Blogs

GPS device manufacturers, mapping the way for a healthy market share

The GPS (Global Positioning System) industry has grown in the civil market over the years, whereas initially it was only used for military purposes. In today’s world, various industries around the globe have broadened the use of GPS. The GPS market generated $9.1 billion in 2011 and is expected to generate $26.36 billion by the end of 2016, registering a growth at a CAGR of 23.7%. The demand is increasing for more accurate devices to deliver the high-quality mapping solutions.

The automotive sector accounts for c. 40% of total revenue for the GPS segment. The automotive sales have grown at an average rate of 8% p.a. over the past three-year period, the year-to-date (2016) growth stands at 6%. The market for automotive navigation systems is expected to grow at a pace of CAGR 11.1% with the dynamic change in the lifestyle and spending capacity of the consumers in the APAC region. In contrast, lower volume sales were recorded in the United States and other developed nations. Additionally, the availability of 3G and 4G networks in the APAC region has further driven the field of GPS applications and as such has created a feasible infrastructure that allows industry players to provide effective navigation services. The top player in the sector, Garmin international enjoys a 20 percent point lead in the market share over that of its primary competitors, TomTom followed by Magellan. Garmin has been able to maintain its high market share by being cognizant towards the R&D requirements in the GPS industry. Further, it has always stressed on its capability to provide efficient warranty and after sales services, with superior technical repairs and customer support. Similarly, TomTom has increased its R&D services and cross-sales through a bundle of offers in order to improve its market share. The same is evident from an analysis of the cost structure.

Source: gpsreview.net

Source: Televisory’s Research

Note: As TomTom predominately deals in the PND, the revenue of automotive and consumer segment is taken into consideration for comparison of both

The cost of sales, R&D and employee expenses are the major cost drivers for the GPS manufacturers. The cost of sales in 2015 for Garmin accounted for 51.4% of the revenue per unit, while R&D expense accounted for 14.6%. The cost of sales accounted for 48.5% of the revenue per unit for TomTom, while R&D expense and employee expense accounted for 18.4% and 20.6% respectively. Moreover, TomTom has shown a marginal increase of 0.7% in the revenue which can be attributed to an improvement in the sales of sports segment (included in the consumer segment), this strategy partly helped in the revenue growth despite a fall in the volume of sales. Furthermore, TomTom strengthened its Average Selling Price (ASP) by bringing a product mix of higher price models and offering service bundle in each of its purchased products. However, in 2015 the EBITDA per unit sold declined by 75% (74% in EUR terms). The EBITDA declined by 14% and the EBITDA margin declined by 6.3 percentage point owing to the strengthening of the USD, which created a downward pressure on revenue. 

Source: Televisory’s Research

TomTom’s ROE (Return on Equity) was 2%, which was relatively low as compared to that of Garmin. The ROE of TomTom was primarily driven by its equity multiplier, which was greater due to a higher proportion of intangible assets to the total assets (c.72.3% of total assets). In 2015, the depreciation and amortisation were 12.23% of total revenue out of which 62.36% was of amortisation of technology and databases. This primarily led to a net profit margin of 2%. On the other side, Garmin's ROE was majorly driven by its net profit margin. This was because of the high EBIDTA margin. Further, the total tangible and intangible assets were 15% of the total assets, because of which the depreciation and amortisation were 2.78% of the total revenue. Therefore, Garmin's ROE was 7.24 times higher that of the TomTom.

Garmin and TomTom, along with other players have initiated various strategy plays to either improve the top line or operating margins. The sector has been unfavourably impacted by the advent of smartphone technology. The consumer base for PNDs has been consistently shrinking by an average rate of 7% in the last three years, primarily for the B2C segment. Most of the big companies have tried to establish alternate revenue streams and focused more on the commercial fleet management, navigation and tracking services (space where TomTom has a very limited presence). TomTom can hope to increase its market share because of its improved product offering within the consumer navigation segment, but, the size of the consumer navigation market is constantly shrinking.

