Navigation Market Status and Outlook

Frost & Sullivan White Paper

December 2010

Table of Contents

Market Status & Developments – North AmericaI

III Voice of Consumer on Apps and HMI - Europe

2

IV Conclusions

Market Status & Developments, North America

3

Market Overview – Fastest Growing Segment is Mobile Navigation

NA Navigation Market – Market Size by Product Segment (North America), 2009-2016

4

Source: Frost & Sullivan

• PND market in NA is expected to decrease to about 13 Million units in 2016, representing a declining CAGR of 4% from 2009. This decrease in PND market can be largely attributed to the fact that navigation is becoming a commodity in the Smartphone market (e.g. Google and Nokia free Navigation service)

Technology Roadmap: Navigation Systems (North America)

2004 2008 2012 2015

Serv

ices

Serv

ices

Co

nte

nt

Co

nte

nt

TrafficTraffic

DeliveryDelivery

Real-TimeReal-Time PredictivePredictive

AM/FM RadioAM/FM Radio

HistoricalHistorical

RDS-TMC >>>Satellite RadioRDS-TMC >>>Satellite Radio

HD Radio, MSN Direct, CellularHD Radio, MSN Direct, Cellular

Wi-FiWi-Fi

2D View2D View

5

Co

nte

nt

Co

nte

nt

Map ViewMap View

Note: All figures are rounded; the base year is 2008. Source: Frost & Sullivan

2D View2D View

2.5D View2.5D View

3D View3D View

Hard

ware

Hard

ware

NavigationNavigation

Media StorageMedia Storage

Processor Memory

Processor Memory

DVD-ROMDVD-ROM

Hard Disk Drive (HDD)Hard Disk Drive (HDD)CD-ROMCD-ROM

400 MHz, 32-bit RISC, 64 MB RAM400 MHz, 32-bit RISC, 64 MB RAM

600 MHz, 32-bit RISC, 128 MB RAM600 MHz, 32-bit RISC, 128 MB RAM

Dynamic Real-Time NavigationDynamic Real-Time Navigation

Dynamic / Predictive NavigationDynamic / Predictive NavigationStatic NavigationStatic Navigation

Total Active Apps: 300,000+

Navigation Apps: 6373 (2.0%)

App Store - Close to 6500 Apps on Apple App Store That Cater to Car Navigation

Pandora is the second most important brand on the Apple app storein terms of the download rates. This is clearly a reason whyAutomotive OEMs are creating API’s to use internet radio through thevehicle HMI. E.g. Ford Sync Applink for controlling Pandora radiothrough Sync HMI

Zipcar introduced a car sharing application in late 2009 which was ahuge success witnessing 100,000 downloads within first few days oflaunch. Similarly TomTom’s navigation app amidst 10 other brandednavigation apps also witnessed good download rates currentlyoffered at a price of $70

Automotive App Store Market – Apple App Store Apps Mix (US), 2010

6

Company App Category Features Downloads

Zipcar Free Car Sharing App Mobility Choose, Reserve, Locate and

Lock/Unlock cars

100,000 since first few days of launch

TomTom Navigation App Car Navigation Turn by Turn navigation US &

Canada

80,000 Downloads as of October, 2009

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Automotive App Store Market – Automotive Apps Usage Trends (US), 2009

Source: Frost & Sullivan

Source: 148apps.biz

Automotive Apps – Navigation is Increasingly Becoming Commoditized on the Smartphone Bundle

Car/Van Pooling – car and van pooling apps,

Multimodal Transport –apps for real time bus and

transit networks, e.g. Avego

Car Sharing Access – Virtual key fob apps for

unlocking reserved cars, e.g. Zipcar App

IP TV – live TV using internet,

Social Networking –e.g. Twitter,

Facebook, Xing

News – Online radio news, RSS

feeds reader e.g. Stitcher,

Vehicle Access – Apps for converting

Remote Car Starter/Security

– e.g. Viper SmartStart App from Directed Electronics

Remote Vehicle Horn/Light Flash – Security App,

e.g. Viper SmartStart

Real Time Video Traffic Feeds –

e.g. Visteon

Diagnostics –TPMS,

service/oil notifications, e.g. Hughes Telematics

Integrated Telematics –

eCall/bCall/Tolling etc in one App

Charging Station Locator – on

available charge

Interior Pre-Condition App –

remote heating/coolinge.g. Chevy Volt

App

EV Billing Related –

possibility to integrate all

energy related billing in an app

Dynamic POI Finder

e.g. Trapster

Real time Traffic Information

e.g. Inrix Traffic App

3D Navigation with Video

Support

Automotive App Store Market – Types of Automotive Apps in Different Categories (Europe & US), 2009 - 2015

