OD4546 Fleet Telematics Systems Industry Report

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WWW.IBISWORLD.COM Fleet Telematics Systems March 2014 1

IBISWorld Industry Report OD4546

Fleet Telematics SystemsMarch 2014 Maksim Soshkin

Strong connection: Higher fuel prices and anexpanding trucking sector will lead to growth

2 About this Industry

2 Industry Definition

2 Main Activities

2 Similar Industries

2 Additional Resources

3 Industry at a Glance

4 Industry Performance

4 Executive Summary

4 Key External Drivers

6 Current Performance

8 Industry Outlook

11 Industry Life Cycle

13 Products & Markets

13 Supply Chain

13 Products & Services

15 Demand Determinants

15 Major Markets

17 International Trade

19 Business Locations

21 Competitive Landscape

21 Market Share Concentration

21 Key Success Factors

21 Cost Structure Benchmarks

23 Basis of Competition

23 Barriers to Entry

24 Industry Globalization

25 Major Companies

25 Trimble Navigation Limited

26 Omnitracs LLC

27 Fleetmatics IRL Ltd.

29 Operating Conditions

29 Capital Intensity

30 Technology & Systems

30 Revenue Volatility

31 Regulation & Policy

31 Industry Assistance

32 Key Statistics

32 Industry Data

32 Annual Change

32 Key Ratios

33 Jargon & Glossary

www.ibisworld.com | 1-800-330-3772 | [email protected]


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This industry manufactures hardwareand software for eet telematicssystems. Fleet telematics systems useelectronics and GPSs to track the

location and other characteristics (e.g.mileage or speed) of vehicles in a eet.This industry includes eet telematicssystems for mobile devices.

The primary activities of this industry are

Manufacturing vehicle data collection and transmitting devices

Manufacturing fleet communication hub devices

Designing and publishing data processing software

Designing and publishing mobile phone applications

33422 Communication Equipment Manufacturing in the US

This industry manufactures communications equipment used by telematics manufacturers.

33451a Navigational Instrument Manufacturing in the US

This industry manufacturers navigational instruments used as components in telematics systems.

33531 Electrical Equipment Manufacturing in the US

This industry manufactures electrical components of telematics systems.

33632 Automobile Electronics Manufacturing in the US

This industry manufactures the electronics equipment in vehicles that communicate with telematicssystems.

48412 Long-Distance Freight Trucking in the US

Long-distance freight-trucking operators handle various commodities, generally palletized and transportedin containers or van trailers.

Industry Definition

Main Activities

Similar Industries

Additional Resources

About this Industry

For additional information on this industry

www.isuppli.comAutomotive Infotainment and Telematics

www.fleet-central.comFleet-Central

www.government-fleet.comGovernment Fleet Magazine

The major products and services in this industry are

Local fleet systems

Long haul fleet systems

Mobile devices

Trailer tacking and monitoring systems

Other devices


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% c

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2008 10 12 14 16 18Year

Demand from truck transportation

SOURCE: WWW.IBISWORLD.COM

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−4

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4

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2006 08 10 12 14 16 18Year

Revenue Employment

Revenue vs. employment growth

Products and services segmentation (2014)

38.1%Local fleet systems

28.5%Mobile devices

19.0%Long haul fleet systems

11.4%Trailer tacking and monitoring systems

3.0%Other devices


Key StatisticsSnapshot

Industry at a GlanceFleet Telematics Systems in 2014

Industry Structure Life Cycle Stage GrowthRevenue Volatility Medium

Capital Intensity Low

Industry Assistance None

Concentration Level Medium

Regulation Level Light

Technology Change High

Barriers to Entry Medium

Industry Globalization Medium

Competition Level High

Revenue

$2.0bnProfit

$219.1mExports

$220.0mBusinesses

126

Annual Growth 14-19

7.0%Annual Growth 09-14

8.6%

Key External DriversDemand from trucktransportation

Number of mobileinternet connections

World price of crude oil

Trade-weighted index

Market Share

TrimbleNavigation

Limited16.7%

Omnitracs LLC12.8%

Fleetmatics IRLLtd.8.6%

p. 25

p. 4

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 32



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Key External DriversDemand from truck transportationTransportation companies generally ownlarge eets of vehicles. These companieslook to save money and increase theproductivity of their drivers and vehicles byusing telematics systems. As a result, whenthe trucking sector’s revenue increases, ittypically means that more carriers canaord to install telematics systems.Demand from trucking transportation isexpected to increase in 2014.

Number of mobile internet

connectionsDrivers can increasingly access fleettelematics systems on mobile devices,such as smartphones and tablets.Therefore, as the number of mobileinternet connections increases, it will

become easier for companies with vehicle fleets to use these systems, andthe demand for fleet telematics systemson mobile devices will grow. The

ExecutiveSummaryThe Fleet Telematics Systems industryproved virtually impervious to therecession, outpacing most otherindustries over the past ve years.Operators in this industry manufacturedevices, and develop and service softwareused to track the location and othercharacteristics (e.g. mileage or speed) of

vehicles in a eet. Industry growthslowed during the recession, in line withthe decline of trucking sector, theindustry’s main downstream market.However, increasing fuel costs, in

addition to new markets and products

have begun to drive industry growth. As aresult, industry revenue is expected toclimb an annualized 8.6% in the ve

years to 2014 to $2.0 billion, with a 5.8% jump in 2014.

Industry operators have expanded

their emphasis on software developmentand servicing during the past ve years,

while increasingly outsourcing hardwaremanufacturing to low-wage economies.Models such as software-as-a-service(SaaS), which are constantly updated andexpanded upon, enable consumers toaccess eet data and analysis for asubscription fee. Success of this software

has been further buoyed by a boom inmobile-device use. Because smartphonesand tablets already feature necessaryhardware such as global positioningsystems (GPSs), they can easily be turnedinto telematics devices throughappropriate application downloads.Consequently, demand for industrysoftware has increased in line with thegrowing use of mobile devices.

Additionally, as the prices of industryproducts have declined (due to cheaperhardware, subscription models and

mobile device platforms) the number ofmarkets using telematics has expanded.These include small, local-truckingcompanies, commercial vehicle eetowners and heavy equipment owners.Most importantly, oil prices are expectedto increase at an annualized 10.1% to$100.2 per barrel in the ve years to2014. Consequently, vehicle eet ownershave tried to cut back on fuel costs bypurchasing eet telematics systems andsoftware to analyze fuel usage.

Industry revenue is forecast to grow at

an annualized 7.0% to $2.7 billion in theve years to 2019. Demand will be driven

by an expanding trucking sector, higherfuel prices and increased use of mobiledevices. Furthermore, emissions and

worker safety regulations, and newproducts and markets will provide anadditional boost in demand for eettelematics systems.

Industry PerformanceExecutive Summary | Key External Drivers | Current Performance

Industry Outlook | Life Cycle Stage

Increasing use of mobile devices with GPScapabilities will propel industry demand


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Industry Performance

Key External Driverscontinuednumber of mobile internet connectionsis expected to increase in 2014,representing a potential opportunity.

World price of crude oil As the world price of crude oil increases,transportation companies that own eetsof vehicles will look to cut fuel costs byusing telematics. As a result, as the priceof oil increases demand for industryproducts climbs. The world price ofcrude oil is expected to decrease in2014, representing a potential threat to

the industry.

Trade-weighted indexThe trade-weighted index compares the value of the US dollar to the currencies ofthe country’s trading partners. When the

value of the dollar increases it makesindustry exports more expensive forforeign consumers and imports lessexpensive, thereby reducing exports whileincreasing competition from imports. Inaddition, a stronger dollar makesoshoring hardware manufacturing morepractical, further reducing industryrevenue. The trade-weighted index is

expected to increase in 2014.

M i l l i o n s

400

0

100

200

300

1905 07 09 11 13 15 17Year

Number of mobile internet connections


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Demand from truck transportation


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The recession Throughout the recession the industrycontinued to grow, albeit at a moresluggish rate. Because the truckingindustry accounts for over half of theindustry’s revenue, demand wasnegatively aected by a contractingtrucking sector. In 2009, revenue for thetrucking industry plunged 16.3%, leavingcarriers with fewer nancial resources toinvest into technology such as telematics.Moreover, a primary benet of eet

telematics systems is improved fueleciency, as they ag up inecientroutes, unproductive behavior and idletime. In addition, a sharp decline in the

world price of crude oil (which led tolower fuel prices) in 2009 put o theneed to invest in telematics systems.However, industry revenue continued to

grow by 5.9% that year as penetrationinto new markets and productdevelopment drove demand.