Your Rating

Slack set out to kill E-mail

Started as a side project for internal use in a gaming company High revenue growth with recurring revenues Went Public by offering shares through the Direct Public Offering ...

Will the Big Bang merger drive, of Indian Public Sector banks, provide the required impetus to the slowing economy?

India’s Government announces plans to merge 10 of the country’s public sector banks Probable impact of the mergers   India’s Finance Minister, Nirmala Sitharaman,...

Rapidly growing Indian online food delivery industry and its unrealised profits

Evolution of online food delivery industry in India Geographical penetration and scope for expansion Key players and their zeal to balance revenue and costs   Online...

Tire manufacturing industry, analysing the cost and margin trends

The global market for tire manufacturing stands at $180 billion. Michelin anticipates the long-term demand to rise at the rate of 5 to 10% a year in developing markets and 1 to 2% a year in mature...

An analysis of Malaysian rubber glove industry

How big is the international rubber gloves market? Reasons behind the healthy and steady growth Malaysia’s role in the industry Why are companies struggling for stable...

Failure of Amazon in China, an analysis

E-commerce market in China Online consumer product retailers in China Performance of Amazon in China   Amazon is a global e-commerce player selling a wide...

Can lithium-ion anode demand for needle coke reduce availability for electrode players?

What is needle coke? Uses of needle coke Lithium-ion battery manufacturers demand needle coke   Needle coke? Needle coke is a specialised form of petroleum coke...

Is the radio broadcasting industry in the U.S. dying? An analysis

Radio, the most powerful medium of reach in the U.S. Why the industry is moving at a slow pace? Radio’s health is still sound, will it continue in the long-term?   ...

Carbon black industry, strong potential for supernormal profitability?

What is carbon black? Its uses Impact of the environmental curbs in China   What is carbon black? Carbon black is a fine carbon powder and it is a disorderly...

Housing finance market in India. Is affordable housing driving the growth?

Overview of the housing finance sector in India Key players dominating the segment and their dynamics Factors driving aggressive demand for housing   The housing...

Indian wood panel industry, growth drivers and present trends

Current market scenario in the Indian plywood industry Growth in the housing sector and rapid urbanisation to provide the boost GST rationalization to reduce price difference...

Rice industry outlook 2018

Major rice producers and consumers Global rice trade Factors dominating the trade   Rice is the 3 rd largest produced agricultural commodity in the world, after...

Sri Lankan economic and political crisis

Sri Lanka’s latest political crisis, who governs the nation? Poor economic indicators adding to the nation’s woes   Sri Lanka is currently embroiled in a political crisis,...

Blockchain, an emerging concept, a disruptive technology (Part 1)

What is blockchain? How is blockchain revolutionary? Cryptocurrency, the new money ICOs, the new way of raising money Summary Blockchain is a software architecture...

Malaysian rubber glove industry, an update

Rising global demand for gloves Impact of USP 800’s implementation and the US-China trade war on Malaysia’s rubber gloves industry Key challenges for the Malaysian rubber...

Rise of Ant Financial, will the success story continue?

What is Ant Financial? Journey to become king of unicorn Will regulatory curbs hinder its success journey?    Ant Financial, an affiliate and integral part...

Battle for the textile and apparel industry in Southeast Asia

The reasons for China’s decreasing presence in the industry Initiatives by the governments in Southeast Asia to boost the textile trade Vietnam and Bangladesh’s quest to conquer...

Unnoticed growth of the media and entertainment industry in India

Overall industry brief Growth of the M&E industry and its segments Major supporting elements of this growth   Media and Entertainment (M&E) is a very wide industry...

Education industry in India, an overview

Growth of private universities in the nation Future potential of the education industry in India   The education sector in India is estimated to be worth USD 91.7 billion...

Baidu’s Apollo, the underdog of autonomous driving platform

Overview of the autonomous vehicle sector in the global automobile industry Search giant Baidu’s entry into the autonomous driving space Baidu’s approach in becoming a front-runner...