Smartphone ownership and the market for apps are entering a phase of dramatic growth in China as new young wealthy consumers are becoming comfortable with the technology. Consumers are being introduced to location-based services such as connected navigation through their phones.
Unlike Europe and the USA where handset suppliers are driving the fragmented smartphone app market, network operators in China are attempting to control the apps market through vertical integration of app store, operating system and user interface.
The Chinese smartphone market is dominated by China Mobile and Nokia with over 70% and 60% market share respectively. These two giants have joined forces to offer a Mobile Market MM Ovi app store.
SBD recommends that vehicle manufacturers should investigate the potential of directly cooperating with one of the Chinese network operators to develop in-car app solutions.
Opportunity for vehicle manufacturers:
SBD believes there is an opportunity in China for vehicle manufacturers to gain a competitive advantage by quickly developing apps-based solutions to provide navigation and telematics services.
The flexible and quick-acting domestic Chinese vehicle manufacturers, such as SAIC and HawTai, are already taking this strategy to leap ahead of western brands that are weighed down by complex product quality assurance procedures and legacy systems such as embedded navigation systems and traditional call centre-based telematics.
Automotive apps available inside the car are beginning to enter the market in China and vehicle manufacturers planning apps have a number of decisions to make on which operating system, apps and business model to use. Vehicle manufacturers need to decide if they will integrate the smartphone with the vehicle or provide the apps through an embedded system.
Uniqueness of the Chinese market:
Some of the unique characteristics of the Chinese market are encouraging the deployment of smartphone apps.
These characteristics include the new and changing roads and POIs that encourage off-board smartphone navigation ahead of traditional OE embedded navigation systems, high consumer demand for connected navigation highlighted in SBD’s consumer survey research in China, and consumers having their first experience of navigation through a smartphone.