Update on Telematics in Brazil

Brazil’s economy went from boom to bust recently, and the auto market has taken a hit accordingly. Vehicle sales grew at an average annual pace of 11.8 percent between 2004 and 2012, but fell seven percent last year to 3.2 million units; they are expected to decline further in 2015.

The national auto dealers association, Fenabrave, forecasts a six percent drop this year, as the economy faces its first recession since 2009 and the government reverses tax incentives for auto purchases under a new fiscal austerity package that has contributed to popular calls for the ousting of President Dilma Rousseff.

In a country where an entry-level car such as the Fiat Uno 1.0 cc costs 35 times the monthly minimum wage, only 35 percent of households own a car. There are 5.31 people for every car in the nation, vs. 1.5 on average in developed nations, according to Bradesco, Brazil’s second largest private bank. 

The end of tax incentives makes cars more expensive and adds pressure on automakers to balance affordability and consumers’ avidness for connectivity and infotainment devices. 

Brazilians give more importance to connectivity and safety features than drivers in many other nations. A survey carried out in 12 nations and released last year by consulting firm Accenture indicated that Brazil is where in-car technologies have the greatest influence on purchasing decisions as opposed to driving performance.

Another study, by Madrid-based telecom provider Telefonica, showed that 30 percent of Brazilians are interested in accessing social media in their automobiles, compared to just 9 percent in the United Kingdom. 

 “Automakers would love to fit all sorts of connectivity devices into their cars here, but then they would be too expensive. However, they can’t leave their products stuck in time. Average consumers here demand Bluetooth, GPS, access to their music and integration with their smartphones” said Milad Kalume Neto, business development manager at the Brazilian branch of JATO auto consultants. 

Ford Motor was the first automaker in Brazil to offer connectivity in entry-level automobiles with the SYNC system, developed in partnership with Microsoft. “The direction of our company is to democratize these technologies and make them affordable through gains of scale,” said David Borges, Ford’s supervisor of Connectivity Solutions in Brazil.

Borges says “virtually all” Fords in Brazil come with emergency-assistance systems. “If the airbag pops or the fuel pump is cut off, if the driver’s phone is paired up, SYNC will make an automatic call to the national ambulance system (SAMU) informing the GPS coordinates of the vehicle and connect the ambulance operator with the people inside the car,” the Ford exec explains.

The company launched its SYNC AppLink in Brazil in 2014 and encourages local developers to build apps that work with voice-command. The automaker has already launched a dozen apps in partnerships that are exclusive to the Brazilian market, including a retail bank and radio stations.    

The connectivity bells and whistles don’t add too much onto the sticker price, according to Ford officials, who say it’s a few hundred extra dollars on the entry-level Ka model.

New-car sales should pick up as the economic scenario improves, but automakers no longer expect to see the brisk pace of growth of the recent past. “Growth rates will be more moderate, as the Brazilian fleet has already expanded significantly, holding back growth going forward,” Octavio de Barros, Bradesco’s head of economic research, wrote in a report on the auto industry dated March 2.  

In the aftermarket, multi-media combos that mirror the smartphone screen are popular among Brazilian consumers, as are tracking devices, which entered the market two decades ago, when criminal gangs became specialized in stealing expensive cargo from trucks on unpatrolled roads.

Over the years, insurers, authorities and consumers came to see trackers as essential in the fight against car theft.The economy is not a big factor in this market becausecar theft is epidemic. 476,000 vehicles were stolen in 2013 according to national insurers association CNSeg.

In an attempt to discourage theft, the federal government made several efforts over the past few years to make tracking devices mandatory, requiring manufacturers to install them in every car coming out of their factories. However, legislators and courts have opposed the bill, citing privacy concerns and service costs, and the government gave in last year.

A new bill on tracking devices will be sent to Congress sometime this year, and authorities have signaled that it will carry monetary incentives for drivers who chose to install them.

Auto insurers already offer such incentives, and annual premiums paid by drivers may drop as much as 20 percent if they agree to install tracking devices, which sometimes are given for free. In turn, auto insurers make partnerships with tracking companies who specialize in finding and recovering stolen vehicles. Most tracking devices sold locally include features that cut off the fuel in case of suspicious activity.   

Local manufacturers of tracking devices are now enjoying a moment of competitive advantage compared to imports, as political instability and fiscal concerns weakened the currency by nearly 30 percent in the past year. The Brazilian real fell in mid-March to its weakest level against the U.S. dollar since 2003.

Safety from bodily harm also boosts demand for connected systems, because speaking on cell phones, even if using earphones, is forbidden in every state and road conditions are so precarious that more than 40,000 people die from auto accidents every year and eight times more people are gravely injured.

Hence, Bluetooth technologies connecting the vehicle and smartphones are found in virtually all mid-priced cars, and demand for that type of service is high. There are more than 40 million smartphone users in Brazil, or a fifth of the total population.

Self-driving cars are still seen as utopian here, with the biggest reason being poor road conditions. Brazil’s road network has approximately 1.7 million km (about 1 million miles), but, according to the Transportation Ministry, 80 percent (1.3 million km) are unpaved.

That presents countless challenges to self-driving technologies. Outdated driver-liability legislation and black spots in internet service availability in a country that is larger than the continental U.S. are also seen as big hurdles to self-driving automobiles.

Ricardo Imperatriz, CEO of tracking-technology provider GolSat, sums up the high hurdle for vehicles getting, and staying, connected, “Our communication infrastructure is a huge bottleneck in terms of connected vehicles. Wireless service is just awful here by international standards. Brazil is a country of enormous proportions and wireless operators must still invest heavily in coverage.”

For the latest update on the North American market take a look at TU-Automotive Detroit 2015 – the no.1 auto tech event dedicated to innovation.

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