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Cartrack targets California

Firm to use largest US state as launch-pad for US operations.

JOHANNESBURG – Having previously touted Florida as a potential launch-pad for its US operations, Cartrack has instead chosen California as its American base, which offers little to none of the same tax breaks and rebates on staffing that are offered by other states.

The stolen vehicle recovery and fleet management firm has chosen the west-coast state for the sheer size of its market and economy, says CEO, Zak Calisto.

Data from the US Department of Commerce Bureau of Economic Analysis, shows that California’s population was just above 39 million in 2015, the largest in the nation.

The state’s GDP is the largest in the country, coming in at a cool $2.3 trillion in 2014, while per capita personal income is around $52 651 – 110% of the national average ($47 669) and the country’s tenth largest.

Despite being one of the most advanced economies in the world, telematics penetration in the US is relatively low, according to Calisto, who says Cartrack has seen figures ranging between 15% and 30%.

The country’s Federal Motor Carrier Safety Administration has recently introduced regulation that makes it compulsory for commercial vehicles to be fitted with electronic logging devices to record what’s known as the driver’s “record of duty status”.

Commercial vehicles must comply with this new rule by December 2017 and Cartrack estimates that some 3 million vehicles still need to be fitted in the next 18 months.

The company believes it can deliver telematics devices in the country at roughly half the price of current offerings. It has appointed someone to lead its US business – a South African who has lived in the country for two decades – but Calisto did not want his name to be made public yet.

Consumers will own their own data

Speaking to Moneyweb after the release of Cartrack’s financial results for the year to February, Calisto said that consumers are going to drive demand for telematics going forward.

Rather than insurers collecting data from their policyholders, people will own their own data, such as their driving behaviour, which they will be able to give to insurance companies to secure quotes, he said.

Similarly, Robin Wagner, vice president and head of international insurance at TransUnion, argues that insurance companies – which today fiercely guard their telematics data – will see the benefits of pooling aspects of it in the near future so that a common and accessible “telematics signature” exists for consumers at the point of quote and underwriting.

“Data in isolation has limited impact,” he tells Moneyweb, likening it to the change among banks and retailers, which today share credit information on their customers via credit bureaux.

As telematics platforms are increasingly built directly into cars, rather than installed afterwards, Calisto maintains that car manufacturers will still have need of third parties to service clients on these platforms.

“I’ve got absolutely no doubt that in 20 years time every single car will have a telematics device, driven by safety and security, as well as government regulations around pollution and general demand from businesses for workforce efficiency,” he said.

EY expects that some 104 million new cars will have some form of “in-car connectivity” by 2025.

But since telematics is not the core business of motor vehicle manufacturers, which are not geared to handle all the technical and servicing issues, according to Calisto, opportunities exist for companies such as Cartrack, which today manages the telematics solution built into MAN Trucks across Africa.

Cartrack’s subscriber base grew 17% to 502 849 units for the 12 months to February. South Africa experienced growth of 16% on the previous year, to 391 000 units.

The country accounts for 74% of total revenue, which grew 20% to R1 billion, as operating profit climbed 19% to R344.8 million.

Calisto believes the company will experience growth in South Africa for quite a few years to come, despite the 50% spike in debtor defaults – mostly cash-strapped consumers.

Cartrack expects that its businesses in Asia and the Middle East, which made a R12 million operating loss over the period as start-up costs took their toll, will turn profitable in 2019. This year was the first full year of operation for most of them. 

Cartrack declared a full-year dividend of 55 cents a share, representing a 20% increase from the prior year.

With 231 000 shares changing hands, at a value of R218.7 million, the firm’s share price was unchanged on Tuesday at R9.50.

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