Telematics’ Prognosis in Emerging Markets

Emerging markets such as Latin America stand to benefit from telematics technologies.

Four of the top 10 most congested cities in the world are in Latin America, according the latest TomTom Traffic Index, compiled by TomTom, www.tomtom.com. Mexico City, Mexico is ranked in the top spot, with three Brazilian cities—Rio de Janeiro, Salvador, and Recife—occupying the fourth, seventh, and eighth spots. By contrast, the most congested U.S. city, Los Angeles, which is notorious for its gridlocks, comes in at number 10.

Telematics technologies applied to commercial fleets, private vehicles, and city transportation systems, including transportation infrastructure, can help ease traffic congestion and/or prevent conditions from getting worse in the future. In emerging markets like Latin America, telematics adoption will become increasingly important for this reason, as population numbers in urban centers soar and as economic development bolsters the populace’s demand for transportation. Beyond relieving road congestion, telematics can also improve road safety and decrease road fatalities by rewarding safe drivers; it can increase vehicle life and efficiencies; and it can cut down on vehicle theft and other vehicle-related crimes.

Besides the more traditional reasons for adopting commercial transportation telematics, such as maximizing uptime and ensuring compliance, individual fleet owners and operators in more mature markets are increasingly turning to the technology to enhance logistics and improve safety. But on a grander scale, Roger Lanctot, associate director of Global Automotive Practice for Strategy Analytics, www.strategyanalytics.com, says telematics will ultimately create a connected transportation ecosystem, for instance, by enabling vehicles to communicate urgent, safety-related information from vehicle to vehicle and between vehicles and the surrounding traffic infrastructure.

“All of this is critical to more effectively manage traffic—which means that cities, working with infrastructure partners and wireless carriers, will have greater visibility to transportation hot spots in realtime and tools to mitigate emerging crises or traffic jams,” Lanctot says. When transportation authorities have access to data that can enhance their planning and hone their responses to changes in transportation demand, Lanctot says this will facilitate new transportation-related services and maybe even a platform for congestion charging and tracking.

How close society is to this reality depends on the geographic region in question. The adoption rate, opportunities, and hurdles vary, and, often, emerging markets are still in the wait-and-see or trial-and-error phases. However, the growing need for IoT (Internet of Things) technology in transportation is nearly universally felt, and while there are some unique hurdles in emerging markets, there are also some incredible opportunities to improve citizens’ quality of life.

Telematics in Emerging Markets

On a global scale, new business models, an increasingly clear value proposition, including driver safety, and other factors will drive the number of global commercial telematics subscribers to 59 million by 2021, according to ABI Research, www.abiresearch.com. In the U.S., Susan Beardslee, senior analyst at ABI, says estimated fleet-management penetration was more than 22% in 2016.

Bolstering this rate is the ELD (electronic logging device) mandate. “The FMCSA (Federal Motor Carrier Safety Admin.) published a mandate last December requiring owner-operators, fleets, and drivers to transition from tracking their HOS (hours of service) manually to using ELDs in order to maintain their record of duty status,” explains Beardslee. “This has a significant impact on small to mid-sized fleets in the U.S.”

ELDs synchronize a vehicle’s engine and automatically record driving time. According to the FMCSA, carriers and drivers who are using paper logs or logging software must transition to ELDs by December 2017. Carriers and drivers who are using AOBRDS (automatic onboard recording devices) must similarly transition to ELDs by December 2019.

In contrast to the 22% penetration in the U.S., Beardslee says estimated Latin American fleet management penetration fell below 10% in 2016. Certain regions, though, are particularly promising for the future. ABI’s research suggests Brazil and Mexico are the top Latin American markets as far as commercial telematics fleet management is concerned, with Brazil expected to experience a more than 10% CAGR (compound annual growth rate) between 2016 and 2021 and Mexico expected to experience a 13% CAGR during the same period.

In many emerging markets, including not only Latin America, but also regions such as China and India, growing technical readiness, cost savings, and loss reduction for fleets, and government policies are stimulating the growth of telematics. “Economic development, including rising disposable income (and) urbanization, industrialization, and globalization of commerce are creating a surging demand for logistics support both for last-mile services driven by burgeoning online sales, as well as cross-country commerce development requiring additional long-haul transport,” Beardslee explains. “Local governments are (also) interested in both safety and environmental issues for commercial transport. Commercial telematics solutions track driver performance and identify unsafe driving practices.”

