Wealthy drivers cannot sustain Indian connectivity alone

India manufactures about 3M cars a year and half a million of them are exported, claims Kumar Kandaswami, senior director of Deloitte India.

His research finds that 60% of all cars purchased in the country are small hatchbacks but small saloons and SUVs are also popular in the country. In comparison the executive and luxury car segment of the market is very small, accounting for 30,000 to 40,000 vehicles. Kandaswami, therefore, argues that the connected car market needs to be analysed with this context borne in mind.

Most of the demand for the technology emanates from the upper end of the market – customers who wish to buy executive and luxury cars and other kinds of vehicles. In spite of this, the main opportunity comes from the mass market – the multitude of aspiring Indians who wish to own a small hatchback, a small saloon or SUV.

Abdul Majeed, partner at PriceWaterhouseCoopers (PWC), believes that this segment amounts to 70% of the Indian car market, 10% bigger than Kandaswami quotes. Either way he adds that Indian customers are price conscious. “This is the reason why there is no significant development happening in the Indian connected car market,” he says. Most Indian consumers in the mass market are wary of the cost of investing in any more in-car connectivity and facilities. Yet richer Indians are readily embracing them.

“Connectivity is happening with the higher end cars but not so much with the small car market,” explains Majeed. He says there is demand for satellite navigational and remote applications in the higher end of the market but, overall, he thinks that only 2-3% of the small cars are connected. This slow update will only change when prices become more competitive because an increasing number of Indians are tech-savvy.  Car manufacturers are, therefore, working on the price issues and, with this in mind, he believes that connected car adoption will mature in the course of the next five to 10 years.

Explosive growth

Mark Thomas, director of product marketing of connected car at Jasper, agrees: “The Indian automotive market is poised for explosive growth over the next five years and some analysts are estimating that annual sales will more than double over that period.” Beyond price, regulation remains a key challenge to the development of the market.

By addressing infrastructural issues and regulation the Indian government could, in his opinion, give a big boost to the connected car market – pushing carmakers to “add the additional costs of the embedded telematics to the cars.” This is already being done by Brazil and Russia in the belief that built-in internet telematics in the form of vehicle tracking become an effective vehicle theft deterrent.

Regulation and risk

In terms of regulation there are some concerns about data protection and, therefore, Majeed thinks that consumers need to accept an element of data sharing risk in order to gain from the benefit of connectivity. In his view the risks aren’t that significant anyway. “I am sure that the Indian government will create laws around it and privacy laws already exist anyway,” he says.

While consumers may not be overly concerned about data sharing and privacy breaches, Collin Remegius Noronha, senior research analyst for Automotive and Transport in MENASA, at Frost & Sullivan suggests that it could create some resistance amongst some consumers who might be wary of what kinds of personal data connected car devices and services share. He adds that there is the IT Act and some current legislation that feeds off it. Yet there are no specific laws to regulate connected cars but there is a push for certain kinds of telematics.

Some telematics and connected car services are already active in India, says Remegius Noronha. Many of them are business orientated. “They do such things as vehicle tracking to offer a panic button and for some transport segments these telematics services are mandated by government regulation,” he explains. For example, taxi cabs are required to have a panic button by law and they must be trackable.

Improving road safety

In the consumer market, tracking offers an opportunity for insurance companies to track and monitor driver behaviour in order to offer a premium based on a driving risk analysis of each customer. “A high risk driver would, therefore, pay a higher premium than a low risk driver but a driver’s driving pattern requires a vehicle user to have a device monitoring their driving patterns and so there is a lot of resistance to this technology,” he explains. Indian consumers are, therefore, reacting in very much in the same as way they often do in more developed economics such as the UK.

“People fear that these devices will also capture information relating to the places they have visited in addition to data about their driving behaviour and so it presents a double-edged sword as the consumer looks at it as if an insurance company wants to looking into their life more,” he said. Majeed adds: “Only 10% of vehicles are installing these devices as some customers are willing to pay the premium since safety and the environment are a concern.” Ultimately, Majeed thinks that a change in mind set is needed and this will increasingly occur with the growing middle class.

Smart India

With its backing for the development of smart cities, the Indian government also needs to keep up its support to improve the country’s network infrastructure. Without it connected cars, as well as smart cities in India, will remain up to four years behind the world’s developed markets.

However, the connectivity options are likely to improve because the federal and state governments are making significant investments in network infrastructure. Kandaswami says the launch of 4G service across the country is imminent because the authorities are aspiring to take the internet to every village in India in order to deliver services.

Emergency call

For example, more work needs to be done on developing an eCall type of system in India and this has to be backed up by Indian government regulation. Remegius Noronha points out that all new vehicles in the European Union have to have an eCall system installed by April 2018. He’d like to see it happening in India too but work still needs to be done to align India’s emergency services with the technology in order to improve their response to accidents and road-related emergencies.

“From being largely used within towns and cities, passenger cars are increasingly driven inter-city and improved roads and lifestyles are driving this trend, so vehicles are increasingly designed to improve safety and to cater for the entertainment needs of customers driving longer and faster,” explains Kandaswami. There aren’t otherwise many significant connected vehicle safety features at the moment but engine management and tyre pressure monitoring systems (TMPS) will be become more prevalent over the course of time. For now eCall is already fitted in new Ford vehicles but the problem is that the Indian emergency services aren’t yet aligned with it.

Financial incentives

They are also offering financial and non-financial incentives to manufacturers in order to attract them to the country and to their own federal states. Most of the automotive manufacturers have taken advantage of this. “Most of the carmakers have established captive engineering, business process outsourcing, research and development operations that cater for their global networks and they are facilitated by some friendly tax laws and local talent,” he explains.

Remegius Noronha argues that the Indian market offers great potential for automotive manufacturers such as Jaguar Land Rover (JLR), Tata, General Motors, Volvo and Skoda. He says that Mercedes-Benz has sold 6,500 units in the first quarter of 2015. He says customers in the luxury car market are willing to even pay the import tariffs as they have previously been exposed to the premium brands.  Manufacturers such as JLR have also observed that there is a reasonable market for connected vehicles.

“These consumers have always been exposed to the best of infotainment and connected vehicles technology and these vehicles are now becoming more affordable in India,” he says. With access to credit being unlimited, and as long as consumers can demonstrate their ability to pay back a loan, there is also no restriction to buying their dream car.  

The hottest thing

Increased driving distances are making infotainment one of the key areas for growth and innovation within India’s connected car market. Most customers are achieving connectivity through their smartphones and by using on-board Bluetooth connections. Yet Remegius Noronha believes that the SatNav story is the hottest thing on the India market right now and there is an emphasis on drawing customers away from their smartphones towards integrated dashboard devices.

Products such as Ford’s My Ford Dock are an interim solution. It allows consumers to integrate their devices by docking their device into the vehicle – using the screen as if it were built into the dashboard.

He concludes: “There are also the Maruti Suzuki CIAZ and the Honda Jazz; they are two of the latest products coming with these in-dash systems that have basic entertainment, mobile phone and SatNav capabilities.”

Joining them is Renault’s KWID, which will have a 7-inch screen with infotainment and SatNav features. Yet he thinks the real story is about the fact that lots of manufacturers are trying to establish the base for what will be built into the vehicles in the future.