Update on Telematics in China

China became the world's largest auto market at the turn of the decade placing it firmly, if it wasn't already, at or near the top of the list of target markets for any company in the automotive sector.  
 
18 million cars were sold in China in 2013, up 16 percent from the prior year, according to the China Association of Automobile Manufacturers (CAAM). That explosive growth has slowed down a little but the same body still expects growth of 7.2 percent this year. 
 
As the number of cars rises, the demand for telematics services has risen as well, but it is a difficult market to crack. Analysts at Research in China estimate that there were 4,000 companies offering after-market solutions two years ago but now “most” have folded. Activation rates for telematics in new cars is less than 30 percent. 
 
Some companies from outside of the industry are also taking note. Alibaba, the e-commerce giant, announced a partnership with Chinese automaker, SAIC Motor Corp, to integrate its smartphone OS and cloud-computing platform into SAIC's diagnostics, infotainment and navigation platform. 
 
Irish M2M platform provider Cubic Telecom, which counts Qualcomm as an investor, has just inked a deal with Chinese operator China Unicom to bring its solution to market in China. Cubic Telecom's HSPA + 3G network is the one which most closely resembles Western mobile networks. 
 
The agreement, sealed in November, sees it become a partner of China Unicom that will allow it to provide M2M services to a number of automakers and other partners. Electric vehicle manufacturer Tesla is a key partner who Cubic Telecom will be helping to increase their footprint in China through the deal. 
 
“All of the car companies that are trying to penetrate China now require as a mandatory, a very sophisticated connectivity application platform that goes with the car and that's what role we have to play,” said Cubic Telecom commercial director Gerry McQuade. 
 
“Our focus is not to enter the China market to compete locally with the three big operators but to partner with a local operator and bring Tesla into the Chinese market. 
 
You'd be surprised at how many big companies have struggled to get into China. We'll be bringing these big companies as new business to the operator partner. We're not positioned as a local competitor, we're positioned as a global enabler for the partner, but also we have a project with China Unicom to help them in some of their international programs outside of China.”
 
One of the main reasons it is so difficult to break into the Chinese market is the heavy regulation and the fact that the Communist Central government owns all of the Chinese telecoms companies. Cubic's deal with the China Telecom was the culmination of a two-year journey that involved help from the highest political office in Ireland. 
 
It began with traveling to China on a trade mission to China led by the Taoiseach (Irish Prime Minister) organized by investment body Enterprise Ireland in March 2012. A strategic partnership agreed by the two countries on that trip helped to pave the way for Cubic's deal agreed in November. The political help was key. 
 
“That was very important in establishing our credibility early on with China Unicom. That all culminated in a contract this year but it takes a long time. It doesn't happen overnight, we had a series of proof points and we got to understand the culture of China very well. We traveled over there quite a bit; we leveraged the ambassador at the Irish embassy and Enterprise Ireland a lot.
 
“You have to gain the trust of the partner because every operator and M2M company in the world wants to do business with Chinese operators, so you're competing with a lot of companies.”
 
Cubic's technology revolves around its own SIM-based connectivity, which acts like a local SIM and supports a range of different billing platforms, including all the major ways to pay in China. It has connectivity agreements in place in more than 200 countries, which would allow OEMs to deploy the same solution in each country. Access to local connectivity is provided at wholesale prices. 
 
Cubic business development director Marco Ferreira Gili claims that roaming in China is simply not an option for OEMs who want to deliver a good quality of service in the country. 
 
“China is a hard market, it has a lot of undercover regulation, so some of the other players are just roaming in and all of a sudden they are getting service disruptions. So, the OEM automotive market is very reluctant to make any deployments unless there is local connectivity like the Cubic solution. The automotive OEMs have had a very rough two or three years deploying in China and now they are shifting to solutions that are local.” 
 
WirelessCar, which provides telematics services to BMW, Volvo and other OEMS in China has had a Chinese presence since 2008 before launching fully in 2010. Director of business development Magnus Johansson says that, even if it wasn't a regulatory requirement to work with a local partner, it is key for Western companies to work with one to understand the local market and business practices. 
 
“We have a lot of partnerships with domestic companies when it comes to the hosting of the data services, telecoms, call centers and content. We also have partnerships with companies that help us to develop more customer facing applications because we don't have the language, and mobile apps have to be different to what we are providing in the US. Partnerships are extremely important and also from a regulatory perspective to supply the services. It requires a license to set up a call center, data centers and to deliver mobile services. You need a lot of partnerships in a lot of areas.” 
 
Find out about major telematics markets at TU-Automotive Detroit 2015 (June 3-4). Inspiring innovation in automotive since 2000 – TU-Automotive Detroit is the No.1 event for auto tech. 
 

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