The future of aftermarket telematics, part I

The future of aftermarket telematics, part I

As factory-fitted solutions have gotten cheaper and more advanced, embedded telematics has spread from the luxury segment down to cars for the everyman. The latest estimates suggest that 50% of new cars will come with embedded solutions by 2020, 90% by 2025 (see SBD’s “2025 Every Car Connected” report for more). If you’re the aftermarket, stats like those are scary.

But those who write off the aftermarket altogether do so prematurely. The years of meteoric growth for personal navigation devices (PNDs) may be behind us, but the fact remains that hundreds of millions of cars on the road today lack embedded solutions while their drivers display an increasing appetite for in-vehicle connectivity.

Even if embedded telematics takes over the automotive market eventually, basic math suggests that the majority of drivers will be cobbling together connectivity from various devices—smartphone, aftermarket and embedded—for a long time to come.

In Europe, a large new market in aftermarket telematics is expected to form in 2015 with the launch of pan-European eCall, an automatic crash notification service. While the necessary equipment will come as a compulsory line fit for all newly type-approved passenger and light commercial vehicles, the aftermarket is expected to step in with solutions for older vehicles.  

“There are a billion cars out there, and roughly two to three percent of them have embedded telematics,” says Martin Rosell, managing director at WirelessCar, a telematics service supplier that focuses on embedded telematics. “But 97% of the market today is a perfect fit for aftermarket solutions. … It’s a huge market, and we should not neglect that.”

Aftermarket providers aren’t going anywhere

It’s worth noting that a company like Garmin, a titan of the PND market, has taken stock of the increasing momentum behind embedded solutions and has started a line-install business of its own, announced at CES 2013 as “The K2 Platform” (Chrysler and Suzuki have already signed up). But rather than put all of its business development energy there, it’s continued to pursue automotive aftermarket devices above and beyond your basic PND.

“Line install is a huge priority for us,” says Clint Steiner, director of business development in Garmin’s Automotive OEM unit. “It’s why we’re building our infotainment product line. But we continue to work with other partners in other spaces, and we’ve had very good success there.”

The real question, according to Steiner and other experts interviewed for this article, is not whether the aftermarket is going away, but how it can best position itself to maintain or gain marketshare while accelerating the adoption of telematics into the mainstream.

Expanding connected services via PNDs

PNDs are a natural starting point. After all, they are the one aftermarket device that the majority of consumers has actually heard of, let alone seen in person, whether in a taxi cab or on the dash of a friend’s car. Granted, smartphone navigation has rendered PNDs somewhat redundant, but PND providers believe that they can distinguish themselves with additional services and a level of integration that a smartphone in a cup holder can’t match. 

This logic gave rise in 2009 and 2010 to the much-vaunted “Connected PND” (TomTom’s Live connected service and Garmin’s nuLink!), which offered live services like advanced lane guidance, text-to-speech and fuel price updates in exchange for a monthly or annual data plan. Customers didn’t bite.

“Nobody wants to pay for another data plan,” Steiner says, echoing a realization that has now rippled across the PND industry.

PND providers are now pursuing a pair of approaches that may hold more promise. The first is the notion that PNDs can leverage the connectivity of the smartphone and the data plans that customers already happily pay to the likes of AT&T and Verizon.

Garmin’s solution on this front is an app called “Smartphone Link,” which comes on most 2013 Garmin models and offers everything from live traffic updates to 3D maps and lane guidance. That still falls short of a robust telematics offering (no track and trace, no vehicle warnings, no remote start or emergency services), but for some consumers it may deliver the level of in-car connectivity that they’re looking for.

“It’s like having a mini telematics unit,” Steiner says. “You don’t get into the security side, but it can add a lot of rich content that customers want in the vehicle.”

(For more on navigation, see Telematics and redesigning the navigation experience.)

Semi-integrated PNDs

The second approach is to partner with OEMs to provide PNDs that are closely coupled with the vehicle. In industry jargon, this is called “semi-integrated PNDs” and means that drivers can remove the device to update maps and software but that the PND has a dedicated dock on the dashboard and provides integrated services through the car.

On this front, TomTom has partnered with BMW to offer drivers of 1 Series and 3 Series cars a semi-integrated PND that delivers navigation and hands-free phone calls, and is linked with the car’s entertainment system (selling price: roughly €500).

Garmin recently followed suit when it announced that the new all-electric version of the Volkswagen up! will come with a semi-integrated PND, which connects to the up!’s CAN bus to offer insights to the car’s battery and charging system, plus Bluetooth connectivity and vehicle warnings like open doors and lights left on.

“It’s an integrated infotainment device that’s still removable from the car,” Steiner says. He points to emerging markets and small cars as particular areas of growth for semi-integrated PNDs. “Smaller vehicles often lack room to put a bigger screen and the budget from the cost-development perspective to justify a 700- or 800-dollar head unit.”

(For more on PNDs in emerging markets, see Telematics in Southeast Asia, part II and Telematics in Russia, part III: Growing the market.)

Andrew Tolve is a regular contributor to TU.

For all the latest telematics trends, check out V2V & V2I for Auto Safety USA 2013 on July 9-10 in Novi, MI, Insurance Telematics USA 2013 on September 4-5 in Chicago, Telematics Russia 2013 in September in Moscow, 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: Telematics Connectivity Strategies Report 2013The Automotive HMI Report 2013Insurance Telematics Report 2013 and Fleet & Asset Management Report 2012.

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