Telematics opportunities in Southeast Asia
Siegfried Mortkowitz reports on opportunities for the telematics industry in Indonesia, Thailand and Malaysia
With India’s potentially huge telematics market still running well behind expectations, international companies are taking a closer look at the markets of Southeast Asia, particularly Indonesia, Malaysia and Thailand.
With a population of some 350 million, an expanding middle class and a rapidly growing interest in telecommunications, the region looks like a market ready to catch fire, especially in view of the expected growth in new car sales forecast to outpace every other region in the world except China. Global consultancy Frost & Sullivan forecasts that passenger vehicle sales in ASEAN countries are likely to increase at a compound annual growth rate (CAGR) of 10.2 percent, to 3.1 million units in 2018, more than doubling the 1.5 million units sold in 2011.
Speaking at the Thailand Auto Parts & Accessories (TAPA) exhibition earlier this year, Hagime Yamamoto, director of automotive research at IHS Automotive Thailand, said Indonesia is expected to lead this market growth. He sees new car sales there reaching 1 million units in 2014, up from about 840,000 this year, and then growing by an impressive 8.3 percent until 2017, when volume should reach 1.28 million vehicles. (For more on telematics in Southeast Asia, see Telematics in Southeast Asia, part I and Telematics in Southeast Asia, part II.)
Smartphone and tablet markets
Another interesting regional development is the growth of the smartphone and tablet markets. According to the London-based automotive technology consultancy SBD, nearly 7.7 million units were purchased in Indonesia, Thailand and Malaysia in the first three months of 2012. And smartphones now contribute more than 66 percent of overall mobile phone sales in the three countries.
With a strong position in Southeast Asia, Japanese OEMs have been the first to jump at theopportunity to offer telematics in this market.Following Toyota’s launch of its Smart G-BOOK application for smartphone users in Thailand, Toyota Tsusho Electronics (Thailand), a subsidiary of Toyota Group Japan, started offering what it claims to be the country’s highest-quality and most accurate real-time traffic information service for motorists.
Launched in July, the TSquare Traffic Information service offers data covering 24,000 routes in greater Bangkok and 14,000 routes in the suburbs. This data is sourced from GPS information transferred from 10,000 taxis equipped with the TSquare on-board unit (OBU). The company plans to embed a total of 30,000 taxis with the unit by next year, theoretically tripling the amount of available data.To process the traffic data, Amazon’s cloud system and software engines from the Chinese company CenNavi Technologies are used.
In launching the service, Itti Rittaporn, general manager of content for the electric vehicle department at Toyota Tsusho Electronics, said it made Thailand the first country in Asia to have traffic information with over 70 percent accuracy. This compares with developed countries like Japan, which has 65 to 70 percent accuracy in its traffic information, while China’s traffic data accuracy is also around 70 percent. (For more on telematics in China, see Telematics in China: Making sense of the market, Emerging telematics opportunities in China and Telematics in China: ‘Reverse innovating’ for success.)
The app is available on both iPhone and Android smartphones.Toyota Tsusho plans to provide value-added services soon, particularly data analytics from large pools of data collected daily from more than 50 million GPS chips.
Navigation systems market
In addition, the Garmin Corporation, a unit of Garmin Ltd., announced in September that it was introducing its Garmin StreetPilot Onboard app for iPhone in Indonesia. Garmin StreetPilot has been available in Thailand and Malaysia since February 2012.
According to Vijayendra Rao, research manager for automotive and transportation practice, Asia Pacific, at Frost & Sullivan, the navigation systems market in Thailand, Indonesia and Malaysia is expected to grow at a CAGR of 17.2 percent, to reach 2.08 million units in 2018. “OEMs are currently offering navigation systems for higher grade models within their vehicle line-ups,” Rao says.
The fitment rate for new cars (OE and dealer fitments) in ASEAN has been increasing since 2011, and Rao sees the penetration rate reaching 6 percent in 2018 due to the introduction of new vehicle models that offer navigation systems as standard. In this, Rao says, OEMs are following the example set by luxury automakers, such BMW and Mercedes-Benz, which have standardized their offerings of navigation systems across a majority of their vehicle line-ups.