Furthermore, once the economy began torecover, fuel prices trended upwardagain, and the world price of crude oil isexpected to climb at an annualized 10.1%to $100.2 per barrel in the ve years to2014. Consequently, more companieshave begun to demand eet telematicssystems to cut fuel costs.

Changing products

and markets

The Fleet Telematics Systems industry was formerly a hardware-focusedindustry whereby most industry playersoered devices that needed to beinstalled in vehicles. Widespreadinstallations required substantialinvestment on the part of the consumer,particularly those with extensive vehicleeets. As a result, most customers werelarge, long-haul trucking companies withsucient resources to purchase suchsystems. Additionally, the industry’s

focus has shifted from hardwaremanufacturing to software developmentand service over the period. Becausemost hardware components of telematicssystems are fairly similar, industryplayers have had to dierentiatethemselves by developing software that iseasy to use, exible and able to provideusers with analyses of their assets. Manyof the industry’s largest players have also

begun to use the software-as-a-servicemodel, whereby consumers pay a

CurrentPerformanceThe Fleet Telematics Systems industryhas performed exceptionally well over thepast ve years as the proliferation ofindustry products increased. Industryplayers manufacture devices and develop,maintain, and service software used ineet telematics systems. Fleet telematicssystems combine the functions ofelectronic devices, GPSs and specializedsoftware that tracks the location andother characteristics, such as mileage orspeed, of vehicles in a eet. While the

recession put pressure on industrygrowth, operators began to recover asincreasing fuel prices, untapped marketsand the development of new products

boosted demand for eet telematics.Nevertheless, continued outsourcing ofhardware production and saturation incertain markets slightly hindered growth.However, in the ve years to 2014,industry revenue is expected to climb atan annualized 8.6% to $2.0 billion, with a5.8% jump in 2014.

Fuel prices fell during therecession, causing operatorsto delay the purchase ofindustry products


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Changing productsand marketscontinued

subscription fee in exchange for access toa telematics system and software. Thesoftware is constantly upgraded and isoered to consumers as service by whichthey can access their data and analyses viainternet connection.

The increased emphasis on software hasalso led to greater telematics system use onmobile devices, rather than installed vehiclehardware. Because most mobile devices,such as smartphones and tablets, areequipped with GPSs and othercommunication features, they can function

as telematics devices if appropriate softwareis installed. As the number of mobileinternet connections is expected toskyrocket at an annualized 36.8% to 234.2million connections in the ve years to 2014,mobile telematics software use has becomeone of the dominant product platforms inthis industry. However, because mobiledevices are not directly installed into

vehicles, the type of data they can transmitand analyze is limited, thus constraining thisplatform’s growth.

Changing product oerings and

platforms have also coincided with the

industry’s penetration into new markets.Because many drivers already usesmartphones, and subscription-basedproducts require less initial investment,smaller transportation companies have

begun to be able to aord industry products.This has led to increasing demand fromlocal trucking companies and owner-operators, which account for the majority oftrucking enterprises. At the same time, thetraditional long-haul trucking market has

become saturated as most operators in thissector already use some kind of industry

product. Moreover, the use of telematics hasmoved beyond increasing fuel eciency androute productivity. Telematics’ capacity toallow users to monitor and analyze driver

behavior, improve asset utilization, trackand monitor cargo and equipmentconditions, reduce accidents and improvesustainability has enabled the industry toenter new markets such as logistics, utility

vehicle eets and construction equipmenteets. For example, industry productsenable construction equipment owners totrack the location of their equipment and

monitor its condition.

International trade In the ve years to 2014, imports havegrown at an annualized 6.1% to $898.0million. The primary driver of this growthhas been increased outsourcing ofhardware manufacturing to low-wagecountries, such as Mexico and China. Forinstance, Mexico’s lower wagerequirements, coupled with its proximityto the United States and membership tothe North American Free Trade

Agreement, has rendered it a primelocation to produce the industry’s morecommoditized hardware. However,despite hardware manufacturing movingabroad, imports share of domesticdemand has declined as domestic softwaredevelopment outpaced the import growthof hardware. At the same time, increaseduse of eet telematics systems abroad has

boosted industry exports, which areexpected to grow at an annualized 9.1% to$220.0 million in the ve years to 2014.

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2006 08 10 12 14 16 18Year

Revenue Exports

Revenue vs. exports



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IndustryOutlook

The Fleet Telematics Systems industry isexpected to continue its rapid growthover the next ve years. Growth in thetrucking sector and increasing fuel pricesare anticipated to drive demand forindustry products. Moreover, greater use

of mobile devices with internetconnections, increasing regulations andnew markets are also expected to spurdemand. However, imports and strongcompetition resulting from relatively low

barriers to entry will slightly taper

industry growth. Consequently, in theve years to 2019, industry revenue isexpected to climb at an annualized 7.0%to $2.7 billion.

Trucking sector andfuel prices

As US economic activity picks up,demand for trucking services isanticipated to increase. Trucking sectorrevenue forecast to grow at anannualized 3.5% to $365.1 billion in thefive years to 2019; consequently,carriers will have more money to spendon industry products. In addition, the

world price of crude oil is expected toclimb an annualized 3.6% to $119.5 per

barrel, thereby increasing thetransportation sector’s costs. As aresult, trucking companies and other

vehicle owners will be incentivized toinvest into industry products in orderto cut fuel costs.

Profitability,consolidation andother trends

Rising demand for eet telematics isanticipated to drive up industry protfrom 8.9% in 2009 to 11.2% in 2014.However, protability is expected toremain below prerecession levels asconstantly dropping barriers to entry anda saturated long-haul trucking marketcause price competition to increase. Ashardware prices drop and softwaredevelopment becomes a central functionof the industry, it has become easier fornew players to enter the market andharder for existing ones to dierentiate

themselves. The resulting pricecompetition has encouraged a surge inmergers and acquisitions. This activityhas been characterized by companies, in

addition to large corporations outside theindustry, acquiring rivals in order toexpand product oerings, enter newmarkets, gain market share and expandeconomies of scale. Nonetheless, despiteconsolidation, declining barriers to entryand strong demand for industry products

will attract more players to the industry.Consequently, the number of industryenterprises is expected to increase at anannualized 1.3% to 126 companies in theve years to 2014. Moreover, strongproduct demand and new software

engineering jobs are expected to causeindustry employment to rise at anannualized 1.0% to 6,693 employeesduring the same period.

Increased environmentalregulation will lead togreater use of industry

products


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International trade Industry imports are expected to riseat an annualized 5.0% to $1.1 billion inthe five years to 2019. However,similar to the previous five years, therapid pace of domestic telematicssoftware development will temperimport growth, which accounts onlyfor hardware, thereby reducing itsshare of domestic demand.Furthermore, the trade-weighted index(TWI), which measures the strength ofthe US dollar relative to its tradingpartners’ currencies, is forecast toincrease over the next five years, which

will make imports less expensive for

domestic customers. Simultaneously, astronger dollar will make industryexports more expensive for foreign

buyers, thereby tapering exportgrowth. Nonetheless, increased use oftelematics abroad is expected to helpexports increase at an annualized 7.4%to about $315.0 million in the five

years to 2019.

Continued marketand product change

The industry’s expansion into newmarkets is expected to continue drivingdemand. As the price of eet telematicssystems continues to drop, owners ofsmall vehicle eets will more easily beable to aord them. As a result, the localtrucking, taxi and limousine market isexpected to account for a larger share ofindustry revenue, at the expense of thelong-haul trucking market. Moreover, assupply chains become more complex and

integrated, the need to monitor all vehicle assets (including trailers and

containers) will rise in importance,further boosting demand. Rentalcompanies, especially those specializingin heavy equipment, are also expected tocontinue to expand their use of industryproducts to monitor their equipment andimprove asset utilization. Lastly, with thenumber of mobile internet connectionsforecast to climb at an annualized 6.0%to about 313.0 million in the ve years to2019, demand for already popular mobile

telematics devices and applications willcontinue to rise.

Regulations drivedemand As public awareness of environmentalissues increases, both federal and stategovernments are anticipated to continuephasing in more stringent emissionstandards for vehicles, ranging fromcommercial vans to heavy trucks.Consequently, demand for eettelematics systems will rise as theseproducts can help reduce emissions byimproving fuel and route eciency.Furthermore, the Department ofTransportation’s Federal Motor Carrier

Safety Administration is expected tointroduce rules that would requireinterstate commercial truck and buscompanies to use electronic on-boardrecorders (EOBRs). These recordersmonitor the amount of time a vehicle is

being used, thereby enabling regulatorsto track compliance with laws coveringdriving hours. As a result, eet vehicleowners will be further encouraged to buyindustry products in order to comply

with new regulations.

