In-Vehicle Telematics Value Chain Structure | In Practise

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In-Vehicle Telematics Value Chain Structure

Former Vice President IoT at Sierra Wireless

Why is this interview interesting?

  • Technological history of in-vehicle telematics and connectivity
  • Potential impact of 5G and other technological developments over the next decade
  • Value chain structure for in-vehicle telematics
  • Why the market is fragmented and barriers to consolidation
  • Positioning of the auto OEMs in consumer and commercial auto telematics solutions
  • Core differences in value chain structure between stolen vehicle and fleet management services
  • How a multinational customer chooses a third-party aftermarket provider
  • Challenges and opportunities for aftermarket players such as Calamp, Ituran, etc.

Executive Bio

Dan Mårtensson

Former Vice President IoT at Sierra Wireless

Dan has 20 years in the telco and cellular industry that forms the basis of what is today the telematics or Internet of Things industry. He started his career with 10 years at Telenor, the $20bn Norwegian telco, where he ran the Telematics division before being promoted to EVP Sales. At Telenor, he was deeply involved in the invention of the embedded SIM which is within every connected device and iPhone today. Dan spent 5 years leading cloud telematics companies such as Digital Route and Realcom and recently enjoyed 5 years at Sierra Wireless, a global leading telematics and IoT provider, where he was VP of the IoT division. Read more

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Interview Transcript

Could you provide a short introduction to your background in telematics?

My history in telematics started in 2006, coming from the telco side and the cellular side into what was then called telemetry. It later became telematics and then you could say, it sliced into remaining in telematics and the automotive industry but for the generic markets, it became machine to machine or M2M and, today, that is known as the Internet of Things. It was really from the telco side that I started.

I then worked in all parts of the value chain, from the big data and SaaS-related companies, to targeting IoT solutions, to doing strategic consulting in a couple of different companies around the world. Obviously, all of this has been in a global play. I was also involved in the invention of the embedded SIM, that actually started out as an embedded SIM especially for vehicles, because of the vibration and heat. Today, you find it in your iPhone. That’s my quick background of who I am, in that space.

Can we take a step back and look at how the technological architecture of, specifically, in-vehicle telematics, has evolved over the last decade?

If you take a big leap back, I would say that it started to pick up pace in 2002, 2003, 2004 to 2006, where we started to get car manufacturers (OEMs) to embed telematics units into the vehicles. There were a couple of use cases linked to that. Obviously, the eCall, the emergency call, and stolen vehicle tracking. In the US, you also had GM providing the OnStar service. That’s really where it all started. Over time, it evolved to embedding more and more capabilities, so it became more and more vehicle-related telematics. It also became more and more consumer-related services. You started to see some OEMs starting to embed map downloads, even streaming radio and other services into it. The whole ecosystem around it started to model out. But I think this is also where it started to struggle. Technology wise, it’s there. The business ecosystem, for a global deployment, is not really there.

This could be linked to connectivity, as such. Once you start to do streaming audio and video, into vehicles, you start to consume a lot of bandwidth. From an OEM perspective, the way they manufacture a car is, basically, they put the telematics unit into the vehicle, they put the SIM card into the vehicle, just like the SIM card was nuts and bolts, and then they want to deploy the vehicle across the world and this is where they struggle. Consuming gigabytes of data and roaming in different countries just kills whatever business case they have. This still exists, to a certain degree, today.

We talked about private vehicles, but you also have commercial fleets, where you had the beginnings of fleet management embedded into the vehicles. Obviously, for a lot of fleet owners, some used it and some replaced it with aftermarket and put some third-party solution in there, for fleet management. We know how that has been developed from just being able to send pick-up and drop-off orders to the whole driver behavior, to economy and so on.

How could potential technology developments, in the next five to 10 years, help kick start the ecosystem?

I think there are a couple of things. Regardless as to whether it is embedded or OEM-related or centric solution, or if it is a third-party aftermarket, I think in the coming years, we are going to see some of the barriers being broken down. In five to 10 years, maximum, I think the roaming issue that I referred to before will be less of an issue. There will always be some countries that will be obscured from global cellular coverage, but I think it will be solved in a large portion of the world. That will help to fuel additional services in the vehicle. What are those? Those could be, basically, consumer-related services, in the private vehicle, that is linked to usage-based insurance, to being able to pick and book your time in a repair shop and so on, from that perspective.

On the other side, this then plugs into the whole data access. There is so much data in the vehicles and there are so many partners in the ecosystem that want access. I mentioned usage-based insurance, UBI, where the players in the insurance industry want to get access to the vehicle data if you are also a subscriber of the insurance. You pay, depending on how you drive and where you drive. There is this ecosystem around it that we are going to see evolve.

