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Off-board Telematics Services in India

India's rapid economic growth over the last decade, emergence as a leading producer and exporter of cars and a large population of mobile phone subscribers all point to a potential lucrative market for telematics (high reward, high risk). It is early times yet as compared to telematics service adoption in the West, but players have already started making the right moves to gauge adoption potential. Our recent interactions with vehicle OEMs and suppliers seem to indicate the beginnings of a rat race to building telematics platforms and innovations around services on those platforms. Make no mistake - the Indian market has already been exposed to basic telematics services like GPS-enabled navigation and vehicle tracking systems over the years, but adoption has been niche and isolated.

Until now, we have been slow .....
Unlike in the west, the Indian market has been slow to adopting telematics services. India still lacks a developed and disciplined road infrastructure. Besides, newer and newer neighborhood short cuts are invented everyday - too many for maps to remain updated. Drivers do not need navigational tools when they could always tap into co-travelers or passers-by for directions that are more accurate. Also, rural regions are not part of the digital mainstream (in terms of mapping locations) and hence, navigational aid will only be restricted to cities. Besides, as in most emerging markets, cost has been a major factor and buyers are sensitive to paying more for services they presume are not that important - having not been exposed to this before. In developed markets like Europe where driver salaries, fuel costs and other operating expenditures are high, savings from telematics services are much more appreciated than in typical emerging markets where these costs are comparatively low. However, with fuel costs spiraling over this year, consumers in India are starting to be fuel-conscious too, and hence services that enable optimization of route, detection of fuel pilferage, detection of inefficient driving behavior etc. will be sought after.
Telematics adoption is highly fragmented in the passenger car and the trucking segment (single truck owners might find the cost of installing telematics devices and subscribing to services too costly as their margins are low - as compared to truck fleet owners) while in the commercial vehicle segment , fleet operators, logistic companies and taxi companies are realizing the benefits of adopting telematics value added services like monitoring and routing services, package tracking, accident management, driver management, fuel management, fleet management etc.

.... but there is potential
India represents the world's second largest mobile phone market and the world's third largest mass of Internet users. Rates for data and talk time being the cheapest in the world, this could be reason good enough to hasten adoption of SIM based on-board units for communication with the back end over 2G/3G and 4G networks.

...and things are changing
With widespread smartphone usage, consumers are today conscious of the advantages of application services on smartphones today. Consumers are hence expecting similar experiences on their vehicle units whereby they could hitch their phones to the car unit and access phone services on the car unit or something similar (such facilities are good as part of vehicle-infotainment solutions, but for true vehicle telematics this may not be much relevant beyond navigation services.) Vehicle telematics will require an on-board unit on the Vehicle CAN bus that can capture a lot of relevant information and convey data to the offboard server. Per an article here, last year's sales figures show that only 7,000 of 2.6 million new cars sold in India came with an embedded navigation system. In India too, recent spiraling fuel process and rising concerns of environmental sensitivity are forcing people to be fuel-conscious and telematics services that enable regulate fuel consumption without being in-car, may well be appreciated. People have realized that beyond direct operational margins, the benefits of gained efficiencies in driving behavior, improved fuel efficiency etc. adds to their profits significantly over time.

So who leads adoption and how ....
Today there are multiple entities that are attempting to jump on the telematics bandwagon. From what is available in terms of telematics based solutions in India, the top 5 OEMs control nearly 90% of the total market. However, most of these are basic telematics services - and are not complete telematics solution packages.
It is clear that it is for OEMs to lead the push for true telematics adoption in India considering that consumer interest is generally low and absence of referable business models around telematics in India. Our interactions have indicated that OEMs in India are still learning what would be feasible in the Indian market and if at all, there is interest in the market. Hence, whatever solutions are available today are small-scale mostly pure-tracking solutions. However, knowing the potential in India, OEMs are now looking at supporting real-time data flow from vehicle to back end for true telematics solutions. As the scale of the solution expected is larger, OEMs are experimenting with building platforms on collaborating with third-party partners to sell to their customers. At the same time, considering that this is early times yet, some OEMs do not want to put too much stake and generally expect partners to lead and drive solution development, infrastructure hosting, service provider mediation and solution deployment based on terms of agreement.
Telematics platforms, built by OEMs or third parties are not limited to focusing on a specific vehicle family or integration with specific services. These platforms are being developed and localized for market-specific services. OEMs like Volvo for example, have a strategy where they provide open interfaces from their solutions. Solutions for dealers and OEMs are managed in-house while for customer/driver specific revenue-making services related to logistics and transport operations, they partner with third-party providers. The key is in developing an open NGTP like platform that enables such collaboration.
Telecom companies are also sensing business potential in developing telematics platforms or acquiring them through strategic acquisitions. The acquisition of Huges Telematics Inc. by Verizon was a potential step in this direction.Telecoms are also realizing that voice and data based telecom services are leveling out and hence packaging telematics services with attractive subscription plans could be potentially new revenue models. There are also individual telematics service organizations who can work with telecom service operators to sell attractive packages to consumers.

Companies are facing a challenge in determining a business model that would appeal to potential customers in India. In a market where infrastructure is still maturing and price is a major factor, companies will be required to innovate and create value propositions at low prices. OEMs are still not sure if Indian consumers are ready yet to adopt telematics services in their vehicles as a necessity rather than a luxury.However, until that time, it is important to keep educating users of the benefits in the long run. With the potential end user base being large - ranging from vehicle owners, fleet owners, dealers, insurance companies etc., offboard telematics in India is set to take off.


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