Indian telematics: Fledgling optimism and stiff challenges, part II

Jan

Jan Stojaspal

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25th March 2014

The fractured networks

Return on investment is certainly one of the reasons connectivity remains problematic in India. Another important reason is the decentralized structure of mobile networks throughout the vast country.

Bids for network allocations are made by city, with different cities being supplied by different MNOs. This requires an operator to form partnerships with competitors so that its customers will have seamless connectivity in cities where it has no viable network.

While this works well enough, what is needed, most observers agree, is for the central government to take a prominent role and oversee the establishment of seamless national networks. Mobile network operators say such coverage will likely be available within two years, though still limited to cities and major highways.

Currently, 2G connectivity is available throughout the country, with 3G available in almost all so-called “Tier 1” and “Tier 2” cities – that is, urban areas with populations of more than 50,000. However, that 3G connectivity is far from stable, many executives – such as Pranshu Gupta, CEO of Trak N Tell, and Ashok Yerneni, CEO and founder of AssetTrackr – complain.

It’s little surprise, then, that companies are wary of providing solutions that rely on 3G. Recently, some MNOs have started deploying 4G LTE connectivity in large urban areas, but by location – a single residence or block of flats, say, using routers and boosters – rather than providing an entire network.

One problem for the expansion of 4G is the lack of an ecosystem to support it, since there are currently virtually no devices available on the market capable of using it. As a result, MNOs that offer 4G connectivity market it as a feature for the home computer.

Vijay Kakade, director – MENASA, automotive & transportation practice, Frost & Sullivan, says that there is a real need to expand 3G connectivity outside the large cities, and also to begin moving more quickly on 4G. “Tariff is one of the important parameters impacting penetration of 3G and 4G in India,” he says. “Also, penetration of smartphones is relatively low.”

The ubiquity of 2G

As a result of these issues, AssetTrackr – like almost all other companies providing commercial telematics services – is forced to rely exclusively on 2G connectivity for their vehicle tracking and M2M solutions, Yerneni said.

(For information on the phaseout of 2G in the United Sates, see Fleet telematics and the 2G phaseout.)

The company has designed a Cloud-based solution that also provides APIs for location-based planning as well as automated notifications for customers to directly integrate into their enterprise resource planning (ERP) systems.

Although mapping India had been a thorny issue for years, Yerneni says Google has overcome that hurdle – at least in urban areas and mid-sized towns.

As a result of the improved mapping and pan-India availability of 2G connectivity, AssetTrackr has won many national clients, such as the courier company DTDC and the grocery delivery service company Big Basket. “[Big Basket] are using our technology in shipping their goods from the farm to the warehouse to the end-customer in the quickest possible times,” Yerneni says. “Cloud-sourcing has made it all very cost-effective, lowering the cost of server, improving reliability, redundancy and scalability.”

According to him, all of the company’s devices report to the Cloud. “And we provide web-based tools and smartphone apps to track and monitor assets,” he says. Perhaps the most essential aspect of AssetTrackr’s solution is that it does not need broadband connectivity. “We don’t need 3G,” Yerneni adds, “because the amount of data transmitted is nominal.”

Consequently, nascent markets such as Sri Lanka and Africa have been making inquiries about the service.

The tyranny of price

The price hurdle facing the development of M2M transmission in India, described earlier, is one important example of a consumer attitude that is prevalent throughout the country and, according to many market players, limiting innovation and product development.

“Indians are extremely price-sensitive,” Gupta says. “The competition here is on price, not features. As a result, OEMs are extremely wary of adding features that add to the price of the vehicle. If OEM 1 increases the price and OEM 2 doesn’t, it gives OEM 2 a strong competitive advantage.”

Sumit Gulati, CEO of Blue Ocean Solutions and Services, which is trialing a device that analyzes risk using braking and other driver behavior parameters, agrees. “Product cost is the most important consideration in India today,” he says.

In fact, price is almost universally considered the major driver of sales and, at the same time, the most important barrier to the growth of telematics and connected services in India.

Price affects every aspect of the Indian telematics market, including the sale of mobile phones, which, unlike the car market, continues to flourish despite the economic turndown. The reason, Gupta says, is that young Indian consumers consider smartphones to be a fashion statement (which may well have also been one reason behind the Renault Kwid’s design, for what could be a cooler fashion statement for a young man than driving a car with a roof-mounted drone?).

However, Sirish Batchu, head of infotronics technology at Mahindra & Mahindra, says that almost half of all mobile phones sold in India are locally made. And, though mobile phone penetration in India is nearly 100%, smartphone penetration remains in the single figures – though it is rising sharply as the cost of the phones on the market comes down.

And, most importantly, the emphasis on the lowest possible price also affects car sales. “India is a small-car market,” Frost & Sullivan’s Kakade says. “Some 70% of cars sold are entry-level vehicles.”

This has obviously dampened the enthusiasm of OEMs and tier 1s to offer expensive telematics solutions in India. As a result, what is offered is limited to in-car navigation, six-inch touchscreens, Bluetooth and DVDs.

But even the market for in-car navigation is limited by a specifically Indian characteristic: the fact that most owners of top-end automobiles employ chauffeurs. “There are some cultural issues involved in this,” Kakade says. “Many chauffeurs – and Indian drivers in general – are just more comfortable rolling down the window and asking for directions.”

This is a big reason that of the approximately 2.6 million passenger vehicles sold in 2012 in India, only 7,000 had an embedded navigation system.

(For the first part of the series, see Indian telematics: Fledgling optimism and stiff challenges, part I.)

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.