While a very young market at present, the Chinese telematics and infotainment markets is likely to witness considerable growth and development over the forecast period.

Factors expected to contribute to this include the continued growth in demand as well as production of passenger cars, increasing disposable incomes, growing acknowledgement of the benefits of telematics and infotainment, as well as the upcoming Olympic Games in 2008 and the 2010 World Trade Exhibition. Additionally, newer telelematics and infotainment systems are becoming more affordable and many car companies are also planning to incorporate navigation system as a standard offering, thus boosting their overall uptake.

"Among the market segments, the Chinese productivity market, the roadside assistance market, and the rear seat entertainment market are yet in their introductory stages," notes Frost & Sullivan Research Analyst Angielina Tay. "In comparison, the navigation market is in its growth stage and holds significant promise, especially considering China's high vehicle occupancy rate."

The Chinese vehicle occupancy rate was greater than three million in 2005 and this ensures huge potential for navigation systems (includes both the portable and personal navigation device). Navigation is likely to become a daily requirement for people, regardless of whether they are driving or not, because a navigation system does not just simply help them to get from point A to B, but also provides them with other value-added services, such as providing points of interest (POI). This driver is likely to have a high impact on the market throughout the forecast period.

Notwithstanding the promise, Chinese consumers still lack sufficient knowledge of telematics and infotainment system functions. Besides, there are too many varieties available for the consumers at present, and this coupled with unpleasant experiences such as low-quality products and lack of after sales service are likely to hurt customer confidence in this developing market.

"The non-availability of all functions in a single system is an added barrier to penetration, much like the current high prices of telematics and infotainment systems," says Tay. "For example, the average price for an original equipment (OE) navigation system was about $1,463.4 in 2005 which is relatively high compared to the North American and Japanese markets."

Given these challenges, distributors and manufacturers need to work together on campaigns to raise awareness and promote the use of telematics and infotainment systems. Moreover, to make these systems more affordable, vehicle manufacturers should explore methods of lowering product costs, such as sourcing from local suppliers instead of importing parts.