NAVIBIZ: During the Telematics@China conference you participated in a panel discussion surrounding traffic information services in China. Overall, what was your impressions from the discussions you had both during the panel and afterwards?

Andrew Hart: Overall I would say that there was a lot of refreshing honesty at the conference surrounding the challenges of offering high quality traffic information services in a rapidly growing country like China. Chinese cities are experiencing incredible economic growth, which is rapidly translating into severe road congestion problems as car ownership increases. However, keeping up with the demand for traffic information is tough. This is partly because of the technical challenges of building services in China, but also because of the business challenges of selling services in a country where consumers have less experience of paying for information.

The discussions during the conference also demonstrated how closely intertwined the future of traffic information is with the government's efforts at expanding the road network. One of the most important factors to consider when developing traffic information services in emerging markets such as China is whether the road network in congested cities is capable of supporting dynamic navigation re-routing. Ultimately consumers are only interested in receiving traffic information if they can be re-routed to a less-congested road. But if the road network is not sufficiently developed to enable multiple routes to the same destination, then traffic information becomes much less useful.

NAVIBIZ: Speaking of the government, how is their role likely to evolve in China in relation to traffic information services?

Andrew Hart: That was one of the most interesting discussions during the conference. Many speakers remarked about the lack of a clear business model for offering telematics services. Interestingly, various Chinese companies made overt requests to the government to intervene in order to support the industry during the early years of telematics until the business models emerge.

In fact, the Chinese government has already committed to investing a huge amount of money during the coming years into the telematics and Intelligent Transport Systems (ITS) markets in order boost their adoption. Although the government has yet to decide how to spend this money, one of the most obvious starting points would be traffic information, which offers both clear personal and societal benefits.

When deciding how the government could stimulate the traffic information industry, a number of lessons could be learnt from other markets that have faced similar challenges in the past. Japan adopted a fully collaborative approach through its VICS platform. Most European markets have enjoyed a combination of competing private and public traffic information services. The USA, which was a late entrant, has enjoyed a largely commercially-led innovation boom within traffic information services. Which of these approaches should China adopt?

Well, as is usually the case, China is likely to adopt its own unique approach that draws on the strengths and lessons learnt in other markets. This approach will need to take into account the unique characteristics of traffic problems in China. The strategy of the Chinese government (and its impact on the automotive industry) is one of the areas that we'll be providing more insight and analysis on in our upcoming market report on traffic information in China (due to be published in March 2011).

NAVIBIZ: What else could shake-up the traffic information market in China?

Andrew Hart: The next big shake-up is likely to come when some of the major international traffic information players begin launching services in China. None of these companies have yet to make any public announcements, but we believe that at least some of them will launch traffic services in the coming year. By leveraging their extensive experience elsewhere, these companies hope to gain a strong foothold in China. But expertise with collecting and analyzing traffic data will only get them so far. They will still face major logistical and strategic hurdles in securing traffic data sources and in choosing the right Joint Venture partnerships (a necessity in China). They will also continue to face well-established domestic traffic information providers that won't easily give up their early advantage.

NAVIBIZ: Can you name any of these international service providers?

Andrew Hart: Unfortunately not! But I'm sure they will soon start making their own announcements soon.

NAVIBIZ: What should vehicle manufacturers do in order to choose the right partner?

Andrew Hart: Many vehicle manufacturers have so far been cautious about offering traffic information in China due to quality concerns. As the quality of information improves over the coming years, vehicle manufacturers will have to begin making tough decisions about which service provider to partner with. Too often vehicle manufacturers have made these decisions without comprehensively benchmarking the quality of different services and the strategic strength of each service provider. Without this kind of information, vehicle manufacturers not only risk choosing the wrong partners, but also are unable to set those partners clear quality-based Service Level Agreements that need to be met in order to receive full payment. At SBD we have been helping many of our customers identify the best partners in China for traffic information and other telematics services through a vital combination of technical and strategic benchmarking.

If you would like to discuss any of the contents included within this article with Andrew Hart, please contact him at andrewhart@sbdjapan.co.jp. Further information on SBD's research and reports is also available at www.sbd.co.uk.