Does OEM Spell Doom for Aftermarket Telematics?

The future of aftermarket telematics (AM) suppliers like Geotab is now again in doubt as an increasing number of carmakers are now embedding their vehicles on a wide scale with original equipment manufacturer (OEM) telematics systems to meet customer demand for connected vehicles.

Global Overview of OEM Telematics Market

According to the latest study undertaken by Berg Insight, approximately 32% of all new vehicles sold globally in 2017 were fitted with OEM telematics systems. The figure has risen from 23% in 2016. North America leads the sale of new cars with embedded telematics with an attach rate of 47% followed by Europe with an attach rate of over 40%. GM, BMW and PSA carmakers are among the major embedded telematics adopters, providing the technology as a standard feature across multiple models and geographies.

Berg Insight estimates that the number of telematics subscribers using OEM telematics systems will grow at a compound annual growth rate of 31.9% from 49.0 million subscribers in 2017 to 258.1 million in 2023. Moreover, with a growing compound annual growth rate of 16.6%, the shipments are expected to reach 67 million units in 2023 from an estimated 27 million units shipped worldwide in 2017.

Definition of OEM Telematics and Aftermarket Telematics

Before we go any further, let’s define OEM and AM telematics. OEM telematics refers to a telematics device produced directly by the manufacturer of the car and is embedded into cars straight from the assembly line. On the other hand, AM telematics refers to telematics devices created by a company other than the carmakers and are retrofitted into vehicles via OBD-II.

OEM vs AM Telematics

As telematics become a standard feature with carmakers and is also expected to grow substantially over the next few years, the automotive industry is debating what the future holds for aftermarket telematics. This is mainly due to the fact that carmakers offer a broad range of benefits such as vehicle monitoring, navigation, security, maintenance, hands-free cell phone and entertainment features all in one place. Also, OEMs are increasingly using safety concerns as a justification to further lock down their own telematics systems and accessing car information through OBDII ports. With that said, what new lucrative opportunities can be explored by AM telematics?

Well, the answer to this dilemma does not only lie in the new opportunities AM telematics can bring. Rather, it also lies in the distinctions between the two systems. While they both offer many similar benefits such as insights into driver behaviour and engine status, they vary greatly in the following aspects:

1. Offering One Solution for Mixed Fleets

Industries using fleets rarely have the same brand and model of vehicles as fleets. This is mainly because they depend on various vehicles or equipment to perform various jobs. So, if you have got a fleet of different vehicle brands, models and years, you would have different OEM systems to manage your fleet. This, however, is not a problem for AM telematics. With MyGeotab, fleets are able to manage and monitor multiple cars of various brands and kinds in one place.

2. Offering Tailored Solutions to Meet Customer’s Unique Needs

While businesses may compete in the same sector, their challenges will always vary as variables such as the company goals and fleet sizes and type play a significant part. Companies would, therefore, need a tailor-made telematics solution to meet their distinctive fleet management needs. Most OEMs provide a one-size-fits-all telematics system that only offers standard safety and security functionalities. They are not able to tailor their solutions to satisfy particular requirements of customers.

Geotab, on the contrary, provides tailor-made solutions for different sectors, such as safety and mining, to meet all industry requirements. In addition, with our Software Development Kit, APIs, and IOX expandability, customers have the ability to develop bespoke solutions and third-party integrations to satisfy their varied fleet needs.

3. Subscription Costs

Cost is another deterrent for carmakers. Subscriptions for GM’s OnStar begins at 14.99 USD per month. It provides basic fleet management services like vehicle location, diagnostics, driving data, and marketplace access. Similarly, membership for Chrysler’s Uconnect Services can be bought for 14.99 USD per month or 149.99 USD per year. This pricing is, however, not accessible to OEM, commercial or volume licensing customers. It is only restricted to one buy per customer. Starlink from Subaru has the lowest package and offers the least benefits. It starts at 100 USD per year, providing accident, diagnosis, maintenance warnings and vehicle health reports. It does not include vehicle tracking. In comparison, Geotab Africa’s base package offers vehicle tracking, engine diagnostics and driving information at a price of 10.73 USD per month.

4. Upgrading Telematics Units

The practice of upgrading telematics systems has been normal for those who require greater and more powerful fleet management features. Currently, techniques for upgrading OEM telematics systems are inconvenient and involve considerable time and costs to implement. In this regard, the low cost of AM telematics makes it a very attractive option. Also, they are not only comparable in nature, but they also give comparable value.

Conclusion

While the future of automotive seems to move towards embedded telematics, this does not imply that AM telematics will simply vanish. In fact, a study conducted by McKinsey & Company shows that the overall automotive aftermarket has shown good development and profitability over the past five years. In addition, the industry is expected to expand to around EUR 1.200 billion by 2030 with an underlying global growth rate of around 3% per annum. Thus, looking at both market scenarios, the emergence of OEM telematics appears to have created another option for consumers.

Author: The Geotab Africa Team

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