Mobeen Khan, assistant vice president of Internet of Things Solutions for AT&T, www.att.com, points to similar value propositions that are driving the need for telematics adoption in emerging markets. “Commercial benefits include increased safety during transportation, maintenance optimization, and efficiencies for scheduling, routing, supply chain integration among suppliers and receivers, and entertainment options,” Khan says. He adds that Latin America has about 30 regional vendors of commercial telematics, along with several global vendors, and businesses’ major focuses for commercial telematics are security, theft prevention, route optimization, efficient dispatch, and recovery of shipment losses.

Khan says the main barriers to telematics adoption in general include awareness and pricing. “Another hurdle is the relationship between the OEM (original-equipment manufacturer) and the point of sale—the dealership,” Khan adds. “In many markets, OEMs do not own or manage the dealership sales experience, so getting dealerships to focus on educating consumers about these features and selling these features can be a challenge.”

Further, in certain regions such as Asia and Latin America, interoperability between carriers can be a particular challenge. “Emerging markets often include a complex mix of basic and advanced technologies with uneven distribution and limited legacy transportation infrastructure,” Khan explains.

In addition to the general hurdles preventing telematics adoption, such as the availability of cost-effective solutions, privacy concerns, and the training needs of smaller fleets, emerging markets often face a more fundamental hurdle: insufficient cellular and/or transportation infrastructures. For instance, when wireless network quality is poor and LTE (long-term evolution) is scarce or unavailable, in-vehicle connectivity and inter-vehicle connectivity suffer.

Price sensitivity also tends to be a factor in emerging markets, as does the effects of market fragmentation. Though the hurdles are great in some cases, the opportunities for emerging markets to adopt telematics solutions to improve transportation systems are also great.

“Emerging markets often include a complex mix of basic and advanced technologies with uneven distribution and limited legacy transportation infrastructure.” —Mobeen Khan, AT&T

Telematics Down the Road

One telematics application with room for growth in both developed and emerging markets is UBI (usage-based insurance). Nino Tarantino, CEO of Octo Telematics North America, www.octotelematics.com, says telematics helps both insurers and policyholders make the most of connected cars by moving past “cool” features to real value-added enhancements. These could include services such as crash detection, safe driving tips, road condition alerts, and weather alerts, in addition to facilitating better rates based on actual driving habits and offering a reduction in claims processing time.

When it comes to UBI adoption, Tarantino says the U.S. has a head start. “We’re definitely ahead of the curve in the U.S., with both large and small insurers now moving forward with telematics adoption. Many are just at the beginning of the curve in implementing a UBI program powered by telematics, but we are seeing increased adoption year over year,” he says. “In contrast … Latin America is just beginning to adopt commercial telematics.”

Octo Telematics has already invested resources in Latin America and sees a promising telematics future in that region. There are pain points unique to the region—for example, Tarantino says in Colombia, challenges include high rates of vehicle theft and road fatalities and a low car insurance penetration rate—but with the data the company has collected throughout many years, Tarantino hopes data-enabled insights will help Latin American customers overcome their region-specific challenges.

Looking toward the future, telematics will drive changes that will revolutionize global and regional transportation systems. Driverless, autonomous vehicles are perhaps the first and most prominent example, but Tarantino says there is a plethora of other ways telematics will affect transportation. “From the roads we take, to the time of day we drive, to improving roads faster, telematics is poised to improve just about everything when it comes to automobile transportation,” he says.

To get there, Strategy Analytics’ Lanctot believes it will be important for emerging markets to find ways to bring all stakeholders to the table and focus on common telematics objectives and means to achieve these objectives in their regions. Stakeholders include cities, infrastructure companies, car companies, and wireless carriers, among others. If the right people are at the table, the prognosis for telematics technology adoption and innovation in emerging markets and beyond is bright. Perhaps one day, cities like Mexico City and Rio de Janeiro will be known for their smart, efficient transportation systems and not for being worst in the world when it comes to urban congestion.

Bethanie Hestermann is an editor-at-large for Connected World magazine.

By | 2017-04-03T13:13:12+00:00 4/3/2017|

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