Use of telematics systemsabroad will increase,resulting in export growth


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Profit and othertrends As demand for industry productscontinues to increase, prot margins areanticipated to climb from an expected11.2% in 2014 to 13.6% in 2019. The paceof industry consolidation is also forecastto quicken as companies merge to gainmarket share, enter new markets andimprove their economies of scale.Nonetheless, as hardware becomesincreasingly less important andexpensive, the industry’s barriers toentry will decline further, enablingnew companies to enter. These two

trends, namely consolidation coupled with a rising number of new entrants,are expected to cancel each other outand will lead to growth in the numberof businesses. Consequently, the

number of industry enterprises isforecast to increase at an annualized0.6% to 130 companies in the five

years to 2019. In addition, a rise indemand will lead to the hiring of more

workers to offset continued losses ofmanufacturing jobs to outsourcing,causing industry employment to climbat an annualized 0.9% to 6,998 peopleover the five-year period.

A combination ofincreasing merger activityand more new entrants willlead to prot growth


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Industry PerformanceThe industry is growing fasterthan the overall economy

The number of enterprises in the

industry has increased

The number of industry productsand markets have increased

Life Cycle Stage


20

15

10

5

0

-5

-10

% G r o w t h i n s h a r e o f e c o n o m y

% Growth in number of establishments

-10 -5 0 5 10 15 20

DeclineShrinking economic

importance

Quality GrowthHigh growth in economicimportance; weaker companiesclose down; developedtechnology and markets

MaturityCompanyconsolidation;level of economicimportance stable

Quantity GrowthMany new companies;minor growth in economicimportance; substantialtechnology change

Key Features of a Growth Industry

Revenue grows faster than the economy

Many new companies enter the market

Rapid technology & process change

Growing customer acceptance of product

Rapid introduction of products & brands

Communication Equipment Manufacturing

Local Freight Trucking

Telecommunication

Networking EquipmentManufacturing

Navigational Instrument Manufacturing

Local Specialized Freight Trucking

Fleet Telematics Systems


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Industry Life Cycle The Fleet Telematics industry is in thegrowth stage of its life cycle. In the ten years to 2019, industry value added(IVA), which measures the industry’scontribution to GDP, is forecast to climbat an annualized 6.4%, while GDP willincrease at an annualized 2.7%. Whiletelematics has been around for decades,its use on a large scale is only now

becoming a reality. Increasing fuel pricesand increasingly complicated supplychains have increased demand forindustry products. Moreover, thanks to

increased focus on software development,outsourced manufacturing and droppingprices of hardware inputs, the cost toinstall eet telematics has signicantlydeclined. Consequently, smallercompanies beyond the traditionallong-haul trucking market have begun touse this technology.

Over the past ve years industryplayers have shifted their focus awayfrom hardware, which has become morecommoditized, to software and services.Most companies now oer subscription

based services, where users have accessto data via internet connection andmobile devices. Companies wishing todierentiate themselves fromcompetitors have to provide software thatprovides the best analytics and is easy touse. Moreover, the markets the industry

serves have also begun to change.Originally, the industry primarily servedthe long-haul trucking industry, but nowindustries from construction to utilitiesuse industry products. Furthermore, as aresult of entering new markets the type ofproduct oering industry players provideis also beginning to change. Clients now

want more than just data that helps themcut fuel costs and monitor their vehicles’locations. They want to receive analyzeddata that can help them monitor thecondition of their assets, increase their

workers’ productivity and evenrecommend the best possible action inorder to increase asset utilization.

The industry has also begun to rapidlyconsolidate. The struggle to dierentiateproduct oerings, enter new,unsaturated, markets and gain theeconomies of scale required to bring inand retain clients has incentivized playerto merge. Moreover, as the potential forrapid industry growth has becomeclearer, a number of companies outsidethe industry have entered the market. For

instance, Danaher Corporation and Verizon both entered the market in 2012through acquisitions. Nonetheless,declining barriers to entry has made iteasier for new players to emerge, causingthe number of enterprise to increase overthe past ve years, despite consolidation.

This industryis Growing


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Products & Services The industry’s products and servicesconsist of devices installed directly into

vehicles and equipment, as well as mobiledevices and applications. Softwaredevelopment has increasingly taken up a

larger share of product oering as mobileapplications and complex data analysis

becomes more popular. In particular,companies have to oer constantsoftware updates and informationservices in order for client to retain theirdevices and get up to date information.High quality software also allows clientsto better analyze and visualize data,thereby, making system adoption easier.

A large portion of telematics informationis processed via eet communicationshubs that receive and store the datatransmitted by the vehicle systems.However, the use of cloud computing andinternet connectivity is rapidly replacingthis model.

Local fleet systemsLocal eet systems account for anestimated 38.1% of industry revenue.These devices are installed directly into

vehicles, allowing users to monitor things

such as driver behavior, routeproductivity, fuel eciency and vehiclelocation. Most of these systems are used

by local trucking companies as means toimprove eciency in a competitive

market. However, taxi and limousineservices, and local government agenciesare also increasingly using these devicesin order to keep tack o and monitortheir vehicle eets and workers. Over theve years to 2014, this segments share ofrevenue has increased as the technologyhas become less expensive andapplications of such systems broadened.

Mobile devicesMobile devices make up an estimated28.5% of industry revenue. This productsegment represents applications forsmartphones which perform thefunction of vehicle systems devices aspart of a eet telematics system. Becausesmartphones already house both a GPSand cellular antenna, they have beenutilized to collect and transmit vehiclelocation data in lieu of a vehicle systemsdevice. This software is installed on the

vehicle driver’s phone. As smartphones

Products & MarketsSupply Chain | Products & Services | Demand Determinants

Major Markets | International Trade | Business Locations

KEY BUYING INDUSTRIES48411 Local Freight Trucking in the US

This industry purchases fleet telematics software to track and monitor its vehicle fleets.

48412 Long-Distance Freight Trucking in the USThis industry purchases fleet telematics software to track and monitor its vehicle fleets.

48422 Local Specialized Freight Trucking in the USThis industry purchases fleet telematics software to track and monitor its vehicle fleets.

48423 Tank & Refrigeration Trucking in the USThis industry purchases fleet telematics software to track and monitor its vehicle fleets.

KEY SELLING INDUSTRIES

33421 Telecommunication Networking Equipment Manufacturing in the US

This industry sells wireless telecommunications equipment to fleet telematics systemmanufacturers.

33451a Navigational Instrument Manufacturing in the USFleet telematics systems usually use navigational instruments such as GPS products to performtheir basic functions.

Supply Chain


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Products & Markets

Products & Servicescontinued

have risen in popularity and droppedin price over the past five years, mobile

vehicle systems software has increasedin revenue share, mainly at theexpense of vehicle systems devices.However, they lack some of thefunctionality of the latter because theytypically do not connect to the

vehicle’s computer system.

Long haul fleet systems An estimated 19.0% of industryrevenue is derived from long haul fleetsystems. These systems consists oftelematics devices installed directlyinto long hail vehicles. Nearly all ofsuch systems are installed on long-distance trucks. Like local fleet system,these systems allow users to monitorand analyze data about driver behavior,route productivity and fuel efficiency.

While this segment’s revenue hasincreased over the past five years, itsshare of overall industry revenue hasshrunk due to the more rapid growth oflocal fleet and mobile segments.

Trailer tracking and monitoring systemsDevices installed onto freight trailersaccount for an estimated 11.4% ofindustry revenue. By installing telematicssystems onto trailers, users can monitorthe location of their trailers and createtrucking routes that increase trailerutilization. Furthermore, telematicsdevices can now transmit data on the

condition of trailers, includingtemperature and humidity, which isuseful to companies transporting freightsuch as frozen food and grains.

Other devices All other devices only make up anestimated 3.0% of revenue. Most of theseare heavy equipment monitoring devices,

which allow owners of equipment such asearthmovers to know the location andcondition of their assets. In particular,equipment leasing and rental companieshave increased their use of such devicesas this allows them to improve assetutilization and estimate when equipmentrepairs and maintenance are due.

