A EUROPEAN GLOBAL NAVIGATION SATELLITE SYSTEM — THE GERMAN MARKET AND VALUE ADDING CHAIN EFFECTS
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Acta Astronautica Vol. 50, No. 5, pp. 325333, 2002? 2002 Elsevier Science Ltd. All rights reserved
Printed in Great Britainwww.elsevier.com/locate/actaastro PII: S0094-5765(01)00173-4 0094-5765/02/$ - see front matter
A EUROPEAN GLOBAL NAVIGATION SATELLITE SYSTEM THE GERMANMARKET AND VALUE ADDING CHAIN EFFECTS
A. VOLLERTHUN and M. WIESERInstitute of Astronautics, Technical University of Munich, Boltzmannstr. 15, 85748 Garching, Germany
(Received 8 August 2000)
AbstractSince Europe is considering to establish a market-driven European Global NavigationSatellite System, the German Center of Aerospace initiated a market research to justify a Germaninvestment in such a European project.The market research performed included the following market segments: aviation, railway, road
traCc, shipping, surveying, farming, military, space applications, leisure, and sport. In these marketsegments, the forementioned inputs were determined for satellite navigation hardware (receivers)as well as satellite navigation services.The forecast period was from year 2007 to 2017. For the considered period, the market amounts
to a total of DM 83.0 billion (approx. US $50 billion), whereas the satellite navigation equipmentmarket makes up DM 39.8 billion, and charges for value-added-services amount to DM 43.2billion. On closer examination road traCc can be identiHed as the dominant market share, both inthe receiver-market and service-market. With a share of 96% for receivers and 73% for servicesthe signiHcance of the road traCc segment becomes obvious.The second part of this paper investigates the eJects the market potential has on the
Value-Adding-Chain. Therefore, all participants in the Value-Adding-Chain are identiHed, usingindustrial cost structure models the employment eJect is analyzed, and possible tax revenues forthe state are examined. ? 2002 Elsevier Science Ltd. All rights reserved
There are far more applications for satellite nav-igation systems than only for aeronautical or mar-itime users. A better traCc management, avoidanceof traCc jams, guidance of taxi Keets, precisionfarming, more eCcient sowing, tracking of herds,exploration activities, hiking activities, oJ-shoreapplications, timing information for communica-tion systems and power plants, etc. This is by farnot the end of the list, and it grows longer andlonger every day. Not only some parts of indus-try, but also the European Community has realizedthe future importance and economic potential ofthe satellite navigation market, and therefore has
Paper IAA-99-IAA.3.2.08 presented at the 50th InternationalAstronautical Congress, 48 October 1999, Amsterdam,The Netherlands.
Corresponding author. Tel.: +49 (0)89-289-16018; fax: +49(0)89-289-16004 www:http:==www.lrt.mw.tum.de=personen=vollerthun=.
E-mail address: firstname.lastname@example.org (A. Vollerthun).
initiated a deHnition phase (funded with 40 millionEURO) for a European satellite navigation systemGalileo.The objective of the work presented here was to
establish a sound basis for a decision of the Ger-man government for whether or not it was econom-ically reasonable to participate in such a Europeanproject. Therefore, existing market studies were in-vestigated and completed by a new market forecastin order to determine the market potential in Ger-many. DiJerent market segments and applicationshad to be identiHed and the special requirements offuture users had to be documented.Within an internal additional research project at
the authors institute the economic eJects on theGerman Value-Adding-Chain were investigated.The approach for the market forecast is visual-
ized in Fig. 1. Simultaneous to the evaluation ofprevious market forecasts and new data gathering(where required), a software tool (see screenshotin Figure 8) was developed, in order to be able tochange the input parameters of the market modelvery fast and thus identify market sensitivities. For
326 A. Vollerthun and M. Wieser
model l ing and simulat ion
Employment-Effects Tax Revenue
Evaluat ion ofEffcets on Value-
Market ResearchSatel l i tenavigation
Determinat ion ofcurrent data
Data Evaluat ion
Analysis of potentialInvestment cycles
Pr ices/chargesRequi rements
Market penetrat ion
Tool development:market model l ing and
Evaluat ion ofexist ing studies
Monte-Car lo-Simulat ion
Fig. 1. Study logic.