7

Mobility

Car Sharing –Choosing,

Reservation and locating cars,

e.g. Zipcar

pooling apps, e.g. Zimride,

Avego

Entertainment

Internet Radioe.g. Pandora,

Stitcher, RadioTime

using internet, e.g.. .SPB TV,

Vehicle Access and Security

Vehicle Locator – Apps for

locating vehicle within vicinity,

e.g. Mbrace Blackberry App

converting phone in smart key, e.g. Delphi App on iPhone

Telematics

Emergency Assistance –e.g. Mazda

Assistance App, BMW Assistance

App

e.g. Visteon TrafficJamCam

App

Electric Vehicles

State of Charge Monitoring App

e.g. GM Volt App, BMW

Active 1 Series Concept E App

available charge on a map

e.g. Chevy Volt App

Navigation

Turn by Turn Navigation

e.g. TomTom, Navigon, Sygic

e.g. Trapster speed camera locations app

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Source: Frost & Sullivan

Hybrid Connected Systems Like Ford SYNC are bringing in Navigation as a Beamed-In Feature

Hybrid Telematics Market : Unit shipment (U.S.), 2009 & 2016

0

3

6

9

2009 2016Year

Units (

In M

illio

ns )

Hybrid Telematics Market : Unit shipment Market Share (U.S.), 2009

79%

Hybrid Telematics Market : Hybrid Telematics Providers (U.S.), 2009

Vehicle

ManufacturersMercedes-Benz BMW Ford

Solution Name mbrace ConnectedDrive Sync

ProviderHughes Telematics,

Inc.ATX Group, Inc,.

Microsoft

Corporation

“Ford, GM and Toyota,

combinely is expected to

have around 80 percent of

the unit shipment (first

year subscribers) of Hybrid

telematics in 2016”

8N80D– 18

OEM’s 2009 2016

Mercedes-Benz 34,882 288,169

Ford 805,072 2,468,002

BMW 181,295 311,410

Toyota -- 1,468,513

Hyundai-Kia -- 242,172

General Motors -- 3,036,761

Chrysler -- 403,700

Mercedes-Benz Ford BMW Others

3%18% 0%

Mercedes BMW Ford Others

Hybrid Telematics Market : Unit shipment (U.S.), 2009 & 2016

Vehicle Manufacturers

Current/Planned Telematics Offering

Year of Introduction –Hybrid Solution

Toyota Embedded 2012

Hyundai-Kia Connected 2011

General Motors Embedded 2012

Chrysler Connected 2012

Hybrid Market : OEM’s Introduction of Hybrid Telematics (U.S.), 2009

Hybrid Connected Telematics Market – Solution Offerings in North America

Value Chain Participants Mercedes-Benz mbrace Ford Sync BMW ConnectedDrive

System Integrator –Outsource

Hughes Telematics, Inc. (HTI) Ford Motor Company BMW AG

Hardware ProviderContinental Automotive

Systems (CAS)

Continental Automotive Systems (CAS) / M/A-COM

Wireless Systems

Continental Automotive Systems (CAS)

Service Provider / Connectivity

Hughes Telematics, Inc. (HTI) Airbiquity ATX Group, Inc.,

Wireless Carrier Verizon Wireless --Verizon Wireless, Telus

Corporation and Bell Mobility Inc.

9N80D– 18

Mobility Inc.

Real-time Traffic Information Provider

Traffic.com INRIX, Inc.Clear Channel

Communications

Online Maps Google Inc. MapQuest Google Inc.

Navigation - Map Provider NAVTEQ TeleNav, Inc. and deCarta Tele Atlas NV

Software Provider -- Microsoft Corporation --

Voice / Speech Interface Nuance Communications, Inc.Nuance Communications,

Inc., & Tellme Networks IncNuance Communications,

Inc.

