Making telematics work in fleet management

Following the fleet is now a little easier

Telematics has been part of the fleet managers’ kit for years, and it’s evolved into a potent tool for improving both driver safety and a fleet’s bottom line.

Imagine a car that could tell you if you’re dangerously tired, simply by monitoring your driving performance. A car that could communicate with roadside devices and nearby cars to warn you of impending collisions, even with vehicles still out of sight. And a car which, if you did have an accident, would automatically call emergency services before you had come to a stop.

All this is already possible thanks to the power of telematics, which uses a cluster of black-box and wireless technologies to keep watch on the location and status of vehicles and their drivers.

Telematics isn’t new. For almost 20 years transportation and logistics companies have been using Global Positioning Systems (GPS) to analyse driver performance, track deliveries and keep tabs on vehicles and equipment. But what is new is the growing sophistication, connectedness and availability of these technologies.

Telematics’ interlinked tools can include everything from GPS navigation devices to diagnostic devices, voice-activated dashboard controls and connected smartphone apps.

EY [Ernst & Young] forecasts that 88 per cent of new vehicles will feature integrated telematics by 2025, with 104 million new cars providing built-in connectivity. And the Asia Pacific region is set to lead the way.

According to global research house Future Market Insights, the Asia-Pacific telematics market is expected to grow faster than any other region over the next five years, reaching US$15.2 billion by 2020, with a compound annual growth rate of 11.6 per cent.

Putting the logic in logistics

ACA Research director Steve Nuttall says that telematics is already having a profound effect on the freight transport industry in Australia, where driver safety has long been under the spotlight. Seventy-six per cent of Australian companies with fleets of more than 25 trucks currently use telematics, and take-up continues to rise across the sector.

“Just knowing telematics is installed in the truck has an immediate impact on driver behaviour – not just in terms of driving such as speeding and cornering, but also things like weight load management,” Nuttall says.

Telematics also tracks a vehicle’s progress, and can even spot traffic bottlenecks before they happen and alert drivers to take a different route.

As Nuttall explains: “For long-haul routes, telematics allows companies to communicate with road transport authorities to get vehicles through congested spots and urban areas at certain times of day.”

The technology has come a long way since its inception, he adds. “Early telematics systems were really just tracking dots on a map, but this has evolved significantly.”

Ross Hewitt is the business development manager for Sydney-based telematics solutions provider Black Box Control. He says telematics not only has the potential to make the transport sector safer and more efficient, but can also improve service to the end customer.

“Early telematics systems were really just tracking dots on a map, but this has evolved significantly.” Steve Nuttall, ACA Research

“Fleet operators can instantly advise a customer as to the location, estimated time of arrival, time spent on site and other relevant data, while customers can log in to see where their goods are at any point in time.”

Detecting risky behaviours

Malcolm Noyle has been working in automotive leasing and fleet management for more than 25 years. Currently Asia-Pacific business development manager for Mercedes-Benz’s car2go car-sharing service, Noyle says there is no doubt telematics has helped fleet managers improve driver safety and reduce the cost of managing health and safety liabilities.

“What telematics essentially provides is exception reporting. It helps a fleet manager to work out exactly where things have gone wrong. And this is really what you want to know – not what people were doing right, but who were the five people speeding?”

Ben Lamb, from novated leasing specialists FleetPartners, believes telematics gives managers greater visibility over their entire fleet, allowing them to simplify maintenance, improve security and easily monitor driver behaviour.

“Our clients generally use our driver behaviour scorecard, which gives a fleet manager visibility to benchmark driver performance,” Lamb explains.

“This information is usually used to improve driver safety and reduce incidents by identifying and educating drivers whose driving poses safety issues and increases operating costs on the vehicle.”

Automating tax compliance

Another very useful application of telematics is automatic record-keeping for tax compliance. Under Australia’s complex fringe benefits tax (FBT) laws, clients who use novated leasing arrangements to fund vehicles from pre-tax earnings need to keep detailed records of operating costs and kilometres travelled.

But with telematics, the car itself could take care of record-keeping, potentially allowing drivers to take advantage of the more favourable operating cost method when they do their tax, rather than relying on a statutory formula.

The technology could also help with tracking car park usage and claiming fuel tax credits.

“The key benefit of using telematics for tax reporting is the additional visibility, accuracy and ease of reporting,” says Lamb.

“And from an FBT perspective, telematics gives you the ability to report FBT using actual usage, rather than relying on statutory rates and methods, and conservative positions.”

