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© 2011 AutoLocator, Moscow Brief survey of automotive and telematics industry, Russia 1

Brief survey of telematics industry Russia june 11

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Brief survey of telematics industry in Russia with focus on Stolen Vehicle Recovery and ERA GLONASS project

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Page 1: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

Brief survey of automotive and telematics industry, Russia

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Page 2: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

Project Environment, Russia

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Territory: 17,075,400 km2

11 large cities 1,140 medium-sized towns 240,000 villages 1,140,000 km of local roads 45,000 km of main roads

Citizens: 141.9 m

Cars: 33.8 m

Trucks: 5.3 m

Buses: 0.9 m

Russia is the second largest market in Europe... and it demonstrates huge potential for further growth!

Page 3: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

Automotive market: Statistics

April continued to show growth on the market of new cars and light commercial vehicles in Russia

‣  Among the top 10 bestselling models so far, nine are locally produced.

‣  In comparison to the same period in 2010, January to April 2011 saw the sales of new cars and light commercial vehicles in Russia increase by 64%. Car sales exceeded those within the same period in 2010 by 295,646 units, according to the AEB Automobile Manufacturers Committee (AEB AMC).

‣  Car sales in April 2011 exceeded those in April 2010 by 42% or 70,146 units. ‣  Sales Forecast 2011 – 2.35 mln.

3

67,013

162,596

119,880

221,224

0

50,000

100,000

150,000

200,000

250,000

Sales of new cars 25 best sold models

Source: Association of European Businesses

The amount of stolen cars in Russia has increased to even greater degree in direct proportion to Sales Growth.

Page 4: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

Car theft statistics

In Moscow an estimated fifty cars were stolen per day, with the estimated yearly total for Russia between 100,000 and 150,000. Analyzing the Theft statistics and comparing it with year 2010, it is obvious that car theft is in growth. In accordance with the media statement, crisis in Russia is over , which generated negative theft statistics in Moscow and Moscow region in year 2011. Number of stolen cars increased. Analytics are explaining that by the increasing demand for new and used cars in the market. In Q1,Q2 in year 2011 in Moscow and Moscow region, stolen vehicles: Toyota - 574, VW - 372 , Lexus - 115, BMW - 327 , Mercedes - 245,  Opel - 62, Audi - 251, Nissan - 190 ,Toyota Land Cruiser - 102 , Mitsubishi Pajero - 30 , BMW Х3 и X5 – 50 and local brands LADA - 1587 , GAZ - 132. Within the increasing demand there is an appropriateness for the “Japanese”, which is equipped with very basic security systems (both alarm and immobilizer).

4

# Model Jan - June 2010 Jan - June 2011 %1 Toyta Camry 128 230 80%2 VW Passat 115 225 96%3 BMW 5 series 93 164 76%4 Chevrolet Niva 67 111 66%5 Toyota Avensis 56 128 129%6 Lexus (all models) 51 115 125%7 Nissan Primera 46 54 17%8 Nissan Almera 44 55 25%9 Mazda 6 42 38 -10%

10 Toyota Land Cruiser 40 84 110%11 Mercedes Benz E-class 39 54 38%12 Toyota Corolla 38 58 53%

0 200 400 600 800 1000 1200 1400 1600

Opel Lexus

GAZ Nissan

Mercedes Audi

BMW VW

Toyota AvtoVAZ

Car thefts by brand Jan - June 2010

Page 5: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

Situation on Russian roads

By the statement of the Russian State Traffic Inspection, overall automotive fleet has increased by 4% in year ’10 and that is notwithstanding with the financial crisis and the drop in automotive sales. Daily, almost 350 vehicles is newly registered in Moscow. Fleet increased by 12% in the Moscow region. Fleet increase also drives the increase in crash accidents, as low driving culture is worsening already tensed situation. Road accident statistics is not good at all; in December 2009 in only Moscow accidents registered from 350 to 400 daily. Overall accidents in year 2009 – 16 000 in Moscow and more than 200 000 in whole Russia resulting in 26 000 fatalities.

