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Telematics opportunities in Brazil and LATAM, part I

Jan Stojaspal reports on the growing telematics opportunities in the emerging markets of Brazil and Latin America

With the ninth consecutive deadline for the implementation of Contran 245, Brazil’s ambitious plan to stem vehicle theft by having all new vehicles equipped with tracking modules, come and gone, the telematics industry is once again wondering how much longer it will take for the government to get its act together.

But unlike with previous delays, there is now cautious optimism that the plan is on track for implementation, perhaps as soon as January.

The industry has high hopes for Contran 245, which was passed in 2007 after some 10 years of political debate. The legislation could make Brazil one of the biggest telematics markets in the world, both for tracking modules and value-added services, ranging from basic track-and-trace required by the legislation to advanced concierge services, fleet management and insurance telematics. Vehicle tracking is already in wide use by local insurance companies, but it typically only covers mid- to high-end vehicles or high-value cargo.

The telematics industry also hopes Contran 245 will prove a number of important new standards, including the world’s first interoperable SIM card capable of supporting up to 30 different carriers and a system integration scheme with radio-frequency identification tags to pay for road tolls, parking and fuel. (For more on Contran 245, see Telematics in Brazil: Ensuring security for cars and cargo, Telematics in Brazil and LATAM: Going beyond GPS, and Telematics in Brazil: The law of the market.)

Better news from Brazil

Enthusiasm for the project has waned with the delays, and many are still cautious. Ricardo Takahira, new business manager, electric vehicles, innovation, partnership, at Magneti Marelli Sistemas Automotivos, the Brazilian branch of the Italian automotive components and systems manufacturer, stopped including income from sales under Contran 245 in his budget projections. “We are not saying it’s not going to happen,” Takahira says. “But after three years of delays, nobody wants to report this back to headquarters. It’s a kind of taboo.”

Judging by recent developments in Brazil, Takahira may soon have better news to take back to his board. In late June, the government began live testing of the entire system, with every vehicle manufacturer in Brazil participating.

A number of alliances among vehicle manufactures, mobile carriers and service providers have been concluded, partnerships that will not only offset the cost of the factory-installed tracking modules but hopefully also generate profits further down the line.

INRIX has positioned itself as an important content provider by forging an exclusive collaboration with the leading provider of traffic and location-based solutions in Brazil.

And Volvo Car Corporation has started activating vehicle tracking along with a host of Volvo OnCall driver assistance functions, including automatic crash notification and remote door lock/unlock, on 6,000 to 7,000 cars it had already shipped with the required telematics hardware.

“This is real,” says Antonio Calmon, who was responsible for writing the Contran 245 technological specifications and whose company, Kaitech Consulting, now advises a number of car makers on how best to implement them. Calmon is currently working with three car manufacturers whose road maps all point to Contran 245 implementation in the second quarter of 2013.

Vehicle theft

With some 400,000 vehicles stolen in the country annually, one every 78 seconds, Brazil is one of the worst places on Earth to own a car. Annual losses from vehicle theft amount to $8 billion; another $1 billion goes for stolen cargo.

The government hopes Contran 245 will deter thieves and improve stolen vehicle recovery rates by requiring all new trucks, cars and even mopeds sold in Brazil to be fitted with tracking modules capable of remotely disabling the vehicle when reported stolen and tracking down its location.

Among key requirements, the module must be integrated into the vehicle’s electronics to prevent tampering, shut down the entire vehicle if damaged or disconnected, and give the owner freedom to switch not only between carriers but also between providers of services.

While the tracking module is mandatory, customers may choose whether to activate it. Value-added services are seen as a key enticement for drivers to have the module activated on a bigger scale. “The regulations create a good platform, [but] to create a value-added service is what we intend at the end,” says Christiano Blume of Volvo Group Telematics. “If you don’t create a value for [the customer], he will not buy the service we are offering.”

The implementation imperative

Despite its good intentions, the government ran into difficulties with Contran 245’s implementation almost immediately.

The National Association of Motor Vehicle Manufacturers in Brazil (ANFAVEA), whose members accounts for 13% of the country’s GDP, opposed the plan, fearing the tracking module would add at least $500 to the sticker price of any given vehicle. Not a big deal for high-end automobiles, but a substantial mark-up on motorcycles and entry-level compacts.

Several deadlines were missed as the government was forced to change the system’s specifications in response to a privacy infringement lawsuit that was upheld by a federal court. Then the car makers were not ready, asking for more time to retool their assembly lines and order the new hardware.

Now it is the government that needs more time to finish work on the so-called Home Location Registry (HLR), a central computer database that will handle service activations and data routing to selected mobile carriers and service providers.

In addition to Contran 245, the government has also decided to press ahead with SINIAV, a project to equip all of Brazil’s 60 million vehicles with radio-frequency identification tags by the end of July 2014.

Jan Stojaspal is a regular contributor to TU.

Next week: Telematics opportuntiies in Brazil and LATAM, part II.

For more on the LATAM telematics market, see Special report: Telematics and emerging markets.

For more all the latest telematics trends in LATAM, check out Telematics Brazil & LATAM 2012 on Sept 12-13 in Sao Paulo.

For exclusive telematics business analysis and insight, check out TU’s reports on In-Vehicle Smartphone Integration Report and Human Machine Interface Technologies.

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