Cliff Banks - The Banks Report

CDK & Cox – Two Big Plays in Telematics

July 6, 2015 — Two intriguing investments in recent weeks show that CDK Global and Cox Automotive are looking hard at the growing telematics and connected vehicle space — a sector that many analysts believe will explode in the next year or so.

First, Cox Automotive in early June participated in a $6.5 million Series A financing round led by the Samsung Global Innovation Center in Vinli, a connected car start up firm launched last September. Continental ITS and the Westly Group also participated in the investment.

Vinli wants to bring connected car technology to older model vehicles by creating a small sensor that plugs into the vehicle’s OBD-II port. The device then communicates via Blue Tooth to apps on the driver’s smart phone. Through the apps on the smart phone, drivers will have access to much data about the vehicle then they have now.

The software is open platform with more than 1,000 developers already working on creating apps drivers can download to their phones. At least 20 apps are expected to be ready for download sometime in August with several more on the way.

Cox already spent $315 million last November to acquire Xtime, a company that provides software solutions for dealership service departments including using new-vehicle telematics to connect the car with the dealership.

Meanwhile, CDK Global announced in late June it has invested in connected car firm Automatic, which recently launched Automatic App Gallery with 22 apps already available. The apps are grouped into categories such as Business, Convenience, Savings and Safety, and Performance.

Automatic also is a device that connects to the vehicle’s OBD-II port and communicates with the driver’s smart phone via Blue Tooth.

Already, available apps include solutions for:

  • Fleet management for businesses
  • Expense management for employees allowing them to download mileage and fuel directly into solutions such as Concur
  • Parking reminders
  • Driving habits analysis
  • Performance data and metrics
  • Coaching teen drivers
  • Communicating with your mechanic

App development really is going to come down to “whatever the mind can imagine, we’ll build.” Which will lead to a sector that is beginning to explode already.

To date, Automatic has raised $32 million in investments. The latest round is for $24 million and was led by USAA’s investment subsidiary.

USAA provides financial and insurance services to military families encompassing 11 million members. CDK Global, Comcast Ventures along with existing investors Y Combinator, RPM Ventures, Anthemis Group, Amicus Capital and angel investors Mark Goines, Jared Kopf, Rob Chandhok and Dan Rose participated in the most recent investment.

The two investments could provide significant revenue growth for both Cox Automotive and CDK.

Dealerships can expect possible new revenue streams for their used vehicle sales. It’s likely dealers will be selling the sensors and connecting them to the vehicles for their customers. It will also be interesting to see whether Cox and CDK are able to negotiate contracts that allow their dealership clients to sell apps to their customers.

The investment in Vinli could be a huge play for Cox because of its relationships with most of the nation’s dealerships. It owns Manheim, the leading used vehicle auction company, and is close to completing a $4 billion acquisition of Dealertrack, a firm that processes millions of vehicle credit applications each year.

CDK is also well-positioned in the dealer space being the leading dealer management solution provider in the industry including relationships with 27,000 dealers world-wide.

One other observation — USAA, the company CDK participated with in the investment, was an early and continued investor in TrueCar. Don’t be surprised if TrueCar finds a way to get in on the action.

Make no mistake — these two moves, while receiving little (if any) from the automotive trade press, could be huge the next couple of years.

Franchise car dealers sell approximately 15 million ff the 40 to 45 million used vehicle sales each year. Meanwhile, according to IHS Automotive, there are more than 253 million vehicles on U.S. roads today.

And, the amount of data that is going to be created and flow through the system is going to explode exponentially, which will create even more revenue streams.

Yeah, this is a huge market…

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