A wave of opportunity or a typhoon?

Convention seminar examines positives, negatives of telematics opportunities

In last issue's exclusive interview with Network Magazine, Frank Ordoñez, president of Delphi Product & Service Solutions and vice president of Delphi Corporation, stressed the importance of working with the automotive aftermarket to develop an effective business plan to take advantage of the opportunities in the rapidly expanding telematics industry.

As part of an upcoming seminar at the 2009 Network National Convention in Nashville, Derek Kaufman, president and founder of the consulting firm C3 Network, will provide an overview of the exciting possibilities—and challenges—the telematics boom brings to the aftermarket.

Telematics is already gaining traction among consumers with such features as Global Positioning Satellites (GPS), roadside assistance, lock-out service and stolen-vehicle assistance.

"We have a very large market brewing here," says Kaufman, author of the Telematics Primer—The Aftermarket's Role in the Telematics Future, a recent four-page executive summary commissioned by the Automotive Aftermarket Industry Association (AAIA).

According to Kaufman's report, there is an equal amount of risk and opportunity in telematics for the aftermarket companies. He understands why many in the aftermarket currently fear that factory-installed GPS systems, such as GM's OnStar, have the potential to further tie in customers to OE dealerships, decreasing the odds that a motorist will ever take the vehicle to an independent service dealer for maintenance or repairs—even after the initial warranty has expired.

"The same technology that makes it easy to connect, also makes it easy to build fences," he admits.

However, GPS technology is becoming increasingly portable, which gives the aftermarket an edge, Kaufman maintains. There are many portable or handheld devices that are increasing their technical capabilities and are generating the potential to address a good cross-section of all the cars and trucks on the road today, especially those that have not had telematics devices installed at the factory. And because the primary GPS device is being tied to other systems and databases, the value of the data produced increases.

For the AAIA study, Kaufman conducted extensive research on telematics in the automotive and heavy-duty aftermarkets, including recommendations for turning what is sometimes viewed as a threat into a new vision of business opportunity.

He found that 28 percent of U.S. cars currently have telematics devices installed, but that number is projected to grow to 40 percent of U.S. cars by 2012. The Telematics Primer also shows that there are currently approximately 280 million cars on the road that could use telematics updates.

Vehicles with monitored telematics systems (like OnStar) will grow from 2 to 10 percent by 2012, while non-monitored aftermarket systems will increase from 7.25 percent to 30 percent during that same time period. Telematics will expand to a $2.4 billion market in the U.S. by 2012, and will encompass $9.3 billion worldwide in that same time, Kaufman reports.

According to Kaufman's study, the price is going down as well. For example, the cost to install an OEM navigation system in a vehicle has decreased, from $2,000 per car in 2000 to $1,500 in 2003 and to $800 in 2008.

Kaufman, who has spent much of his career in the OE and aftermarket fields of automotive and heavy-duty businesses, believes the non-monitored segment will continue to account for the fastest growth in the telematics industry since the aftermarket has the ability to bring products to market faster than the OEMs.

In what should also be good news for the aftermarket, Kaufman says portable devices will further dominate the future of telematics growth, fueled by today's younger generation of electronic user.

"Think of your car as a docking station," he says. "And, it's these docking stations that will provide for a variety of Internet streaming entertainment device."
In his interview last issue, Ordoñez agreed with Kaufman's assessment: "Telematics has implications for everybody: the aftermarket, the music and film industries, the diagnostics and repair industry, the restaurant industry—it's all potentially there."

Telematics will also be able to provide drivers vehicle-infrastructure integration, which would provide improved communications aimed at increasing highway safety. Kaufman predicts that many of these telematics opportunities will change the driving habits for many vehicle owners, creating the "connected car."

For example, vehicle-usage reports that detect vehicle speeds, driver acceleration and braking habits, travel times and other vehicle data in some countries are automatically sent to insurance providers, which creates a database for "pay as you drive" insurance coverage.

Kaufman said the technology also would help drivers improve their fuel economy and vehicle use through continually updated route selections. By providing more direct travel routes, drivers could reduce carbon footprints.

The key to the aftermarket's future in telematics is diagnostics, according to Kaufman.

"The whole area of diagnostics is not about the aftermarket's lack of technology to play in the telematics game. In fact, quite the opposite is true. Large companies like Continental and Delphi are certainly capable of working with vehicle architectures on a global basis. Smaller companies like Smart Engineering Tools and MTS are fully focused on providing the kinds of flexibility the aftermarket will need to tune a telematics solution for its specific requirements."

Still, the equipment costs to enter the game are a concern for most in the aftermarket; however, Kaufman envisions "the humble cell phone" eventually playing the important role of being a transmitter of data from the vehicle to Network service dealers.

"Combine the cell phone with a data-connection circuit board, and you are in the telematics business," he says.

When it comes to telematics marketing, time is still on the aftermarket's side, but the Network and its partners must be proactive in our approach. Learn more this amazing opportunity to create new revenue streams through telematics at Kaufman's seminar in Nashville.

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