Telematics in Southeast Asia, part II

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.

At first glance, Malaysia may seem like the perfect market for stolen vehicle tracking and recovery solutions. It has some of the highest vehicle theft rates in the world, and those rates have only been rising in recent years, according to SBD, a United Kingdom-based consultancy specializing in the design and development of vehicle security, telematics and ITS systems.

The problem is that tight government controls prevent insurance companies from reducing insurance premiums for drivers who equip their cars with anti-theft devices. Drivers thus have little incentive to use them, says Fabrizio Finocchiaro, managing director, Asia Pacific at Cobra (Beijing) Automotive Technologies. (For more on insurance telematics, see Special report: Insurance telematics.)

Indonesia, with a population of 240 million and rising, is the region’s most populous single market. But in Indonesia’s case a single market means more than 17,000 islands and road transportation heavily supplemented by boats. Also, being one of the poorer countries in the region, Indonesia still lacks basic infrastructure, from enough roads to contain its formidable traffic to a central registry of car plates that would make electronic road collection possible. Still, Indonesia’s large population size makes it an important market.

Thailand, the region’s car manufacturing hub, is becoming an important base for a number of telematics suppliers to the automotive industry. But localization of services into Thai script remains a challenge, as is the speed of the country’s wireless networks. Thailand only introduced 3G connectivity in 2011.

Rigors of local markets

Map quality is a problem in Vietnam and the Philippines, according to Vivek Vaidya, vice president for the Asia Pacific automotive practice at Frost & Sullivan, a global business research and consulting firm. All in all, the rigors of the local markets put smaller telematics providers at a considerable disadvantage.

“We probably are not looking at Southeast Asia for expansion at this point,” says T.J. Chung, president and CEO ofNavman Wireless,the Glenview, Illinois-based provider of online fleet management services, “not because we don’t think that the market is good. There are some very large markets in Indonesia, Thailand and Philippines that are really quite interesting markets for us to look at. The only reason is that we just don’t have enough [capacity] to expand to those markets.“

But large players like Nokia are confronting the challenges head on. Nokia operates local mapping functions across the region, has local sales and marketing staff, and uses Singapore as a regional hub. “We take this region very seriously,” says Kirk Mitchell, vice president, Asia Pacific, sales & business development at Nokia Location & Commerce.

High hopes for MirrorLink

Navigation-grade quality maps are a big part of Nokia’s business in the region. The company supplies them to a broad range of handset and car manufacturers. It is, in fact, the only map provider with a truly region-wide solution.

Mitchell also has high hopes for MirrorLink, which he regards as an important way for the region to access telematics services in their cars. But the price of MirrorLink-enabled infotainment systems may still be too high. “We’ll probably see MirrorLink and tethered vehicle solutions taking off earlier in Southeast Asia than potentially other parts of the world,” Mitchell says.

Nokia Transit, a public transport information application for smartphones, currently in beta mode, targets those without cars. “The key trend, particularly in Southeast Asia, is a lot of people don’t have access to vehicles,” Mitchell says. “In biggest cities, public transit is key. Nokia Transit will be really relevant in those markets.”

TomTom, which launched a range of personal navigation devices (PNDs) in Singapore and Malaysia in October of 2010 and in Indonesia this February, is also bullish on the region’s potential. “There is a very good strength in all of these markets,” says Chris Kearney, TomTom’s vice president for Asia Pacific.

Keeping the maps up-to-date is a chore in this rapidly developing environment.But what’s equally important is ensuring that all products stay in line with market specifics.

In Indonesia, where addresses can be unreliable, this has meant the need to introduce a search function that allows drivers to also navigate by local landmark or commercial building. In Singapore, TomTom makes it possible to search by postcode.

Another adjustment TomTom made for Asia was the introduction of a split screen mode for junction views so that drivers not only see a map view of an up-coming intersection but also its 3D representation that shows them what lane they to take to make an exit. “They are not revolutionary changes, but it’s little tweaks that are required that are not delivered elsewhere,” Kearney says.

Product localization

Garmin, a TomTom competitor, is also strong in the Asia Pacific region, where it currently holds 15 percent of the PND/mobile market. Like TomTom, the company sees rigorous product localization, which includes languages, maps, content and features specific to each market, as a key to success.

But getting the price right can be just as important, particularly in the lower income parts of the region.

In April, MiX Telematics launched a stripped-down version of its premium fleet management service, hoping to convince owners of smaller truck fleets but also to expand into the motorcycle delivery market. Called MiX Track and specifically geared toward Asian customers, the service includes real-time tracking of vehicles and driver behavior reporting that covers speeding or harsh braking/acceleration. It sells for roughly 25 percent of the price of the premium service.

To be sure, it will take time for the region to mature. But the ingredients are already in place. Frost & Sullivan forecasts that the transportation and logistics market in Asia Pacific will grow annually by 7.6 percent to reach $4.09 trillion in 2016. Thailand is already the world’s second largest producer of motorcycles and pick-up trucks, as well as an important manufacturing hub for a wide range of other products, such as consumer electronics and food and beverages.

And total shipments of PNDs in Thailand, Malaysia, Singapore and Indonesia will grow from 443,000 units in 2010 to almost 1.8 million in 2015, according to Frost & Sullivan. What’s more, smartphone-based navigation systems will far outnumber PNDs. Embedded solutions have only a fraction of the four markets, between 0.5 percent in Indonesia and 5.3 percent in Singapore.

In the meantime, many car manufacturers are using telematics as a way of securing and slowly expanding their market position. “Telematics is seen, similar to China, as a way of capturing the imagination of the customers in an early stage and positioning themselves as kind of technology leaders.“ says Andrew Hart, senior ITS and telematics specialist at SBD.

One thing they can no longer afford to do is ignore the region. “If you combine all these countries, it’s like a three-million unit market [passenger and light commercial vehicles], which is as big as India,” Vaidya says. “If you think India is an important enough market, then logically you should also think that Southeast Asia is an important market to you.” (For more on telematics in India, see Telematics in India and Emerging telematics opportunities in India.)

Jan Stojaspalis a regular contributor to TU.

Read Telematics in South East Asia, part I.

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.

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