AUTOLOCATORFLEET MANAGEMENT INDUSTRY ANALYSIS / RUSSIA / JULY 2011                          prepared by
THIS PAGE IS INTENTIONALLY LEFT BLANK2                                    © AUTOLOCATOR 2011
TABLE OF CONTENT                      3   Current Trends                      4   Automotive Industry                     ...
THIS PAGE IS INTENTIONALLY LEFT BLANK4                                     © AUTOLOCATOR 2011
21    Current trends    According to market analysts, international naviga-    tion market will continue to grow. As state...
21    1. Automotive industry    According to "Development Strategy of automotive           • Low working efficiency    ind...
Sales of new cars in Russia, mln4.5                                 Stagnation                                            ...
Sales of Trucks in Russia, thousands300                                                                                   ...
Automotive Fleet                                                          Commercial Fleet Structure / 2010 (mln)In 2010 a...
21    2. Fleet Management Industry analysis    Fleet Management Industry is on early stages of de-                        ...
Cumulative number of installed Tracking units, thousands                                     2009   2010    2011F   2012F ...
21    3. Key Market Players    Fleet Management market in Russia is highly con-                         Talking about Flee...
Sales structure of GLONASS/GPS Terminals by company, 2010                                              others             ...
14   © AUTOLOCATOR 2011
4. Price monitoringAll Russian manufactures and telematics service                                                        ...
21    Conclusion    Fleet Management market in Russia demonstrates                • Idling    substantial sales growth. Ma...
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Fleet management industry analysis Russia july 2011

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Brief survey of telematics industry in Russia with focus on Fleet Management solutions.

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Fleet management industry analysis Russia july 2011

  1. 1. AUTOLOCATORFLEET MANAGEMENT INDUSTRY ANALYSIS / RUSSIA / JULY 2011 prepared by
  2. 2. THIS PAGE IS INTENTIONALLY LEFT BLANK2 © AUTOLOCATOR 2011
  3. 3. TABLE OF CONTENT 3 Current Trends 4 Automotive Industry 8 Fleet Management Industry 10 Key Market Players 13 Price Monitoring 14 Conclusion© AUTOLOCATOR 2011 3
  4. 4. THIS PAGE IS INTENTIONALLY LEFT BLANK4 © AUTOLOCATOR 2011
  5. 5. 21 Current trends According to market analysts, international naviga- tion market will continue to grow. As stated by ABI International market segmentation 2011 Research, it will reach $140 billions by 2014. Key Military drivers (in addition to Military Forces) will be Auto- forces, 16% Automotive motive Industry and Mobile Network Operators. Exact time industry, 51% Similar situation will have place in Russia. services, 1% As Russian Government continues to force the de- Mobile applications, velopment of GLONASS project, the main growth 15% within the telematics industry is observed in the Geodesy and market sectors that are being tenderly looked after cartography, 7% by Government. Aviation industry, 1% Marine navigation, In 2010 the sales volume of Tracking Systems in 10% Russia increased by almost 300% (from ~90k to Source: ABI Research ~370k) comparing with 2009. This trend will con- tinue in 2011/2012. The key driver is the implemen- tation of the Government Decree # 641 "Equip- ment of automotive motor vehicles by GLONASS Sales of GPS Tracking Systems / Russia or GLONASS/GPS navigation systems" (25.08.08) GLONASS terminals GPS terminals and the Federal Law # 23 "About the navigation ac- 400,000 tivity" (14.02.2009). 300,000 In 2011/2012 only the leading market players (Sys- 200,000 tem Integrators) expect substantial sales growth. 