Telematics in Russia, Part II: The impact of ERA-GLONASS

When the government of one of the world’s largest car markets mandates basic telematics services for every automobile on its roads, as Russia’s has done, it is usually seen as very good news for OEMs. However, delays in deploying the project and uncertainties about its ultimate impact have cooled initial excitement. “The question everyone is asking now is, ‘Is it ever going to happen?’” says Andrew Hart, head of advanced research at British automotive technology consultancy SBD. “The good news is that the delays are technical, not political. So it is going to happen.”

The mandated ERA-GLONASS project is intended to reduce traffic fatalities significantly by requiring every Russian vehicle to be equipped with an embedded receiver linked, via the system of Russian GLONASS satellites, to a nationwide network of emergency response centers, currently under construction.

Once a car occupant signals an accident, either automatically or manually, the car’s exact location is transmitted to the nearest NIS Regional Emergency Response Center and a two-way hands-free voice link is established via the 112 emergency number. An operator then dispatches the appropriate emergency services, if necessary.

The GLONASS receiver and equipment are designed to be compatible with the GPS-based eCall system currently being developed in Western Europe, making it theoretically possible to drive from Vladivostok in eastern Russia to Paris and always be within the reach of an emergency response network. However, it’s no easy matter to cover 16,377,742 square kilometers (6,323,482 square miles) of land, vast stretches of it uninhabited.

Dmytro Koshevy, analyst in global automotive and LBS for the consultancy IHS Automotive, believes there will be some holes in the coverage on the Russian side: “The locations of the call centers will be based on population density,” which may leave large sections of Russia’s road network far from emergency response services. (For more on telematics in Russia, see Emerging Telematics Opportunities in Russia and Industry insight: Telematics and emerging markets.)

LBS functions

The system was to go fully operational by the end of 2012, but that deadline has been delayed again. The latest plan is to launch the service at the end of this year. All new vehicle models are now required to be equipped with the GLONASS receiver starting in January 2015, and every newly registered vehicle, new or old, must have the equipment as of January 2017.

The infrastructure that is being constructed for the ERA-GLONASS project is intended to serve as a basis for the development of GLONASS technology-based navigation information systems and services in Russia. It will therefore be capable of serving as a basis for additional LBS functions, such as pay-as-you-drive insurance, toll collect and SVR.

OEMs are hoping that it will inspire car owners to access an array of additional telematics services, such as navigation, information exchange and remote vehicle diagnostics. But Russia’s size may be a deterrent, at least initially, to modem-based services.

Dmitry Markov, ERA-GLONASS program director at navigation service provider NIS GLONASS, which until recently had sole responsibility for deploying the project, told RIA Novosti last year that, while over half of the Russian territory has mobile network coverage, “100 percent coverage along all Russian roads is unlikely to be achieved within the next decade.” Furthermore, even before the latest delays in deployment, some analysts were forecasting that uptake of the equipment would be slower than foreseen or hoped.

Koshevy says he expects it will take 10 to 15 years before every vehicle on Russian roads is equipped with the mandated ERA-GLONASS receiver. “It is going to be developing very slowly,” he says. “There has been a lot of planning and very little action. As a result, many OEMs are still waiting to see how ERA-GLONASS develops.”

Slow uptake

Koshevy also foresees a very slow piggyback effect as a result of the mandated system, because “ERA-GLONASS is not driven by consumer needs and wants. It’s driven by government mandate.” Furthermore, low-end Lada models, produced by Russia’s largest automaker Avto-VAZ, currently have a large chunk of the domestic car market. “So there will be little uptake because of the high costs,” he cautions.

The ERA-GLONASS service will be free of charge to users, though the in-vehicle unit is expected to add something to the car’s sticker price, depending on the manufacturer’s profit target. Inexpensive vehicles have in fact, driven the recent growth in the Russian car market. According to data from the online Best Selling Cars Blog, three Lada models had more than 18 percent of the Russian market in 2012.

Another issue, says Dominique Bonte, vice president and practice director of navigation, telematics and M2M at ABI Research, is the nature of the ERA-GLONASS device. “It is low bandwidth, and will be transmitting voiceover data just a few bytes in size, and so is not apt for broadband services, such as infotainment,” he says. He therefore expects most vendors to push a smartphone or iPad solutions to infotainment.

Furthermore, because most drivers will probably never have to use the ERA-GLONASS emergency response system, there will be little awareness of the system, and therefore of telematics, Bonte says. “In fact, you don’t ever really want to have to use the service,” he adds.

Local partners

As a possible blueprint for ERA-GLONASS, Bonte cites the 12 to 15 years it took for GM’s now popular OnStar system to build awareness of its usefulness. Despite the doubts, analysts agree that, as Frost & Sullivan research analyst Krishna Jayaraman puts it, “ERA-GLONASS will be a game-changer for the Russian telematics market.” And all analysts agree with Jayaraman when he says, “There will be a real need for OEM partnerships with local third-party providers.”

“Russia is a very specific market and difficult to follow from Western Europe,” says Massimiliano Kisvarday, chief business development officer for the Moscow-based telematics and security services provider Cesar Satellite. “Having a local partner is the key to success in the Russian market.” In addition to the language and alphabet, the way of doing business in Russia is also different from the West, he says. “It will be difficult for a car-maker to follow projects. You need a local partner to tell you what’s going on.”

More specifically, says SBD’s Hart, by law OEMs will not be able to use European telecom providers. “They must be Russian.” In addition, OEMs are prohibited from sending customer data outside Russia and all encryption data must be approved by the Russian intelligence service FSB. “The question is if demand is big enough to overcome these barriers, but we don’t see that yet,” Hart says. “There is not a clear-cut demand from consumers to invest a lot. We don’t see many OEMs risking to offer much just because there’s a box in the car.”

A survey carried out two years ago by SBD showed that Russian consumers ranked low in terms of awareness of and demand for telematics services, he says. “There was not a huge demand for traffic information, for example.” Hart believes that the initial focus after ERA-GLONASS has been deployed will be on aftermarket services.

While most analysts say that GLONASS will eventually provide a boost for telematics services, they are uncertain as to how much of a boost and what services will be in demand. Cesar Satellit’s Kisvarday says that much depends on the strategy of the OEMs: “Are they going to install only the ERA-GLONASS device or will they provide additional options?”

He expects end-user numbers to grow significantly, depending on OEM strategy. “If OEMs decide to provide additional services, it creates further opportunities, such as for SVR and roadside assistance,” he says. He says that his firm, which provides end-to-end solutions for OEMs, has seen “definite interest” from manufacturers in the future of the Russian telematics market. But, as Kisvarday cautions, “It is too early to know what will happen.”

Siegfried Mortkowitz is a regular contributor to TU.

Next week: Telematics in Russia, Part III: Growing the market.

Read Telematics in Russia, Part I: Waiting for ERA-GLONASS.

For more on Russian and other emerging telematics markets, see and Industry insight: Telematics and emerging markets.

For more on Russia, visit Telematics Russia 2013 on September 9-10 in Moscow.

For all the latest telematics trends, check out Data Business for Connected Vehicles Japan 2013 on May 15-16 in Tokyo, Telematics Detroit 2013 on June 5-6, Content & Apps for Automotive Europe 2013 on June 18-19 in Munich, Insurance Telematics USA 2013 on September 4-5 in Chicago, Telematics LATAM 2013 in September in Sao Paulo, Brazil, Telematics Japan 2013 on October 8-10 in Tokyo and Telematics Munich 2013 on November 11-12.

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

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