Mobile Apps --Pandora, Stitcher and

TwitterBerry--

Q38 How interested would you be in buying a navigation system that does the following…

Features of Navigation System that Consumers Look For

1%

0%

1%

0.9%

0.9%

1.8%

10.0%

10.2%

14.1%

33.3%

37.3%

32.2%

55.3%

51.2%

50.6%

Automatically re-routes if you

miss a turn, provides automatic

changes to your route as required

Automatically updates your route

and re-routes automatically in

case of accidents or hold ups on

the roads

Notifies emergency services

automatically in case you are in

10

Base: All respondents n=1,056

1%

0%

1%

1.8%

0.9%

1.3%

14.1%

11.8%

12.2%

32.2%

41.2%

41.6%

50.6%

45.7%

44.3%

automatically in case you are in

an accident

Provides road condition status

which can in turn influence

driving conditions (floods, ice,

etc.)

Continually provides Information

on accidents or delays on your

route

Not Interested at All Not Interested Neither/Nor/Not sure/Don't know Interested Very Interested

Over 55% of consumers are very interested in a system that automatically re-routes if they miss a turn and in the eventof accidents or hold ups on the road. Overall more than 80% were interested or very interested in the features below.

Type of System Preferred for Next System

Q72 Please select the type of system that you would prefer for your next system?

49.1%

22.3%

Dynamic GPS

Map based

GPS Map based

11

Base All respondents n=1056

Generally, map based is preferred to turn-by-turn. The dynamic GPS map based is the most popular type of systemwhere nearly half of the respondents selected it.

13.4%

15.2%

0% 10% 20% 30% 40% 50%

GPS Turn-by-turn

Dynamic GPS

Turn-by-turnSets a new route based on traffic

jams or road conditions

Sets a new route based on traffic

jams or road conditions

Voice of Consumer on Apps and HMI - Europe

12

2010 Infotainment Voice of the Customer-

European Consumers’ Attitudes, Perceptions, and Willingness to Pay Regarding New Generation Infotainment,

App Concepts, and HMI Solutions

Research Objectives, Methodology and Sample Size

25%

25%

25%

14

25%

Specifically, survey respondents had to be 18 years or older, own a new generation smartphone (e.g. Symbian, Apple, Blackberry, Palm, Android, Microsoft), and own a vehicle three years old or less

Executive Summary: Current Usage of Infotainment and Apps Solutions

• Apps that keep people generally informed are most popularly used. Yet, awareness and usage of apps is low-to-moderate.

• Apps used inside the car are generally car-related – with navigation being the most popularly used.

• High Apps Users – though a small segment of the population – are likely the target for car-related apps, given their daily usage of multiple apps.

16%15%

28%

10%38% 35%

28% 28% 27% 26% 24% 22% 20% 18% 17%11%

80%

100%Awareness/Usage of Smartphone Apps (N=1,911)

Daily user

Weekly user

Navig-ation

Live Traffic

Access to Smartphone Apps Inside Car

15

5% 6% 2%8%

3% 5% 8% 10% 11% 11% 7%

36%36% 35%

32%

42%

40%43%

47% 46%53% 56%

48%

43%

21% 24% 38%

22%30%

26%21% 22%

16%28%

0%

20%

40%

60%

New

s

Weath

er

Navig

ation

Music

Vid

eos

Liv

e tra

ffic

in

form

ation

support

ed …

Inte

rnet

radio

Gam

es

Sport

s

Busin

ess

Tra

vel

Pro

ductivity

userAware, but non-userNever heard of

Travel

Music

Internet

Radio

Source: Frost & Sullivan

High Apps Users: 9%

Moderate-to-Low Apps

Users: 88%

Vehicle Track-ing

Emerg-ency/

Break-down Service

Service and Maint-enance

Navig-ation with Points of Interest

Overview of Current and Future Usage of Car-Related Apps

Currently, navigation with points of interest apps are most popularly used (53%). Yet, among non-users, vehicle tracking apps may be just as popularly used in the future.