Products and services segmentation (2014)

Total $2.0bn

38.1%Local fleet systems

28.5%Mobile devices

19.0%Long haul fleet systems

11.4%Trailer tacking andmonitoring systems

3.0%Other devices



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Products & Markets

Major Markets TruckingTrucking dominates the market fortelematics systems, accounting for anestimated 63.0% of industry revenue. Mostcustomers in this market are for-hirecarriers, but private eets have become amajor users over the past ve years.Long-distance freight trucking companies

were the rst to invest in eet telematicssystems and remain a large market for the

systems. These companies have the most togain by investing in telematics systems

because they have large eets, and thesesystems generate savings on a per-vehicle

basis. In addition, because long-distancefreight trucks stay on the road for longstretches of time, the marginalimprovements in fuel usage quickly pay forthe initial investment in a eet telematicssystem. This market’s share of revenue is

DemandDeterminantsDemand for eet telematics systemsdepends on a number of variablesincluding the performance ofdownstream markets, fuel prices,proliferation of mobile devices and theprice of industry products.

The Fleet Telematics Systemsindustry is mostly sold to the truckingand logistics industries. As a result,industry performance is somewhatdependent on how well thesedownstream markets do. Theseindustries invests in eet telematics

systems to a greater degree when protis high and cash is available to invest intechnology improvements, explaining

why industry growth slowed down, whenthe transportation sector was hit by therecession. However, because theproliferation of eet telematics is stilllow, industry revenue still showedstrong growth during the recession.Moreover, because industry productshave been proven to improve routeproductivity and reduce fuel costs anyincrease in fuel prices makes investment

into industry products more attractive.Consequently, even during periods of

weak demand for trucking, truckingcompanies acquired industry productsin order to reduce costs and gain acompetitive edge. In addition, othertypes of logistics companies have been

buying telematics systems as a way tomonitor increasingly complex and datadriven supply chains.

Over the long term, demand fortelematics has steadily increased becausethe price of semiconductors, whichcomprise the computational systemsnecessary to this industry, has steadilyfallen. The price drop in these inputs hascaused the prices of industry products todrop as a result. Smaller-scale companies

with vehicle eets can now aord eettelematics systems, which used to beavailable only to large-scale companies.

Another key industry demanddeterminant is the proliferation of mobile

devices with internet connections. Mostmobile devices such as smartphone andtablets already have both a GPS andcellular antenna. Consequently, they areincreasingly being utilized to collect andtransmit vehicle location data in instead ofa vehicle systems devices, with manyindustry players developing software forsuch devices. Moreover, because it costsless and easier to integrate a mobile basedsystem than a one based on direct vehicleinstallation, mobile devices have becomepopular among smaller customers. Lastly,

potentially reduced insurance premiumshave also begun to drive demand forindustry products. Insurance companiesare increasingly oering lower premiumsto customers who install telematics ontheir vehicles. This allows insurancecompanies to analyze driving behaviorand habits, which then lets the chargehigher premiums to more risky driversand lower premiums to safer ones.


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Products & Markets

Major Marketscontinued

set to increase as regulations concerning“hours of service” (the amount of timetruckers are allowed to work within acertain time frame) intensify.

As the price of telematics systems hassteadily decreased over the past ve years,local freight trucking companies haveincreased their investment in them. Thesecompanies have smaller eets than their

long-distance counterparts and, as a result,cut fewer costs through investing in atelematics system. However, thesecompanies are more likely to invest in amobile-phone-based telematics system dueto its lower cost. As a result, local freighttrucking’s share of industry revenue hasincreased over the past ve years and isexpected to continue growing.

Express and logistics servicesCompanies such as express carriers andthird-party logistics providers account

for an estimated 12.0% of industryrevenue. Parcel and couriercompanies are installing telematicssystems on their vast fleets of trucks inorder to improve their efficiency ofroutes. Shipping and logisticscompanies are also using industryproducts and services to monitorincreasingly complex and integrated

supply chains.

Other All other markets make up anestimated 25.0% of industry revenue.These include, taxi and limo services,government and commercial vehiclefleets, and owners of heavy equipment.

While the applications of telematicsdiffers with each segments, most useindustry products to monitor driver

behavior, vehicle and equipmentconditions and improve utilization.

Major market segmentation (2014)

Total $2.0bn

63%Trucking

25%Other

12%Express and logistics

services



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Products & Markets

Imports From...

Total $898.0m

42%Other

21%Mexico

15%China

14%Taiwan

9%Canada

Exports To...

Total $220.0m

69%Other

12%Japan

10%Canada

6%Mexico

4%France

Year: 2014SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA SOURCE: USITC

International Trade ImportsIn 2014, IBISWorld estimates thatimports will account for 34.1% ofdomestic demand, which is down from36.7% in 2009. However, while imports’share of domestic demand has declinedin the ve years to 2014, their value isactually expected to increase at anannualized 8.0% to $898.0 million. Theprimary reason for this disparity is thatindustry revenue growth (a lot of which isdriven by non-traded softwaredevelopment and service) has outpaced

imports of hardware. Nonetheless, theindustry imports more than it exports

because most industry hardware isrelatively easy to produce, with manycompanies moving manufacturing tocountries with low labor costs in order toreduce prices. That is one of the reasonsMexico accounts for an estimated 20.8%of imports. Its relatively low labor costs,proximity to the United States andmembership to the North American FreeTrade Agreement (NAFTA) makes it an

ideal location in which to produceindustry products for the United Statesmarket. Similarly, China makes up anestimated 14.7% of imports because of itsrelatively low wages. Taiwan, whichaccounts for an estimated 14.2% ofimports has a strong tech sector whichimports many industry products into theUnited States, while Canada makes up

Level & Trend

Exports in theindustry areMedium andIncreasing

Imports in theindustry areMedium andIncreasing

$ m i l l i o n

800

−1600

−1200

−800

−400

0

400

2006 08 10 12 14 16 18Year

Exports Imports Balance

Industry trade balance



18/34


Products & Markets

International Tradecontinued8.8% of imports primarily because of itstech sector, proximity to the United Statesand membership to NAFTA. Lastly,imports have been boosted in recent years

by a strengthening dollar, which haslowered the price of imports compared todomestically produced goods.

ExportsIndustry exports are expected to increaseat an annualized 11.1% to $220.0 millionin the five years to 2014. Such rapidgrowth has increased exports share of

industry revenue from 11.0% in 2009 toan expected 11.2% in 2014. In generalexports have been driven by wideracceptance of industry products outsidethe United States. Nonetheless, exports

are far lower than imports because US based manufacturers have to compete with lower priced products from Chinaand Mexico, while also dealing with arecently strengthening dollar that hasmade exports more expensive forforeign buyers.

Canada and Mexico account for 9.5%and 6.1% of exports, respectively, becausethey both border the United States andare members of NAFTA. Moreover, bothcountries have relatively large truckingindustries which transports the majority

their freight both domestically and to theUnited States. Japan and France make up11.6% and 3.7% of exports as bothcountries have large logistics industries

which use industry products.


19/34


Products & Markets

Business Locations 2014

MO0.6

VT0.3

MA5.3

RI0.3

NJ4.0

DE0.3

NH1.1

CT2.1

MD1.9

DC0.0

1

5

3

7

2

6

4

8 9

Additional States (as marked on map)

AZ3.7

CA19.7

NV0.5

OR2.1

WA4.6

MT0.3

NE0.0

MN1.9

IA1.0

OH3.2

VA2.4

FL8.3

KS1.6

CO1.0UT1.6

ID0.6

TX8.3

OK0.8

NC1.1

AK0.0

WY0.0

TN0.5

KY0.3

GA0.8

IL3.0

ME0.0

ND0.0

WI0.6 MI

1.4PA3.8

WV0.2

SD0.2

NM1.1

AR0.5

MS0.3

AL1.0

SC0.0

LA1.0

HI0.3

IN1.3

NY5.0 5

6

78

321

4

9


Establishments (%)

Less than 3%

3% to less than 10%

10% to less than 20%

20% or more


20/34


Products & Markets

Business Locations Several factors aect industry locations,including proximity to complementaryindustries, customers and suppliers.Firms also consider the location andaccessibility of highly skilled labor.

The West, Southeast and Mid-AtlanticThe West dominates the industry, with27.2% of establishments located there.California alone is home to 19.7% ofestablishments because it is a hub fortechnology and software developments.

As a result, it is easier for companies to

not only find the best engineers, butalso establish links with otherindustries and investors that can helpoperators grow. The Southeast andMid-Atlantic account for 16.3% and15.0% of industry establishments. Thestates of Florida, Massachusetts andNew York are particularly popular foroperators as they all have high researchand development spending.

