Traffic congestion costs Australian firms more than $2.6 billion annually, report says

Rohini Nambiar
Mexico City is home to the world's worst traffic congestion

Bumper-to-bumper highways with blazing horns is more than just annoying drivers, there is research to show that being stuck in a traffic jam is costing businesses big bucks.

TomTom Telematics, a unit of the Dutch company TomTom that manufactures navigational and mapping products, released a global report Tuesday on exactly how much this congestion is costing companies across 390 major cities — including Singapore, Sydney, Bangkok, Jakarta and London — in 48 countries.

The data is collected via TomTom's LINK device which monitors drivers' behavior, engine efficiency and directions. A congestion index is calculated based on the difference in average duration it would take to get to a destination under normal traffic conditions and when there is a traffic jam. The numerical cost of congestion to businesses is then calculated by the number of hours lost to traffic annually multiplied by the average number of vehicles on the road and the minimum wage in the city.

In Australia alone, an excess of 3.37 billion Australian dollars ($2.6 billion) is lost annually, due to traffic congestion, in its busiest cities like Sydney, Melbourne and Perth, according to TomTom Telematics.

And in Mexico City, which tops TomTom's Traffic Index, companies are estimated to have lost 16 billion pesos (about $813 million) in 2016 due to traffic congestion.

The figures provided by TomTom Telematics are conservative, CEO Thomas Schmidt told CNBC, as many drivers are paid more than the minimum wage.

TomTom Telematics claims to have the solution to reduce the cost of congestion as it provides drivers with a platform that tracks hot spots for traffic jams and offers the fastest route to a destination.

While this might seem similar to the offerings of Google Maps and Waze, TomTom attempts to differentiates itself by providing feedback to drivers. For example, the OptiDrive 360 by TomTom provided data and suggestions on how to reduce fuel consumption and how to increase driver safety.

"Most providers in the world of fleet management get stuck with the basic points of tracking where somebody is and how somebody behaves, while we give the drivers more active driver feedback and how they can improve their driving, how they can find the better route and how they can do a better job and save companies a large amount of money," Schmidt told CNBC's "Squawk Box."

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