: Connected car connectivity revenue will reach over USD550 million in Forecast methodology and assumptions 38. Market definitions (1) 39. Market definitions (2) 40. Definition of geographical regions 41. About the authors and Analysys Mason 42. About the authors 43. Analysys Mason s consulting and research are uniquely positioned 44. Research from Analysys Mason 45. Consulting from Analysys Mason Analysys Mason Limited

5 List of figures Figure 1: Connected car connections by type, worldwide, Figure 2: Selected CSP connected car partnerships for embedded connectivity Figure 3: Passenger cars and percentage of passenger cars with embedded connections, worldwide, Figure 4: Passenger car sales and percentage of passenger cars sold with embedded connections, worldwide, Figure 5: Connected car connections and CAGRs 1 by region, 2025 Figure 6: Connected car connectivity revenue and ARPC by type of connection, worldwide, Figure 7: Key data and forecasts for connected cars, 2015 and 2025 Figure 8: Connected car connections by type, Western Europe, Figure 9: Connected car connectivity revenue and ARPC by type of connection, Western Europe, Figure 10: Connected car connections by type, Central and Eastern Europe, Figure 11: Connected car connectivity revenue and ARPC by type of connection, Central and Eastern Europe, Figure 12: Connected car connections by type, Middle East and North Africa, Figure 13: Connected car connectivity revenue and ARPC by type of connection, Middle East and North Africa, Figure 14: Connected car connections by type, Sub-Saharan Africa, Figure 15: Connected car connectivity revenue and ARPC by type of connection, Sub-Saharan Africa, Figure 16: Connected car connections by type, Emerging Asia Pacific, Figure 17: Connected car connectivity revenue and ARPC by type of connection, Emerging Asia Pacific, Figure 18: Connected car connections by type, Developed Asia Pacific, Figure 19: Connected car connectivity revenue and ARPC by type of connection, Developed Asia Pacific, Figure 20: Connected car connections by type, North America, Figure 21: Connected car connectivity revenue and ARPC by type of connection, North America, Figure 22: Connected car connections by type, Latin America, Figure 23: Connected car connectivity revenue and ARPC by type of connection, Latin America, Figure 24: Vertical definition Figure 25: Regional breakdown used in this report Analysys Mason Limited

6 Worldwide: The percentage of new cars sold with embedded connections will increase dramatically, reaching 94% in 2025 The percentage of new cars sold with embedded connectivity will increase rapidly between 2016 and Penetration of all connected car solutions will reach 54% worldwide by Figure 3: Passenger cars and percentage of passenger cars with embedded connections, worldwide, The increase in the percentage of new cars sold with embedded connectivity will be driven by a number of factors, including those detailed below. Legislation, including ecall in Europe and ERA-Glonass in Russia, will mandate connectivity to provide emergency service alerts and improve safety. All new models of cars sold in the EU will have ecall capability from March Vehicle manufacturers are deploying connectivity to reduce warranty costs, enhance their products and engage with customers. They are also differentiating their products through acquisitions. For example, a consortium of BMW, Daimler and VW (Audi) acquired Nokia s mapping service Here, which was already widely used by vehicle manufacturers. Figure 4: Passenger car sales and percentage of passenger cars sold with embedded connections, worldwide, Some uncertainty remains regarding consumer willingness to pay for connectivity, but awareness of the services and benefits available is slowly growing. Analysys Mason Limited

7 Worldwide: More than half of passenger cars worldwide will be connected by 2025 Figure 7: Key data and forecasts for connected cars, 2015 and billion The number of passengers cars worldwide will grow from 0.9 billion in 2015 to more than 1.3 billion in 2025 a huge addressable market for IoT. 54% 603 million 116 million 54% of passenger cars worldwide will have either an embedded or aftermarket connection by Embedded connections worldwide will grow from 48 million in 2015 to 603 million in 2025, while tethered connections will grow from 13 million to 400 million over the same period. The number of cars with aftermarket connectivity will grow rapidly from 60 million in 2015 to 116 million in % 45% of passenger cars worldwide will have embedded connections by USD12 billion Automotive connectivity generated USD1.3 billion in revenue worldwide in 2015 this will increase to USD12 billion by 2025 at a CAGR of 21%. Source: Analysys Mason Analysys Mason Limited

8 CONTENTS WORLDWIDE TRENDS REGIONAL TRENDS WESTERN EUROPE CENTRAL AND EASTERN EUROPE MIDDLE EAST AND NORTH AFRICA SUB-SAHARAN AFRICA EMERGING ASIA PACIFIC DEVELOPED ASIA PACIFIC NORTH AMERICA LATIN AMERICA FORECAST METHODOLOGY AND ASSUMPTIONS ABOUT THE AUTHORS AND ANALYSYS MASON Analysys Mason Limited

9 About the authors Michele Mackenzie (Principal Analyst) is an analyst for Analysys Mason's IoT and M2M Solutions research programme, with responsibility for M2M and LPWA forecasts. She has 17 years of experience as an analyst. She produces reports and forecasts on M2M and IoT in industry sectors, such as transport, healthcare and smart cities, and analyses the impact of IoT network technologies, such as LPWA networks. Prior to joining Analysys Mason in February 2014, Michele was a freelance analyst with a focus on M2M and IoT technology and trends. She has written reports for Machina Research and produced research for other clients in areas such as mobile broadband and digital media. Tom Rebbeck (Research Director) leads Analysys Mason s Digital Economy research practice, as well as the Custom Research team, drawing on more than 15 years of experience in the telecoms sector. He is based in our London office, but works for clients worldwide. Tom is a specialist on the Internet of Things (IoT) and other new digital services. He has written articles and reports exploring the potential for these new services and possible roles for telecoms operators. He has worked for a range of clients including operators, regulators, industry bodies and vendors exploring the opportunity for new services. Many of these projects have been supported by original research, such as expert interviews and surveys of enterprise and residential customers. Analysys Mason Limited

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