Telematics: Doing business with the BRICs

Telematics: Doing business with the BRICs

Despite the recent recession—and the fear of another one—telematics has helped the BRIC nations (Brazil, Russia, India, and China) continue to innovate and grow. “Emerging markets such as Brazil, Russia, India and China could lead future growth of navigation systems and telematics services,” according to an August 2008 white paper from the British consulting company SBD. These countries have emerged as hot spots due to surging economic growth, the rise of the middle class, and the attendant demand for private cars. And these trends have continued in the three years since the recession.

Commercial versus consumer telematics

In Brazil, commercial telematics is on the rise. According to US-based traffic services company INRIX, there are now nearly one million Brazilian vehicles tracked with commercial telematics systems to prevent theft. Other telematics features in Brazil include SINIAV high-speed vehicle identification. “In Brazil, commercial telematics is fairly mature,” says Scott Sedlik, vice president of marketing at INRIX. “It’s immature in China and India and fairly adolescent in Russia.” (For more on telematics in Brazil, see Telematics in Brazil: Ensuring security for cars and cargo, Emerging telematics opportunities in Brazil, and Telematics in Brazil: Is it for real this time?)

In China, tracked vehicles are often taxis; Sedlik says commercial telematics systems guide about 100,000 taxis in the country. India is developing quickly, too. One component to the growth of India and China is their reliance on telematics-based fleet management services. (For more on telematics in China, see Telematics in China: ‘Reverse innovating’ for success and Emerging telematics opportunities in China; for more on India, see Emerging telematics opportunities in India.) Auto theft plays a greater role in Russia. In the 1990s, yearly thefts ranged from 100,000 to 150,000 vehicles. Theft has created a new demand in Russia for telematics solutions such as GPS tracking and immobilizers. (For more on telematics in Russia, see Emerging Telematics Opportunities in Russia.)

Consumer telematics differs drastically in the BRIC nations. In Brazil, even in urban areas, it’s difficult to get a good cell phone signal so the prospect of mobile telematics taking off is still several years away. In this regard, Brazil is far behind China and India. Sedlik still calls consumer telematics “immature across all four countries, but China is the furthest along for solutions coming to market.” China and India have built out cellular infrastructure and can support 3G and 4G as well as smartphones.

Regulatory and cultural differences

One big trigger for the telematics market is government policy. The Brazilian government has mandated through Contran 245 that all vehicles be outfitted with anti-theft GPS devices. The law, which officially kicks in this January, requires all vehicles to have GPS devices installed by 2013. The law initially inspired some controversy due to privacy concerns, but now that it’s moving forward the GPS capabilities of Brazilian cars should facilitate the growth of other telematics features in those cars; namely, infotainment. (For more on Contran and infotainment in Brazil, see Telematics in Brazil: The law of the market, Telematics in Brazil and LATAM: Going beyond GPS, and Telematics in Latin America: Getting ready for infotainment.)

In Russia, other telematics applications, such as the country’s eCall system, launched in 2010, have begun to gain traction. The Russian eCall “is creating a foundation for adding additional [telematics] services,” Sedlik says. But government can also complicate matters. Brazil recently announced new taxes for all imported cars, startling many car manufacturers. China has required many foreign businesses to partner with local ones when entering the Chinese market. Another obstacle in the Chinese market, according to Sedlik, is the presence of copycat companies, which are adept at manufacturing duplicate hardware at knock down prices.

Companies need to be aware of cultural differences, too. The Chinese, for example, prefer to speak with someone at a call center rather than with the mechanical voice of an onboard navigator. In Brazil, most people prefer prepaid phones, which impacts their willingness to pay for new data plans.

The rise of the middle class

In China and India, telematics has broken through largely due to a growing population of drivers. In 2008, China became the world’s second-biggest producer of cars, after Japan. In 2007, China accounted for 14% of the world’s automobile sales; in 2009, it accounted for 21%. India’s Tata Motors bought Jaguar and Land Rover three years ago for just under $3 billion. Brazil’s vehicle market has featured an annual growth rate of 9% over the last three years, with passenger vehicle sales forecast at 3.53 million this year.

China merits special attention due to its sheer size, Sedlik notes. The country will sell 18 million consumer vehicles this year, about double what is sold in the United States. “How everyone’s approaching China is very unique, because it has to be,” Sedlik says. The country represents “the largest single-market opportunity” in telematics.

Despite their many differences, the BRIC countries feature emerging middle classes and a new population of drivers and mobile users who will benefit from telematics. The market is beginning to open up.

John Hendel is a regular contributor to TU.

For more information on dynamic telematics markets, visit Telematics Japan 2011 on Nov. 29-30 and Telematics China 2011 on Dec. 1. Both events are in Tokyo.

For more all the latest telematics trends, join the sector’s other key players at Content & Apps for Automotive USA 2011 on Nov. 29-30 in San Diego.

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

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