The core value in the telematics value chain is the data content. The source of the data content is either the vehicle’s systems that track parameters related to the vehicles performance or external/ third party media content beamed in through the telecommunication networks. From left to right, data flows from the source to the target.
Content relates to the media and entertainment data consumed by the subscribers in the vehicle. It ranges from social networking related content – photos, videos, chats - to navigation information such as maps, points of interest like news, stock information and weather updates. Players in this segment are content providers like social networking websites, media organizations, map databases and government agencies.
To remain competitive, content creators need to constantly innovate in terms of the offerings provided. Content generation and upgrades are a continuous process and warrants a stable, integrated and efficient information technology system. Application development and maintenance along with information technology infrastructure is mandatory for each of the sources mentioned in the content creation segment.
Customized content needs to be delivered to the target consumer. For example, in some locations, certain government regulations restrict the usage of social networking sites; while in other geographies, such content can be accessed freely. Similarly, there are several other policies that restrain the content that can be provided in a telematics setup. Technology helps manage the customization as well as track and manage revenue from these offerings.
The content generated, particularly via third parties, in the vehicle will reach the telematics unit directly. It will not connect to the network for transport to the target.
Typically, there are two ways in which the third party content reaches the target subscriber. One is through the dashboard of the vehicle, which connects to the cellular network to receive and display the content. The other is the regular cell phone, which connects to the cellular network for data.
Telecom service providers and the infrastructure players operate in this segment and cater to the provisioning and management of the cellular networks.
Telematics Unit is the point where all the vehicle data is aggregated and updated. It connects to the cellular networks to download and display third party content. Therefore, this unit can connect both to the vehicle systems and the telecommunication network as well. Automotive OEMs, Automotive Ancillaries and Automotive Engineering players design, build and produce these devices to be implemented in the vehicles.
This is the GUI that reaches the target consumer. In the vehicles, this is the dashboard that displays the content generated within the vehicle systems and the third party content from the telecommunication network. Application development for this dashboard is either done in-house or outsourced to a third party vendor.
Business Models and Applications of Telematics
Based on the value chain, there are three business models that emerge
This is the most widely adopted model with OEMs offering customers subscriptions for different services. Partnering with third party content aggregators to provide these services is the norm.
Services in this section include:
- Navigation – maps, turn by turn routing
- Location Based Services (LBS)
- Traffic related data
- Entertainment – Internet radio, Pandora
- Information – weather, news, stock prices
Here OEMs use the data pulled from the vehicle to track usage and hence offer preventive maintenance. This model, though just emerging, provides opportunities for cutting costs through warranty predictions and helps OEMs discover new services to offer customers.
Services under this section include:
Vehicle health reports
Vehicle servicing reminders and alarms
OEMs continuously gather data from vehicles, some of which are of utility to third-party businesses that can offer customized solutions. This model has recently come in for considerable attention as it holds the potential of a revenue stream that spans the vehicles lifecycle. There are different businesses that fit this segment:
- Insurance: Automotive insurers can track driver behavior and vehicle usage patterns to prove accurate premium ratings. Usage based insurance like Pay-As-You-Drive benefit enormously from telematics. Data mining can aid pattern recognition that can be used for fine-tuning insurance scheme proposals to fit the demography
- Media/ Content Providers: Web portals can beam content into vehicles – streaming audio and video as well as customized data such as RSS feeds for weather and stock data, news bulletins or social networking updates. Essentially, the vehicle becomes the new content distribution and consumption platform. Besides these, there is also a revenue opportunity in providing geography specific information like restaurants, shopping offers and traffic updates to passengers.
- Logistics Industry: Telematics can aid in better commercial fleet management by improved tracking, flexibility in route planning, efficient use of capacity, reduced fuel consumption and thereby higher revenues.
- Green Telematics in Automotive OEMs: Environmental concerns and government regulations are compelling OEMs to incorporate fuel-efficient measures in vehicles. Telematics delivers real time data on driving patterns, routes covered, engine parameters – all of which can be used to enforce environment compliant policies.
- Telecommunication: Telecommunication equipment manufacturers can utilize or enhance the network layout to cater to the infrastructure demands of telematics services. The telematics service provider pays for network transport and service delivery while the subscriber pays for time or data usage to the telecommunication service providers.
- Utilities: The electric vehicle segment relies on power utilities for charging the vehicle. These utility companies need to track charging schedules for vehicles to optimize the power supply through the day. Data gathered from the telematics units as the vehicles are charged will provide a characterization of consumer behavior and identify potential incentives for electric vehicle charge stations.
Opportunities for Service Providers
Looking at the value chain and its applications, there is ample scope for information technology service providers to provide solutions.