100,000 The main reasons are the following: 0 • No subscription fee 2008 2009 2010 • No extra charge for the Software development (in Source: GLONASS/GNSS Forum (www.agff.ru) order to meet clients individual requirements) • Client base: large-scale pro-government enterprises dency to lower retail prices and swift business de- SMB sector (Fleet Management solutions for Small velopment in Russia, we believe that the growth and Medium-scale business) also demonstrates a rate in SMB sector will exceed this parameter in steady growth. Most medium/small-scale compa- corporate sector within 2 year. Competition in the nies do not experience the need for Fleet Manage- industry will become much more intense though. ment Systems at the moment. This can be ex- plained by the following facts: • High retail price of equipment • High subscription fee • In general, these companies use illegal trade schemes Russian Fleet Management market is immature that lead to low level of accounting and reporting. and not well structured yet. This results in ab- • These companies do not face problems that can be sence of accurate statistical and quantitative da- solved by Fleet Management Systems. ta. On that account this report should be consid- Taking into account that there is an obvious ten- ered only as an expert opinion. © AUTOLOCATOR 2011 5
  6. 6. 21 1. Automotive industry According to "Development Strategy of automotive • Low working efficiency industry in Russian Federation 2020", the market • Legislation imperfection will continue to grow. By 2020 an overall fleet These facts make us confident that the future should exceed 50 mln cars. growth in automotive industry will be driven by production of foreign brands in Russia. June 2011 shows the recovery on the Russian mar- ket is now well established. The first half of 2011 40% Foreign brands share saw sales of new cars and light commercial vehicles 35% 34% in Russia increase by 56% compared with the same 30% 25% 26% period in 2010 or by 441,959 more sold units, ac- 20% 16% 18% 14% cording to the AEB Automobile Manufacturers 15% 10% 8% 9% Committee (AEB AMC). Russian market is tracking 5% 1% 4% ahead of our latest forecast of 2.35m units for the 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 full year. Source: PwC Nevertheless, Russian automotive industry experi- ences a number of problems. Ministry of Industry and Trade defines the following major issues: • Weak variety of models • Low investments in production • Low productivity, technological retardation • Weak automotive components industry • Low budgeting of R&D • Low investment attractiveness Parameter 2009 2010 2020F Sorce data Macroeconomic GDP, billions RUB 32,723 38,743 63,366 Ministry for Economic Development Population, mln 142 141.9 134.2 RosStat Able-bodied population 68.5 66.4 67.9 Ministry for Economic Development Automotive industry share in GDP 0.98% 0.57% 2.38% Ministry for Economic Development Domestic market, thousands Sales of new cars 2,801 1,400 3,600 Ministry of Industry and Trade Sales of light commercial vehicles 210 102 350 Ministry of Industry and Trade Sales of trucks 171 44 190 Ministry of Industry and Trade Sales of buses 20.3 11.4 26.6 Ministry of Industry and Trade Automotive fleet Cars and LCVs 32 33.2 52 Ministry for Economic Development Trucks 5.2 5.4 9 Ministry for Economic Development Buses 0.9 0.9 1.6 Ministry for Economic Development # of cars per 1000 people 225 229 363 Ministry for Economic Development 6 © AUTOLOCATOR 2011
  7. 7. Sales of new cars in Russia, mln4.5 Stagnation Growth Post-crisis restoration Market Stabilization 4 3.6 3.6 3.6 3.4 3.53.5 3.3 Economic crisis 3.1 3 2.8 2.8 2.4 2.42.5 2.2 2 1.8 1.8 1.4 1.3 1.41.5 1.1 1 1 1 0.8 0.9 0.9 1 0.8 0.70.5 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020FSource: Ministry of Industry and Trade Sales of Light Commercial Vehicles in Russia, thousands 500 Stagnation Growth Post-crisis restoration Market Stabilization 450 400 Economic crisis 350 343 350 324 304 282 300 257 229 250 198 210 209 200 176 167 170 163 138 134 145 132 149 146 146 150 126 88 110 107 99 100 50 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020FSource: Ministry of Industry and Trade© AUTOLOCATOR 2011 7
  8. 8. Sales of Trucks in Russia, thousands300 Post-crisis restoration Market Stabilization250 Economic crisis 186200 179 182 174 171 174 169 161 146150 125 128 90 106 89 92 88100 56 63 50 0 2003 2004 2005 2006 2007 2008 2009 2010 2011F 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020FSource: Ministry of Industry and Trade Sales of Buses in Russia, thousands 40 Post-crisis restoration Market Stabilization 35 33.1 30 Economic crisis 26.6 25 25.7 23.7 24.8 25 22 22.5 21.1 19.7 20.3 18.4 18.3 20 15.9 15 13.6 11.4 11 10 5 0 2004 2005 2006 2007 2008 2009 2010 2011F 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020FSource: Ministry of Industry and Trade8 © AUTOLOCATOR 2011
