TomTom (Accumulate): New Ford Automotive contract + Telenav develops maps
The facts:
At the IFA in Berlin, Ford has announced the arrival in Europe of a new version of Ford Sync. The new version will come with an ecosystem called AppLink, allowing customers to enable voice-controlled smart phone apps from the driver's seat. The new Sync will include a navigation app from TomTom including traffic but also apps from Spotify, die Welt, Hotels.com, ADAC, CitySeekers and AHA. The new Sync version will first be introduced in Ford's new Ecosport and S-Max but is expected to further penetrate other European models when new versions are introduced.
Telenav has announced that it will step up investments in the Open Street Map (OSM) organisation with the aim of using OSM maps in Telenav products and solutions. Telenav has been collaborating with OSM for years, sending crowd sourced data from its own subscriber base (>35m) to OSM with the aim of improving the map. Telenav says it will be using OSM maps for their Scout product in the US (a browser based turn by turn navigation product) but not yet for the apps for the iOS and Android platform.
Our analysis:
Based on the Ford Europe press release and video we gather that TomTom is the preferred navigation partner on the Sync platform. As Ford sells approximately 1m units per year in Europe and the Sync platform is expected to penetrate (eventually) all models, the contract could become a substantial revenue generator. Assuming 70% model penetration for Sync in three years and 90% of Sync users using the navigation app would mean over 600k app sales per year generating over EUR 20m for TomTom. However, we are not 100% sure that TomTom will remain the only navigation app provider. We have asked TomTom but no answer yet.
The fact that Telenav thinks that the OSM map is already good enough for their desk top navigation solution scout.me in the US suggests that it is only a matter of time before Telenav feels comfortable enough to start using OSM maps for iOS, Android and Windows solutions. Telenav's subscriber base (>35m) creates so much map data that if properly used, it can help OSM in creating high quality maps that can be used in a car environment. If OSM succeeds in getting there with the help of Telenav (and why shouldn't, it worked for Waze to a certain extent), TomTom will not only lose a customer (Telenav is a relatively large customer) but the value of the map database will also be negatively impacted.
Conclusion & Action:
The Ford Europe Sync contract is a solid win for TomTom in the Automotive space and one that could have a material positive impact on the revenue and margins of the Automotive division. The Telenav developments, although early in the game, could have negative repercussions for TomTom in the longer run,