Telematics in Latin America: Getting ready for infotainment

Latin America may be the next promising new frontier in infotainment telematics, with exciting commercial potential in countries such as Brazil and Argentina. Magneti Marelli, an Italy-based company focused on high-tech automotive enhancements with 2009 sales of $6.4 billion, has centers in both countries. What stopped Latin America’s expansion for a long time, according to Ricardo Takahira, Magneti Marelli’s infotainment program manager, was lack of quality digital maps. Those maps started emerging in Brazil in the past five years and have been expanding ever since.

Back in 2005, the only trustworthy digital maps in Brazil were for Sao Paulo, Rio de Janeiro, and Minas Gerais. Takahira notes that data integration is an ongoing struggle, just as in Europe and the US, a situation exacerbated in Brazil due to disjointed traffic agencies and delays in digital map projections. “When you go to city hall, the map is still on paper and not digital,” says Takahira.

Infotainment in Brazil

“Our context is different than any other part of the world,” Takahira says of Brazilian investment realities. Telematics began to emerge as a major force in Brazil through security and GPS-based theft prevention rather than the infotainment technologies now available for cars in Europe and North America.

INRIX, a leading company in traffic data and driver services, has also led the way in opening the Latin American telematics market. “In Latin America, Brazil, by far, leads the overall market opportunity for automotive manufacturers and the entire consumer telematics ecosystem,” explains Scott Sedlick, INRIX’s vice president of marketing. “No other country in Latin America has the key ingredients in place for major deployments of connected infotainment solutions.”

According to a recent white paper from Intel, infotainment and telematics technology has been slow to penetrate because of costly proprietary systems and a fragmented industry without firm standards. The car market in Latin America remains strong, though, with GM, Volkswagen AG, and Fiat S.p.A some of the biggest manufacturers throughout the region. Automotive sales in Brazil grew from 3.1 million in 2009 to 3.4 million in 2010. (For more on the Brazilian market, see ‘Telematics in Brazil: Is it for real this time?’ and ‘Emerging telematics opportunities in Brazil’.)

Developing infotainment solutions

For Sedlick, mobile technology and infrastructure are critical factors to developing traffic and infotainment solutions. He speaks favorably of the spread of Apple’s iPhone and Android-based smartphones. Smartphone sales tripled in Brazil in 2010, according to Sedlick. Wireless penetration exceeds 100%, and the country’s mobile market is the fifth largest in the world.

Takahira suggests that the infrastructural challenges create an opportunity for US and European players active in Brazil to provide better connectivity and service. Both business leaders also point to price as the big obstacle in selling infotainment, despite the expansion of products from TomTom, Garmin, and touch-screen technology like the iPad.

“Pre-paid phones dominate [Brazil’s] market, with about 82% penetration compared to 18% of post-paid subscriptions,” Sedlick says. “This creates both a barrier and an opportunity for OEMs to offer reasonable business models for infotainment features, which require connected data subscriptions.” Smartphones, including the iPhone, are becoming increasingly popular in Brazil and are having a major impact on changing mobile behavior, Sedlick points out. However, monthly plans as well as smartphones and handsets are much more expensive in Brazil than in the US, particularly because of heavy government taxation.

Other major factors for companies like Magneti Marelli and INRIX to consider include the availability of consumer credit and consumer demand as well as government-backed initiatives such as support for electric cars and the Brazilian mandate that all vehicles be equipped with GPS tracking.

Poised for growth

Statistically, Brazil’s automotive market seems poised to grow. “The Brazilian automotive sector continues to have positive growth rates, driven by strong domestic demand and government tax reforms, enabling wider access to credit,” Sedlick says. Although Brazil’s central bank announced monetary tightening measures at the end of 2010, resulting in the average interest rate on car loans increasing from 22.8% to 25.2%, these are still significantly lower than historical interest rates on consumer loans.

Some commercial infotainment products have already entered the Brazilian marketplace. Navteq Traffic began offering its real-time road services this May through AIRIS Easy Way. Magneti Marelli is evaluating the costs and benefits of offering products in the market now.

“An interesting feature is the speed warning,” Takahira notes, which warns drivers when they exceed the road’s speed limit and when they are approaching fixed and variable speed radars. In time, telematics products such as this may become the rule in Latin America rather than the exception.

John Hendel is a regular contributor to TU.

For more on the growth of telematics in Latin America, join the sector’s other key players at Telematics Brazil & LATAM 2011 on September 19-20 in Sao Paulo.