Fleet telematics: Where the growth is, part I

In China, fleet telematics is gaining momentum as a way of preventing the country’s booming economy from developing one gigantic gridlock. In Russia, a brand-new emergency response system will require that all new vehicles come with pre-installed auto-response devices. And in Brazil, the government is preparing to challenge car thieves with a groundbreaking approach to stolen vehicle tracking.

Together, these markets will help to more than double global revenue from fleet management and trailer tracking systems by 2016, when technology market intelligence agency ABIresearch expects it to exceed $12 billion. “While commercial telematics in developed markets such as North America and Western Europe is reaching maturity, especially in the trucking segment, the major growth in future is expected to come from developing regions where safety and security requirements are currently the main drivers,” says Dominique Bonte, telematics and navigation group director for ABIresearch.

According to Bonte, China will lead the way “as it moves from ‘developing’ to ‘developed’ status” as an economic power. (For more on fleet telematics, see The impact of eCall on fleet telematics, Cloud computing and fleet management, Mapping fleet and asset management’s future and Why green means ‘go’ for fleet telematics.)

China

Until a few years ago, the country was remarkably underdeveloped for its population size and vast export-driven manufacturing base, with a seemingly insatiable appetite for commercial vehicles. But this is changing, according to industry insiders. “While telematics in China has long been held back by small fleet sizes, this is changing rapidly with a more organized and larger-scale transportation industry emerging,” Bonte says. “As fleets struggle to add a sufficient number of new vehicles to keep up with the surging economy, telematics becomes an important tool for optimizing the use of the limited available vehicle resources.”

There are already estimated to be between a million and 1.5 million vehicles equipped with tracking systems. The government requires all taxi and public bus fleets to be tracked; also tracked are trucks transporting explosives and dangerous materials. And the number of tracked vehicles will continue swelling as the government uses fleet telematics to manage traffic congestion in its overpopulated cities and keep the economy stocked and moving.

For example, Beijing has in recent years deployed the Urban Intelligent Transportation Management Command and Control System. Equipped with high-definition cameras and tens of thousands of detection coils, the system provides automatic alarms for nine types of traffic accidents, dispatches rescue services, and regulates traffic flow through several thousand coordinated traffic lights. (For more on China, see Telematics: Doing business with the BRICs, Emerging telematics opportunities in China and Telematics in China: ‘Reverse innovating’ for success.)

The telematics priority

According to the Shanghai Vehicle Connectivity and Telematics Alliance, telematics has been listed as a priority in the 12th Five-Year Plan period (2011-2015), requiring increased investment in automotive electronics and information and communication technologies. “In my opinion, government policy will drive the market to growth in the next one or two years,” says Jason Huang, China operations research manager for automotive & transportation at Frost & Sullivan.

To be sure, doing business in China comes at a cost.

After thoroughly studying the market, Navman Wireless concluded that a joint venture with a local partner was out of the question. “One thing that we were worried about was that they would steal our IP [intellectual property],” says T.J. Chung, president and CEO of the Glenview, Illinois-based provider of online fleet management services.

The company decided instead to set up a 100%-owned foreign subsidiary. The process took nine months. “It’s taken us two years to get any traction at all before we got our first customer,” Chung says. Navman finally started signing customers late last year and already tracks several hundred vehicles. But the potential pay-off is huge.

Signing up one of China’s largest logistics companies for just one regional territory brought Navman 5,000 vehicles to track, enough to keep it busy with converting the fleet to its platform within a year. “We are bidding on another one and they have 3,000 vehicles,” Chung says. “We have very good growth through all our other counties, but no other country is like China, where the top ten prospects all have one thousand units or above. Opportunities are huge for us. If we do it right and do it wisely, we will have very solid customer base in China for years to come.”

Jan Stojaspal is a regular contributor to TU.

For more on emerging markets, see Special report: Telematics and emerging markets.

For more on emerging market opportunities in the fleet space, visit Telematics for Fleet Management Europe 2012 on March 26-27 in Amsterdam.

For more all the latest telematics trends, check out V2X Safety & Mobility 2012 USA on March 20-21 in Novi, MI, Content & Apps for Automotive 2012 on April 18-19 in Germany, Insurance Telematics Europe 2012 on May 9-10 in London, Telematics Detroit 2012 on June 6-7, and Insurance Telematics USA 2012 in September in Chicago.

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

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