TomTom is expected get a boost in sales following recently-announced deals with Fiat and Renault, which has seen the company start to put its navigation technology directly into cars–a move previously seen as too expensive.
UBS analysts predict that TomTom’s automotive sales could reach 125 million euros ($178 million) in 2011, or 7% of total group sales. Analysts hadn’t previously considered these deals to have an impact on group sales but have gradually started to incorporate them into their calculations, said Giles Shrimpton, managing director of TomTom’s automotive division.
So far, TomTom’s business had been focused on the creation of stand-alone navigation devices as well as software for personal assistants and mobile phones. And the lack of investment in integrated navigation devices for cars was due in part to its high cost – around 2,000 euros ($2,852) per device or even higher.
But the recent deal with Renault indicates TomTom is now on the road of building considerably cheap navigation systems, at around 500 euros ($713). TomTom hasn’t yet said how much Fiat’s own navigation system will cost in the market but it is expected to be around the same figure.
Expect other carmakers to join TomTom’s new strategy. TomTom’s Shrimpton told Forbes on Friday that it is the company’s “long-term goal” to “get these products in every car”. Shrimpton said such devices had a penetration of around 50% in the luxury car sector but only about 10% in the cheaper “volume” segment. He expects TomTom to increase the sales of navigation devices in these mass-market cars to more than 50% over the next five years.