TomTom Looks to Auto Industry for Future Growth

TAIPEI – TomTom NV is gratified at its success in the personal-navigation system aftermarket, but infiltrating the auto industry at the OEM level is proving more difficult, Giles Shrimpton, general manager-automotive division, says.

Shrimpton cites differing product-development cycles in the automotive sector, compared with the consumer-electronics industry, as the primary obstacle TomTom faces in entering the global arena.

“If we start developing a product for the auto industry (today), define it now and launch it in 2010, that product can last five to seven years,” he says at the AutoTronics Tapei industry trade show here. “In the consumer electronics industry, we would have already done two levels of innovation.”

How to overcome the product-cycle discrepancy is just one of the challenges facing TomTom, as well as other navigation providers attempting to enter the automotive industry.

Another potential stumbling block is turning a profit, Shrimpton says, noting the multitude of players in the segment inhibits profitability.

“In the consumer (segment), we sell to the distributor, and the distributor has a certain margin,” he says. “In the automotive industry, there are more people involved in the value chain.”

An in-vehicle navigation system with a color screen currently costs about €1,500 ($2,400) to €3,000 ($4,700) in Europe, while personal navigation devices (PNDs) typically fall into the €500 ($800) price range, Shrimpton says.

TomTom, provider of personal navigation devices, aiming to become OE automotive supplier.

“So you also have a fundamental price issue in the industry,” he says. “We’re trying to (develop) products that are more in the €500 area, rather than the €2,000 ($3,200) area.”

Quality concerns are another obstacle. Although TomTom takes great pains to ensure topnotch quality in its line of consumer GPS products, the auto industry demands a higher level of quality.

If there’s a problem with an in-vehicle navigation system, “you have to take the whole vehicle back to the dealership,” says Shrimpton. “It’s an incredibly expensive exercise. If you have a PND, it’s a lot easier. It’s a small product, so you just take it back” to the retail outlet.

Key to overcoming this problem is a higher degree of product validation and the utilization of better components, both of which add costs, he says.

Although TomTom must address numerous issues before it can achieve its automotive OE ambitions, the company is forging ahead with its plans, Shrimpton says, noting in-vehicle navigation systems offer more than just convenience.

Citing a study conducted by TomTom in 2007, Shrimpton says using an in-vehicle navigation system can cut the number of miles driven 16%, thereby reducing tailpipe emissions.

Furthermore, the study shows navigation systems can result in an 82% reduction in dangerous or illegal maneuvers that occur when drivers are in unfamiliar areas.

“We believe navigation is very important for safety and the environment,” Shrimpton says.

One advantage TomTom has over other navigation providers is name recognition, Shrimpton says. The latest edition of the Dutch dictionary has an entry for TomTom, which is defined as “find your way.”

“In a number of countries, we have spontaneous brand recognition of 90%-100%,” he adds, noting TomTom has become part of everyday lexicon. “When people talk about TomTom, it’s now like Google or Walkman.”

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