With 5G and that big technology step around the corner, that will help. The car started to become connected back in the 2G time and then there was a 3G and a 4G evolution and the speed racked up. But 5G is a big step because, for the IoT, 5G compressed the delays. Even if you have a good throughput on 4G, the delays are still fairly long. In 5G, we start to get very low latency and that will help autonomous driving enormously. When you do autonomous driving and you need to process data, the latency needs to be very, very short.

I think we are going to see a lot more, from a technology perspective, and also from an experience perspective. I think we are going to see a lot more companies replicating what Tesla is doing, where you actively start to push out software, over their updates, that really change the car. It’s a part of the car; it’s not something where you need a phone to update your solution in the vehicle; it’s something that just gets updated, overnight.

Going back to the roaming issue you mentioned, is that just because of the networks in each different local area that stops global OEMs having global coverage? Can you just elaborate on exactly what that barrier to globalization is?

If you are an OEM or an aftermarket player and you have one piece of hardware and one backend platform, you need to connect it over the cellular network. You go and buy a SIM, from a mobile operator, you put the SIM in the vehicle, as a subscription, and you need to integrate into the carrier network, from the backend, so you can get the data out, without passing internet. Think of it as a private network, within a mobile infrastructure.

That piece is fairly simple, but when you manufacture a car, where a car ends up in the US, another car ends up in Northern Europe and a third one ends up in Southern Europe and the fourth one ends up in Australia, you can understand the complexity. There is not a single carrier today that can provide a competitive price for high-volume data, in all these geographies. For example, if you take Telenor, where I live in the Nordics, in Sweden, and you put a Telenor SIM in the vehicle, that probably works very well for the Nordics, it works okay for Europe. I’m not so sure it scales for high-volume data in the US, because the roaming prices would be absurd and the same thing applies for Australia. On top of that, in some markets, like Australia, you actually have a permanent roaming ban. You cannot place a SIM in that country and have it constantly roaming, so you need to utilize a local SIM.

For global coverage, it is not a single provider covering the globe. It’s really a patchwork, with multiple carriers. For each one of these carriers, it has individual settings and it has individual backend integration. Then, when you manufacture the car, you need to understand where the car will end up, because I need to put the right SIM and the right configuration in it. The automotive industry is really struggling in that sense. They are not built for that. They really want this vision of, I can just put the SIM in there and I can go. The embedded SIM and the eUICC on top of that is one technology that will help the OEMs or the aftermarket players, over the air, to change the type of subscription that they care to use. This is still in the early days and there is still more work to be done there, before it’s really industrialized.

Can we just lay out the different parts of the auto telematics value chain? Between the OEMs, the TSPs, the aftermarket players, can you just lay out how you look at it?

I’ll start with the OEM side, which is what I refer to as the embedded type. Obviously, you have the OEM who is the manufacturer of the vehicle, the one that is selling it and also, at least in the future, the one that will provide the service to you, as a consumer or as a fleet owner. If I buy multiple Volvo trucks, I am the fleet owner and Volvo provide the fleet services for me. Typically, for a car OEM, they have their Tier 1 partnerships where, basically, they buy the different components. A car OEM can go to a Tier 1 and say, we want this telematics unit from you; it should include this, this and that. The Tier 1 goes to the Tier 2 and the Tier 3 and build it up and sell it. Then the OEM encapsulates it. It’s a fairly complex chain because there are so many dependencies in it in terms of how the product should go and stack. For example, say the Tier 3 sourced the SIM card, but it is the OEM that provides the services. It’s the OEM that buys the services of the SIM card from the carrier. It’s a bit of a complex ecosystem.

For the aftermarket, I would say that it’s similar but probably slightly more simplified. In the aftermarket, you have players that are trying to build a full-service proposition, where they build their own device. They probably also use subcontractors as well so, to a certain degree, they have their Tier 1s, 2s and 3s, but on a smaller scale. They contract for the carrier services and they sell this as a finished product to the fleet owner. Again, if I take myself as an example, I will buy the 20 Volvo trucks and I can decide to opt in for the Volve fleet-management services and then it goes into this complex value chain of the different tiers.

Or I can go to TomTom, as an example, and buy their fleet-management services and I put that in all my trucks. The benefit with this is that me, as a fleet owner, I have 20 Volvo trucks, but I also have 20 Daimler trucks. Having a third-party system enables me to have the same system, regardless of the vehicle that we are actually using.

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In-Vehicle Telematics Value Chain Structure

October 21, 2020

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