satellite navigation equipment, a very precise fore-cast was possible, whereas not for the market of re-lated services. Therefore, Monte-Carlo simulationswere performed to quantify the service-related sen-sitivities. Based on the results for the market po-tential, the tool also involved the investigation ofthe Value-Adding-Chain.To determine the market potential and the
eJects on the Value-Adding-Chain, the follow-ing set of parameters was implemented in thecomputer-based model for the market:
Number of equipment (e.g. number of newcars) and services including a linear=quadratictrend model,
Equipment penetration factor (percentage ofe.g. new cars equipped with a satellite nav-igation system) including a linear=quadratictrend model,
Prices=charges including a linear=quadratictrend model,
Investment cycles, Sales taxes, value of production, industrialcost breakdown structures and
Sensitivity analysis based on best-=worst-casescenarios (Monte-Carlo simulations).
To identify the special requirements of the diJer-ent market segments, questionnaires, personal=tele-phone interviews and workshops were used.To classify and understand this market forecast,
some boundary conditions have to be taken intoaccount:
Only the German market is considered. Con-clusions for the European market can only bedrawn with care.
The considered period of time are the years20072017.
All market values are given in German Marks(DM) in 1998 values.
Market values related to satellite navigationequipment can be considered very robust,since data are based on company statementsused for their business development. Formarket segments, where no data were avail-able the assumption was made that there isno market.
Navigation satellite system 327
The market potential for services is very sen-sitive since the acceptance of a satellite navi-gation system is very much dependent on theprice=charges structure. Therefore, the num-ber of users is extremely variable.
The market potential that is considered isnot equal to the potential that the EuropeanGalileo will cover. The latter will verymuch depend on implementation strategiesand realization times.
2. MARKET SEGMENTS & APPLICATIONS
The following market segments for a future Euro-pean satellite navigation system were investigatedwithin this market forecast:
Road traCc, Other terrestrial, Recreational, Civil aviation, Rail road, Maritime applications, Military and Space.
The market research was performed separately inevery segment. Within the segments diJerent usergroups were identiHed and analyzed. Table 1 givesan overview over segments and user groups. Withineach user group 67 applications were identiHed.Due to the limited space, applications are not visu-alized in Table 1.For each application, the number of sold
equipment=sold services, the equipment penetra-tion factor, prices=charges, and investment cycleswere determined. These data were the basis forthe forecasted market potential. The companiesthat supported the data gathering were companiesfrom various Helds, e.g. car=truck manufacturers,car rental services, Keet management companies,emergency services, government authorities, air-lines.
3. GERMAN MARKET POTENTIAL
To ensure a robust market forecast, the potentialfor satellite navigation equipment and services wasdetermined separately. The relevant period of timefor the market forecast was 20072017. This periodwas chosen, since 2007 is the estimated operationalstart (with full capability) of the planned Galileosystem. The identiHed potential is not necessarilythat, available for Galileo, but available for alloperational systems at that time.
Table 1. Market segments and user groups
Road traCcMotorbikesCarsBusesTrucksTruckloadsTrailersMobile homesAmbulancesPolice carsFire departmentTaxisCar rentals
Civil aviationCommercial aircraftSingle-engine aircraftMore-engine aircraftSailplanesBalloonZeppelinsGlidersHelicopters
Rail roadICE 1-, ICE 2-LocomotivesOther LocomotivesCargo wagons
Maritime applicationsOil-, gas-tankersCargo shipsContainer shipsFishery shipsYachts, sailing boats
Before presenting the results for navigationequipment and services in detail, within the nextsection the overall market will be pointed out.For the mentioned period of time, a market po-
tential of DM 83 billion was determined, whichis equivalent to a yearly potential of DM 7.5 bil-lion. Figure 2 shows the accumulated potential overtime. This almost constant yearly potential turnedout, even though the assumption was made that forexample the prices for in-car satellite navigationsystems would drop more than 65%. This decreasein prices is more than compensated by the increas-ing number of cars that will be equipped with asatellite navigation system.Figure 3 shows the distribution among naviga-
tion equipment and services. The potential of DM83 billion is divided into two almost equal parts.The potential for satellite navigation equipment isestimated to DM 39.8 billion, whereas it is DM43.2 billion for related services. The following sec-tion will discuss in more detail the diJerent marketsegments within equipment and services, in orderto verify where a commercial market will be avail-able.