  9. 9. Automotive Fleet Commercial Fleet Structure / 2010 (mln)In 2010 automotive fleet in Russia exceeded 39 mlnmotor vehicles. 8,1 mln of them are commercial ve- Trucks 5.4hicles. Private cars are excluded from the estima- Buses 0.9tion, because their owners are not potential users of LCV 1.8Fleet Management Systems. Total: 8.1 Commercial Fleet Structure / 2010 (mln) Corporate Fleet 4.0 Public Conveyances 2.0 Small/Medium-scale business 2.1 Total: 8.1 Source: RosStat© AUTOLOCATOR 2011 9
  10. 10. 21 2. Fleet Management Industry analysis Fleet Management Industry is on early stages of de- Penetration of Fleet Management velopment. While in the US and Europe the key Systems motivating factor to install a Tracking system is the 6.00% need for increased efficiency, Russian companies 5.20% 5.00% are looking for assets control. Having regard to the 4.00% business conditions in Russia, we think that the 3.00% economic effect of Fleet Management System will 2.00% be much higher than in Europe and USA. Conse- 1.20% 0.50% 1.00% quentially, we forecast a higher level of penetration 0.00% on the Russian market. Corporations Pro-government Small and enterprises medium scale business Key issues: • A level of penetration remains very low (3% in Russia, 12% in the US) • Inefficient logistics (that means more possibili- Quantity of installed units (thousands) ties to reduce costs) • Stimulating efforts of Russian Government will Level of penetration (right scale) keep strong demand for Fleet Management Sys- 1600 20.0% tems for the next 2-3 years. 1400 1200 15.0% Industry forecast: 1000 Average annual growth rate in the industry will be 800 10.0% around 44% till 2014. Level of penetration will 600 reach 17.8% by the end of 2014. 400 5.0% 200 The highest growth rate will be observed among 0 0.0% pro-government enterprises. But in terms of quanti- ty of installed units, huge corporations will keep the lead. In the sector of Small/Medium Business com- Source: Investment Bank "Otkrytie" petition will become tougher because big market players (who now specialize in system integration) teresting offer to consumers: will enter SMB sector in search for additional sources of revenue. Several companies have already • Hardware price doesn’t exceed RUB 6,000 ($215) developed Web-based Fleet Management Solutions • Monthly payment RUB 300 ($11) with annual subscription fee (acting as a service • No charge for Software and Cartography. provider / outsourcing). This business model is widely exploited in the US and Europe even by huge corporations. Nevertheless, big Russian companies prefer to mine this data without assistance. Mobile Network Operators have also initiated this move. MTS and Beeline have developed a very in- 10 © AUTOLOCATOR 2011
  11. 11. Cumulative number of installed Tracking units, thousands 2009 2010 2011F 2012F 2013F 2014FCorporations 206 307 428 581 753 948Pro-government enterprises 24 43 77 135 244 402Small/Medium-scale business 11 17 30 51 82 124Total 241 367 535 767 1079 1474Source: Investment Bank "Otkrytie"© AUTOLOCATOR 2011 11
  12. 12. 21 3. Key Market Players Fleet Management market in Russia is highly con- Talking about Fleet Management market it is very solidated. 3 market leaders (M2M-Telematics, Rus- important to understand the difference in business sian Navigation Technologies and E.N.D.S) control models: almost 70% of the market. Analysts and official 1. System Integrators develop Software and pro- representatives of these companies provide differ- duce telematics equipment. They specialize in ent estimation of the market share. According to “server solutions” offering it to corporations and market research of investment bank “Otkrytie” pro-government companies. The main sources “RNT” is the absolute leader with 24% market of revenue are price markup on equipment, sys- share. “E.N.D.S.” holds 16%, “M2M-Telematica” – tem implementation and the following regular 9%. “Reasearch.Techart” draws another picture: technical support. These companies are usually “M2M-Telematica” is the leader; "RNT” is the fol- considered as market leaders. lower. We are likely to believe that these compa- 2. Service providers generally specialize in Web- nies are almost identical in terms of revenue and based applications and offer Fleet Management quantity of installed telematics units (~70-75k solutions to Small/Medium-scale companies. units). The rest 30% of the market is distributed be- Their business model considerably differs – the tween small players. The overall number of main source of revenue is a monthly subscrip- telematics service providers exceeds 300 compa- tion fee (from 300 to 1500 RUB per month). nies. Contenders Market leaders Autotracker (RNT) M2M-Telematica E.N.D.S. Antor System Integration TopPlan ITOB NOVA-IT Scout Autograph Caesar Satellite Fleet Master Starcom Eshelon Kupol AL Satellite M Golden Eye AL Chaser AL Truck D+ And etc. Niche players Visioners AL - AUTOLOCATOR products Functionality 12 © AUTOLOCATOR 2011
