Commercial Vehicle Telematics Market Outlook –

Europe And North America

July 2013

Kabirdas Sathyanarayana, Industry Analyst

Frost & Sullivan’s Automotive & Transportation

Research Group

2

Functional Expertise

More than 11 years of automotive industry expertise, which include 7 years of market research and consulting experience. Particular expertise in:

- Cross profile experience – expertise in research, quality and manufacturing in automotive domain

- Strategic recommendation - growth consulting in advanced automotive technologies market

- Analysis – competitive and end-user analysis ; benchmarking

- Client interaction - analyst briefings and media interviews

Industry Expertise

Experience base covering broad range of sectors, leveraging long-standing working relationships with leading industry participants’ Senior Executives

- Telematics and infotainment systems

- Automotive safety and security systems

- Passenger vehicle and commercial vehicle markets

Career Highlights

Before Frost & Sullivan, expertise in quality and manufacturing in several leading auto firms:

- Jaguar Cars, Castle Bromwich, England

- PSA Peugeot Citreon at Ryton, England

- SunFab Industries, Chennai, India

Education

Master of Science in Automotive Engineering from Coventry University, Warwickshire, UK

Certified Training Programme on Six Sigma and Quality Tools

Bachelor of Engineering in Mechanical Engineering from Madras University, Chennai, India

Kabirdas Sathyanarayana

K.Sathyanarayana Industry Analyst

Automotive &

Transportation

Frost & Sullivan

North America

Chennai, India

3

Agenda

Fleet Management System - Overview 4

Types of Fleet Management System 6

Different Levels of Packages and Business Models Offered 7

Fleet Operators’ Purchase Decision 9

Value Chain Ecosystem of FMS Solutions 11

Key Fleet Management Market Trends 13

FMS Services Roadmap 14

Key Fleet Management Regulatory Trends 15

Unit shipment of FMS Systems by Vehicle Type 16

FMS Opportunities Globally 18

Conclusion 19

Frost & Sullivan Contact Information 20

4

Benefits of Fleet Management System Fuel Savings is one of the key benefits of FMS

Fuel – 30%

Driver Wage – 26%

Maintenance – 5%

Tires – 1%

Others (Tax, Interest) -22%

Insurance – 6%

Depreciation – 10%

Cost of Fleet Operation and Key Focus Area for FMS

FMS focus areas for cost

cutting and cost

optimization up to about

62% influence

FMS Benefits

Benefits of Effective Deployment of FMS

Driver Safety

Business Intelligence

Strengthen Compliance

Reduce Fuel Costs

Decrease Carbon

Footprint

Green Benefits

Customer Satisfaction

Productivity

Asset Utilization

5

Types of Fleet Management System Solutions Low cost smartphone solution to dominate in LCV, while embedded solution is the key for

MCV/HCV; smartphone to have significance presence in both segments

Fleetboard, Qualcomm, Peoplenet,

XRS XataNet, Transics, Trimble, Mix

Telematics, to name a few

TomTom Work Solution, XRS

Turnpike, Microlise Handheld

Devices, Masternaut, to name a few

Qualcomm, Transics, Xora, TeleNav,

Verizon, Google to name a few

Fleet box/Onboard computer

A dedicated telematics box is installed

in the vehicle. The capability to connect

to the engine management and also

provide tele-diagnostics make this an

appealing solution.

Requires installation and costs more.

Mostly OEM-installed; some

aftermarket.

Unique selling proposition (USP):

Comprehensive solution with

extensive customization.

Embedded – CAN based

Handheld PDA

Proof of service, proof of delivery

type of operations mainly catered

to by this segment.

Portable Navigation Device (PND)

The advent of PND navigation opened

the door for providing navigation

combined with other value-added

services. Mostly aftermarket.

USP: Easy to use.

No installation required.

Portable – OBDII based

Smart Phones

The availability of Internet in the phone

along with GPS becomes a very

powerful tool for providing telematics

services.

Navigation and all other location-

based services are available for free.

Mostly aftermarket; can also be offered

as a supplement for embedded systems.

USP: Has the potential to reduce

telematics service cost.