328 A. Vollerthun and M. Wieser
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 20170
t & S
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Fig. 2. Accumulated market potential (equipment & services).
Equipment39,8 billion DM
Services43,2 billion DM
Fig. 3. Market share satellite navigation equipmentversus services.
Road traffic 95.8%
Fig. 4. Market potential for navigation equipment.
3.1. Market potential user equipment
A robust analysis for the potential for satellitenavigation equipment was possible, since a fore-cast can be made, based on statistical data. As men-tioned before the potential amounts to DM 39.8billion.As will be shown when discussing the results for
navigation services, the major potential with almost96% is contributed by the Road traCc segment(see Fig. 4). It was often argued that a Europeansatellite navigation system is needed especially forthe big market of civil aviation applications. Figure4 reveals that the Civil Aviation segment onlymakes up about 0.63% (i.e. DM 249.1 million). Ifthe intention of Europe is to build a commercialsatellite navigation system, the aviation segment isnot decisive. Concerning political arguments andespecially the increasing load of air traCc over Eu-
rope, the special requirements of the aviation seg-ment will have to be considered adequately.In the Railway segment, problems might occur
on the legislative side, since never before autho-rization procedures for satellite navigation systemshave been implemented, and therefore, no stan-dards have been established yet.In the segment Other terrestrial applications
the highest requirements are expressed for survey-ing. Using GPS-signals and reference stations, aprecision within millimeter-range can be achievedalready today. Obviously, a European systemwould require these reference stations, too, but therequirement that is driving the competition here isavailability. Galileo will therefore have to pro-vide a higher availability, especially within cities.Requirements from the Road traCc segment arevery heterogeneous. For telematic applications,automobile industry requires a precision betterthan Hve meters. Fleet-management applicationsfor emergency services also require a precision of5 m, whereas e.g. for cargo transports, 100 m issuCcient. For emergency services today, the timefor an initial determination of position is too long.
3.2. Market potential services
Determining the potential for satellite navigationservices proved to be delicate, since, with the ex-ception of the aeronautical segment, not very manyservices exist today and it is especially diCcult topredict what charges can be raised. Nevertheless,it seems certain that the potential for services ishigher than that for navigation equipment. Alreadythe (conservative) assessment of the services po-tential performed here predicts a volume of DM43.2 billion. It has to be mentioned that only a com-paratively small number of services was analyzed.The list of services could have been extended byfar, but to ensure a robust market forecast only alimited number (those services that are being de-signed today) was investigated (Fig. 5).
Navigation satellite system 329
Trucks: Fleet management
12.6%Air navigation charges
Traffic and regionalinformation, TeleAid
Fig. 5. Market for navigation services (20072017).
As with the navigation equipment potential thelargest part in services is again the Road traCcsegment with DM 31.4 billion. Within that emer-gency systems represent the largest amount (DM18.2 billion). The readiness of an individual to in-vest into a security-related service is much higher,than the interest in information-providing services.This mainly has two reasons: First an increasinginterest in security, and secondly insurances mayoJer discounts, when the individuals use satellitenavigation services for special applications.Already today, the most signiHcant part in
services is Fleet management. The determinedmarket potential amounts to DM 11.1 billion. Thisincludes cargo business, police, Hre department,ambulances, car rentals, and taxis.While the potential for civil aviation equipment
is very limited, within services it is the secondlargest segment with DM 8.2 billion. The assump-tion was made that charges in this segment wouldbe similar to those existing today with a decreasingtendency.In order to cope with the already mentioned un-
certainty in the prediction of the services potentialMonte-Carlo simulations were performed withinthis market research. The result of these simulationsis a probability distribution for the expected marketpotential. According to the determined standard de-viation of DM 4.62 billion, the expected potentialfor satellite navigation services will lie in a rangefrom DM 34.0 billion to DM 52.5 billion.
3.3. Overall market potential
Figure 6 summarizes the previously determinednumbers for the market potential of satellite nav-i...