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Second-generation OBD-II market to grow — Frost

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MOUNTAIN VIEW, Calif. (July 2, 2014) — The entry of device makers, app developers, telecom providers and system integrators into the automotive aftermarket will power the growth of second-generation on-board diagnostics, or OBD-II, services to a $1.6 billion industry across North America over the next five to seven years, according to Frost & Sullivan Inc.

The research firm predicts “parts and service suppliers will soon scramble to align themselves with OBD-II subscription providers to avoid being left out of the ‘connected vehicle’ space.”

With OBD-II, consumers can receive notifications when a part is failing, schedule to have their vehicle repaired at a nearby garage or even purchase their spares online. Once fitted into the car, the OBD-II receiver can transmit data through embedded cellular features or via Bluetooth/Wi-Fi interaction using the driver's smartphone.

The independent aftermarket must act soon because of the high installation of embedded telematics systems designed to route vehicle owners back to the nearest franchised dealership, presenting a potential threat to distributors, service chains, independent repair facilities and parts retailers, according to Frost & Sullivan.

OBD-II systems have been a requirement for all light-duty cars and trucks since the 1996 model year.

Frost did not specify the size of the market or what percentage of growth it expected to see in the next several years.

The Mountain View-based research firm did say that with the growth of telematics platforms in modern vehicles capable of sending and receiving data, OBD-II has spawned a device and service industry allowing consumers to purchase user-based insurance, monitor their driving behavior and track their car or truck in the event of a theft, among other possibilities.

Smartphone app developers are also becoming more active, with programs using a vehicle's Bluetooth receiver to transmit data collected from the growing network of sensors and computers found on modern automobiles.

User-based insurance (UBI) accounts for about 90 percent of total OBD-II services revenue, according to Frost. However, a wide range of fleet management services—including prognostics, driver monitoring and vehicle tracking, among others—will eventually propel the growth of OBD-II among companies, as well as consumers.

Major developers, including Danlaw, Delphi, Voxx International, CarShield, Automatic, Zubie, Carvoyant, Dash Labs and Mojio, are creating new business models and subscription services to differentiate themselves, Frost said.

The biggest challenge facing solution providers are the OEMs, which have a head start with products—such as General Motor Co.’s OnStar and Ford Motor Co.’s SYNC systems—that already have gained acceptance among tech-savvy drivers.

As of now, devices are priced around $100 for consumers, with subscription fees ranging from $5 to $10 per month, Frost said

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