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Since the launch of broadband cellular data networks over a decade ago, the U.S. market for mobile resource management (MRM) solutions, often referred to as commercial telematics, has expanded at a rapid pace.
Today, more than 400,000 U.S. companies are using MRM systems and services to monitor fleet vehicles, as well as assets, such as trailers and heavy equipment. In addition, GPS-capable smartphones and tablets are increasingly being used to help manage mobile workers. The total MRM market is projected to increase from 7.4 million units currently in service to 10.5 million units by 2017.
While some industry suppliers feel that the rate of market growth may be slowing from the 15-20 percent growth seen in recent years, there are strong indications that market saturation will not occur anytime soon. For example, a number of major suppliers to the enterprise and small and midsize business (SMB) markets report record sales for 2014. Also, major suppliers of GPS fleet management solutions report that a significant majority of sales continue to be to fleets that had not been using a solution, which confirms that the market is continuing to expand.
Although U.S. fleet MRM penetration is currently estimated at over 30 percent, there is still considerable room to grow before market saturation takes place. A C.J. Driscoll & Associates survey of over 500 U.S. fleet operators, conducted in 2013, concluded that about one-third of surveyed fleets currently use an MRM solution, while another third expect to deploy a solution in the future. The survey showed that MRM penetration of large fleets is significantly higher than small fleets.
A number of higher-end car models from various OEMs currently include features such as LTE high-speed data connectivity; WiFi hot spots in the vehicle to support Internet connectivity for multiple devices; and off-board navigation and two-way text messaging through cloud-based voice recognition technology. Going forward, these features will become more widely available in cars and light-duty trucks.
Heavy-duty trucks and buses are becoming increasingly connected as well. Going forward, connected fleet solutions will be based on integration of data from a broad range of sensors. Truck and engine OEMs and their telematics providers are increasingly opening the portals to support third party applications, such as driver behavior management, navigation and routing, and others.
Following are various other promising technologies that could help the commercial telematics industry enhance current solutions and create new opportunities:
1. Vehicle-to-Vehicle (V2V) Communications: According to the National Highway Traffic Safety Administration (NHTSA), which released an advance notice of proposed rulemaking and research report on V2V communications technology for light motor vehicles, V2V’s Left Turn Assist (LTA) and Intersection Movement Assist (IMA) could prevent as many as 592,000 crashes and save 1,083 lives per year. And, other V2V features, such as “blind spot” and stop sign/stop light warnings, could help drivers avoid accidents.
V2V systems are designed to transmit basic safety information between vehicles through dedicated short-range radio communication (DSRC) devices operating in the 5.9 GHz band.
V2V could be mandated for new cars by 2020 or sooner, and a rulemaking for V2V use in commercial vehicles is expected to take place in the next few months.
2. Vehicle-to-Infrastructure (V2I) Communications: V2I communications involves the wireless exchange of critical safety and operational data between vehicles and highway infrastructure. Although it is designed mainly for prevention or mitigation of vehicle accidents, it can serve a number of other useful purposes, such as transmitting information about traffic and road conditions to vehicles/drivers. Traffic signal phase and timing information would provide advance notice before traffic signal light changes. And, while the primary goal is safety, V2I could also reduce delays and congestion caused by crashes, enable wireless roadside inspections, or help commercial vehicle drivers identify safe areas for parking.
V2I is still in the trial stage, and specific details regarding funding and timing are not yet known.
3. Autonomous Vehicles: Alt-hough self-driving vehicles could be on the road as early as 2025, a number of challenges remain, particularly navigation of crowded city streets. As a result, for the next few decades, fully autonomous cars could be limited to well-controlled settings with little traffic and low speed limits, such as construction sites.
One market that could significantly benefit from autonomous vehicle technology in the next few years is long-distance trucking. Truck drivers could drive the vehicle through local roads to the highway, and the “auto-pilot” could then take control on highways. This could potentially make driving a truck more appealing and help to alleviate the shortage of drivers, which is the greatest problem facing the U.S. trucking industry today.
Opportunities for Growth
While the rate of market growth is likely to slow in coming years as penetration increases, there will still be many opportunities for MRM solution providers who are able to adjust to a changing market:
1. Expanded Solutions: Major GPS fleet management solution providers are expanding their solutions to include features such as work order management and routing solutions. These are often optional value-added features which can help to protect average revenue per unit (ARPU) in the face of downward price pressure for basic solutions.
2. Data Analytics: Cloud computing can be used to convert data from the engine control module and a wide range of vehicle sensors into valuable vehicle information. This information can be used to determine what should be done to reduce fuel consumption and improve safety, to determine the best time to trade in a vehicle based on analysis of previous and projected maintenance costs, to help analyze overall fleet operations costs, and to obtain valuable insight in other areas.
3. Insurance Telematics: About 3 million usage-based insurance telematics units are currently used on personal cars in the U.S., usually resulting in insurance discounts for safe drivers. The majority of these are Progressive Snapshot units.
While the use of telematics is sometimes taken into account by insurers as a factor in setting rates for fleet customers, few fleet insurers have formal insurance telematics programs since they have found that risk models that work for personal vehicles do not necessarily apply to heavy trucks or other fleet vehicles.
Analysis continues, and usage-based insurance programs for fleets are likely to be offered going forward, which should present opportunities for commercial telematics providers that can supply the driver performance data needed by insurers.
4. Targeting Vertical Markets: There are many fleet market segments, such as car rental and waste management, which would benefit from solutions that are tailored to fit their specific needs. Going forward, an increasing number of MRM solution providers are likely to target the trucking sector, assuming the Department of Transportation’s proposed rules requiring use of Electronic Logging Devices for monitoring driver hours of service are implemented.
5. Asset Tracking: The market for tracking assets, such as rental equipment, pharmaceutical/medical shipments, and waste disposal containers, will grow as hardware costs decline and battery technology becomes more advanced.
6. Going Global: Growth opportunities are also present in overseas markets. For instance, Europe has displayed strong fleet telematics market growth in the last few years, and a number of top U.S. solution providers have established operations in European countries.
One of the fastest growing overseas markets is China. The C.J. Driscoll 2015 China Commercial Telematics Market Study concludes that there are more than 5 million commercial telematics units in service in China, and the Chinese market is growing by at least 20 percent per year. It is projected to exceed the U.S. market within the next few years, based on total units in service. While China is a difficult market for overseas suppliers, the market size and rate of growth has motivated a number of commercial telematics suppliers from the U.S. and other regions to partner with local Chinese companies in order to get a share of the market.
Although growth of the MRM market appears to be decreasing slightly from its prior rate of 15-20 percent per year, demand remains solid, and there is plenty of room for market growth in a variety of areas. The return on investment for fleet operators has been well established. The solutions continue to expand, offering ever growing capabilities for increasing fleet efficiency and reducing the cost of fleet operations.
Clement Driscoll is the president of C.J. Driscoll & Associates, which provides strategic consulting and market research services, with an emphasis on telematics.