EU vs LATIN AMERICA: Reasons behind m2m adoption rates and key developing verticals

Published by Rosalía Simón IoT General

In the following years the m2m market is expected to experience a sharp growth, going from the current figure of 5 billion connected devices to 16 billion devices worldwide by 2020, according to figures forecasted by Machina Research.

The European market accounts for around 25% of the overall business figure whereas Latin America represents 6% of the market. These market shares are expected to remain stable over the next years. The other two relevant portions of the market are the U.S. and Asia Pacific.

There are several reasons to explain the business gap Latin America has regarding other markets:

  • Infrastructure development In Europe, operators have deployed technology – such as 4G, for instance – in a higher percentage than in Latin America. One of the most urgent challenges for Latin America is completing the migration from 2G networks to 3G ones and to increase the deployment of 4G in similar terms to Europe where there is uniform coverage available in the vast majority of the territory. Another challenge is the adoption of LPWA solutions that adapt better to isolated areas.
  • ICT adoption rate in Latin America is far lower than in Europe especially among SMEs.
  • High taxes on m2m connections like the FISTEL in Brazil become entry barriers for m2m in many business areas where the cost reduction that technology enables is not enough to compensate for the taxes that must be paid for usage.
  • Lack of regional regulation. Latin America has isolated initiatives like Brazil’s CONTRAN that promotes adoption of SVR technology. The E.U. is pushing for eCall to become a standard across the Union. Having country specific regulations like the aforementioned CONTRAN makes it difficult to develop cost effective solutions for all Latin America, thus requiring country-specific products that become entry barriers.

There are different penetration rates for each vertical solution depending on local business drivers that affect each market’s development:

Connected Transport, more specifically Fleet Management, is one of the most successful markets, representing 52% of all sold units – accounting for 71% of the total of vehicle telematics sales. The Stolen Vehicle Recovery (SVR) market is the most developed market in Latin America while Fleet Management is the business where highest growth rates are expected (as some indicators begin to show in markets like Chile).

The European market is increasingly interested in solutions that improve efficiency, lifestyle, and wellness welcoming wearables and connected-everywhere solutions via mifi, connected car or others. The Connected Car market is more mature in Europe than in Latin America. By 2020, BI Intelligence estimates that 75% of all cars produced worldwide will be connected. Europe remains in third position in this market very close in market share to Asia and North America.

Businesses related to Utilities are being more rapidly developed in Europe due to regulation boosts that are barely inexistent in Latin America because of the lack of regional regulations.

The m2m market is a very fragmented and heterogeneous. Agricultural applications, for instance, have a better chance of attracting relevant market shares in Latin America where these solutions offer companies alternatives to streamline productivity. In Europe meanwhile the focus remains on digitizing industrial processes – a strategic goal for some countries like Germany (Industry 4.0).

Legislation in general is a relevant catalyser to speed up m2m adoption. Its impact is more noticeable in some vertical areas than in others:

  • The adoption of Smart Meters – as we anticipated before – is regulated through a European Directive that sets 2020 as the deadline. In Spain, for instance, the date has been set forward to 2018. This legislation push was one of the driving forces behind the SMIP programme created by the British Department of Energy and Climate Change (DECC) in the UK.
  • In the case of Connected Cars there is a clear difference in regulations and objectives between the CONTRAN resolution in Latin America and the European eCall regulation.
  • The key role of the EU as a driving force in the transformation of Smart Cities through the FIWARE initiative moves all European countries forward in Smart City adoption.

In m2m we are far from the point of talking about mature markets: markets are still under development in every business area, and in every region. Latin America is expected to undergo a steady and strong growth in Smart Metering, Smart Grid and Smart Cities – as we are already seeing in Smart Lighting through Public-Private Partnerships (PPP).  In the case of Fleet Management, for instance, the Latin American market is expected to undergo higher growth rates than Europe in the years to come. The LATAM consumer market is very keen on paying attention to security solutions so people and product asset tracking are expected to grow consistently.

Finally, we believe that across both regions the sustained decrease of the costs of m2m hardware & modules, as well as their applications and taxes will greatly benefit adoption and help boost its deployment. 

Rosalía Simón
m2m Vertical Industrial Solutions Director