The Brazilian automotive market is cooling but still hot. In 2010, Brazil became the fourth-largest new-vehicle market, behind China, the United States and Japan. While growth of light vehicle sales has slowed, Brazil is by far the largest automotive market in Latin America, with 25 million consumer vehicles in operation, compared to 7.5 million in Argentina, the next largest market, according to Ward Automotive. (For more on telematics in Brazil and LATAM, see Industry insight: Telematics and emerging markets.)
The telematics market in Brazil has so far mostly focused on security and theft recovery solutions, with fleets being the primary customers. Even though these services are well established within insurance companies, actual penetration of vehicle insurance is still low among commercial vehicles, according to Marcio Webber, products and marketing manager for Sascar, a company that offers a range of solutions for fleet management.
He estimates that 40 to 50 percent of heavy trucks have tracking solutions in place and sees plenty of opportunity in partnering with insurance companies, not only for tracking but also for value-added services. "It makes sense to better manage and control your fleet," Webber says. "We're talking about telematics solutions to understand how your driver is behaving, who is driving better,and finding ways to empower your employees."(For more on fleets, see Industry insight: Fleet telematics.)
Follow the fleet
With the high cost of equipment, fuel and labor in Brazil, Sascar is betting on more growth in logistics management and fuel economy. The company recently completed a major technology upgrade to allow its platform to scale enough to handle 2 million or more vehicles.
Scaling up is important, because in Brazil, it's the largest companies that are actively seeking value-added telematics services, says Newth Morris, president of routing and navigation solutions for Telogis, a platform for location intelligence.
The CONTRAN 245 law, which mandates that all new vehicles be equipped with tracking technology, won't provide that much additional revenue for telematics companies, because competition is already driving prices down. But it can be a wedge that pries open the door to more advanced telematics offerings. Telogis and Sascar both think the market is ripe for their fleet management solutions. (For more on Contran 245, see Telematics in Brazil and LATAM: Going beyond GPS and Telematics in Brazil: The law of the market.)
Telogis already has done deployments integrating its offerings into existing track-and-trace solutions. "We can add value on the operational level, rationalizing route operations, field force automation of some of the paper processes and fuel card reconciliation," Morris says. The latter is an emerging use case in Latin America, while it's more common in North America. (For more on track-and-trace solutions, see How telematics keeps cargo management on track and Telematics in Brazil: Ensuring security for cars and cargo.)
Sascar is offering a solution that lets fleet managers monitor how a vehicle is being driven. It includes tech to identify a driver and determine which drivers are not following regulations or engaging in sub-optimal behavior, such as hard braking or fast acceleration. Sascar also offers a Web service center that lets fleet operators and individuals plan routes, set alarms for events and monitor performance; it includes an iPhone interface.
The Telefónica question
Interestingly, Brazil is also the single largest Latin American market for the Apple App Store, according to Distimo, a research firm focused on the app store market. While US carriers are eyeing the automotive apps market, network operators in Brazil have not focused on this market, according to Scott Sedlik, vice president of product planning and market development for Inrix, a provider of traffic services, although Telefónica has been actively marketing GPS-based telematics services through its Vivo brand.
"Brazil is a follower in that market," Sedlik says. Operators are providing data plans for stolen vehicle tracking on the commercial side, but not actively selling into the market.
Morris notes that, while wireless carriers have large sales forces, they are more comfortable selling typical services like air cards and phones. "A service like theft recovery that's easy to explain, the reps sell well,” he says. “But typically, a wireless carrier rep does not have the background to sell our solution.” Instead, Telogis would partner with Vivo or another operator to make sure customers to which it sells its solution get appropriate wireless coverage.
Nevertheless, Sedlik sees the smartphone and hybrid telematics solutions playing a bigger role as the Brazilian telematics market moves from security solutions to infotainment, thanks to this growing penetration of smartphones and data services converging with the continuing push of telematics by insurance companies. Moreover, automakers are rolling out global platforms for infotainment. (For more on smartphones, see Industry insight: Telematics and apps.)
"With all these trends coming together, it opens market opportunity for the introduction of premium and budget-conscious infotainment solutions in a way that was not possible before," Sedlik says. "We expect a major wave of consumer infotainment solutions coming into Brazil and over all the Latin American market starting in 2013 and ramping up in 2014 and 2015."
There's one way Brazil is just like other markets: Customers are tight-fisted right now.
Sascar has adjusted its business model to suit the demands of different customer segments, according to Webber: "Corporate customers prefer to rent the device and charge monthly fee for the service. In retail, you must sell the device and charge a monthly fee."
Telogis, as a premium provider, prices its products based on an analysis of each customer's ROI, pricing as a percentage of the monthly amount the customer is expected to save. "We are never even close to the cheapest guy," Morris says. "It's all based off establishing the value a company will derive."
Telematics providers also must be accommodating in working with the partners they'll go to market with, whether that's other telematics companies, network operators, insurance companies or aftermarket distributors.
For example, Sedlik says that Inrix spent a year analyzing the Brazilian market before partnering with MapLink. "Understanding the unique dynamics of every country in Latin America is critical,” he says. “Also, picking the right partners: We don't try to do everything ourselves."
Susan Kuchinskas is a regular contributor to TU.
For more on telematics in Brazil and LATAM, see Industry insight: Telematics and emerging markets.
For all the latest telematics trends, check out Telematics for Fleet Management Europe 2013 on March 19-20 in Amsterdam, Telematics India and South Asia 2013 on April 17-18 in Bangalore, Insurance Telematics Europe 2013 on May 7-8 in London, Telematics Detroit 2013 on June 5-6, Content & Apps for Automotive Europe 2013 on June 18-19 in Munich and Telematics Russia 2013 in September in Moscow.
For exclusive telematics business analysis and insight, check out TU’s reports: In-Vehicle Smartphone Integration Report, Human Machine Interface Technologies and Smart Vehicle Technology: The Future of Insurance Telematics.