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OnStars Turn-by-Turn Navigation Rivals Traditional Systems

TRG Predicts Subscriber Growth

OnStar is once again shaking up the telematics world with a new feature designed to improve customer retention. The company’s new Turn-by-Turn navigation, a feature of OnStar’s latest generation system, is the first automotive OEM navigation solution to use “off-board” technology, liberating drivers from the prevalent and expensive DVD-based solutions. The new OnStar solution will start this year on a few vehicles but become standard by the end of the 2008 model year.

According to TRG estimates, the new service will help OnStar build its subscriber base to more than 11 million users in 2010. If one forth of these users sign up for the new navigation service, the incremental revenue to OnStar could push $300 million.

General Motors is committed to OnStar, making it standard equipment on all GM nameplates by the end of 2007. But making OnStar navigation so widely available may complicate the selling process on the showroom floor and negatively affect GM’s ability to sell traditional navigation systems. Aside from the service fee, OnStar equipment is standard while GM’s new DVD navigation systems sell for more than $2,000. Will customers go for a fee-based navigation service or prefer an integrated navigation system with no monthly fees?

“For some navigation consumers, the value may be in the simplicity of the OnStar system,” says Dr. Egil Juliussen, TRG’s principal technology analyst. Users needing driving instructions do not have to enter a physical address like they do on a traditional navigation system. Instead, they first speak to an OnStar advisor who then downloads the mapping instructions to the car. (This is identical to the Avis Assist cellphone-based system available for a fee to Avis renters.)

Despite the new OnStar solution, the U.S. market for traditional screen-based navigation systems is growing too – exceeding 1.2 million units last year. According to TRG’s forecasts, the installed navigation systems will push 4 million units annually by 2010 for all OEMs.

OnStar Sales and Navigation Revenue Estimates

2006 2008 2010
OnStar Vehicle Sales 2.6M 3.8M 4.2M
Cumulative OnStar Vehicles 10.8M 18M 26M
OnStar Subscribers 5M+ 8M+ 11M+
OnStar Subscribers w/new Navigation feature .14M 3M+ 10M+
Potential OnStar Navigation Revenue(a) $4.2M $93M $300M+

(a) Assumes $10 per month and 25% of subscriber usage

About TRG:
TRG (Telematics Research Group, Inc.) tracks and analyzes the automotive telematics, wireless, and entertainment sectors. TRG conducts a global telematics survey profiling the systems used in hundreds of production light vehicles and licenses this intelligence for competitive and market analysis.

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