Other regions About 13.9% of industry establishments

are located in the Southwest, with Texasalone accounting for 8.3% of them. The

state not only home to major technologyhubs like Austin, but has a large truckingindustry which uses industry products.

All the other regions account for lessthan 10.0% of establishments as they are

less focused on technology and havesmaller populations.

%

30

0

10

20

S o u t h

w e s t

W e s t

G r e a t L a k e s

M i d - A t l a n t i c

N e w E n g

l a n d

P

l a i n s

R o c k y M o u n

t a i n s

S o u t h e a s t

Establishments

Population

Distribution of establishments vs. population



21/34


Cost StructureBenchmarks

ProfitProt, dened as earnings before interestand tax expenses, is estimated tocomprise 11.2% of industry revenue in2014. Prot margins have slightlyincreased over the past ve years as thetrucking sector began to recover andincreasing fuel costs incentivized moretransportation companies to usetelematics. However, increasing internal

competition caused by declining barriersto entry and increased use of softwareservice has kept margins from reachingtheir prerecession levels.

PurchasesPurchases are the largest expense for theFleet Telematics Systems industry.Purchase will account for an estimated32.6% of revenue in 2014. Purchases

Key Success Factors Company’s product is user/ consumer friendlyThe industry’s products are highlytechnical. However, successful rmscreate products that can be easily used byusers with little technical knowledge.

Customers will switch to a more user-friendly system if available.

Proximity to key marketsMost fleet telematics systemscompanies are small, local operations.Successful telematics companies mustlocate themselves close to theirpotential customers.

Ability to quickly adopt new technologyCompanies in this industry must be onthe cutting edge of wirelesscommunication and navigationalinstrument technology.

Level of competitionexisting in the marketThe fleet telematics system softwareindustry has a low level ofconcentration, with most playersoperating in a small geographic region.Therefore, a firm’s revenue is heavilydependent on how many other firmsare operating in that region.

Market ShareConcentrationThe Fleet Telematics Systems industry hasa moderate level of market concentration,

with the four largest players accountingfor an estimated 43.0% of industryrevenue. Despite the presence ofnationwide major players, most of theindustry comprises small-scale rms thatonly serve a small market, based on thefunctionality of the telematics systemsthey provide. These smaller companiestypically have only a few contracts andoperate web-based applications ratherthan through hardware installed at the

client’s base of operations. The larger-scale rms use their abundant resourcesto oer premium products that allowmore functionality.

However, over the past five years market concentration hassignificantly increased. Constantlyfalling barriers to entry, the potentialfor future growth and the advantagesobtained from scale have encourageda major wave of merger andacquisition activity. In fact, most ofthe industry’s major players haveeither been acquired or themselvesacquired a competitor. Nevertheless,despite rapid consolidation, theindustry’s falling barriers to entry

have made it easy for new players toenter the industry, with the numberof enterprises rising over the pastfive years.

Competitive LandscapeMarket Share Concentration | Key Success Factors | Cost Structure Benchmarks

Basis of Competition | Barriers to Entry | Industry Globalization

Level

Concentration in thisindustry is Medium

IBISWorld identifies250 Key SuccessFactors for abusiness. The mostimportant for thisindustry are:


22/34


Competitive Landscape

Cost StructureBenchmarkscontinued

include metal products, printed circuit boards, semiconductors, wirelesscommunications devices and many othermaterials, components and supplies.However, purchases share of revenue hassteadily declined over the past ve yearsas companies have outsourced theirmanufacturing operations to lower costscountries such as Mexico and China.Moreover, as more companies focus onsoftware development as opposed tohardware manufacturing, purchases willcontinue to decline year by year.

Wages At an estimated 18.6% of revenue, wagesare the second-largest single expense forthis industry. The two dominant types ofindustry workers are factory employeesand software engineers. As the industryhas focused more and more on softwaredevelopment and services, softwareengineers’ share of wages has increased,

while increased outsourcing ofmanufacturing has lowered factory workers share of wages. Moreover, because the number of softwareengineers is lower than that of industrial

workers, wages share of revenue hasdeclined over the past ve years.

OtherRent and utilities, marketing anddepreciation only account for anestimated 3.0%, 2.0%, and 1.6% ofindustry revenue. Other costs, such

as research and development (R&D),insurance, administrative costs andlegal fees account for an estimated31.0% of industry revenue. Inparticular, R&D accounts for a largeportion of revenue because companieshave to constantly develop andupdate their software and hardwareofferings in order to stay aheadof the competition.

Sector vs. Industry Costs

■ Profit

■ Wages

■ Purchases

■ Depreciation

■ Marketing

■ Rent & Utilities

■ Other

Average Costs of

all Industries in

sector (2014)

Industry Costs

(2014)

0

20

40

60

P e r c e n t a g e

o f r e v e n u e

80

100

14.7

19.2

4.87.27.6

24.6

21.9

11.2

31.0

3.0 2.01.6

32.6

18.6



23/34



Barriers to Entry The industry exhibits moderate, butconstantly declining, barriers to entry. Ingeneral, hardware manufacturers have toinvest into machinery and facilities

required to produce telematicsequipment. However, as the use ofmobile phone applications and web-

based interfaces instead of hardwareand central communications hubs hasmade it easier for new players to enterthe market, especially if they oer easyto use and high quality software andservices. These new product lines havenot completely eclipsed the old model,though, because a physical piece ofhardware installed on a vehicle candeliver more functionality than just amobile phone due to its link with the

vehicle’s computational system.Moreover, the price of semiconductorshas fallen, lowering the cost of hardwaremanufacturing. On the other hand, new

entrants have to face strong competitionfrom large incumbent players. Thesecompanies have better brandrecognition, with many downstreammarkets already using their products.Consequently, it is more expensive forcustomers to switch to a new telematicsprovider as it would require investmentinto buying and learning new hardwareand software.

Basis of Competition The major points of competition in thisindustry include brand strength, price,niche markets and value-added services.Brand strength allows existing andestablished companies to gain greatermarket presence and product acceptance.In order to gain market share, emergingrms must convince potential customersthat their telematics system has a largeenough coverage area and is easy to use.In addition, switching to a new brandforces the customer to invest in a new setof hardware and learn how to use a new

interface. Companies also competestrongly on price because most industryproducts oer similar functions. As aresult, price-competition is oftenintense, with many operatorsoutsourcing hardware manufacturing to

low cost countries such as China inorder to better compete.Companies can compete by supplying

products to niche markets. Most small-scale operators only provide industrygoods to one market (i.e. long-distancefreight trucking and local refrigerationtrucking) by building hardware, softwareand services that are tailored towardsthat markets end users. This allowsthem to build a specialization thatmakes competition from non-nicheplayers less likely. Finally, a company

can gain an edge over competitors byoering value-added services. Theseservices include providing designsolutions, application engineering andsoftware development and updates,repairs, and general post-sales services.

Level & Trend

Competition inthis industry isHigh and the trendis Increasing

Barriers to Entry checklist Level

Competition High

Concentration Medium

Life Cycle Stage Growth

Capital Intensity Low

Technology Change High

Regulation & Policy Light

Industry Assistance None


Level & Trend

Barriers to Entryin this industryare Medium andDecreasing


24/34



IndustryGlobalizationThe Fleet Telematics Systems industryhas a moderate, but increasing level ofglobalization. The Unites States marketfor telematics is the largest in the world,

with most players based in the States inorder to serve their local or nichemarkets. Moreover, most industrysoftware development takes place in the

United States, however, hardwaremanufacturing is often outsourced tocountries with low labor costs. Moreover,an increasing number of foreign-basedplayers are entering the industry. Forinstance, Fleetmatics is one of the largesttelematics companies in the UnitedStates, but it is based in Ireland.


Trade Globalization Going Global: Fleet Telematics Systems 2004-2014

E x p o r t s / R e v e n u e

E x p o r t s / R e v e n u e

200

150

100

50

0

200

150

100

50

0

Imports/Domestic Demand Imports/Domestic Demand

0 040 4080 80120 120160 160

International trade is amajor determinant ofan industry’s level ofglobalization.

Exports offer growthopportunities for firms.However there are legal,economic and political risksassociated with dealing inforeign countries.

Import competition canbring a greater risk forcompanies as foreignproducers satisfy domesticdemand that local firmswould otherwise supply.

