SOUTHFIELD, MI – Global revenue from automotive telematics systems will grow at a compound annual growth rate of more than 19% to $4.2 billion by the end of 2021, according to new forecasts from IHS Automotive. 

The forecasts are driven by continued innovation in vehicle connectivity and safety technologies, and project nearly $2.8 billion in additional annual revenue by the end of the forecast period in 2021, compared to 2015.

The data represent production of telematics systems, including embedded, consumer electronics and hybrid telematics (those that include both consumer electronics and embedded technology).

Consumer electronics-based (CE) solutions will make up nearly 30% of the market, leaving only about 15% of embedded systems in 2021, the forecasts say. Additionally, hybrid telematics will boast the strongest revenue CAGR at more than 12% from 2015 – to 55% of the overall market.

Currently, CE telematics leads the global automotive telematics market since it is a relatively low-cost solution and available in a wide range of vehicles. More cars of the future will feature multiple connections for a variety of applications and services. As a result, hybrid telematics is expected to dominate in the global telematics market after 2018. The eCall mandate, effective March 2018, will require an embedded connection in vehicles for automatic crash notification (ACN) and SOS calling, which forces all OEMs to offer either embedded or hybrid telematics in Europe.

The mandate will have a significant impact on the growth of the telematics market. If other regions follow this trend, it will expedite the growth of telematics and all vehicles will eventually be connected.

“The telematics supply chain will see amazing growth and innovation through the end of the decade, as more vehicles debut new connected solutions that make use of embedded modules, while at the same time enabling consumers to fully leverage their mobile devices,” said Anna Buettner, manager for infotainment at IHS Automotive.

“There are opportunities in vehicle segments that traditionally didn’t offer connectivity, but due to market demand and the imminent roll-out of eCall in Europe, the avenues are opening up quickly,” Buettner said. “Autonomous driving applications will further drive the demand for non-stop, reliable connectivity.”

Global production volumes for all telematics systems, including those that are based on brought-in devices, are estimated to grow by more than 112% over the forecast period, surpassing 55 million units in 2021, IHS Automotive says. The forecasted global growth in telematics systems is based on multiple factors. In China, for example, overall volume is expected to grow because original equipment manufacturers (OEMs) are continuing to add embedded and CE-based solutions, while regional vehicle sales also increase. Meanwhile, telematics systems production will triple in Europe in order to meet demand as eCall is rolled out in all new vehicles in the market starting in spring of 2018.

Even though telematics has existed in the automotive industry for almost 20 years, growth is still expected for the next decade, whether due to mandates or the desire from consumers to be connected even while driving. Telematics systems based on wireless communications have become a vital link between customers and OEMs, and will be increasingly important in all regions.

Telematics systems are a major factor in changing the automobile from a collection of analog control systems to a fully networked and connected digital car, where software-defined functionality can be remotely changed, corrected and updated. Telematics systems also add connectivity-based applications that make the average car safer and more fuel efficient, as well as help to correct common driver errors. As a result, telematics can bring many benefits to various parties including consumers, auto manufacturers, dealers, communities, and more.

As the telematics market grows, the automotive industry starts to face new challenges and issues that need to be solved. Cybersecurity is one of the most important issues in the connected car era. Since the role of telematics increases in importance as connectivity becomes essential for V2X and autonomous driving cars in the future, the automotive industry needs to find solutions to protect its telematics systems from cyber-attacks, IHS says. Research and development is under way but must continue.