Proving the Business Case for the Internet of Things

Deutsche Telekom targets German carmakers in China

Iain Morris
October 15, 2014

Deutsche Telekom is appealing to German carmakers with operations in China through its recently announced joint venture with China Mobile.

The German telecoms incumbent last week unveiled details of a connected-car alliance with China’s biggest mobile operator, under which Deutsche Telekom (Bonn, Germany) will contribute telematics and IT expertise and China Mobile (Beijing, China) will provide connectivity.

The partners aim to sell in-vehicle technology to carmakers looking to offer a range of tracking and infotainment services to their customers.

Speaking to the International M2M Council about the new deal, Sven Krey, M2M sales development manager at Deutsche Telekom, would not say whether China-based carmakers have already signaled interest in the venture’s offering but clearly indicated which companies are in its sights.

“You know which customers of ours have operations in China,” he said. “There is probably not a German carmaker without a China presence and there is no German carmaker without some relation in the IT space with Deutsche Telekom.”

That suggests BMW and Daimler may be among the venture’s first customers.

Deutsche Telekom signed a major systems integration deal with Daimler in May, indicating that it would also collaborate with the manufacturer on future connected car and cloud-based services.

It has also teamed up with BMW on the carmaker’s Connected Drive offering, contributing the M2M SIM chips that are an integral part of the telematics boxes installed in vehicles.

Krey says that in most foreign markets Deutsche Telekom’s connected-car strategy involves providing the telematics platform and taking advantage of roaming relationships with other network operators to support connectivity.

In China, however, such roaming deals are not permitted.

Without a local presence and partner in China, Deutsche Telekom may also have encountered other legal barriers when trying to address connected car opportunities in the country.

Even so, one issue for operators addressing this space is exactly what kind of role they can play, with some of the world’s biggest carmakers keen to seize the M2M initiative.

“The question is how much of the overarching business the operators can occupy and generate revenue from,” acknowledges Krey.

At the moment, Krey says Deutsche Telekom generates “hundreds of millions of euros” from developing telematics, as well as IT services in the energy and healthcare markets, but relatively little from pure M2M connectivity.

For an extra monthly charge, US operator AT&T is allowing customers to add vehicles as additional devices on their mobile plans, but Krey is skeptical this model will represent a significant revenue opportunity in the years ahead.

As connected devices proliferate, operators will probably be forced to let customers use a variety of gadgets as part of a single monthly fee, while competition will continue to force down prices.

How Deutsche Telekom and China Mobile will split revenues remains unclear, but their joint venture is slated to begin operations in early 2015, with each company holding a 50% stake in the new organization.

Market research indicates there will be as many as 68 million connected cars in China by 2018.

“China is or strategic importance for our connected-car business,” said Reinhard Clemens, the chief executive of Deutsche Telekom’s T-Systems division. “The partnership with China Mobile is therefore strategically of utmost importance to Deutsche Telekom.”
 
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