Emerging telematics opportunities in Brazil

Emerging telematics opportunities in Brazil

Brazil, South America’s largest economy, is world’s sixth largest car and truck manufacturer, and last year accounted for five percent of total vehicles sold in the world.

Brazil also has one of the highest rates of vehicle thefts in the world.

The government introduced legislation making it mandatory for vehicle manufacturers to outfit tracking devices on all vehicles, so that stolen vehicles can be more easily recovered.

This has not gone down well with consumers.

Vehicle owners oppose the proposed law, arguing that it would violate their rights by making them pay for the anti-theft device even if they didn’t need it.

Others object to tracking devices out of privacy concerns.

Roger Dewey, chief executive of M2MV, a U.S.-based telematics consulting firm, says the biggest issue in Brazil is market perception: “When the government decreed that every vehicle required a tracking device, it generally struck the population in a very negative context.”

While some saw the decree as the government acting as Big Brother, Dewey explains, others regarded it as a disguised tax, an additional expense for something they did not choose to buy.

Consumer reaction also prompted automobile manufacturers to oppose the idea.

Installing a tracking device increases the cost of the vehicle, and manufacturers fear customers will not be willing to pay the higher price.

Fiat, the largest automobile player in Brazil, openly urged the government to reconsider the bill’s provisions.

Privacy concerns

Even the Brazilian government ministry responsible for protecting civil rights said consumers should have the choice of whether to buy a tracking device.

Last year, Brazil’s federal civil court twice stalled the bill on these grounds, forcing the government to delay implementation until this summer.

Under instructions from the court, the government backed off on mandatory vehicle tracking without the owner’s consent.

The hardware was modified so that owners can disable the tracking service.

The modified hardware has already undergone six months of pilot tests, and the government said in March that the court has now allowed the implementation of the new rules.

By December, all vehicles are expected to have the devices installed.

Market boost

The proposed law will significantly boost the market for anti-theft and vehicle immobilization systems and supporting technologies.

Brazil produces about four million vehicles a year, and all of them would have to be fitted with the tracking device.

In addition, over 52 million existing vehicles would be required to install the system.

All this would mean a massive opportunity for manufacturers and service providers.

A number of telematics players have already started striking deals in Brazil.

Last year, Telit Wireless Solutions of Italy signed an exclusive agreement with Positron Telecom to provide wireless modules using GSM technology in Brazil.

The module’s functions include online vehicle monitoring, speed control, geo-fencing, route tracking, and a starter disabler.

But telematics equipment vendors may have to brace themselves for a wafer thin margin as vehicle manufacturers and vehicle buyers perceive little value for the device.

International telematics product manufacturers also need to factor in higher production costs in Brazil in comparison with China.

Israel’s Ituran Location and Control and Massachusetts-based LoJack Corp currently dominate the vehicle tracking system market in Brazil.

Ituran sells its system for $400 to $500 in the after-market segment; the company also leases the device for $15 a month.

Ituran uses land- and satellite-based receivers, while LoJack has deployed a terrestrial radio network for tracking.

WirelessCar, a Volvo group company, last year established operations in Brazil, including a call center and a GPRS telecommunication link.

The company has received certification by the Brazilian Ministry of Transport as an authorized telematics services provider.

WirelessCar services include vehicle tracking and immobilization, crash notification, roadside assistance, and other remote services, such as door unlock.

Misreading the market

Dewey says telematics players may have misread the market opportunity by focusing on price and sales volume rather than the value proposition.

OEM purchasers approached telematics as a commodity, according to Dewey, a requirement that had to be obtained at the lowest possible cost because there was no perceived value proposition for the feature.

“The decree created an instant captive market,” Dewey says.

“Many suppliers of telematics solutions jumped into the market and began selling based on price instead of value proposition because the OEM had to buy it anyway.”

But in order to build a robust market for tracking systems, both the government and device manufacturers will have to invest in educating the public about the value of such devices in theft reduction and vehicle recovery.

The government also needs to address privacy issues and introduce privacy protection measures.

More attention also needs to be paid to building robust platforms from which to offer other telematics services.

“What has been missing in all of this is the active marketing of a scaled value proposition for different levels of telematics services to the public,” according to Dewey.

Telematics players in Brazil need to stop focusing exclusively on the captive market for tracking and start expanding the overall telematics market.

For more on emerging telematics markets, see ‘Emerging telematics opportunities in India’, ‘Emerging Telematics Opportunities in Russia’, and ‘Emerging telematics opportunities in China’.

Rajesh Chhabara is a regular contributor to TU.

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