  13. 13. Sales structure of GLONASS/GPS Terminals by company, 2010 others 31.2% Geiser 1.1% Hiton 2.3% Scout 3.1% Navigator M2M-Telematica 3.6% 41.0% Autotracker 17.5% Sales structure of GPS Terminals by company, 2010 M2M-Telematica 6.0% Autotracker 8.9% Navigator 15.7% others 48.8% Scout 9.1% Auto Connex 3.6% Autolocator Navsi C-Nord 2.0% 2.6% 3.3%© AUTOLOCATOR 2011 13
  14. 14. 14 © AUTOLOCATOR 2011
  15. 15. 4. Price monitoringAll Russian manufactures and telematics service Sales of GPS /GSM Tracking systemsproviders are struggling for a chance to offer a best by price levelretail price for the telematics unit to a consumer.It’s not a surprise; there is an obvious tendency tolower retail prices. Many Russian companies have 22% 30%found an easy way to reach this goal: they simplyplace orders for telematics units in Chi-na/Russia/Taiwan and etc. under their own brand.This inevitably leads to poor quality of hardware 48%equipment. It’s also important to mention, thatthere’s still no quality standards, no quality control-ling authorities in the telematics industry in Russia. 8k-12k RUB 12-20k RUB >20k RUBRussian market is too young. ($230-340) ($340-560) (>$560)Low retail price is one of the most important rea- Source: GLONASS/GNSS Forum www.agff.ru)sons why a number of internationally known com-panies were forced to leave the Russian market. Sales of GLONASS/GPS /GSMGNSS Forum states that 75% of GLONASS/GPS Tracking systems by price levelTerminals cost less than 20,000 RUB ($560) inRussia. It seems almost impossible if we take into 12.5%account the cost of GLONASS Module. Current av- 25.0%erage retail price of GLONAS/GPS Tracking Systemexceeds 20,000 RUB but has a tendency to de-crease. 62.5%Installation cost differs from 0 to 13,000 RUB. 8k-12k RUB 12-20k RUB >20k RUB ($230-340) ($340-560) (>$560) Cost of GLONASS Module Source: GLONASS/GNSS Forum (www.agff.ru) 800 $ 580 $ 600 $ 400 $ 325 $ 400 $ 175 $ 200 $ 75 $ 35 $ - $ 2006 2007 2008 2009 2010 2011Source: Macro Group© AUTOLOCATOR 2011 15
  16. 16. 21 Conclusion Fleet Management market in Russia demonstrates • Idling substantial sales growth. Market analysts predict • Parking that steady sales growth will continue in future. For • Geo-zones the next two years initiatives of Russian Govern- • Speed violation ment will keep strong demand for Fleet Manage- • Driving style ment Systems mostly among corporations and pro- government enterprises. Growth rate in SMB sector Pricing 2 business models (with/without monthly subscription will be steady and in 2012 may exceed this parame- fee) will help to meet consumers requirements in all ter in corporate sector. market sectors: Nevertheless, Fleet Management Solutions with 1. Small/Medium-scale business moderate integration possibilities (ERP systems, Equipment price, RUB <10,000 ERA GLONASS infrastructure, intellectual transport Subscription fee per year, RUB <6,000 systems) will be forced to leave the market. No Installation cost, RUB ~3,000 matter what market sector you are in, integration abilities with Eco-systems (that are just being 2. Large-scale business formed) will be the must in the nearest future. Equipment price, RUB <20,000 By our opinion, an exemplary Fleet Management Software, RUB ~300,000 system must meet the following requirements: Installation cost, RUB ~3,000 Software • Integration with most ERP systems (1C, Oracle, SAP) • Various levels of reporting that can be easily configured by customer • Remote technical parameters control • Web-based or Locally installed application to let con- sumer choose the most comfortable option • Data export Hardware • GLONASS/GPS module • GSM data transfer protocol • FMS/CAN-BUS • Emergency call • Accelerometer • Black box • Remote configuration Reporting • Fuel consumption • Working hours • Technical breakdown 16 © AUTOLOCATOR 2011

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