Export ExportGlobal Global

ImportLocal ImportLocal

Fleet TelematicsSystems 2004

2014

Level & Trend

Globalization inthis industry isMedium and thetrend is Increasing


25/34


Player Performance Trimble Navigation Limited is aSunnyvale, CA-based company that

builds technology to increase work

process productivity across numerousindustries, including agriculture,architecture, civil engineering,construction, environmentalmanagement, government, naturalresources, transportation and utilities.The company, which has 6,561employees, was established in 1978 andgenerated about $2.0 billion in 2012.Trimble has four divisions: engineeringand construction, eld solutions, mobilesolutions and advanced devices.

The mobile solutions division, which is

the only segment relevant to thisindustry, provides hardware and softwaredesigned to manage mobile workers andassets. Products in this segment includeembedded telematics, scheduling anddispatching software, enterprise

software, and eet managementhardware and software. During much ofthe past ve years, Trimble has been a

minor player in the Fleet TelematicsSystems industry; however, beginning in2011, the operator has acquired severalkey players, including PeopleNet,GEOTrac Systems and TMW Systems,making Trimble the industry’s largestcompany. While the company doesproduce telematics hardware, mostrevenue is collected through itssubscription-based software-as-a-service(SaaS) model. Under this model, thecompany installs proprietary hardwaredevices (most of which are produced in

Mexico) consisting of a GPS receiver, business logic, sensor interface and wireless modem onto vehicles. Data isthen processed through Trimble’s datacenter, to which clients gain access viainternet-connected application software.

Major CompaniesTrimble Navigation Limited | Omnitracs LLC

Fleetmatics IRL Ltd. | Other Companies

61.9%Other

Trimble Navigation Limited 16.7%

Omnitracs LLC 12.8%

Fleetmatics IRL Ltd. 8.6%


Major players(Market share)

Trimble Navigation Ltd. (US industry-specific segment) financial

performance*

YearRevenue

($ million) (% change)Operating Income

($ million) (% change)

2008 103.6 NC 7.0 -8.6

2009 96.0 -7.3 8.9 27.1

2010 95.7 -0.3 1.2 -86.5

2011 135.5 41.6 2.8 133.3

2012 215.8 59.3 20.2 621.4

2013 300.5 39.2 40.2 99

*Estimates

SOURCE: ANNUAL REPORT AND IBISWORLD

Trimble NavigationLimitedMarket share: 16.7%


26/34


Major Companies

Player Performance San Diego-headquartered Omnitracs LLC

is one of the industry’s leading telematicsproviders for the trucking sector,particularly for long-haul carriers.Omnitracs, established in 1988 as a partof telecommunications manufacturerQualcomm, pioneered machine-to-machine communication with theintroduction of OmniTRACS, a satellite-

based communication system for thetransportation industry. The systemallowed companies to track and monitortheir trucking assets. Until recently,Omnitracs was part of the Qualcomm

enterprise services (QES) division, whichis grouped under the Qualcomm Wireless& Internet (QWI) segment. QES providesequipment, software and services thatenable companies to wirelessly connect

with their assets and workforce.Specically, it oers satellite- andterrestrial-based, two-way wireless

connectivity and GPS location services to

transportation and logistics eets andother enterprise companies. The servicepermits customers to track the locationand monitor the performance of theirassets, communicate with personnel andcollect data. However, in 2013,Qualcomm nalized the sale ofOmnitracs to Vista Equity Partners forabout $800.0 million.

Financial performanceIn the ve years to 2013, Omnitracs’ USindustry-specic revenue is expected to

decline at an annualized 2.5% to $230.6million. At the height of the recession,the company’s revenue plummeted by18.7% and has since struggled to recover.In general, the company has haddiculty moving away from the saturatedlong-haul trucking market toward thelocal trucking market. As a result,

Player PerformancecontinuedFinancial PerformanceTrimble’s industry-specic revenue isexpected to increase at an average annualrate of 23.7% to $300.5 million in the ve

years to 2013. Similar to many otherindustry players, the company lostrevenue and operating income during therecession, with revenue declinescontinuing through 2010. However, the

company has since acquired variouscompetitors, causing its market share toskyrocket. In 2011, the company acquiredPeopleNet, and in 2012, it purchasedGEOTrac Systems and TMW Systems.However, TMW System’s revenue wasnot recorded until 2013, leading revenueand operating income to increase by39.2% and 99.0%, respectively, that year.

Omnitracs LLC (industry-specific) financial performance*

Year Revenue (% change) Operating Income (% change)2008 262.3 N/C -0.3 N/C

2009 213.3 -18.7 6.7 N/C

2010 233.1 9.3 4.5 -32.8

2011 244.9 5.1 -56.7 N/C

2012 230.0 -6.1 -5.5 -90.3

2013 230.6 0.3 -3.0 -45.5

*EstimatesSOURCE: ANNUAL REPORT AND IBISWORLD

Omnitracs LLCMarket share: 12.8%


27/34


Major Companies

Other Companies Danaher Corporation Estimated market share: 4.9%Danaher Corporation oers professional,medical, industrial and commercialproducts and services. The company is

headquartered in Washington, DC and,in 2013, about 42.0% of its $19.2 billionin revenue was earned in the UnitedStates. The company entered the FleetTelematics Systems industry in 2012,

Player Performance Fleetmatics IRL Ltd. is a Dublin, Ireland- based operator that provides eetmanagement solutions to commercialeets of small- to medium-sized

businesses. The company’s revenue isprimarily derived through an SaaSmodel, in which clients subscribe to its

software services. These services allowusers to monitor vehicle locations, fuelusage, speed, mileage and otherinformation through mobile devicesinstalled with Fleetmatics software. Thecompany mainly operates in the UnitedKingdom, Ireland and the UnitedStates. However, only its Boston-basedUS operations, which account for morethan 87.0% of its revenue, are relevantto this industry. In 2010, the companyacquired SageQuest Inc., leading to a

boost in the number of vehicle

subscriptions from nearly 150,000 in2009 to over 200,000 in 2010.

Financial PerformanceIn the ve years to 2013, Fleetmatics’ USrevenue is expected to grow at astaggering average rate of 43.9% per

year to $155.1 million. While thecompany’s overall revenue grew duringthe recession, it suered a loss of $4.1million in 2008. However, similar toother major players in this industry,Fleetmatics has rapidly expanded itsrevenue stream through its acquisitionstrategy. The acquisition of SageQuestInc. in 2010 caused company revenue toclimb by 54.8% in 2011. Subsequently,combined company revenue grew at adouble-digit pace and is expected toincrease by 39.2% in 2013 alone.

Player Performancecontinuedoperating margins have been negative forthe past three years, with revenueexpected to slightly grow 0.3% in 2013.

Fleetmatics IRL Ltd. (US industry-specific) financial performance*

Year Revenue (% change) Operating Income (% change)

2008 25.2 N/C -4.1 N/C

2009 36.3 44.0 3.2 N/C

2010 50.9 40.2 2.0 -37.5

2011 78.8 54.8 5.1 155.0

2012 111.4 41.4 10.8 111.8

2013 155.1 39.2 25.8 138.9

*EstimatesSOURCE: ANNUAL REPORT AND IBISWORLD

Fleetmatics IRL Ltd.Market share: 8.6%


28/34


Major Companies

Other Companiescontinued with the acquisition of Navman Wireless,a major provider of vehicle-tracking andeet management hardware andsoftware. In 2013, it further boosted itsmarket share in the industry through theacquisition of United Kingdom-basedTeletrac from private equity rm VectorCapital. As a result of these acquisitions,IBISWorld expects Danaher to generate$88.2 million in industry-specicrevenue in 2013.

Verizon Telematics

Estimated market share: 2.7% Verizon Telematics, which isheadquartered in Atlanta, entered theFleet Telematics industry in 2012 withthe acquisition of Hughes Telematics,Inc. Hughes, which was formed through amerger of Polaris Acquisition Corp. and

Hughes Telematics, is a telematicsservices company that providesnumerous real-time voice and datacommunication services and applicationsfor use in the automotive industry. Since2009, Hughes has been the exclusivetelematics service provider in the UnitedStates for all new vehicles sold byMercedes-Benz, and has entered intoservices agreements with Volkswagen to

become their exclusive provider in 2013.Through its acquisition of formerindustry leader Networkeet, Hughes

provides a eet management solutionthat includes an easy-to-use, automatic-

vehicle location and remote-vehiclediagnostics system. ThroughNetworkeet, Verizon Telematics isexpected to generate $49.4 million inindustry-specic revenue in 2013.


