Indian telematics: Fledgling optimism and stiff challenges, part I

Jan

Jan Stojaspal

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19th March 2014

GDP growth in the low single digits, miniscule new cars sales and a dearth of mobile networks capable of transmitting M2M data.

These are hardly the ingredients for a thriving telematics market in India. Still, Pranshu Gupta, CEO of Trak N Tell, a Gurgaon, north India-based developer of a smartphone app that will provide real-time traffic and alternate routing information to drivers, is optimistic.

“Telematics is currently nascent in India,” he says. “But I’m very optimistic. Five years ago, we had no cars here with MP3 players. Now Bluetooth and MP3 are standard equipment.”

Gupta’s optimism is not an anomaly – almost everyone else active on the Indian telematics market believes the tipping point is only a year or two away – but it stands in stark contrast to current reality, especially the state of the country’s economy.

Vision vs. reality 

India’s GDP growth has fallen to low single digits since the heady days of the country’s robust economic expansion three years ago, and new car sales are down 7.59% over January 2013, representing a little more than 160,000 new cars sold in January 2014 – in a country of some 1.24 billion people.

By way of comparison, in Germany, which has a population about 1/15 that of India, 206,000 new cars were registered this January.

“People are afraid of losing their jobs, so they are holding on to their money,” says Vijay Kakade, director – MENASA, automotive & transportation practice, Frost & Sullivan. “Because of the economic slowdown and rising inflation, they are deferring the decision to buy a new car.”

In addition, the country stands before a momentous general election that is adding to the reluctance of consumers to spend. “We need a strong election mandate with a stable government,” Kakade says. “If there is a fractured mandate, there will be no important decisions taken, and this will be bad for the automotive industry.”

Given the gloomy economic picture and the lingering political uncertainty, it is all the more surprising to find that – in addition to the optimism of domestic players – foreign OEMs and tier 1s are showing their faith in the Indian telematics market by investing.

Bullish about the market

The Auto Expo 2014, held in New Delhi in early February, was the stage for several major announcements that suggested market bulls were gaining momentum.

For example, the German auto parts giant Bosch announced that it would open a new research and development center in Bangalore with plans to invest about $200 million in the country in 2014. The R&D center is to focus on all aspects of the connected car, including automotive computer vision, autonomous driving and ADAS functions.

Samsung and Indian carmaker Tata Motors said they had formed a partnership to offer in-car smartphone-based connectivity in Tata vehicles. Using Samsung’s Drive Link app, the collaboration will provide Tata car owners with music access, hands-free calling and in-car navigation via the smartphone.

But perhaps the most surprising announcement to come out of the auto show was Renault’s unveiling of the Kwid, a new concept car with a built-in drone that can be launched from the vehicle’s roof to observe traffic conditions and to detect obstacles on the road ahead.

The connectivity issue

The launch of the Kwid in New Delhi reveals two faces of telematics development in India.

On one hand, it was the first concept car Renault ever launched outside Europe, suggesting that the French carmaker wants to make its presence known on the market. On the other hand, the car’s radical design says as much about the formidable hurdles still facing telematics service providers and OEMs in India.

Significantly, Renault says the Kwid was designed with input from its India-based design group and was developed especially for emerging markets such as India. What was left unsaid is expressed articulately by the Kwid’s drone, dubbed “The Flying Companion” – that because of the paucity of stable connectivity and the absence of mobile networks capable of transmitting M2M data, OEMs must go to extremes to provide real-time traffic information.

Trak N Tell’s new smartphone app is one way to get around the problem. Its premise is that most car owners have a smartphone with data connectivity. According to Gupta, the app will download real-time traffic and routing information wherever there is sufficient connectivity.

However, in places with no cellular coverage, the app, like other apps, will not work, he says. “One may come across dead spots in the countryside or traveling on the highway,” he says. “In such areas, the traffic and routing information will be unavailable until the user reaches an area of connectivity. In essence, if you can't check Facebook or use WhatsApp, then you can't get traffic alerts either.”

Currently, the company provides real-time traffic alerts through its website. Anyone can log on to the site and take advantage of alerts scrolled through a small window, such as “Traffic Jam At: NH-8 (1.6 Kms east of Trident Hilton Gurgaon, 2.8 Kms east of Gurgaon), Sector-29, Gurgaon, India.”

According to Vikram Puri, CEO of Transworld Technologies, the problem is that mobile network operators (MNOs) are unwilling to invest in increasing bandwidth because, at current market prices, there would be little return on the investment.

Show me the ROI

“We probably have the lowest tariffs for cellular communication in the world,” he says. “To send 1.5 GB of 2G data costs about $1.50. So, because of these low revenues per connection, [MNOs] don’t see the returns.”

One collateral effect of this attitude is that most Indian MNOs currently have only one executive responsible for M2M – “only one relationship person,” as Puri puts it. This reluctance to commit more staff reflects the limited MNO interest in M2M and the difficulty companies such as Transworld, which provides track-and-trace and driver-behavior solutions for commercial fleets, are experiencing in pleading their case.  

Another, more damaging effect is that the MNOs’ fear of losing customers if they raised prices is stunting technological development in general and M2M broadband development in particular. As long as prices of mobile communications remain so low as to dissuade operators from providing M2M bandwidths, “high-tech production will suffer,” Puri says. “The operators must see that cellular bandwidth must be charged according to cost, not market prices. Once this happens, it will benefit high-tech development and the cellular companies as well.”

Clearly irritated, he adds: “We would gladly pay the higher rates.” 

Given the current connectivity situation, there is a 3- to 5-minute time lag from the time the data is generated to its availability on Transworld’s server, not very far – but still too far – from real time. “But this is changing,” Puri says, and he explicitly cites Vodafone as a company that has altered its outlook. “More executives are now being assigned to this vertical.”

(Return next week for part two of the series.)

Siegfried Mortkowitz is a regular contributor to TU.

For all the latest telematics trends, check out Content and Apps for Automotive Europe 2014 on April 8-9 in Munich, Germany, Insurance Telematics Europe 2014 on May 6-7 in London, Telematics India and South Asia 2014 on May 28-29 in Bangalore, India, Insurance Telematics Canada 2014 on May 28-29 in Toronto, Telematics Detroit 2014 on June 4-5 in Novi, Michigan, Advanced Automotive Safety USA 2014 on July 8-9 in Novi, Michigan, Insurance Telematics USA 2014 on Sept. 3-4 in Chicago, and Telematics Munich 2014 on Nov. 10-11 in Munich, Germany.

For exclusive telematics business analysis and insight, check out TU’s reports: Insurance Telematics Report 2014, Connected Fleet Report 2014, The Automotive HMI Report 2013 and Telematics Connectivity Strategies Report 2013.