Van den Drijvertje:
TomTom
Daimler map contract vote of confidence
The facts: Yesterday, at the start of the Frankfurt International Motorshow,
TomTom made several announcements, including a contract to provide maps to
certain Daimler models (Mercedes A, C, B and E-class) in North America. The other
announcements included an add-on to the TomTom map for electric vehicles (with
the map accurately showing where EV charging stations are located) and an
increase in the number of countries where TomTom Traffic is available.
Our analysis: The latter two announcements are of less importance in the near
term (although EV charging data will become of importance in the medium term) but
the Daimler map contract win is material. Daimler was already a client of TomTom
for Traffic Services (in Europe, North America and Africa) but in the map market,
Daimler has been a 100% Here client or a very long time. As such, the contract win
is interesting because Daimler is also a significant shareholder in Here. The contract
win can therefore be seen as a sign that Daimler is hedging its bets, not relying on
Here alone to provide it with map data, which will become more important as the
industry moves from level 2 autonomous driving to level 3 and eventually 4 and 5.
TomTom is not selling Roadmap or HD maps but the technology roadmap of
TomTom will certainly have played a part in the contract win, as will have pricing
(we assume TomTom will have enticed Daimler also at the price level).
The press release states that the contract will not have a material impact on the
FY17 financial results, which suggests that deliveries will start at the end of 4Q17.
The financial impact of the contract on an annual basis is, indeed, relatively limited.
We assume that TomTom will not only provide maps for the A, C, B and E models
but also their sister models the CLA, GLA, GLE and GLC. In total Mercedes has
sold 171k of these models in the USA (Daimler data Ytd July 2017) and we assume
another 35k in Canada (Ytd Aug 2017 35k units sale sfor all models). For a full year
that would lead to around 340,000 unit sales of the relevant models. If we then
assume an 85% take rate for the infotainment systems with TomTom maps and a
EUR 30 map price (with map updates for the next three years), we get to annual
revenues for TomTom of EUR 8.7m of which a part must be deferred over the life
time of the contract (as is custom for TomTom).
Should this contract be seen as a first step whereby Daimler fully switches from
Here to TomTom, meaning that the European volumes (900k+ units per year) and
Asia Pacific volumes (590k+ units per year but growing fast) will follow? We think
that Daimler will dual source to keep both Here and TomTom on their toes and
therefore do not assume an
Conclusion & Action: Although the financial impact is limited, the Daimler North
America map contract win is a vote of confidence for TomTom and one that we did
not expect given that Daimler is a large shareholder in Here. Impact on EPS
estimates is negligible. We rate the TomTom shares Neutral because of concerns
over lower growth in Telematics and uncertainty over TomTom’s position in the
Automotive market in the medium to long term due to new entrants and technology
Analyst(s) changes.