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Page 6: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

Situation on Russian roads:

6

-

10,000

20,000

30,000

40,000

2006 2007 2008 2009

Number of cars (thousands)

Cars Trucks Buses

Source: Rosstat

Growing Number of Cars Low Safety

159 169 178 195 214

0

50

100

150

200

250

2005 2006 2007 2008 2009

Cars per 1,000 people

0.142 0.137 0.128 0.117

0

0.05

0.1

0.15

0.2

2007 2008 2009 6 months 2010

Fatalities / Number of accidents &

56% 41%

3% Structure of road accident fatalities

Death before arrival at hospital

Death in hospital

Instantaneous death in road accident

Source: Health and Social Development Ministry

For comparison: this ratio is 0.01 in Germany

“Golden Hour”

Page 7: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

Road Safety in Russia vs Other Countries

7

vs Russia 14%

Number of deaths per 100 injured in road accidents in different countries

Page 8: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

Decision making motivation while buying an SVR System*

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* - AutoLocator’s Consumer Research (1200 respondents)

Key motivating factor for installing the Telematics SVR System:

1.  Property and life protection needs 2.  Insurance policy discount

16%

25%

61%

66%

No motivating factors

Extended guarantee

Discount for new equipment

Subscriber's fee discount

Key motivation factors for purchasing an SVR System Key factors to extend subscription

319

307

82

645

1204

472

410

132

193

728

800

1300

678

Equipment costs and Subscribers fee

Manager's advice

Friend's advice

Insurance policy discount

Property and life protection needs

signi!cant importance moderate importance low importance

Page 9: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

TELEMATICS INDUSTRY in AFTERMARKET

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Page 10: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

Key Players in telematics business in Russia

10

35000, 23%

55000, 36%

40000, 27%

21000, 14%

Active subscribers (SVR)

Cobra

Caesar Satellite

AutoLocator

Other players

We estimate the current SVR market approximately within 150 000 running active units. Key subscribers for the SVR services are the owners of 40 000 USD and higher price cars.

85% of the subscribers are located in Moscow and St. Petersburg. Regional sales still insignificant yet. Most well regionally presented companies are AUTOLOCATOR and Cesar Satellite. However, AUTOLOCATOR is originally focused on Moscow market as long as it allows to keep the highest ARPU among all competitors.

“AUTOLOCATOR” is providing services for 40 000 active subscribers at the moment, Cesar Satellite – 55 000. The rest is distributed between small players like Arkan , Echelon and other). So, AUTOLOCATOR controls 27% of the market if we estimate AUTOLOCATOR’s share in amount of active subscribers. But, if estimate market share in revenue, AUTOLOCATOR’s share is 34%.

We see positive dynamics within the SVR market and serious future growth due to affordability of new products and services, which would have more value for the consumer, like AutoLocator Assistant (SVR + E-Call and B-Call + Infotainment).

12,250 18%

27,500 39%

24,000 34%

6300, 9%

Revenue 2010 (thousands dollars)

Cobra

Caesar Satellite

AutoLocator

Other players

Page 11: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

Current SVR Business Model

Current sales model is based on distribution of the telematics units through automotive dealerships. Service Providers are purchasing the units from the manufacturers and then supply the dealers . The Dealer is selling and installing the units when the consumer purchasing the car. It is obvious that current model generates high retail price. Therefore, this kind of services is affordable only for the owners of expensive cars.

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Producer

Dealer

Subscriber

1

2 3

4

Insurance companies

5

1.  Units purchasing

2.  Unit sales to Auto Dealer

3.  Unit Sales and Installation to the consumer

4.  Tracking services. After sales.

5.  Insurance discounts

SVR systems in cars could at risk of being stolen is almost obligatory by leading insurance companies. Most of the insurance companies are providing reasonable discounts while the SVR system is installed. Insurance companies sponsoring Telematics SVR, stimulating growth in the industry.

