The future of aftermarket telematics, part II

The conventional wisdom is that aftermarket devices that plug into the OBD2 port to offer telematics services like track and trace, remote start, automatic emergency notification and curbside assistance are a doomed proposition. At least when it comes to selling these solutions directly to consumers.

“You’re completely alone in regard to the car manufacturer,” says Martin Rosell, managing director at WirelessCar. “They constantly change electrical systems and codes, and if you use the CAN bus, there’s no guarantee, one month to the next, that you’ll be able to get information out of the system.”

“It’s just a difficult space to do business in,” agrees John Canali, senior analyst at Strategy Analytics.

He points to the example of OnStar’s aftermarket device (OnStar FMV) as a cautionary tale. Given OnStar’s established position in the market with GM, most believed that when it delivered an aftermarket product, it would quickly find traction. Instead, the rearview mirror replacement device, which offers OnStar services like emergency response, roadside assistance and turn-by-turn navigation to any vehicle for $299 plus a data plan, barely got off the starting block, he says, mostly due to lack of demand outside of GM customers.

“We saw GM really stumble with their aftermarket solution,” Canali says. “The total volume that they moved was really quite negligible.”

But this year at CES 2013 a couple new aftermarket products delivered some buzz. First came Audiovox with a new aftermarket vehicle integration kit (Driven by DICE) that allows drivers to talk to their iPhones in the car and, by leveraging Siri, control existing radio and head unit capabilities. Audiovox coupled this solution with a “Car Connection” device that plugs into the OBD2 port and provides drivers with features like remote start, remote lock/unlock, automatic crash notification and roadside assistance.

For drivers with shiny new phones but older cars or newer ones without factory-fitted telematics, such a solution could prove appealing.

Enter the big partners

Delphi announced a similar solution, this one dubbed Delphi Connected Car, which, in addition to remote start and vehicle diagnostics, allows parents to real-time track their children’s cars, a feature that doubles as stolen vehicle recovery if the car falls into the wrong hands. The Delphi solution has garnered attention given the prominent involvement of Verizon, which will provide the connectivity via its cell network and will offer the device to its customers.

Canali says that the involvement of big wireless providers may signal a way forward for direct-to-consumer aftermarket devices. “Verizon has a good distribution channel, and they’re looking to spread out their M2M platform, so I think it makes a lot of sense for them to give it a try,” he says. “Anybody who’s shopped for a phone knows that you typically go in and spend 30 minutes just wandering around checking things out in the store. Maybe they will find some consumers interested in the more high-tech side of driving.”

Verizon acquired Hughes Telematics in 2012 and with it the In-Drive aftermarket solution. It remains to be seen how it will further leverage this asset moving forward.

(For more on Verizon and Hughes Telematics, see Video: The emerging telematics landscape.)

Rosell points out that partnering with OEMs to offer aftermarket telematics products is another option for specific solutions, like stolen vehicle recovery. BMW in Russia, for example, installs aftermarket stolen vehicle and recovery solutions on most of its cars the moment they arrive in Russian ports.

“From the OEM perspective, if you go to market where a niche service is required, as is the case in Russia for BMW, then both the provider and OEM can benefit,” Rosell says. “But with a more general solution for telematics, if you want to provide more robust services, especially remote control, you will never manage that with the aftermarket because you really need close collaboration with the OEM.”

Still, moving forward the business-to-business model may prove more successful than the business-to-consumer model, Rosell says.

New frontiers: Insurance telematics

One of the most dynamic areas of aftermarket activity today, especially in the U.S., is in insurance telematics. Many insurance providers, rather than wait for OEMs to embed telematics devices that they can harness for usage-based insurance (UBI) solutions, are forging ahead with black boxes of their own that, when installed in customer vehicles, can deliver information about braking, speed and time on the road.

“Right now the insurers have decided to try to carve their own path into telematics,” Canali says.

To mitigate cost, insurers like Progressive have performed temporary integrations. Snapshot, for example, only needs to be in the car for six months to give a “snapshot” of behavior. Progressive can then reclaim the device for the next customer. Still, the cost of devices has been an impediment to UBI taking off to date, and it remains to be seen if the aftermarket becomes the go-to device that unleashes the insurance telematics revolution or merely a stepping stone along the way.

“As more OEMs install factory-fitted telematics systems, it begs the question as to why you would want to bring in a second piece of hardware,” Canali says.

The longer term trend in his opinion is that insurers will work with companies like GM and Ford, both of whom have opened up their APIs to developers this year, to create an app that sits on top of a platform like OnStar. “That way they can share costs, share marketing and everything else,” Canali says.

(For more on UBI, see Inudustry insight: Insurance telematics.)

The fleet management parallel

One could make the same argument for fleet telematics, however. Fleet management solutions have steadily grown in market share and provide a major revenue source for aftermarket telematics solutions in commercial vehicles.

Rather than leverage embedded solutions in trucks or wait for these embedded solutions to emerge, fleet management providers have forged ahead with their own black boxes or have partnered with companies like TomTom or Garmin to provide the in-vehicle veneer to their back-end solution.

This year at CES, Garmin unveiled “fleet 590,” which integrates a black box, cable and antenna with a user interface similar to a PND. “We announced our own embedded connected unit that works with backend fleet providers,” says Clint Steiner, director of business development in Garmin’s Automotive OEM unit. “They sell hardware because they need the connection, but they don’t ultimately care about the hardware. The backend services are the real core of their business.”

The same can be said for backend insurance services. Even if embedded telematics solutions ultimately deliver fleet management and UBI, it’s safe to say that the aftermarket will have an active role in ushering these services into the mainstream in the coming years. 

(See also The future of aftermarket telematics, part I.)

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 2013, The Automotive HMI Report 2013, Insurance Telematics Report 2013 and Fleet & Asset Management Report 2012.