Independent -Smart Phone based

6

Participant Hardware Services Installation Package

Aftermarket

($1740)

e.g. Trimble

~ $600 ~ $30 Per Month 10% of

Hardware costs

Aftermarket

($1620)

e.g. Teletrac

Not

applicable ~ $45 per month Not applicable

OEM

($1620)

e.g. Ford

Not

applicable ~ $40 per month Not applicable

Smartphones

($1455)

e.g. Xora

~ $99.99*

Services ~ $15 per

month + voice plan

with data package ~

~ $39.99

One time

activation fee ~

$35

Services

Installation

Hardware

Services

Installation

Hardware

62.07%

3.45%

34.48%

6.87% 2.41%

90.72%

Different Levels of Packages and Business Models Offered Smartphones have a low hardware pricing, but have been mostly used to manage drivers;

Vendors are changing their business models to apportioning the hardware costs with services

7

Currently Evaluated Pricing Model Shift from no upfront investment model to profit sharing model; 2014 will see few players

evaluating various ways to get this started, though it will take another 3 years to be launched

High upfront investment

with low monthly service

fee – fleet operator buys

hardware for a set fee and

pays low monthly

subscription fee

Profit sharing model -

Sharing of cost savings

with fleet management

vendor (for example; for

every ‘X’ percent of cost

savings achieved by using

the vendor’s fleet

management solution, they

get paid about ‘X’ percent

of that cost saving)

Low High Low High Low High

Hardware

Monthly

Subscription

Fee

No upfront investment

with high monthly

service fee – hardware is

offered as free; vendor

recovers the hardware cost

with high subscription fee

Low hardware cost and service cost

Low hardware cost but high service cost

High hardware cost but low service cost

Currently

evaluated only in

‘matured’ markets

8

Fleet Operators’ Purchase Decision Successful telematics suppliers need to mirror fleet operators’ purchasing decision process and criteria;

simple, easy implementation and quick ROI through the SaaS (Software-as-a-Service) Model.

Purchase

Criteria Solution

Cost

Service

Ubiquity

After-

sales

Support

Brand

Value

Quick

ROI

Value for

the Money

Financial

Viability Reliability High

Medium

Low

• Quick ROI

• Solution Cost

• After-sales

Support

• Service Ubiquity

• Experience – Brand

Value

• Number of Services –

Value for the Money

• Reliability – Failsafe

• Financial Viability

• Appearance

• Convenience

in Purchasing

• Ease of Use

Small

Fleet

Owners

Large

Fleet

Owners

Government

Haulers

General -

For ALL

Criteria

Service ubiquity is highly preferred by high-value

load haulers, who require visibility at all times

Small fleet owners highly prefer carriers

who extend lucrative financial options

Large fleet owners prefer brand value or

experience

Overall, compelling ROI, life cycle cost and good

after-sales support are the preferred criteria

Source: Frost & Sullivan analysis.

9

A specialised fleet

management solution

provider (n=26)

3.7

A fleet management

solution from a vehicle

manufacturer (n=26)

3.8

Overall Performance of Current Fleet Management System Vendor Although the performance rating for solutions from a truck manufacturer is higher than for 3rd

party vendors, the loyalty with solutions from a truck manufacturer is lower

Q16. Considering all your experience with your current fleet management system vendor,

how do you rate their performance overall?

Q18. How likely are you to change your existing fleet management vendor within the next 24 months? Source: Frost & Sullivan analysis.

A specialized fleet

management solution

provider (n=26)

A fleet management

solution from a vehicle

manufacturer (n=26)

Likelihood of Changing current Vendor

next 24 months

• The overall performance rating shows a

very acceptable level with a score of 3.7

on a 5 point scale

• Vehicle manufacturer solutions seem to

show slightly more variance in

performance rating

• Overall customer loyalty is rather low with

over 50% of operators likely or unsure to

change provider. (high attrition rate risk)

• Vehicle Manufacturer seem to drive a

lower customer loyalty (27%) than

specialist providers (46%).

Key Take Away Overall Performance Rating

10

Expanding Value Chain Ecosystem of FMS Solutions Going forward, many real-time information providers (tolling, secured route, parking slots and other

real-time information) are likely to join the ecosystem.

Fleet Operator

Cloud

OEM Component

Suppliers

Independent

Telematics

Vendor

Data

Aggregation

Management

Wireless

Provider

Billing

Engine

Mobile

Phone

Source: Frost & Sullivan analysis.