29/34


Capital Intensity The Fleet Telematics Systems industryhas a low level of capital intensity. In2014, for every dollar industry playersspend of labor, an estimated $0.09 will

be spent on capital. Manufacturers oftelematics hardware have to invest intorelevant machinery, equipment andfacilities make products such as

vehicle systems devices and fleetcommunication hubs. On the otherhand, firms must invest in highlyskilled labor, such as softwareengineers and technicians. These

professionals are highly sought after ina variety of industries, and their wagecost is high. Moreover, as electronicshardware manufacturing has becomeless expensive (due to outsourcing andcommoditization) and the software

aspect of telematics more important,the industry has become less focusedon hardware manufacturing.

Operating ConditionsCapital Intensity | Technology & Systems | Revenue Volatility

Regulation & Policy | Industry Assistance

Tools of the Trade: Growth Strategies for Success


L a b o r I n t e n s i v e

C a pi t al I n t en s i v e

Change in Share of the Economy

New Age Economy

Recreation, Personal Services,Health and Education. Firmsbenefit from personal wealth sostable macroeconomic conditionsare imperative. Brand awarenessand niche labor skills are key toproduct differentiation.

Traditional Service Economy

Wholesale and Retail. Relianton labor rather than capital tosell goods. Functions cannotbe outsourced therefore firmsmust use new technologyor improve staff training toincrease revenue growth.

Old Economy

Agriculture and Manufacturing.Traded goods can be producedusing cheap labor abroad.To expand firms must mergeor acquire others to exploiteconomies of scale, or specializein niche, high-value products.

Investment Economy

Information, Communications,Mining, Finance and RealEstate. To increase revenuefirms need superior debtmanagement, a stablemacroeconomic environmentand a sound investment plan.

CommunicationEquipmentManufacturing

Local Freight Trucking

Telecommunication NetworkingEquipment Manufacturing

Navigational Instrument Manufacturing

Fleet Telematics Systems

Capital intensity

0.5

0.0

0.1

0.2

0.3

0.4


Dotted line shows a high level of capital intensity

Capital units per labor unit

Fleet TelematicsSystems

InformationEconomy

Level

The level of capitalintensity is Low


30/34


Operating Conditions

Revenue Volatility This industry has a moderate level ofrevenue volatility, with year-on-yearrevenue changes averaging 6.9% since

2009. Volatility has been primarilydriven by rapid revenue growth caused

by strong demand for telematics.

Technology& Systems

The rate of technology change is high inthe Fleet Telematics Systems industry.Companies generally adopt newtechnology to oer either new featuresor better usability to customers.Currently, telematics systems can usesatellite networks, terrestrial networks,

such as broadband cellular networks, orsome combination of the two. Somesystems also use a wireless local areanetwork (WLAN, also known by thecommon standard Wi-Fi) to transmitdata back to the central server withoutincurring any network usage charges.

In addition, the industry has movedaway from only using hardware installedon eet vehicles and in the customer’soce. Hardware in vehicles is beingreplaced by mobile phone applications thatperform similar functions. Mobile-phone-

based systems are especially popularamong customers who only use a eettelematics system to track vehicle positions.

A device installed on the vehicle’s computersystem can also provide info such asdiagnostics and cargo monitoring. Also, atelematics system can be used to

implement an auto insurance policy baseddirectly on a driver’s driving habits. Back athome base, specialized computers used tocollect and process the data from the

vehicles is being replaced by webapplications that serve similar functions. Asthe hardware needed to operate atelematics system is reduced, the cost ofimplementing a telematics system goesdown. Combined with the steady decline ofthe price of computer components,technology change is causing industryproducts to steadily decline in price.

Capital IntensitycontinuedNonetheless, capital intensity hasclimbed over the past five years asmanufacturers invested into

automated production equipment inorder to improve productivity andlower wage costs.

Level

The level ofTechnology

Change is High


Volatility vs Growth

R e v e n u e v o l a t i l i t y * ( % )

1000

100

10

1

0.1

Five year annualized revenue growth (%)

–30 –10 10 30 50 70

Hazardous

Stagnant

Rollercoaster

Blue Chip

* Axis is in logarithmic scale

Fleet TelematicsSystems

A higher level of revenuevolatility implies greaterindustry risk. Volatility cannegatively affect long-termstrategic decisions, such as

the time frame for capitalinvestment.

When a firm makes poorinvestment decisions itmay face underutilizedcapacity if demandsuddenly falls, or capacityconstraints if it risesquickly.

Level

The level ofVolatility is Medium


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Operating Conditions

Industry Assistance While the industry receives no directassistance from the government,certain environmental regulations canpotentially boost demand fortelematics. For instance, theDepartment of Transpiration’s FederalMotor Carrier Safety Administrationhas proposed rules requiring interstatecommercial truck and bus companies to

use electronic on-board recorders(EOBRs). EOBRs allow the monitoringof the amount of time a vehicle is beingused, which enable regulators to trackcompliance with regulations coveringdriving hours. If this regulation is totake full effect it would lead toincreased demand for telematicsproducts that can be used as EOBRs.

Regulation & Policy The Fleet Telematics Systems industry isnot directly regulated by the government.However, regulations on related

industries do impact this industry. TheFederal Communications Commissionheavily regulates the manufacturing ofcommunication devices, such as GPSnavigation devices, cellular networks and

wireless networks, which telematicssystems employ. On the other hand, theindustry benets from the actions of theEnvironment Protection Agency (EPA).

As the EPA continues to pressuretransportation companies to reduce theircarbon footprint, they will increasingly

turn to eet telematics systems to helpreduce fuel usage.

Moreover, like in all manufacturing

industries, industry facilities are subjectto federal, state and local environmentaland health and safety regulations thatimpose workplace standards, as well aslimitations on the discharge of pollutantsinto the environment. Such laws includethe US Clean Air Act and the Clean Water

Act. These acts require compliance withair and water quality standards andempower the Environmental Protection

Agency to establish and enforce limits onthe emission of pollutants.

Revenue VolatilitycontinuedIndustries such as trucking haveincreased the use of telematics as meansto improve eciencies in the face ofstring competition and increasing fuelprices. In particular volatility increasedafter 2011 as demand for industryproducts increased on the back of an

improved economy, with revenue growthclimbed from 6.1% in 2010 to 12.8% in2011 and from 4.2% in 2012 to 14.6% in2013. Over the next ve years, volatility isexpected to remain moderate asadvancements in relevant technology andnew markets drives rapid growth.

Level & TrendThe level ofRegulation isLight and thetrend is Steady

Level & Trend

The level ofIndustry Assistanceis None and thetrend is Steady


32/34


Key StatisticsRevenue

($m)

IndustryValue Added

($m)Establish-

ments Enterprises EmploymentExports

($m)Imports

($m)Wages($m)

DomesticDemand

World priceof crude oil

($ per barrel)

2005 984.6 439.3 131 116 6,297 117.8 494.2 289.5 1,361.0 53.4

2006 1,041.5 437.7 132 117 6,761 141.0 592.3 307.3 1,492.8 64.3

2007 1,147.1 450.1 136 120 6,423 156.8 640.3 295.6 1,630.6 71.12008 1,221.6 478.7 139 122 6,389 148.3 665.4 300.6 1,738.7 97.0

2009 1,293.6 445.9 144 118 6,354 142.2 667.3 308.7 1,818.7 61.8

2010 1,373.1 471.5 141 117 6,474 155.7 705.9 316.6 1,923.3 79.6

2011 1,548.4 513.1 144 117 6,482 158.0 738.7 329.1 2,129.1 104.0

2012 1,613.2 544.7 148 122 6,565 180.2 751.3 336.6 2,184.3 105.0

2013 1,849.0 573.2 152 125 6,629 197.0 834.4 354.0 2,486.4 104.1

2014 1,956.1 614.1 153 126 6,693 220.0 898.0 362.9 2,634.1 100.2

2015 2,249.5 682.8 156 126 6,767 250.0 926.4 382.4 2,925.9 101.0

2016 2,384.5 720.0 158 129 6,821 270.0 982.0 391.7 3,096.5 105.0

2017 2,514.5 757.6 158 130 6,885 290.0 1,037.5 401.1 3,262.0 110.5

2018 2,652.8 797.7 159 131 6,949 301.0 1,093.1 410.7 3,444.9 114.9

2019 2,737.9 827.7 160 130 6,998 315.0 1,148.6 417.0 3,571.5 119.5

Sector Rank 62/94 68/94 71/94 69/94 59/94 5/9 2/9 69/94 5/9 N/A

Economy Rank 1014/1313 1017/1313 1083/1312 1064/1312 1020/1313 291/420 204/421 992/1313 277/420 N/A