Rao sees aftermarket fitment of navigation systems in ASEAN growing at a CAGR of 19.2 percent in the next seven years. However, he says embedded navigation systems will remain a niche in the region due primarily to their high costs. Andrew Hart, senior telematics and ITS Specialist at SBD, agrees. “Embedded telematics is not the right first step in Southeast Asia,” he says.
Cost is one reason. In addition, “IT and billing infrastructure in these countries are very immature. So it is not very easy to launch something in the short-term,” he says. In addition, there is always a risk in providing services based on anything but local data. “If you develop data systems based on your data center in Europe, and the Indonesian government, for example, suddenly passes a law that decrees that all domestic IT data must be locally generated, you’re going to have a lot of problems adapting,” he cautions.
The M2M market
The region also has an underdeveloped M2M market, Hart says, and local telecom operators have little experience of SIM management or handling Service Level Agreements (SLAs). Consequently, he strongly recommends app-based solutions. “Standalone apps are easy wins for OEMs,” Hart says. “They’re inexpensive and they can target local needs more quickly and more effectively.” (For more on M2M, see Industry insight: Telematics and machine-to-machine communications.)
And the smartphone represents the “ideal platform” for the telematics services in the region, since the device represents “the only gateway to the Internet for many people there,” Hart notes. The exception is SVT, which requires an embedded solution and is in high demand in certain parts of the region, especially in Malaysia, where cars are routinely stolen and shipped to neighboring countries to be sold. But, Hart says, it is unlikely that other telematics services will be able to piggyback on embedded SVT because of the costs.
SBDhas recently completed what it calls the largest survey of consumer attitudes towards telematics services in Southeast Asia so far, covering 2,400 recent car buyers in Indonesia, Malaysia and Thailand. One result of the survey was the astonishing popularity of smartphones among recent car purchasers in all three markets. (For more on smartphones and telematics apps, see Industry insight: Telematics and apps.)
In Indonesia, for example, 80 percent of recent car buyers own a smartphone, well above the overall smartphone penetration of 62 percent. SBD found that in Thailand 80 percent of recent car buyers have smartphones, while in Malaysia the figure is an impressive 92 percent. Both rates are well above those of their respective general populations. In addition, the survey found that the first experience of navigation for virtually all consumers in the three markets is likely to be smartphone-based.
Little wonder, then, that the major smartphone manufacturers, such as Apple, Nokia or Android, have launched or are planning to introduce some form of smartphone navigation in the region. SBD estimates that over 10 million navigation-enabled smartphones are expected to be shipped in all three markets during 2012.
One surprising result of the SBD survey was that new car drivers in all three markets were passionate about environmental issues and green solutions. The reasons are two-fold, Hart says. “Firstly, Southeast Asia is at the forefront of the negative impact of global warming and, secondly, fuel prices have shot up.”
This suggests that there exists a potential demand for eco-drive services in all three countries. However, Hart cautions that, to attract customers, “Any app telling people how to drive must be designed as a way to save money and not how to drive better.”
The survey also found that, because of the difficulty of entering destinations in current navigation systems in all three markets, drivers were very interested in a simplified points-of-interest (POI) destination-input solution.
In addition to emphasizing standalone apps, the survey also recommends that OEMs with an interest in the region provide faster-to-market solutions to address immediate problems that drivers are already facing, such as high fuel prices, and that they use a proactive approach to partnerships with key local players.
Hart says that there is little doubt that the markets are rich in potential, and he notes that, based on interviews he’s had, there will be several “major announcements” in 2013, concerning SVT and app-based solutions, which are sure to spur growth there.
Siegfried Mortkowitz is a regular contributor to TU.
For more on emerging markets, see Industry insight: Telematics and emerging markets.
For the latest on telematics in India, check out Telematics India and South Asia 2013 on June 5-7 in India.
Coming up: V2X for Auto Safety and Mobility Europe 2013 on February 20-21 in Frankfurt, Telematics for Fleet Management Europe 2013 on March 19-20 in Amsterdam, Insurance Telematics Europe 2013 on May 8-9 in London, Telematics Russia 2013 on May 14-15 in Moscow, Telematics Detroit 2013 on June 5-6 and Content & Apps for Automotive Europe 2013 on June 17-21.
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.