Telematics in Brazil: Is it for real this time?

Telematics in Brazil: Is it for real this time?

Let’s start with the simple things. If you are going to talk about anything mandated by law in Brazil, you need to understand the country’s culture first. If I can paraphrase George Orwell in Animal Farm, all laws are enforced but some are more enforced than others. Based on that motto, it is easier to understand why the tracking and blocking devices law, originally published back in 2007 and scheduled for enforcement in 2009, is still not currently enforced.

The law has the noble intention of reducing rates of stolen vehicles and cargo in Brazil. According to some unofficial data, almost one vehicle/cargo is stolen every three to four minutes in Brazil. These rates currently account for 50% of the insurance premium, against 25% in Europe. Some local insurance companies in Brazil have reported recovery rates as high as 95% after installing their own tracking and blocking devices, but with a decline to around 80% today due to the advance of countermeasures by thieves. So the Brazilian law makes tracking and blocking devices mandatory certainly generated a lot of attention!

Driving innovation

From vehicle manufacturers to insurance companies, from service providers to device suppliers, the whole automotive products and services supply chain started to believe the law was going to be enforced one day. Technical working groups, involving all the players plus the government, were created and started to meet regularly.

The debate brought together many new companies interested in tapping this potential market and spurred the development of some new technologies, like the SIM card over the air carryover. This had to be agreed by the telecom carriers, since every vehicle will leave the factory with a government generic SIM card and will only be transferred once the consumer chooses a carrier. Depending on who you ask, the new enforcement date is now anytime between May of this year and January of next year. Still a pretty wide range if you are thinking about embarking on this adventure…

Time to invest

But that is not what I look at when advising clients on whether they should invest in this market. I look at other signs. During all this time, investments were made everywhere in the supply chain. The local subsidiaries of the vehicle manufacturers and their suppliers have put together stronger engineering teams able to work in more aspects of the technology. The service providers have invested in technology and partnerships to broaden the range of possible services. Even the consumer has become more demanding regarding what he wants at his fingertips (or on voice command) while inside the vehicle.

So, in response to the question ‘Is telematics in Brazil for real this time?” my answer is definitely a big YES! Why? Because everybody who committed to the implementation of the mandatory tracking and blocking devices law has developed plans to get a return on their investments. (By the way, I believe the law will be enforced with a limited market penetration of 20% to 40%. It will never go above that percentage because of technical limitations and the evolution of devices demanded by the market. It will probably stop being enforced after a couple years.)

The ROI is being calculated with market demand figures and not just based on the tracking and blocking devices law anymore. Sure, if the law gets enforced sooner rather than later, it will make the results better. But with or without the law, demand is being shaped right now for different products and services in around 10% to 30% of total vehicles sold. Considering that last year almost four million new vehicles were sold, that’s not a bad market at all, especially when we look at the economic crisis around the world.

So, if you or your company is thinking about participating in this market, the time is now. Pack your bags and be one of the players that will help shape the market. In six months, it could be too late!

Carlos Alberto P. Nogueira (ca@carlosalberto.org) is founder and president of Nogueira Business Consultants.

For more on Brazil, see ‘Emerging telematics opportunities in Brazil’.

For all the latest telematics trends, join the sector’s thought leaders at Telematics Detroit 2011 in Novi, MI on June 8 and 9.


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