53%

71%

63% 63% 63%61%60%

80%

Current Use, Future Use, and Future Market Potential(N=1,911)

Current Use Future Usage Future Market Potential

Future MarketPotential

Note: Future

market

potential is a

sum of current

usage and

16

53%

36%33%

27% 28%

40%

27%

34%

28%26% 25%

38%

18%

27%30%

36%33%

11%

24%

15%

20%22%

19%

5%

51% 51%49% 48% 48%

44% 43%

0%

20%

40%

Navi

gatio

n

with

Poin

ts o

f In

tere

st

Serv

ice a

nd

Main

tenance

Em

erg

ency/

Br

eakdow

n

Serv

ice

Vehic

le

Tra

ckin

g

Vehic

le

Info

rmatio

n

Ente

rtain

ment

Rem

ote

Lock

and S

tart

Mile

age

Based

Insura

nce

Toll

Passage

Eco-D

rivi

ng

Pers

onal-

isatio

n

RS

S F

eeds

Source: Frost & SullivanQ14/36A. Please indicate your level of awareness for the following and let us know your future preferences to access these apps.

usage and

future usage

Spend on Apps Inside Car - First Time Fees, Details

9%7% 9% 10% 9% 13% 16%

14%13% 13% 17% 18% 15% 12%

18%17% 20% 20%

9%

7% 8%9% 10% 7% 9%

11%13% 11% 15%

19%

6% 6% 8%8% 10% 12% 8% 13%

11% 7%

60%

80%

100%

First Time Fees for Apps Inside Car (N=1,911)

No Fee Less than €1 €1-€5 €6-€10 €11-€15 €16-€20 More than €20

First time fees of apps used inside the car – which range from navigation to traffic to entertainment – are largely free.

17

60% 57% 56% 55% 55% 54% 51%41%

36% 34% 33%28%

7% 9% 10% 9% 13% 16%

15%16% 16% 16%

16%

17% 20% 20%

18%

0%

20%

40%

60%

Weath

er

Navi

gatio

n

Liv

e t

raff

ic in

fo

Inte

rnet

radio

Music

Tra

vel

New

s

Vid

eos

Sport

s

Busin

ess

Gam

es

Pro

ductiv

ity

Q6. For the following apps that you use inside your vehicle, please provide the following details about your usage.

Source: Frost & SullivanNote: Proportions less than five not shown numerically in chart.

Conclusions

18

So What – Navigation will become a Commodity App on Phone, Revenue for OEMs through Terminal Mode Type Solutions

Clear opportunities for solutions like Terminal mode which can

seamlessly connect phone to cars

Revenue opportunities for OEMs

So what??

Apps for Navigation currently have a good

market. In our European survey we

found a large part of the sample (1911) using

North American market is expected to

be dominated by Smartphone

navigation apps which will mean

decreasing sales of PNDs

19

Revenue opportunities for OEMs exist in these interfaces and

Tier 1 suppliers can get some traction through low cost OEM units

which should sell less than $500

Most consumers want to use existing data plan to access

services – tethering is the way to go

Electric vehicle apps are expected to be priced for free – again another area where OEMs can add value for

customers

Source: Frost & Sullivan

With companies like Bosch introducing navigation apps

on the Apple platform, navigation will eventually become a function of the

smartphone and not the carTogether with navigation the next big thing is the need for

traffic information. This real-time traffic information brings the

benefit of dynamic route guidance which also has a

positive environmental impact

sample (1911) using navigation related apps for weekend journeys

Replicate Enable Provide

Most cost effective Most rich experience

Mobile phone based apps

Embedded Apps

Example: NOKIA Terminal Mode Example: Ford Sync, Fiat Blue&Me Example: Harman 3G Infotainment System,

Continental AutolinQ, InkaNet 3G, GENIVI

Short to Medium Term will see OEMs Focusing more on the Replicator and Enabler Roles

20M653-18

Positives: Low Cost of Development for OEM, Design advanced interfaces which can easily access information from portable deviceNegatives: Loosing control of infotainment, Possible High level of distractionApprox implementation time 6

months after introduction of Terminal

Mode

Minimal source of Revenue

Positives: Relatively low cost of development, allows consumers to associate with brand, provides connectivity of CE devicesNegatives: Is not always the best integrated solution, possible level of distraction

Approx implantation time 2 years

Possible source of revenue include

subscription to critical services

Positives: Safest and best way for integrated experience, strong association with brand, flexible system allows to upgrade and keep in line with technology Negatives: Cost associated is usually high, proprietary systems

Approx implementation time 5 years

High source of revenue

Contact

Sarah Saatzer

Corporate Communications

sarah.saatzer@frost.com

21M653-18

sarah.saatzer@frost.com

P: 210.477.8427 ; F: 210.348.1003

www.frost.com