Dealer

Network or

Leasing

Company

OE

M t

o F

leet

Ow

ner

(e.g

., V

olv

o a

nd D

aim

ler)

Ind

ep

en

den

t V

en

do

r t

o F

leet

Ow

ner

(e.g

., Q

ualc

om

m,

Xata

)

OEM through Independent Vendor to Fleet Owner (e.g., Ford through Telogis)

Flow of

Information

Tel C

om

. O

fferi

ng

F

MS

d

irectl

y

(e.g

., V

erizon W

irele

ss; usin

g X

ora

)

Current solution Offering Future solution Offering

11

New FMS Vendors Evolving – Expanding Value Chain Going forward all value chain partners are assessing whether to offer their own FMS solution;

Consolidation (acquisition/partnership) is the key force driving this trend

Most of the value

chain partners of

the trucking

industry are

eyeing this market

12

Key Fleet Management Market Trends Regulatory mandates and infusion of investments are likely to boost the market in North America and

Europe; Venture capitalists see huge opportunities in Telematics industry

• OEMs offer FMS as standard

• M/HCV dominant FMS vendors focus shifting to

LCV ;

• Vendors focus shift to under-penetrated market

• Focus on service, retail and parcel delivery in

LCV; construction & mining in M/HCV

• Independent Smartphone to gain more attention

• New value chain partners to enter as FMS vendor

• EOBR mandate to push adoption of FMS in

the coming years

• Non-automotive participants to enter market

• Vendors combine expertise to create higher

capability products

• OEMs partner with third party vendor to

offer FMS

• Shift from 2G to 3G

• Service vehicles to install telematics in Turkey

• Big shopping malls demand telematics

installation

• FMS vendors to make partnership with OEMs

• European strongholds to enter the Turkish

telematics market through direct operations

• Market is expected to shift towards scalable

subscription model

13

FMS Services Roadmap New services of FMS are likely to provide more value to fleet owners and help to reduce the

return on investment period.

2010 2014 2018

Shortest Secured, tolling, charging, real-time parking slots routes Map

Information Eco-route

Brakes, odometer, gear box, engine and CAN BUS, accelerometers and others

In-cab camera, lane departure warning, forward collision warning, roll stability control, blind-spot detection, active

cruise control, and others

ADAS Integration

Driver Behaviour Training Real-time/active vehicle control Real-time feedback dashboard

Transport Management

Trucks only Bi-modal (trucks-rail) and multi-modal (trucks-rail-sea-air)

Mobile Apps Location Tolling and charging Driver comparison Driver drowsiness

intimation

Network 2G 2G / 2.5G / 3G / Wi-Fi / Satellite - World-wide Chipset (GOBI)

Type of Solution

Embedded and Portable –

smartphone as APP Independent Smartphone Solution

Product Portfolio

Trucks Telematics

only

Truck telematics + Trailer Management + TMS (one stop shop; offering truck telematics, trailer telematics and transport & logistics management)

14

Key Fleet Management Services to Watch out Basic track and trace will be in demand across all regions. High-end FMS services will grow in popularity in

mature markets; Prognostics, driver behavior monitoring and proof of delivery will be in demand

• UK—Track and trace and advanced back-end

integration

• Germany—Advanced back-end Integration; driver

behavior monitoring; TMS; and predictive analytics

• France—Eco taxes (toll roads) and advanced back-

end integration

• Benelux—TMS; driver behavior monitoring;

advanced navigation; advanced back-end

integration; and predictive analytics

• Italy—Track and trace, basic services, and insurance

telematics

• EOBR

• Prognostics

• Proof of delivery

• Advanced back-end integration

• Predictive analytics • Track and trace to be biggest revenue

generator

• High growth expected for FMS-D and high-

end FMS

15

Key Fleet Management Regulatory Trends Despite strong push from governments in EU, Brazil and Russia to mandate telematics, the legislative

process has suffered from continuous delays and uncertainties

• Toll (eco taxing) on all French road for transport

vehicles , over 3.5T; ~600,000 French trucks

and ~200,000 foreign trucks are subjected to

this – July 2013.

• New Digital tachograph legislation .

• eCall Legislation – All new cars must be fitted by

2015 with eCall devices (GPS and wireless

modules) - 95% of New EU Cars to be

Connected in 2019

• EOBR : The effective date of

enforcement is most likely to be in

2016.

