By Yeswant Abhimanyu, Automotive & Transportation Industry Analyst, Frost & Sullivan: Yeswant.abhimanyu@frost.com
SAO PAULO, Brazil – 03/09/2014 – The passenger car market in Latin America is diverse. Each country poses its specific traits, dynamic customer requirements and complex trends. Brazil, Latin America’s largest automotive market, is expected to grow to over 5 million annual vehicle sales by 2020. The market today is experiencing dynamic shifts due to various regulations, with the aim of further strengthening its local automotive value chain and future-proofing the industry. The need to adhere to these norms, the influx of new competition, wavering vehicle sales and high vehicle cost, is posing a strategy-altering question to OEMs: What to do to “maintain” share in the market?
More connected, more social and more real-time.
Frost & Sullivan understands this period to be filled with opportunities – a period to embrace current challenges, to differentiate brands by offering newer services and to innovate towards the “car for the future”. A key proposition that the automotive value chain is looking towards in this regard, is a fresh in-car experience – an experience that is more connected, more social and more real-time.
Ever since initial discussions around the CONTRAN 245 mandate (implementation of which has been repeatedly delayed – now expected in 2016), OEMs in Brazil have been working on solutions along with other stakeholders in the ecosystem (such as telecom providers, telematics hardware manufacturers, tracking and monitoring service providers among others) to offer connected services. As a result, some premium manufacturers already offer these services in Brazil; and looking at the volume manufacturers – the market is ready to go, ready to respond to regulations and ready to respond to first movers.
Frost & Sullivan’s forecast
The delays in the CONTRAN 245 mandate are understood to be key factors owing to the lagged introduction of connected services in the market. OEMs are unsure of whether to introduce telematics services just yet. If in a scenario, the specifications of the mandate are changed or even cancelled; OEMs may have to accordingly re-calibrate offered services. Frost & Sullivan however expects that irrespective of the outcome of the CONTRAN 245 mandate, OEMs in Brazil will introduce connected services on limited models in the short term (1 to 2 years). The market by 2020 is expected to grow to over 1.3 million subscribers in Brazil. The spike for introduction of these services in expected post 2016.
Over 60% of vehicle sales in Brazil are focused on price-sensitive A- and B-segments. This furthermore poses as a challenge, especially as the entire automotive value chain is striving to limit additional cost increase to the vehicle. Questions regarding the right mix of services to be offered to the consumer are also being discussed. Frost & Sullivan therefore envisions that varied business models and services package will be introduced depending on vehicle segments and OEM strategy. While the smaller vehicle segments may witness the possibility of “purchasing” connected services in the dealership, midsize and higher-end vehicles may adopt a “free trial + renewal subscription” offering.
Brazil also has strong stolen vehicle tracking (SVT) and immobilization solution offerings in the aftermarket with a number of well-established service providers (SPs). Frost & Sullivan believes that the complementary partnerships (rather than competition) between OEMs and SPs will be the way forward. This is expected to be a win-win situation for both stakeholders, as OEMs can benefit from the bandwidth and scope that aftermarket providers currently enjoy, while SPs can venture towards being complete, high-end telematics services providers (TSPs) and diversifying their service offerings.
Brazil therefore is expected to present immense opportunities for the future of the connected car. Frost & Sullivan forecasts that connected services beyond SVT and immobilization-such as remote vehicle diagnostics, 24 hours assistance, emergency calls and breakdown calls will be introduced in the short term. The market will witness OEM-TSP partnerships. These will be extended to other ecosystem stakeholders like hardware manufacturers and infrastructure providers as well. The future of the connected car in Brazil is here.
Frost & Sullivan’s latest LATAM Connected Car research titled “Strategic Analysis of the Automotive Connected Services Market in Brazil and Mexico” details all aspects discussed. A complementing study, “Voice of the Consumer” (End Consumers – Car Owners) that looks at the consumer’s willingness to pay for connected services, the features of interest, and the effects of the smartphones, is also in progress.
