Connected VehicleIndiaVehicle Telematics

Connected cars and connected services in India

Sathish Elango
Strategy & Operations
Deloitte Consulting LLP
Sathish Elango
Indian market readines to embrace telematics
It’s not without a reason that the likes of tech giants like Facebook and Google are looking to invest heavily in India’s digitization e?orts. The desire for a connected lifestyle has made the Indian audience an attractive market to invest in. We are in an era where macro-economic factors, government regulations, and customer readiness are all coming together at the same time.
India is the second largest market for smartphones in the world with an estimated 204 million1 smartphones – thanks to the availability of cheaper smartphones that has driven such penetration levels. With an increasing smartphone penetration, with 4G speeds becoming mainstream in several urban cities, and the government laying the foundations for a digital infrastructure through smart cities and other digital initiatives, we can only expect connected services to leapfrog exponentially in the Indian market, and catch-up with other ‘telematically’ developed nations in the coming years. While India has been a silent gold mine for fragmented aftermarket telematics solutions and commercial telematics solutions over the last decade, there has been a renewed focus on OEM fitted telematics solutions, aimed at addressing the passenger telematics market that carves out a huge chunk of the $113M telematics opportunity in India.
Customer willingness to pay for telematics solutions
Telematics is becoming a key factor influencing vehicle purchase decision for consumers. In a 2014 consumer survey conducted by Deloitte, over 48% respondents had indicated a willingness to pay for telematics solutions in their vehicle. In terms of absolute rupee value, the respondents ranged around INR 1100 per year for infotainment solutions, and up to INR 2400 per year for advanced telematics solutions including Safety and Convenience features.
Infotainment solutions: Contrary to  a popular belief in the Indian market, over 69% of the respondents preferred a one-time premium being added to the cost of the vehicle, specifically for infotainment solutions (e.g., smartphone integration). This aligns with the business model followed in developed nations, where the cost of infotainment is baked into the cost of the vehicle, and the services are provided free of cost for a lifetime. The underlying value proposition is not compelling enough for the Indian consumers to pay on an ongoing basis.
Safety & Convenience: However, when it comes to Safety related features (e.g., automatic collision notification) respondents were willing to pay and try out a subscription model, as the value proposition is more compelling. Also, high operational costs disallow automakers from providing these features free of cost to consumers. Such features usually require the inclusion of a DCM (Digital Communication Module) unit in the vehicle which significantly adds to the cost of the vehicle, making it an economically di?erentiating factor for consumers.
What are the trending factors to look out for?
1. Smartphone integration: Smartphone integration will definitely be the future of in-vehicle infotainment,given the flexibility and ease with which the smartphone app stores can bring a multitude of applications to your vehicle. Contrast that with a traditional native application being developed by the auto-maker or a tier 1 supplier that would take months to deploy.
However, strictly speaking in the Indian context, building the required app ecosystem to fully utilize the smartphone integration, will be a tricky area. Players like Mahindra are already leading the way by joining the Open Automotive Alliance (OAA), and integrating android phones to their line of premium vehicles. Players like MapMyIndia are already bringing social media integration and a bunch of other applications to your vehicle. Unless we have strong content aggregators like Harman, Nuance or MapMyIndia investing in this app ecosystem, we will not be able to reap the complete benefits of the smartphone integration. Andriod Auto or Apple CarPlay becoming mainstream will be a game changer in this space.
One of the major factors holding back content aggregators, is scale. Also, unlike developed markets, content aggregators don’t find the Indian market a?uent enough to invest, as customer willingness to spend on infotainment is quite minimal. Having said that, telematics and infotainment are definitely not to be viewed as profit centers, but rather as an enabler to boost vehicle sales. Or, rather an enabler to help you stay competitive.
2. Evolving business models
Content providers: One other key inhibitor in bringing innovative contents to the vehicle is the lack of a standard for content providers. In most cases, auto-makers and content providers do not know the best business model to engage with.
There are certain content providers like Zomato who have shown interest in bringing their content to the vehicle with zero licensing fee. Such players have content readily available but do not necessarily understand their role in bringing the content over to the vehicle. There is a lack of awareness of Content Aggregators and Systems Integrators that can provide the necessary integration.
Consumers: Similar to how auto-makers are trying to figure out viable business models, consumers are also skeptical about how much to pay for these services. We are at a stage where consumers do not know the value proposition of telematics yet. While consumers are open to subscription based models and freemium models, they need more clarity on the value proposition.
3.  Differentiating solutions
Telematics in itself is a differentiating factor that influences the purchasing decision for consumers. However, it’s only a matter of time where services like navigation, vehicle diagnostics, news alerts etc., become commonplace across all auto-makers. The real differentiating factor would then lie in o?ering customized products that can eliminate key pain points for the Indian audience.
Parking: On an average, an urban driver spends over 40 mins in a day only trying to find a parking spot. This has been one of the biggest and most frustrating hassles in an Indian urban context. Niche players like Pparke3 have begun beta testing their integration with players like Bosch to bring parking solutions to the vehicle. However, the success of such a solution depends on the supporting ecosystem that can identify and provide parking spaces.
Entertainment while commuting: On an average an urban driver spends over 1.5 hrs a day commuting to and from their workplace. This is a large chunk of the consumer mind space, and cracking this pain point will open up a tremendous business opportunity. One way could be to bring more engaging applications (e.g., social media) to the vehicle. One other way could be to bring more data consuming media applications (in a driver-friendly manner), by tying up with telecom providers to setup in-vehicle wi-fi hotspots that can support high data applications.
‘Indianized’ solutions: Players like Volkswagen and Ford have cashed in on the Indian passion towards cricket, and have made e?orts to bring in live commentary and scores to the vehicle especially during major events like the IPL and the Cricket World Cup. Such features can be provided through simple integrations with APIs that content providers like ESPN CricInfo might open up. Catering such custom solutions to the Indian market would be a game-changer.
Overall, this is a very exciting phase for the Indian telematics market, with all major players already in action. There is also a tremendous opportunity for Consulting partners to apply their learnings from more matured markets like the US, and develop standards for the Indian context. Stay tuned and keep watching this space for more action in the coming years!

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