“Our solution, supported by a smartphone app, gives drivers an easy way to record business usage. For instance, our product has a calendar integration, which uses an algorithm to determine the relevant calendar entry to prefill the business trip descriptions. This makes it easier to obtain valid logbooks with the level of detail required by the ATO [Australian Taxation Office].”

Reducing insurance risk

Insurance companies are also looking to telematics to find better ways to predict and manage risk, so that they can offer competitive premiums tailored to individual drivers. An evolution of the “pay as you drive” model already offered by many insurers, this new approach has sometimes been described as “pay how you drive”.

Instead of relying on indicators such as age, gender and driving experience to predict each customer’s risk level, insurance companies can now use telematics to assess individual driving behaviour. That lets them reward with lower premiums those customers who drive more conservatively, don’t drive far or rarely drive at night, while charging higher rates to those drivers who represent more risk.

Telematics can also assist insurers to offer value-add services to customers, including up-to-the-minute information on the fastest, safest way to get to work. Pioneered in the US by companies such as Progressive insurance, which launched its Snapshot vehicle monitoring device in 2011, “pay how you drive” is yet to make major inroads into the Asia-Pacific market. But ACA Research’s Nuttall says that with some companies already trialling safe driving smartphone apps, we’re unlikely to have long to wait.

“This is really what you want to know  . . . who were the five people speeding?” Malcolm Noyle, car2go

“We’re not seeing new entrants to the insurance market yet – but that’s not to say the market isn’t ripe for disruption. I think that once the consumer understands the benefit and the position of control that it could potentially give them, we’ll see more insurers embrace this model.”

Telematics and big data

With millions of vehicles likely to be equipped with integrated telematics over the next decade, companies are set to collect terabytes of data about us and the way we drive.

Such data could be used to understand and control our increasingly complex transport networks, but that’s only the start. According to Nuttall, the next phase of the telematics revolution will be the commercialisation of that data.

“Once fleets have reached a plateau in terms of safety and cost management, there will be a huge opportunity to commercialise and mine that data, which will become an asset with value in its own right.”

Not everyone is delighted with the idea of sharing their personal driving data. A recent Deloitte study of UK drivers found that 37 per cent of car insurance buyers were unwilling to use telematics to monitor their driving, even if it meant they might be able to access lower car insurance premiums.

But while there are privacy concerns, Nuttall believes that the benefits could outweigh any disadvantages to drivers.

“Consumers now have the ability to do a trade-off with an insurance company. Suddenly you have data about how you drive your car, which you can trade for a cheaper insurance policy and a tailored insurance experience. So while the consumer gives the insurer access to this information, it isn’t free of charge,” he says.

“The most important thing is that telematics should not be used with stealth – it’s about being transparent, so consumers can make informed decisions,” Nuttall concludes.

The sharing option

Car sharing is already transforming the way many of us think about cars. Vehicles have gone from something you own, to something you pick up and use at will, then leave behind.

And it’s all made possible by telematics, says car2go’s Malcolm Noyle.

“Car-sharing telematics encompass a full-scale booking system which stores your details,” he explains. “They allow car-sharing organisations to track members’ usage and bill them on a pay-as-you-drive basis. It’s a small step to extend this to a corporate environment.”

Related: Lease and like - why access is better than ownership

In future, telematics may also allow governments and fleet operators to incorporate car sharing with other modes of transport for a holistic transport system.

“With telematics, you could link a city’s public transport travel card, such as Hong Kong’s Octopus card or London’s Oyster card, with car sharing and bike sharing,” enthuses Noyle.

“Our clients generally use our driver behaviour scorecard, which gives a fleet manager visibility to benchmark driver performance.” Ben Lamb, FleetPartners

“Suddenly you have linked mobility to an integrated structure. ”Satellite tracking of vehicles (top left) can help identify traffic bottlenecks. Car2go’s fleet of Smart fourtwo vehicles (above left) are supplemented with electric vehicles in selected cities.

Where’s the electric fleet?

Cost-effective electric vehicles have been around for more than 15 years, yet account for only a fraction of automotive fleets. But that could soon change, says ACA Research’s Steve Nuttall.

“In countries with the potential infrastructure to support an electric fleet, there’s a huge interest,” he says.

“We should see more electric fleets in countries such as China, which are leading the charge in renewable energy research. There are also opportunities in the car-sharing firms.”

Car2go’s Malcolm Noyle agrees. He points out that corporate electric fleets in the US are predicted to number 100,000 cars by 2020.

“Auckland Transport has a tender out with the objective to provide 100 per cent electric vehicle fleets,” he adds.

This article is from the June issue of INTHEBLACK.

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