The U.S. fleet telematics market is approaching saturation levels, but opportunities still exist. Pádraig McGarrigle reports.
If you still need evidence that the U.S. fleet telematics market is approaching saturation levels, then look no further than a recent telephone survey of more than 500 U.S. fleet operators that was published by C.J. Driscoll & Associates.
Covering interest, use and satisfaction of fleet operators with mobile resource management (MRM) systems and services, and released this month, the survey shows that a full 36% of respondents in the United States already have a GPS-based fleet management solution – and that the number could be as high 50% when other types of portable and wireless solutions are added.
The findings, which were presented by the survey’s author, Clem Driscoll, on day two of Telematics for Fleet Management USA 2013 last week in Atlanta, Georgia, came as a shock to many in attendance. But it wasn’t all bad news, Driscoll said, pointing out that close to 90 of the 508 companies surveyed were planning to buy some kind of an MRM solution in the next 12 to 18 months. “That’s pretty good,” he said.
Maybe pretty good. But no longer easy pickings for MRM providers, who have to pick over what is left of the market: insurance telematics, which actually came as a surprise to many; smaller fleets of five to 25 vehicles, which may deliver higher margins compared to large fleets but also cost more to install and support; compliance with government regulations on things electronic on-board recorders (EOBRs); and previously neglected verticals, such as emergency vehicles, rental fleets and taxis.
The good news is that MRM solutions no longer need much explaining to clients as the case for cutting operational expenses is now overwhelming. One respondent – a large municipal fleet totaling 12,200 vehicles – said it was saving $100,000 a month thanks to telematics. Also, satisfaction with telematics is high – more than two thirds of those with a solution have stuck by their original MRM provider.
To be sure, there are still profitable fleets that shun telematics for reasons such as ‘we’re too old-fashioned’ and ‘we’re too conservative,’ Driscoll said.
A big surprise was that a third of MRM-equipped respondents were already receiving an insurance discount that was specifically linked to having a telematics solution. “I follow insurance telematics pretty closely, and it’s just not brought up that often by the suppliers of fleet management systems,” Driscoll said. “I’m not aware of them saying, ‘There’s a good chance you’ll get an insurance discount.’ But nearly a third do.”
What’s more, in most cases, insurance companies were giving discounts but not asking for access to any driver-behavior data. “It is the fact that they are tracking their drivers,” Driscoll said. “The insurance companies probably feel the use of a telematics system … is an indicator of control and interest in managing the fleet efficiently.”
Christopher Carver, former program manager for commercial insurance telematics, Liberty Mutual, and current director at The Maris Group, weighed in on the topic during his presentation. “Commercial insurance is waking up to telematics,” he said. “Fuel efficiency is definitively linked to lower claims costs. Improved efficiency – driving fewer miles at less busy times – means [fleet operators] are a better bet for an insurance company.”
But it is important to go all the way. “Providing mileage on half the fleet doesn’t provide information an insurance company is interested in,” Carver said. “It’s the whole fleet.”
(For more on insurance telematics in commercial lines, see Selling insurance telematics to commercial fleets.)
Focus the offering
With the telematics market beginning to saturate, successful MRM solutions will need both depth and focus to better meet client demands. But providers need to be careful not to overcomplicate things, particularly when selling to smaller clients who are still unsure of the value of telematics, said Nick Ehrhart, vice president, business development for telematics, at Donlen Corporation, a fleet leasing and management solutions provider.
According to him, it is better, initially, to sell clients a solution that directly answers a specific need in their business, e.g. lowering fuel costs or cutting accident rates. Then, and only then, additional telematics services that impact other areas can be introduced. According to Ehrhart, projected monthly savings on accidents alone were $10 per vehicle, per month.
“It’s not really aha, it makes sense,” he said. “But, when you are talking to a customer about that, and you’re trying to sell your products, if you have hard stats to back this up, that’s going to go a lot further than talking anecdotally about ‘If you’re drivers are driving more efficiently, they’re going to be a lot safer.’”
Telematics and societal impact
Governmental policy may further add to growth in telematics. The U.S. government is currently assessing the potential for telematics to reduce the cost of accidents to society. On day one of Telematics for Fleet Management USA 2013, John Dierberger, field administrator, Southern Service Center, Federal Motor Carrier Safety Administration (FMCSA), said that telematics offered the opportunity to reduce the $87 billion that truck and bus crashes annually cost the society.
Technological advances mean that the federal government is now moving towards electronic logging devices as a way of identifying and removing unsafe vehicles. Currently the FMCSA’s federal staff can rate just 140,000 vehicles per year, with a further 3.4 million inspections – a mixture of roadside stops and fleet garages – undertaken by state law enforcement agencies. Electronic logging devices would make it possible to rate every truck and bus on the road – once a month.
“We’re in the 21s century, we need to get rid of paper,” Dierberger said. “Most documents aren’t worth the paper they’re written on.”
(For more on EOBRs, see Commercial telematics and the new EOBR rule: What to expect.)
The other verticals
High deployment rates in established markets also mean providers are now looking at verticals they may have neglected beforehand.
Stefan Joselowitz, founder and CEO, Mix Telematics, said that his company was “now broadening into other verticals,” such as motor coaches applications for improving driver behavior and safety. Others are looking at segments like emergency vehicles, rental fleets and taxis to extend their traditional reach.
While, before, companies may have worried about spreading themselves too thinly, they now seem to accept that expanding into new markets is key to future growth.
Telematics is now a global marketplace
A final piece of good news was that fleet telematics was now a global enterprise. For service providers looking to expand to markets that have yet to reach maturity, China and other developing markets will offer opportunities for years to come, said Mark Licht, president of Licht & Associates, the caveat being that, like the United States, these markets too will eventually reach maturity.
Licht predicted that a 50% penetration in many markets by 2020 was not inconceivable and that China would be the second largest market for fleet telematics within the next three years. Already, a fleet market consolidation is afoot in China as evidenced by Alibaba, China’s version of Amazon, paying $298m this May for a 28% stake in Chinese digital mapping company AutoNavi.
“The amount of money that is changing hands is very significant,” Licht said. “This has become a big business. The challenge in the market is the business model. The obstacles in this industry are willingness to pay, willingness to renew, and the cost of the service. It’s true for everyone.”
Pádraig McGarrigle is a staff writer at TU.
For all the latest telematics trends, check out Content and Apps for Automotive USA 2013 on Dec. 11-12 in San Francisco, Consumer Telematics Show 2014 on Jan. 6 in Las Vegas, Telematics for Fleet Management Europe 2014 on March 12-13 in Amsterdam, The Netherlands, and Content and Apps for Automotive Europe 2014 on April 8-9 in Munich, Germany.
For exclusive telematics business analysis and insight, check out TU’s reports: Telematics Connectivity Strategies Report 2013, The Automotive HMI Report 2013, Insurance Telematics Report 2013 and Fleet & Asset Management Report 2012.