Page 12: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

Pricing

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67,000 65,000

48,000

9,300 7,000

7,000

18,500 15,000

12,000

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

AutoLocator Caesar Satellite Cobra Connex

Average service payment per year

Installation cost

Equipment - Average retail price RUB The cost of equipment and service payment remain too high what makes it affordable only for the owners of luxury cars. Price range: $ 1000 - $ 4000

Page 13: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

Insurance in Telematics

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TOP 5 Russian Insurance companies

20% 40% 60% 80% Insurance Policy Discounts (Theft Risk)

•  1 protection outline •  No sensors •  Wired relay control

•  1 protection outline •  Volume sensor •  Tow sensor •  2 types of relay control

•  2 protection outline •  Volume sensor •  Tow sensor •  2 types of relay control

•  2 communication channels •  Volume sensor •  Tow sensor •  2 types of relay control •  Additional Mechanical protection

(hood lock, gearbox lock)

+ ADDITIONAL 5% discount for Damage Risk in case of providing the insurance company with the 3D accelerometer reports ( drivers behavior, crash analysis, etc.)

AUTOLOCATOR is in partnership with more than 30 leading Insurance Companies offering Special Deals.

Page 14: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

ERA-GLONASS

"Emergency Response to Accidents“. This system will provide location services for emergency calls, similar to Enhanced 9-1-1, E112 and eCall.

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Page 15: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

ERA-GLONASS Infrastructure*

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• Moscow

•  Saint-Petersburg

• Kaluga •  Stary Oskol

•  Saratov • Krasnodar • Volgograd • Ufa

• Khabarovsk •  Barnaul

• Novosibirsk

• Krasnoyarsk

• Arkhangelsk

Geographical distribution of the ERA GLONASS infrastructure: ‣  Moscow: Federal Navigation Information Center (FNIC); ‣  15 Regional Navigation Information Centers (RNIC); ‣  83 service centers for technical support; ‣  Maximum coverage with cellular networks (based on MVNO – mobile virtual network operator); ‣  High-precision positioning network. To date: ‣  70 regional dispatch centers deployed (October 2010); ‣  System architecture and functionality developed; ‣  MVNO license and communication network code 55 obtained, numbering range (940 - 949) secured - 100 million numbers; ‣  Two pilot projects in progress (in the Kaluga and Ryazan regions).

* - prepared by NIS-GLONASS

Page 16: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

ERA GLONASS: System design milestones and activities*

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2010 Feed Start up

2011 Infrastructure development

2012 Pilot Project

2013 Full-scale Operation

1 • Legislation enabling the creation and operation of ERA-GLONASS System

2 • Design of ERA-GLONASS SAS Infrastructure

3 • Integration with emergency response services

4 • Equipping vehicles with ERA-GLONASS terminals

5 • Development of value-added services based on ERA-GLONASS infrastructure

2013 ERA-GLONASS Full-scale operation Startup

Installation of ERA-GLONASS terminals will be mandatory for vehicle categories M and N as of 2013.

* - prepared by NIS-GLONASS

Page 17: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

Commercialization is one the most important objectives of ERA-GLONASS .

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Basic services (Emergency Response on Accidents or eCall) will be provided without charge. If an end user would like to have additional services (e.g. PAYD, SVR or infotainment), he will have to:

1.  visit an ERA-GLONASS web site. 2.  choose one of the certified telematics

service providers. 3.  choose the desired services. 4.  pay the subscription fee.

Page 18: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

Architecture of Russian ERA GLONASS*

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* - prepared by NIS-GLONASS

Page 19: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

ERA-GLONASS system: the basis for integration of navigation information systems*

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Fleet Management Service Providers

Insurance companies Toll Road operators SVR Service

Providers Location-based Service Providers

Location-based Content Providers

ERA-GLONASS Infrastructure

Service Delivery Platform MVNO (Mobile Virtual Network Operator)

Precise Positioning System Data Network

Network of Navigation Information Centers

END USERS * - prepared by NIS-GLONASS

Page 20: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

First results of cooperation

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AUTOLOCATOR becomes one of the few companies who was recognized by NIS-GLONASS as our equipment meets all necessary technical requirements. Information about the vehicles operating in Sochi for the purpose of Olympics objects construction is transmitted to Transport Management of Olympic Games and NIS-GLONASS. This allows our clients to get all necessary permissions easily.

