Telematics in Russia, Part I: Waiting for ERA-GLONASS
Siegfried Mortkowitz outlines the potential of the Russian telematics market in the run-up to ERA-GLONASS
Many OEMs looking for footholds in the Russian telematics market are gearing up for the Big Bang the mandated countrywide emergency response system ERA-GLONASS is expected to produce. But until the system is actually in place, Russia remains a developing country in telematics, with minimal growth and little customer awareness.
“In the three years I’ve been dealing with the Russian telematics market, I’ve had only four inquiries about it, that’s how little OEM interest there is,” says Dmytro Koshevy, analyst in global automotive and LBS for the consultancy IHS Automotive. “I would describe the market currently as small and stationary.”
The problem for telematics in Russia is largely on the demand side, he says. “Russian consumers feel no need for telematics, they have no knowledge of it and no money to pay for it.” As a result, few OEMs are offering telematics in the country, which keeps consumer awareness low. (For more on telematics in Russia, see Emerging Telematics Opportunities in Russia and Industry insight: Telematics and emerging markets.)
According to IHS, Volvo was the first carmaker to introduce OEM vehicle telematics in Russia. Its Volvo OnCall was launched 2008 and came with a few basic functions, including emergency call, breakdown call and stolen vehicle recovery. Koshevy says that BMW has been offering in Russia a limited version of its ConnectedDrive system, including a teleservice that automatically notifies the dealer of any problem with the car.
In addition, Nissan (with Car Wings) and Mazda have begun expanding aggressively to offer telematics services in the run-up to GLONASS implementation. And Russia’s largest car manufacturer, AvtoVAZ, has begun mass production of two of its Lada models with built-in dual GLONASS/GPS receivers in anticipation of the GLONASS mandate.
Several other problems have kept the Russian telematics market from growing, says Dominique Bonte, vice president and practice director of navigation, telematics and M2M at ABI Research, a market intelligence company specializing in global technology markets. One issue is cellular coverage, which is available in only about half of Russian territory. “This is why satellite is so important in Russia, especially for asset tracking and fleet telematics,” Bonte says.
Another issue is the quality of available digital maps, which are inferior to those in Western Europe, especially in the vast rural stretches of Russia. Bonte says that TomTom and NAVTEQ have improved their maps, but they still lag behind Western European standards. However, in the cities, digital mapping technology is more than adequate, and as a result PNDs are growing in popularity.
Frost& Sullivan research analyst Krishna Jayaraman says that while the popularity of PNDs in Western Europe is on the decline, primarily because of smartphone-based navigation options, that is not the case in Russia. There are currently about 1 million Russian users of navigation devices, Jayaraman says. That number is projected to grow to about 2.5 million by 2016. Apart from TomTom and Garmin, Prestigio’s Geovision series of PNDs are currently popular in the Russian market.“There is a good opportunity for growth in Russia for PNDs, and prospects of steady growth,” Jayaraman says.The market is also promising for a low-cost integrated PND solution, such as the one pioneered by Renault with TomTom, he says.
Smartphone penetration is about 25 percent in Russia, according to a Frost & Sullivan report, but that is steadily increasing. Frost & Sullivan projects that smartphone navigation subscribers will number about 4.4 million in 2016.
Jayaraman says that MTS and Telemap launched a smartphone navigation solution in January 2011, MTS Navigator, which offers advanced personal search and navigation functions. And while the MTS GLONASS 945 was the first smartphone with a GLONASS receiver, other manufacturers are rapidly following suit.
IHS’s Koshevy says that smartphone producers have begun manufacturing chipsets with multi-navigation services, equipped with both GLONASS and GPS receivers. “They are doing this so that, once the technology becomes relevant, they will have the option available,” he says. “They want to be ready for the market. They are saying, ‘We don’t want to play catch-up. We want to be leaders.’”
Perhaps the most significant pre-GLONASS market event was the announcement, in July, 2012, by the national navigation services provider NIS GLONASS and Hughes Telematics (HTI) that they were teaming up to pilot a range of joint telematics services, including infotainment, remote diagnostics and usage-based insurance. If successful, the pilot will form the basis of a large-scale cooperation between the companies.
“HTI's cooperation with NIS GLONASS will enable HTI to develop a stronghold in developing the Russian automotive market,” Koshevy says. “Additionally, this cooperation will drive the conclusion of Russia's national GLONASS navigation system to bring Russian consumers compelling safety and infotainment features.” However, since that announcement nothing more has been heard about the project from either firm. Neither HTI nor NIS GLONASS responded to request for comments on the status of their partnership.
But, according to Massimiliano Kisvarday, chief business development officer for the Moscow-based telematics and security services provider Cesar Satellite, one reason for the lack of activity may be that NIS GLONASS is no longer the principal entity for developing the ERA-GLONASS infrastructure. Instead, the firm is part of a non-profit partnership, which also includes RTComm.ru, a subsidiary of Russian telecommunications giant Rostelecom, mobile operator MegaFon, telecommunications operator Summa Telecom, Internet company Yandex, and the GLONASS/GNSS Forum association. Russia’s largest mobile operator, MTS, and VimpelComjoined the group later.
IHS’s Koshevy says that the partnership, which is called NP GLONASS, was set up for the commercialization of GLONASS technology. According to the press release, the partnership activities will be primarily focused on the development of a competitive GLONASS-based market in Russia for navigation and information services.
Another purpose for the partnership, he says, was to pump finances into the development of the ERA GLONASS. “NIS GLONASS, Summa Telecom and MegaFon have all confirmed financial investments totaling several billion rubles,” Koshevy notes.
The formation of NP GLONASS was also a strategic move. “Back in 2011 when NIS GLONASS was on its own, the Ministry of Communications allocated for the functioning of ERA-GLONASS only one code, DEF-941, with 10 million lines,” he says. “This was not enough since estimates state the ERA GLONASS function would need 70 million numbers.”
NP GLONASS received a MVNO license in January 2013 and is now in charge of deploying the ERA-GLONASS infrastructure. However, Kisvarday says, the date for the full deployment of ERA-GLONASS has been pushed back again. All new vehicle models are now required to be equipped with the GLONASS receiver starting in January 2015. Every newly registered vehicle, regardless of model, must now have the equipment as of January 2017.
These delays, changes and a financial scandal that led to the firing of the GLONASS designer and touched the highest echelons of Russian government put the Russian defense ministry in the awkward position of having to refute, in December 2012, media reports that it had not authorized ERA-GLONASS for service.
Siegfried Mortkowitz is a regular contributor to TU.
Next week: Telematics in Russia, Part II: The impact of ERA-GLONASS.
For more on Russian and other emerging telematics markets, see Industry insight: Telematics and emerging markets.
For more on Russia, visit Telematics Russia 2013 on September 9-10 in Moscow.
For all the latest telematics trends, check out Insurance Telematics Europe 2013 on May 7-8 in London, Data Business for Connected Vehicles Japan 2013 on May 15-16 in Tokyo, Telematics Detroit 2013 on June 5-6, Content & Apps for Automotive Europe 2013 on June 18-19 in Munich, Insurance Telematics USA 2013 on September 4-5 in Chicago, Telematics LATAM 2013 in September in Sao Paulo, Brazil, Telematics Japan 2013 on October 8-10 in Tokyo and Telematics Munich 2013 on November 11-12.
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.