Fleet telematics in emerging markets

North America is the most active telematics market in the world, with analysts predicting double-digit growth in most telematics sectors to continue in the coming years. Nevertheless, dynamics in the fleet telematics sector are shifting, with vehicle OEMs like Freightliner entering the arena and market penetration climbing.

Competition in North America is fierce. But BRIC countries—Brazil, Russia, India, and China—hold enormous potential as future markets. (For more on emerging markets, see Industry insight: Telematics and emerging markets.)

Low market penetration

Economist Jim O’Neill coined the acronym BRIC in 2001 to refer to a bloc of rapidly developing nations on the verge of becoming the world’s largest economic powers. In a 2009 paper, O’Neill estimated that BRIC economies would surpass the G7 nations as early as 2027, much sooner than many anticipated. BRIC countries have proven resilient through a global recession, reinforcing O’Neill’s theory.

Part of the appeal of the BRIC countries for telematics providers is that market penetration remains incredibly low. “In terms of fleet telematics, the BRIC countries are very far behind,” says Michael Sena, president of Michael L. Sena Consulting, which works principally with vehicle OEMs on navigation and service infrastructure solutions.

But the shipping sector in these countries is growing, and that means opportunity for anyone that can provide affordable telematics solutions.

In Brazil, the market for commercial vehicle recovery systems has already seen significant growth. “In the fleet area,” says Michael Sena, “companies have taken the initiative because of a high degree of theft, which is a major problem in Brazil.” Ituran, one tracking and asset recovery company operating in Brazil, has recovered more than 18,000 vehicles in that country in the last ten years. (For more on security in Brazil, see Telematics in Brazil: Security for cars and cargo, part I and Telematics in Brazil: Security for cars and cargo, part II.)

On Brazil’s consumer front, legislation known as CONTRAN 245 may also create a massive new market for vehicle tracking equipment. The proposed legislation, designed to combat high auto theft rates, has been edging slowly toward implementation since it passed in 2007. Given that some 400,000 cars are stolen in Brazil every year, service providers and aftermarket manufacturers could be looking at a goldmine. (For more on CONTRAN 245, see Telematics in Brazil: Ensuring security for cars and cargo, Telematics in Brazil: The law of the market and Emerging telematics opportunities in Brazil.)

Russian fleet operators

In Russia, telematics penetration in the commercial trucking sector is on the rise, though not because fleet operators are demanding telematics solutions. Russia, with few heavy truck manufacturers of its own, imports a large portion of its commercial trucks from companies like Volvo and Daimler-Benz. These OEMs have started including telematics solutions as part of standard packages.

Whether Russian fleet operators will use telematics services on a large scale remains to be seen, but OEM’s have provided some of the infrastructure already, sowing the seeds for what could mature into a vibrant market down the road.

The primary obstacle for the telematics industry in BRIC countries, not surprisingly, is cost. “The dynamics of fleet telematics are very much related to the affordability of systems,” explains Sena. “If you look at who is actually running the fleets, outside of North America, many are owned by individual business owners. So the size of the fleets is very small, which means that the return on investment has to be obvious and has to be quick.” (For more on Russia, see Emerging Telematics Opportunities in Russia.)

Return on investment

In Europe, where fuel prices, driver salaries, and other operating expenses run high, the return on investment in telematics solutions is obvious, even for small fleets. Analytics and navigation systems that can reduce driving time and fuel expenditure by just a few percentage points will pay for themselves in no time. The same can’t be said for countries like China and India, where the labor and fuel are cheap.

“For [a commercial fleet operator] to invest in something that could cost four thousand, five thousand, even ten thousand euros per year is very difficult,” says Sena. “That could be the company’s profit, if margins are very thin.”

That’s the case in China, where large fleets are still a rarity. Even so, analysts are optimistic about the future of automotive telematics there. With new wealth, an emergent consumer class is spending big money on cars. China bought 1.12 million cars in July of this year alone. OnStar arrived there in 2009, paving the way for other telematics providers. This year, OnStar reported 400,000 Chinese subscribers. (For more on China, see Telematics in China: Making sense of the market, Emerging telematics opportunities in China and Telematics in China: ‘Reverse innovating’ for success; for more on other Asian countries, see Telematics in Southeast Asia, part I and Telematics in Southeast Asia, part II.)

Of all the BRIC countries, India’s commercial telematics industry is the least mature. But the nation is large, democratic, and English speaking, which makes it an appealing target for telematics providers already operating in North America. (For more on India, see Telematics in India and Emerging telematics opportunities in India.)

For now, the telematics market in the BRIC countries is very young. There can be little doubt, however, that there is enormous opportunity for expansion, especially as the prices for devices and service continue to drop.

Greg Nichols is a regular contributor to TU.

For more on fleets, see Industry insight: Fleet telematics.

For more on emerging markets, see Industry insight: Telematics and emerging markets.

For the latest in fleet telematics, check out Telematics for Fleet Management USA 2012 on November 13-14 in Atlanta.

For all the latest telematics trends, visit Content and Apps for Automotive USA 2012 on December 4-5 in San Diego.

Coming up in 2013: V2X for Auto Safety and Mobility Europe 2013 on February 19-20 in Frankfurt, Telematics for Fleet Management Europe 2013 on March 19-20 in Amsterdam, Insurance Telematics Europe 2013 on May 8-9 in London and Telematics India and South Asia 2013 on June 5-7 in India.

For exclusive telematics business analysis and insight, check out TU’s reports: In-Vehicle Smartphone Integration Report, Human Machine Interface Technologies and Smart Vehicle Technology: The Future of Insurance Telematics.

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