Telematics in Southeast Asia, part I

Despite being home to more than 600 million people, Southeast Asia has long been a mere afterthought for the international telematics industry, a region overlooked for its low incomes, poor roads and telecommunications, and considerable geopolitical fragmentation. But as many of the region’s 11 countries advance economically, a growing number of international companies are taking a fresh look—and starting to like what they see.

“Navigation and telematics systems did not get introduced early enough due to infrastructural constraints,” says Vivek Vaidya, vice president for the Asia Pacific automotive practice at Frost & Sullivan, a global business research and consulting firm. “Also, once they were introduced, the prices were too high for the customers. It’s only now that infrastructure, prices and consumer acceptance have fallen into place; hence, the markets are becoming more attractive."

Japanese automakers, with their traditionally strong position in local automotive markets, are leading the way. But a growing number of European companies, such as Nokia and TomTom, are right there with them. (For more on telematics in other remerging markets, see Special report: Telematics and emerging markets.)

Market pioneers

In February, Thailand became the first country outside Japan for Toyota to launch its Smart G-BOOK, a telematics application for smartphones (iPhone 3Gs or higher, Android) that provides route guidance based on traffic information, destination setting by an operator, and enables users to request assistance in an emergency.

According to Andrew Hart, senior ITS and telematics specialist at SBD, two to three other car manufacturers are in advanced planning to launch similar services and are actively looking for local partners. SBD is a United Kingdom-based consultancy specializing in the design and development of vehicle security, telematics and ITS systems.

Also in February, Proton, Malaysia’s national carmaker, announced a partnership with YTL Corporation to offer 4G Internet connectivity in its cars. Up to five devices will be able to connect to the Internet through the car’s hot spot, and plans are under way to enhance the offering with a range of telematics features, such as remote vehicle diagnostics and security and location-based services.

At the 33^rd Bangkok International Motor Show in March, Alpine Electronics showcased its ICS-X8, the world’s first in-car infotainment unit using MirrorLink, a loose smartphone tethering technology developed by the Nokia-led Car Connectivity Consortium. MirrorLink allows smartphone applications to use the car’s head unit for display and also to take advantage of the car’s built-in controls.

The launch of ICS-X8 was seen as a particularly important development for Southeast Asia, where embedded telematics systems are few but smartphones abound.

“I don’t think heavy telematics is a way that many vehicle manufacturers want to go in Southeast Asia,” SBD’s Hart says. “There is more likely to be a lighter version of telematics, leveraging the fact that there is a huge penetration of smartphones in some of the markets, a huge acceptance of smartphones, and a much higher willingness to use smartphones in the car.”

Maturing markets

ROA Holdings, a Tokyo-based consultancy specializing in Asian wireless and mobile markets, predicts in its Asian Mobile Market Forecast 2012-2015 that the total number of global mobile subscribers will reach seven billion by 2015 and that Asia will make up more than 65 percent of the total.

Honda began in May a large Indonesia trial for a new generation of traffic information technology that strives to minimize traffic congestion by encouraging drivers to drive more smoothly as opposed to merely providing alerts to potential traffic jams.

Last December, Hart traveled the region to assess market developments in the telematics area for a variety of clients. While he found many of the building blocks for telematics services still wanting, they no longer appeared to be deal breakers. “We are not advising [our clients] to stay away,” he says. “If anything, they need to address [the region] more aggressively.”

According to Hart, a number of vehicle manufactures initially expected the market to be quite similar to China, and a few were even considering whether to simply manage services from their China headquarters.

But that would be the wrong approach to take in Southeast Asia, he says: “Simply copying and pasting the approach for Europe, the US or even China is too risky. We strongly, strongly advise that they spend a lot more time looking at consumer needs there, looking at how people live, how people drive. … There is no one block of markets that you can have one service for, and there are a lot of unique requirements both on the customer side but also legislative.” (For more on China, see Emerging telematics opportunities in China and Telematics in China: ‘Reverse innovating’ for success.)

Opportunities and challenges

Anyone who takes the time to study the perpetually snarled traffic of Jakarta, the capital of Indonesia, may conclude that investing in a sophisticated traffic information system makes little sense because the city provides few alternative routes. “You can spend a lot of money building a big traffic information service for some of these countries and find that the drivers don’t need it because there is no other way to get from A to B,” Hart says.

But each country of the region comes with its own set of opportunities and challenges. Singapore, the most advanced country in the region, offers some of the best wireless infrastructure in the world and some of the highest smartphone penetration rates. But its compact size and population of roughly 5.2 million limits its appeal for telematics.

“The city itself is 30 kilometers by 40 kilometers,” Vaidya says. “You don’t really require a very huge tracking system for your vehicles. All the routes are pretty straightforward.” Nor is there much vehicle theft to warrant stolen vehicle tracking.

Still, there is big potential in in-car infotainment, from Internet radio to location-based services. In fact, the country’s online offerings have become so sophisticated that MediaCorp, Singapore’s leading media company, shut down on Dec. 1 all of its 13 Digital Audio Broadcasting (DAB) radio stations, citing rapid growth of listening online and through its MeRadio mobile application.

Electronic toll collection also presents an opportunity in Singapore, where the government is eager to replace a number of roadside gateways with a GPS-based system and to let private companies in on the project. Singapore also plays an important regional role, both as a proving ground for new technologies entering the region and benchmark of success for neighboring countries.

“Yes, it’s a small market, but Indonesia and Malaysia are absolutely always looking at Singapore in terms of the solutions and technologies they find appealing,” says Alfred Schaeffer, business development manager for Asia at MiX Telematics, a South Africa-headquartered global provider of mobile asset management solutions. “Typically, Singapore is a market where our technologies are adopted and then get rolled over into Indonesia and Malaysia.”

Adds Werner Du Plessis, international business development manager at MiX Telematics:“While we use [Singapore] as a catapult, [Indonesia, Malaysia and Philippines] look at it as a magnifying glass to replicate the success in their own countries.”

Jan Stojaspal is a regular contributor to TU.

Next week: Telematics in Southeast Asia, part II

For more on telematics in other remerging markets, see Special report: Telematics and emerging markets.

For more on telematics in Southeast Asia, join the industry’s other key players at Telematics Japan 2012 in October in Tokyo.

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

Infotainment