Remote control: telematics for the people

There are a number of reasons for this growth. Firstly, rising fuel costs and increased competition in the logistics market have made cost a major factor for industry stakeholders, whilst the massive push towards wireless connectivity in all areas of business – not just transport – has made high-tech telematics systems more viable.

But even more importantly is a regulatory push from governments to mandate the use of fleet management software to improve safety standards. The European Union (EU), Russia, and Brazil will all require the installation of telematics in new vehicles from 2015 and 2016. The US, meanwhile, remains one of the largest telematics markets in the world.

Here in the Middle East, where regulation – particularly in the commercial vehicles sector – generally takes longer to develop, it’s the companies themselves that are pushing the new technology.

In Europe and the US, it is often security that is the key concern for fleet managers, with telematics giving them the ability to track stolen vehicles. In the Gulf, however, profitability and safety are the primary motives for end users.

Such considerations are likely behind claims, most recently by research firm Frost & Sullivan, that the Middle East’s unified connection (UC) market is expected to reach $235mn by 2014.

In Oman, a deal signed between MiX Telematics and the Omani Public Authority for Electricity and Water (PAEW) is already showing results. The fleet management system has been installed in 400 of the authority’s trucks, and a reduction in accidents was noticeable within just three months of the initiative’s introduction.

Alan Hall, managing director of MiX in the Middle East, said that PAEW served a population of over 1.5 million people, and transported more than 650,000 cubic metres of water per day. In order to achieve the aim of connecting 90% of the Omani population to the water network by 2035, telematics – which can optimise both safety and efficiency – was a no-brainer.

“PAEW had a critical need to control violations within their vehicle fleet,” explained Hall.

“Unsafe driving, vehicle collisions, speeding, high maintenance costs, and excessive fuel consumption were all areas of concern before PAEW fitted MiX Telematics systems,” he added.

Of these, it was speeding by drivers that represented the main concern for the authority, Hall said. The ability, not only to monitor journeys but also to communicate with drivers, has proven to be a significant help in the reduction of reckless driving. It is little surprise that, knowing their movements are being monitored, drivers’ habits improve.

“Having the tools to effectively manage our vehicles and drivers enabled us to achieve a sharp reduction in major violations such as over-speeding, unfastened seat belts, and harsh braking,” explained Saif Al Mawali, director-general of administration at PAEW, who said that the technology had also served to lower fuel consumption.

Hall pointed out that other end users in the Gulf had already seen the cost benefit of telematics solutions. He claimed that one of MiX Telematics’ clients – a large oil and gas company – had seen a 72% sustained improvement in driver behaviour only six weeks after the installation one of the firm’s systems. The same customer achieved a 15% reduction in fuel costs within just 12 months.

Of course, this is not to say that the emerging sector does not face challenges. Chief amongst them is the high cost of telematics hardware, which makes the argument more difficult for small-and-medium-sized fleet operators.
This cost factor is especially important in the current economic climate, and particularly in the Gulf. In this region, margins are tight and the market is perennially competitive, notably within the construction sector.

Another factor that is particularly concerning for the Middle East is the gap between the fast-moving technological changes and the number of qualified practitioners in the job market capable of operating these new systems. Large fleet operators and major transport companies might have little problem finding and bringing in the top talent, but smaller players sometimes struggle within the finite skills space.

Lastly, companies must consider the limits of telematics technology in accounting for the actions of drivers. For example, although software is able to identify when a driver makes a rash decision or an erratic turn, it can be difficult for supervisors to discern the exact circumstances that lead to such actions. Consequently, there could be situations in which operators are unfairly penalised for acting in the only way they could.

Even so, these factors are unlikely to put a dent in the global telematics market, with costs sure to reduce as the technology advances. The dearth of individuals qualified to oversee these systems, meanwhile, is equally likely to improve due to supply and demand.

Also, as data grows, it will be easier to account for the role of driver action in causing and avoiding accidents. Even at present, the pros – such as avoiding reckless driving and speeding – seem to outweigh the cons.

Certainly, in global telematics, a slew of mergers and acquisitions this year suggests that the market is finding its feet. Vector Capital recently sold Teletrac (formerly TrafficMaster) to Danaher Corporation for an undisclosed sum. This comes after another huge deal in which Qualcomm sold Omnitracs to Vista Equity for $800mn in cash.

“It will be interesting to see Vista Equity’s strategic roadmap for Omnitracs, and how this will impact other players during the next few years,” commented Gareth Owen, principal analyst at ABI Research.

He added that in Europe: “The commercial telematics industry has long been a very fragmented market, but there are now firm signs that this is changing and we expect to see several players breaking the 500,000-subscriber unit barrier over the next few months and years.”

In the Gulf, John Taylor, chief operating officer at SITECH Gulf said that end users – generally – are becoming more receptive to the potential benefits of telematics, using products such as Vision Link and Product Link, which enable fleet managers to monitor their entire cohorts.

These systems allow supervisors to keep watch over factors such as fuel usage, and to compare working time with idle time. With this in mind, SITECH’s COO says that the Middle East’s telematics sector looks well placed to grow further during the coming years.

“It is already popular among medium and large fleet customers,” Taylor told PMV.

Wireless hotspot
Although most experts agree that telematics systems are still in their infancy, there is no denying their growing importance within the Middle East’s construction and commercial vehicles sectors.

“Around 18 months ago, fleet operators in the GCC had never heard of machine control,” commented John Taylor, COO of SITECH Gulf, during a roundtable hosted earlier this year [May 2014, PMV Middle East].

“Now, we’re past that; the major companies know exactly what we’re talking about and understand the associated benefits,” he explained.

SITECH Gulf has certainly been busy of late. Since the beginning of 2013, the firm has established a SITECH KSA dealership, hosted a customer open day in Abu Dhabi, and showcased its technologies at Germany’s bauma trade show.

There has also been a raft of technological activity within the region’s commercial vehicles community. In April
2014, for example, Volvo Trucks’ official UAE distributor, FAMCO, revealed that its line-up could become completely telematic within five years.

“FAMCO has taken the decision to have telematics technology fitted to a large number of its commercial vehicles at the Volvo factory in Sweden,” revealed Frank O’Connor, managing director of FAMCO’s UAE operations.

“In the past, we would go out and talk to UAE customers about telematics, and then make a lot of local alterations to the trucks to integrate the hardware if it was desired. Our new approach means that many of our trucks arrive with the necessary components,” he added.

Meanwhile, Al-Shirawi Enterprises (ASE), Scania’s distributor for Dubai and the Northern Emirates, is also preparing for a wireless future, revealing its intention to introduce Ecolution by Scania to the UAE before the end of 2014.

“I want the customers not only to feel that they earn more money with Scania vehicles, but to be able to prove that this is the case,” commented Lars Möller, general manager for aftersales at ASE.