Changing market conditions, growing competition and new technologies are forcing telematics device manufacturers to reexamine their strategies and choose new ways. What will be their future role in the market? What are their alternatives? Israel Ronn, president of Spotam, considers the answers.
Telematics device manufacturers were once considered indispensable to anyone serious about stolen vehicle recovery, fleet management or driver behavior.
Now competition – whether from cellular operators or OEM telematics programs – is everywhere, eroding price levels on a quarterly basis.
What are telematics device manufacturers to do?
Extensive work is being done in cost reduction, allowing very low-cost devices to be introduced into the market. Already, price levels are almost one third of what they were four years ago.
Unfortunately, cost reductions only work for a short period of time. What’s more, their potential is close to being exhausted as margins are already so thin that only very high production runs lead to anything resembling profits.
Introduce new products?
Maybe the rescue will come in the form of new products? Probably not.
A quick review of next-generation product portfolios shows a predictable range of driver behavior solutions, diagnostics devices (ODB2 dongles and other) and asset tracking solutions – and little differentiation.
For some players, particularly the small- and medium-sized ones, consolidations of various types may be the solution.
Consolidated organizations will enjoy economies of scale, larger market share and higher brand recognition. This will help them face current price pressures but does not insulates them from challenges further ahead.
Change market focus!
The next strategic alternative, and so far the most promising one, is a change of market focus.
In this respect, telematics device manufacturers have two options: Stay with vehicle telematics but expand their role within the value chain, or expand to cover the wider M2M market.
Expand the value chain
A value-chain expansion strategy might, for example, include the addition of back-end software capabilities or introduce niche solutions, such as driving analysis software, mobile device clients or application development platforms.
Taking this strategy has the potential to open up a whole new horizon of product opportunities. (It might be taken even further by manufacturers adding services to their offerings.)
One of the immediate results will be the addition (or increase) of recurrent revenues, which will ease current financial pressures. The risk is that manufacturers will find themselves competing with their traditional customers.
Expand to M2M
M2M – sometimes called the Internet of Things – is expected to become the next big thing in mobile, and, as such, it presents a major opportunity for manufacturers who already own the needed telematics technologies.
An expansion to M2M can be done by companies moving to similar markets like asset tracking or expanding further into areas like smart metering, remote control and more.
More alternatives may exist, and there is always the potential for a game-changing new technology. But, with all the confusion around the future of telematics device manufacturers, one thing is certain: They should start thinking outside the box and embrace current market challenges as an opportunity to evolve.
Israel Ronn is the president of Spotam, a business advisory firm for the high-tech sector.
For all the latest telematics trends, check out Telematics for Fleet Management Europe 2014 on March 12-13 in Amsterdam, The Netherlands, Content and Apps for Automotive Europe 2014 on April 8-9 in Munich, Germany, Insurance Telematics Europe 2014 on May 6-7 in London, Telematics India and South Asia 2014 on May 28-29 in Bangalore, India, Insurance Telematics Canada 2014 on May 28-29 in Toronto, Telematics Detroit 2014 on June 4-5 in Novi, Michigan, and Advanced Automotive Safety USA 2014 on July 8-9 in Novi, Michigan.
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.
March 2014, The Mövenpick Hotel, Amsterdam, The Netherlands
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