China fleets embrace telematics to save fuel, weather price war

Soaring fuel prices, combined with an escalating price war in the transport and logistics sectors, are forcing a growing number of fleet operators in China to adopt telematics.

Profits are eroding across China, says Al Schaeffer, manager for the Greater China region at the South Africa-based MiX Telematics. “So these companies have a great appetite to explore the use of telematics to cut fuel costs.”

China’s super-regulator, the National Development and Reform Commission, has already raised its price ceiling on 90-octane gasoline five times this year, most recently in August by 2.5% to 9,505 yuan ($1,553) per ton.

This, in turn, has had a huge impact on profit margins as fuel already accounts for about 40% of total operating costs of the average Chinese transportation company. And it’s not helping that advances in e-commerce have swollen the ranks of express delivery outfits across the country.

Werner Du Plessis, international business development manager at MiX Telematics, estimates that China now has some 700,000 truck transport firms. And competition is primarily on price.

Telematics to the rescue

Until a few years ago, the country was remarkably underdeveloped when it came to telematics, despite its population size and a vast, export-driven manufacturing base with a seemingly insatiable appetite for commercial vehicles. 

This is now beginning to change. China got its first real taste of telematics in the run-up to the 2008 Olympic Games in Beijing when many government-run buses and taxis were outfitted with simple GPS-based systems to help reduce fuel consumption and cut emissions, in part through route planning.

Today, the government requires all taxi and public bus fleets to be tracked. Also tracked are trucks transporting explosives and dangerous materials.

According to various estimates, there are now between a million and 1.5 million vehicles equipped with tracking systems in China. And the number will continue to rise as the government turns to fleet telematics to manage traffic congestion in its overpopulated cities and to keep the economy stocked and moving.

Gareth Owen, who tracks worldwide telematics trends from the London office of the technology market intelligence firm ABI Research, says that the total market value for telematics across the Asia-Pacific region is projected to reach $1.98 billion at the end of 2013, including $1.55 billion in subscription revenues and $430 million in hardware revenues. 

That compares with a total market value of $1.51 billion chalked up in 2012, including $1.18 billion in subscription revenues and $330 million in hardware revenues. According to Owen, China accounts for a major part of the regional figures, “particularly as the country is the biggest market for vehicles.”

(See related article: Telematics and air pollution in China.)

What’s more, demand is starting to shift from simple tracking solutions to more sophisticated systems that incorporate real-time feedback – to drivers and fleet managers – about things like harsh braking, revving and excessive idling, each of which wastes fuel. Better route planning software is also making gains, Schaeffer says.

In many places, the government continues to drive adoption. But private fleets are equally alert to the potential of telematics to save them money.

The pilot of pilots

The government of Guangdong province, in southern China, is, for example, working with the World Bank on a four-year pilot program to help transport fleets cut fuel consumption and harmful emissions by installing telematics systems across the region.

“In China, trucks are a major source of fossil fuel consumption and greenhouse gas emissions,” the World Bank said in a report on the project issued on Sept. 13. “The road freight industry accounts for more than 15 percent of China’s total oil consumption. But the fuel efficiency of trucks running on roads in the country is 30 percent lower than in OECD countries.”

The World Bank helped launch and fund “The Guangdong Green Freight Demonstration Project,” which will run until 2015, to create a showcase on how to improve fuel efficiency for transport firms through a system of telematics-aided feedback on positive and negative driver habits. Transport firms that join the experiment are entitled to a variety of rebates and grants. 

As part of the project, training has been provided to fleet managers, drivers and government officials. “With escalating fuel costs, increasing fuel efficiency has become a major goal for any trucking company,” the World Bank stated in the report. “This goal coincides with China’s need to reduce emissions and tackle air pollution.”

And there are signs that the project could be expanded to other provinces.

Kevin Holden is a regular contributor to TU.

For all the latest telematics trends, check out Telematics Munich 2013 on Nov. 11-12 in Munich, Germany, Telematics for Fleet Management USA 2013 on Nov. 20-21 in Atlanta, Georgia, Content and Apps for Automotive USA 2013 on Dec. 11-12 in San Francisco, Consumer Telematics Show 2014 on Jan. 6 in Las Vegas, Telematics for Fleet Management Europe 2014 on March 12-13 in Amsterdam, The Netherlands, and Content and Apps for Automotive Europe 2014 on April 8-9 in Munich, Germany.

For exclusive telematics business analysis and insight, check out TU’s reports: Telematics Connectivity Strategies Report 2013, The Automotive HMI Report 2013, Insurance Telematics Report 2013 and Fleet & Asset Management Report 2012.