IVA/Revenue(%)

Imports/Demand

(%)

Exports/Revenue

(%)

Revenue perEmployee

($’000)Wages/Revenue

(%)Employees

per Est.Average Wage

($)

Share of theEconomy

(%)

2005 44.62 36.31 11.96 156.36 29.40 48.07 45,974.27 0.00

2006 42.03 39.68 13.54 154.05 29.51 51.22 45,451.86 0.00

2007 39.24 39.27 13.67 178.59 25.77 47.23 46,022.11 0.00

2008 39.19 38.27 12.14 191.20 24.61 45.96 47,049.62 0.00

2009 34.47 36.69 10.99 203.59 23.86 44.13 48,583.57 0.00

2010 34.34 36.70 11.34 212.09 23.06 45.91 48,903.31 0.00

2011 33.14 34.70 10.20 238.88 21.25 45.01 50,771.37 0.00

2012 33.77 34.40 11.17 245.73 20.87 44.36 51,271.90 0.00

2013 31.00 33.56 10.65 278.93 19.15 43.61 53,401.72 0.00

2014 31.39 34.09 11.25 292.26 18.55 43.75 54,220.83 0.00

2015 30.35 31.66 11.11 332.42 17.00 43.38 56,509.53 0.00

2016 30.20 31.71 11.32 349.58 16.43 43.17 57,425.60 0.00

2017 30.13 31.81 11.53 365.21 15.95 43.58 58,257.08 0.00

2018 30.07 31.73 11.35 381.75 15.48 43.70 59,102.03 0.00

2019 30.23 32.16 11.51 391.24 15.23 43.74 59,588.45 0.00

Sector Rank 70/94 1/9 4/9 56/94 56/94 19/94 74/94 68/94

Economy Rank 672/1313 139/420 257/420 601/1313 627/1313 286/1312 510/1313 1017/1313

Figures are inflation-adjusted 2014 dollars. Rank refers to 2014 data.

Revenue(%)

IndustryValue Added

(%)

Establish-ments

(%)Enterprises

(%)Employment

(%)Exports

(%)Imports

(%)Wages

(%)

DomesticDemand

(%)

World priceof crude oil

(%)

2006 5.8 -0.4 0.8 0.9 7.4 19.7 19.9 6.1 9.7 20.5

2007 10.1 2.8 3.0 2.6 -5.0 11.2 8.1 -3.8 9.2 10.7

2008 6.5 6.4 2.2 1.7 -0.5 -5.4 3.9 1.7 6.6 36.4

2009 5.9 -6.9 3.6 -3.3 -0.5 -4.1 0.3 2.7 4.6 -36.3

2010 6.1 5.7 -2.1 -0.8 1.9 9.5 5.8 2.6 5.8 28.9

2011 12.8 8.8 2.1 0.0 0.1 1.5 4.6 3.9 10.7 30.6

2012 4.2 6.2 2.8 4.3 1.3 14.1 1.7 2.3 2.6 1.0

2013 14.6 5.2 2.7 2.5 1.0 9.3 11.1 5.2 13.8 -0.9

2014 5.8 7.1 0.7 0.8 1.0 11.7 7.6 2.5 5.9 -3.8

2015 15.0 11.2 2.0 0.0 1.1 13.6 3.2 5.4 11.1 0.9

2016 6.0 5.4 1.3 2.4 0.8 8.0 6.0 2.4 5.8 3.9

2017 5.5 5.2 0.0 0.8 0.9 7.4 5.7 2.4 5.3 5.2

2018 5.5 5.3 0.6 0.8 0.9 3.8 5.4 2.4 5.6 4.0 2019 3.2 3.8 0.6 -0.8 0.7 4.7 5.1 1.5 3.7 4.0

Sector Rank 28/94 22/94 54/94 47/94 61/94 2/9 3/9 50/94 2/9 N/A

Economy Rank 237/1313 172/1313 780/1312 676/1312 784/1313 49/420 91/421 611/1313 76/420 N/A

Annual Change

Key Ratios

Industry Data



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Jargon & Glossary

BARRIERS TO ENTRY High barriers to entry mean thatnew companies struggle to enter an industry, while lowbarriers mean it is easy for new companies to enter anindustry.

CAPITAL INTENSITY Compares the amount of moneyspent on capital (plant, machinery and equipment) with

that spent on labor. IBISWorld uses the ratio ofdepreciation to wages as a proxy for capital intensity. Highcapital intensity is more than $0.333 of capital to $1 oflabor; medium is $0.125 to $0.333 of capital to $1 of labor;low is less than $0.125 of capital for every $1 of labor.

CONSTANT PRICES The dollar figures in the Key Statisticstable, including forecasts, are adjusted for inflation usingthe current year (i.e. year published) as the base year. Thisremoves the impact of changes in the purchasing power ofthe dollar, leaving only the “real” growth or decline inindustry metrics. The inflation adjustments in IBISWorld’sreports are made using the US Bureau of EconomicAnalysis’ implicit GDP price deflator.

DOMESTIC DEMAND Spending on industry goods and

services within the United States, regardless of theircountry of origin. It is derived by adding imports to industryrevenue, and then subtracting exports.

EMPLOYMENT The number of permanent, part-time,temporary and seasonal employees, working proprietors,partners, managers and executives within the industry.

ENTERPRISE A division that is separately managed andkeeps management accounts. Each enterprise consists ofone or more establishments that are under commonownership or control.

ESTABLISHMENTThe smallest type of accounting unitwithin an enterprise, an establishment is a single physicallocation where business is conducted or where services orindustrial operations are performed. Multipleestablishments under common control make up an

enterprise.

EXPORTSTotal value of industry goods and services soldby US companies to customers abroad.

IMPORTSTotal value of industry goods and servicesbrought in from foreign countries to be sold in the UnitedStates.

INDUSTRY CONCENTRATION An indicator of thedominance of the top four players in an industry.Concentration is considered high if the top players accountfor more than 70% of industry revenue. Medium is 40% to70% of industry revenue. Low is less than 40%.

INDUSTRY REVENUE The total sales of industry goodsand services (exclusive of excise and sales tax); subsidieson production; all other operating income from outsidethe firm (such as commission income, repair and serviceincome, and rent, leasing and hiring income); andcapital work done by rental or lease. Receipts from

interest royalties, dividends and the sale of fixedtangible assets are excluded.

INDUSTRY VALUE ADDED (IVA) The market value ofgoods and services produced by the industry minus thecost of goods and services used in production. IVA isalso described as the industry’s contribution to GDP, orprofit plus wages and depreciation.

INTERNATIONAL TRADE The level of internationaltrade is determined by ratios of exports to revenue andimports to domestic demand. For exports/revenue: low isless than 5%, medium is 5% to 20%, and high is morethan 20%. Imports/domestic demand: low is less than5%, medium is 5% to 35%, and high is more than35%.

LIFE CYCLE All industries go through periods of growth,maturity and decline. IBISWorld determines anindustry’s life cycle by considering its growth rate(measured by IVA) compared with GDP; the growth rateof the number of establishments; the amount of changethe industry’s products are undergoing; the rate oftechnological change; and the level of customeracceptance of industry products and services.

NONEMPLOYING ESTABLISHMENT Businesses withno paid employment or payroll, also known asnonemployers. These are mostly set up by self-employedindividuals.

PROFIT IBISWorld uses earnings before interest and tax(EBIT) as an indicator of a company’s profitability. It iscalculated as revenue minus expenses, excluding

interest and tax.VOLATILITY The level of volatility is determined byaveraging the absolute change in revenue in each of thepast five years. Volatility levels: very high is more than±20%; high volatility is ±10% to ±20%; moderatevolatility is ±3% to ±10%; and low volatility is less than±3%.

WAGES The gross total wages and salaries of allemployees in the industry. The cost of benefits is alsoincluded in this figure.

Industry Jargon

IBISWorld Glossary

CLOUD COMPUTING A model that uses a network ofremote servers hosted on the internet to store, manage,and process data, rather than a local server.

GPS NAVIGATION A device that receives globalpositioning system signals to determine the device’scurrent location.

HOT SPOT A site that offers internet access over a localwireless area network.

WI-FI Technology that allows an electronic device towirelessly exchange data over a computer network.


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Documents

OD4546 Fleet Telematics Systems Industry Report