Uber-Didi isn’t the only Car Deal of China that needs to be noted as we move into convergence of devices and services. In a cross border deal across the Atlantic, Verizon acquired Fleetmatics which is a step toward its three-pronged connectivity + platforms + solutions strategy. The US$2.4bn acquisition of Fleetmatics will give Verizon meaningful scale in telematics. Although the acquired assets won’t be an overnight success, Verizon is aggressively putting the building blocks in place to create its own tech ecosystem.
The Telogis and Fleetmatics deals will help boost Verizon’s scale in Telematics, where it has a growing portfolio of solutions including automatic, insurance, and fleet management. Since buying Hughes Telematics in 2012, the majority of Verizon’s auto revenue (~US$500m) has come from wholesale as opposed to its retail LTE connectivity. In this case, the Telogis acquisition adds to its enterprise telematics positioning while Fleetmatics improves its SMB offering.
Autos and Telcos join hands to offer service which involves an OBD (on-board diagnostic) reader, a Bluetooth connected speaker, and a smartphone app, enabling older cars to become smart vehicles. IoT continues to be a major initiative among the telcos.
The global connected car space is currently a US$40bn+ market with the potential to grow to US$150bn+ by 2020. ~25% of car buyers said connectivity made a vehicle much more desirable at the time of purchase. Currently, ~15% of all vehicles manufactured globally are LTE-enabled. We believe that this number will continue to grow, and we expect that connected cars will account for 75%+ of global vehicle shipments by 2020.
Automobiles & Telcos – Connected Cars Business Model
Business models will continue to be tested as OEMs and providers decide the best way to monetize their connected opportunities. Some OEMs like GM focus on monthly sales by offering GB usage on a monthly basis to the consumer. At the other end of the spectrum, Tesla bakes all LTE costs into the ticket price and conceals all LTE costs. Finally, some OEMs offer a medium-term plan like Audi who includes three years of LTE in conjunction with the sale of a car.
Indian Telcos are engrossed in battle to fight the monolithic Reliance Jio Infocomm and want to serve the un-banked with Mobile Wallets / Payment Bank Licenses. However, connected cars is a big opportunity they simply can’t afford to ignore.