3d Qtr. 2011 – a joint pilot project is to start with NIS-GLONASS. The main object is to test: •  basic services (Emergency Response on Accidents or eCall) •  additional services (Infotainment, SVR, Fleet Management

and etc.)

1

2

Page 21: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

Support of Value-Added Services by Different Versions of ERA-GLONASS Terminal*

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•  MSD transmission mechanism •  ETSI in-band modem (primary method) •  SMS (secondary method); •  SMS can be used at the request of the PSAP operator (if voice call was established, but data could not

be transmitted in-band) or initiated by IVS if voice call could not be established; •  Testing mode for user-initiated IVS functional test; •  OTA configuration; •  OTA firmware update; •  Optional functional requirements to support value-added services.

ERA-GLONASS In-vehicle system requirements*

* - prepared by NIS-GLONASS

Page 22: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

ERA-GLONASS Project Status* ‣  Draft amendments to Technical Regulations on Vehicle Safety were published and passed public discussion. Presently, the amendments are undergoing the state

approval process. ‣  Draft IVS requirements were circulated and discussed with project stakeholders. ‣  ERA-GLONASS infrastructure design is in progress. Infrastructure will be available to support trials from the beginning of 2011, full-scale pilot projects from the

beginning of 2012 and be ready for production by the end of 2012. ‣  NIS was licensed as the Mobile Virtual Network Operator (MVNO). ‣  The drafting of regulations for 112-call prioritization is currently in progress. ‣  Pilot projects were launched in two regions (Kaluga and Ryazan). Two more regions (the Moscow region and the Leningrad region) will join the pilot program this year. ‣  The pilot program in the Leningrad region is being designed to support the cross-border ERA-GLONASS / eCall joint pilot project with Finland.

Amendments to regulations on Vehicle Safety* ‣  Amendments are proposed to come into effect on January 1, 2013 for all vehicles manufactured after this date. ‣  Retrofit IVS configuration is allowed, as well as OEM preinstalled configuration. ‣  GLONASS should be used to locate the vehicle either alone or in combination with other systems (GPS and/or GALILEO). ‣  IVS should enable automatic and manual emergency call with MSD transmission. ‣  The regulations contain provisions for recording and transmission of the acceleration profile before, and in the course of, the accident. ‣  The IVS system shall report its status at preconfigured time intervals as part of its operability control. If it identifies an internal failure, the system reports such a failure

immediately. ‣  It should be possible to initiate IVS test from the vehicle at a service center or in course of technical inspection.

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* - prepared by NIS-GLONASS

Page 23: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

RESUME

Russian automotive market demonstrates significant growth

Growing consumer’s wealth, leads to negative stolen vehicle statistics.

Every Russian who purchased a car is ended up in risk group ( car theft / crash accident). Russian consumers feel hunger for SAFE being and property protection.

Insurance companies are sponsoring the Telematics SVR industry with the discounts for the insurance, which keeps strong demand for the SVR Systems.

Russian Government is forcing the development of GLONASS project. We are sure that the demand will grow rapidly with the new State Technical Regulations for Automotive transport .

23

1 Fact One

2 Fact Two

3 Fact Three

4 Fact Four

5 Fact Five

Page 24: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

Industry forecast

24

42 17 30 38

66

290

435

860

0

100

200

300

400

500

600

700

800

900

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2008 2009 2010 2011f 2012f 2013f 2014f 2015f

Car Sales (millons) SVR systems Sales (thousands)

1.  Since 2011 significant sales growth of SVR systems with subscriber’s fee will take place.

2.  When ERA-GLONASS full-scale project is launched, penetration of SVR systems will reach 100%.

Page 25: Brief survey of telematics industry Russia june 11

© 2011 AutoLocator, Moscow

Contact Us 107140, Moscow, Russia, Verhnyaya Krasnosel’skaya str. 3 b. 1 Tel. +7 (495) 974 25 25 www.autolocator.ru