• Distracted Driving : The FMCSA

prohibits regulated drivers from

texting and using handheld mobile

phones while driving

• BTK mandates - only telecom companies can open the

SIM card for the customer use and manage their profile

directly

• 37 TL of first private communication tax (OIV), collected

for the first year of M2M registration, is legislated in

June 2012

• With digital tachograph regulation, to be mandatory

starting from 2014; telematics installation is expected to

increase

16

Unit shipment of FMS Systems by Vehicle Type North American Market is still underpenetrated with just 12.4% penetration. In European Union: Germany,

Poland, Italy, Turkey, Iberia and France are potential markets.

~12.1%

MCV/HCV

~28.0%

~5.1%

LCV

VIO

(M

illi

on

)

~17%

~15.4%

MCV/HCV

~39%

~5.8%

LCV

VIO

(M

illi

on

)

~18%

~16.5%

MCV/HCV

~38%

~8.5%

LCV

VIO

(M

illi

on

)

~22%

17

FMS Opportunities by Country Growing demand in North America, Europe, Russia, Brazil and South Africa; Middle East and Asia are likely

to gain momentum beyond 2015; European and North American vendors plan to enter the Brazilian market.

1

2

3

6 7

5

4

2 3 4 5 6 7 1 North America Europe Russia Brazil South Africa Middle East Asia

Source: Frost & Sullivan analysis.

Qualcomm, Trimble /

PeopleNet, XATA, Teletrac,

WebTech Wireless, Telogis,

Networkfleet, FleetMatics,

Actsoft, SkyBitz, ID Systems,

and others.

MixTelematics, Digicore,

Netstar, Tracker, and others

Potential Countries

Beyond 2015

Autotrac, Zatix, Onixsat,

WirelessCar, and others

TomTom, Masternaut, Transics,

Qualcomm, Microlise, FleetBoard, Dynafleet,

MixTelematics, Trimble, Novacom, Schmitz

Cargobull, IDEM-Krone and others

China GPS Ltd,

FleetBoard, Navman

Wireless, Trimble and

others

Mobiliz, Arvento, Vektor,

Infotech, Solit, Satko, Pergo

and others

Arya Omnitalk, eLogistics, CMC

Limited, Pricol, Mahindra

Telematics, Ashok Leyland,

Trimble, iTrack, MobiApp and

others

18 NC5B-18

Region Challenge Advantage Strategy

Europe • Difficulty addressing smaller

businesses with low-cost

offerings

• Different needs and legislation

in every European country

• Aftermarket vendors need

presence across all Europe,

requiring infrastructure

investments

• High competition

• High levels of awareness of

FMS solutions

• Commitment of OEMs in

offering FMS as standard

• Regulatory mandates like eCall

to support the adoption of

telematics across different

regions

• Smartphone-based solutions to

increase presence in small

fleets

• Target markets such as Italy,

Poland, Nordic and Iberia

• Provide differentiation factor;

OEM using prognostics,

aftermarket using partnerships

• Focus on recurring revenue

North America • Fragmented market makes it

difficult for fleet operators to

choose from vendors offering

similar solutions

• Vehicle and driver safety

• High competition

• Spectrum issues—removal of

2G towers and moving to 3G

• High awareness levels among

fleet managers about FMS

• Safety is likely to be a big

mover; regulatory mandates—

EOBR, CSA 2010

• Push from non-automotive

participants such as Google

and wireless providers

• OEMs promote FMS with

vehicle-centric information

(diagnostics) as a

differentiating factor

• Offer solutions with no upfront

hardware cost

• Wireless providers to focus on

small business owners with

smartphone solutions as

affordable solutions

Key Conclusions In mature markets, industries such as delivery, service, and transportation can be targeted using affordable

FMS that may lack fully integrated system benefits, but can accommodate fleets of up to five vehicles.

Source: Frost & Sullivan analysis.

19

Frost & Sullivan Contact Information

Kabirdas Sathyanarayana Industry Analyst

+91-44-66814022

sathyanarayanak@frost.com

Industry Analyst Research Manager

Praveen Chandrasekar Program Manager

+001-248-536-2008

cpraveen@frost.com

Jeannette Garcia Corporate Communications

+001-210-477-8427

jeannette.garcia@frost.com

Corporate Communications