Global revenue from automotive telematics systems will grow at a compound annual growth rate (CAGR) of nearly 17% to more than $6.7 billion by the end of 2023, according to new research from business information provider IHS Markit.

These automotive telematics forecasts from IHS Markit are driven by continued innovation in vehicle connectivity and safety technologies, and demonstrate a wide variety of viewpoints from consumers across leading global markets. The data represents production of factory-installed telematics systems, including embedded, consumer electronics (CE) and hybrid telematics.

The IHS Markit research estimates that more than 33 million light vehicles equipped with some form of telematics were produced in 2016 globally. It is expected that production of such light vehicles will grow at a CAGR of 11 percent to reach over 66 million units in 2023. Approximately 70% of new light vehicles produced in 2023 will be equipped with some form of OEM telematics systems.

CE telematics continue to lead the global automotive telematics market since it is a relatively low-cost solution and available in a wide range of vehicles. It currently makes up nearly half of the market, the new research says. The rapid growth of the smartphone market has had a significant impact on the telematics market, as many OEMs currently offer smartphone integration via Apple CarPlay and Google Android Auto or other smartphone projection-mode solutions as part of their connected car offerings.

Meanwhile, embedded telematics solutions are often used for safety and security features of telematics services such as emergency calling, roadside assistance, stolen vehicle tracking, over-the-air updates and more. The demand of embedded telematics control units (TCUs) will increase, especially with the European eCall mandate that goes into effect in 2018. Then, the total revenue of embedded TCUs is expected to grow at a CAGR of 15% by 2023, IHS Markit says.

Hybrid telematics solutions, using both an embedded TCU and a connected CE device to provide a two-way data connection to the car, will have the strongest growth among the three types of telematics systems during the forecast period, according to IHS Markit forecasts. The production of hybrid telematics systems will surpass the production of other types of telematics systems in 2018. It will continue to lead the market throughout the forecast period.

“A large portion of vehicles already feature multiple connections especially in the luxury segment,” said Anna Buettner, manager for automotive infotainment at IHS Markit. “This trend is expected to spread to other lower segments during the next few years, as strong market demand will bring connectivity to vehicles and regions that traditionally lagged behind.”

While telematics has existed in the automotive industry for more than 20 years, growth is still expected for the next decade, whether due to mandates or consumers’ desire to be connected even while driving.

“OEMs need to ensure that these offering are affordable for consumers and easy to use. Autonomous driving applications and the new urban mobility movement will further push demand upward,” Buettner said. “Consumers have an expectation for staying connected while on the go and that is also true for the in-vehicle experience.”