Emerging telematics opportunities in India

Emerging telematics opportunities in India

On paper, India looks like a promising market for telematics.

The country has enjoyed rapid economic growth over the past few years, and is now the ninth largest car producer in the world and the fourth largest Asian automobile exporter.

Plus, some 584 million of India’s one billion people are mobile phone subscribers.

Yet the overall telematics market remains sluggish.

“The telematics market in India is still in a very nascent stage,” says V.G. Ramakrishnan, an India-based senior director for the Automotive & Transportation Practice at research firm Frost & Sullivan.

Growing slowly

Telematics services such as GPS-enabled navigation and vehicle tracking were first introduced as early as 2004 in India.

In 2005, the revenue from passenger vehicle telematics was a tiny $6.4 million, according to Frost & Sullivan estimates.

This segment had revenues of $23.2 million in 2008.

Frost & Sullivan estimates that the passenger vehicle telematics and navigation systems market in India could reach $44.1 million in 2013, still a far cry from earlier figures of over $80 million by 2011.

Unique market conditions have prevented a larger uptake of telematics services.

“India still does not have a developed road infrastructure and drivers don’t need navigation aid,” Ramakrishnan points out.

“It’s common for car owners to employ chauffeurs who are familiar with the routes.”

Cultural factors are also at work.

In India, it is a fairly common practice for drivers to simply roll down the window and ask a passer-by for directions. So, why spend money on a navigation device?

Route planning is also less critical for drivers, since India does not have a congestion-based tolling system in place.

“Consumers don’t want to pay for navigation devices or extra services that telematics can offer,” Ramakrishnan says. “They just don’t feel the need for these services.”

Market opportunities

As a result, very few cars are sold with a fixed navigation device, even though India now produces two million passenger vehicles a year.

Dramatically reducing the cost of tracking devices could, however, lure private car owners wary of increasing levels of car theft in the country.

The commercial vehicles segment presents a slightly different picture.

Large fleet operators, logistics firms, and taxi companies have taken a more positive view of telematics services.

To cater to the commercial vehicles segment, a number of local players offer fleet management, vehicle tracking, and other value-added services using technologies such as GPS, GPRS, GSM, and CDMA.

Current offerings include monitoring and routing applications for taxi operators, order delivery tracking, call centres to receive emergency calls from vehicles, fleet management systems, and remote management of LCD displays in public transport buses and bus stops.

The commercial vehicles segment remains small, though.

The trucking segment, for example, is highly fragmented, mainly made up of single truck owners or small transport businesses, which generally own two or three trucks.

Truck owners, often themselves drivers, work as contractors for other companies to provide transport services.

“Individual truck owners have no bargaining power,” Ramakrishnan says.

“The competition is fierce. They often operate on razor-thin margins and can’t afford to invest in telematics systems.”

The price of software and telematics hardware is also high in relation to the cost of a vehicle, which further deters adoption.

All this could change, though, if the government decides to give a regulatory push to promote telematics.

Currently, public transport operators, fleet operators, truck operators and private drivers are not legally required to install tracking devices.

Going mobile

Telematics in India is not likely to take the conventional growth route, where the market begins by selling fixed navigation systems.

“India will directly move to mobile phone-based telematics services,” according to Ramakrishnan.

With 584 million subscribers, India’s mobile phone industry offers an exciting opportunity for location-based as well as GPS-enabled services.

Local operators have already launched location-based services (LBS) aimed at enterprises as well as consumers.

Telenity, a US-based company that provides converged services over mobile networks, offers LBS in India through the country’s top mobile operator Airtel and the state-run telecom giant BSNL.

Airtel, which has 120 million subscribers, now offers a location-based service called Buddy Finder on each handset.

BSNL has introduced eTrack, a fleet tracking system, which uses a vehicle-mounted, microprocessor-controlled device to send periodic SMS/GPRS messages from the vehicle to a network command center.

Tata Teleservices, which offers mobile phone services on a CDMA platform, has launched an LBS service that supports Points of Interest and Navigation applications for enterprises as well as consumers.

The company also offers vehicle-tracking through a device that includes a GPS unit and a CDMA module.

Google has launched Latitude, its location finder service using Google maps, for mobile phone users.

Mobile phone may be the key to growth

Mobile phone operators may hold the key to the future growth of telematics in India.

But they need to come up with innovative packages in which the handset is pre-loaded with telematics features at a small upfront price, Ramakrishnan says, because “Consumers are still not willing to pay monthly subscriptions for such services.”

“Telematics service operators therefore need to come up with a workable partnership with mobile phone operators to penetrate the market.”

Working out a viable revenue model is also a big challenge; “Revenues for players across the board are going to be pretty much limited.”

Bundling features such as navigation with entertainment systems could be another attractive proposition.

“Telematics as a concept will eventually flourish in India,” Ramakrishnan concludes.

“But the conventional model of product-based solutions may not work; offering affordable services on mobile phones is more likely to succeed.”

For more on emerging telematics opportunities in Russia, click hereand in China click here.

For more on telematics and mobile phones, see ‘What is the best way to deliver in-car telematics?’click hereand ‘The smartphone: Friend or foe of in-car infotainment?’. click here

Rajesh Chhabara is a regular contributor to TU.

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