For years, whispers within the OBDII industry have suggested a thriving market. While optimism is welcome, the reality for some, like myself with a collection of dust-gathering OBDII devices, is a lack of compelling value to maintain their presence in my vehicles.
The OBDII landscape presents a paradox: a market simultaneously expansive and niche, lucrative yet challenging, experiencing rapid growth from a modest starting point. Success stories coexist with failures, painting a complex picture of this sector within the connected car industry.
Munic, previously known as Mobile Devices, highlights this very conundrum as they venture into a public offering. Their aim is to propel their company forward, capitalizing on the potential profitability that lies within the realm of connected cars, specifically through OBDII technology. Munic is actively working to dispel the notion that the OBDII business, built upon devices interfacing with standard vehicle on-board diagnostic ports, is outdated or nearing obsolescence.
Misinformation contributes significantly to this perception, with German automakers notably leading the charge to eliminate the OBDII port altogether. For these manufacturers, the port is viewed as both a cybersecurity vulnerability and a privacy concern.
Originally mandated for emissions testing, the OBDII port became a standard feature in all internal combustion engine vehicles across major global markets, including Japan, North America, and Europe. This port enables external devices to access and extract operational data from the vehicle, primarily for diagnostics and testing.
Despite claims that the rise of electric vehicles (EVs) would render OBDII obsolete, even EV pioneers like Tesla Motors incorporate OBDII ports in their vehicles.
The advent of vehicles equipped with integrated wireless connectivity introduced the concept of real-time data extraction, moving beyond periodic emissions checks. This capability, coupled with wireless OBDII devices (utilizing Bluetooth for smartphone connectivity or cellular modems), opened up possibilities for vehicle tracking and monitoring across various sectors, including insurance, fleet management, and performance analysis.
The prospect of affordable devices capable of real-time vehicle data extraction ignited a “gold rush,” attracting numerous companies offering Bluetooth and cellular solutions. These solutions targeted diverse applications, from insurance and anti-theft measures to diagnostics, Wi-Fi hotspots, e-commerce, and basic tracking services. While initially appealing for fleet management of conventional passenger vehicles, some companies aggressively pursued the direct-to-consumer market.
As vehicle data emerged as a valuable asset in its own right, OBDII providers shifted their focus towards “data monetization,” seeking to extract value from vehicle data regardless of its source – OBDII or other emerging technologies. Companies like Moj.io spearheaded this transition, and Munic mirrored this strategic pivot with the launch of their EKKO data platform, highlighting a partnership between the two entities.
Munic strategically navigates the OBDII market from multiple angles, reflected in their diverse customer portfolio. This includes pay-as-you-drive insurance providers like Metromile, tire manufacturers such as Michelin, wireless carriers like T-Mobile, and rental car giants like Avis, among numerous others. Munic’s IPO strength is underpinned by long-term commitments from these and similar clients, encompassing both device provisions and subscription services. These agreements are projected to drive Munic’s revenue from €17 million in 2019 to an impressive €100 million in 2023.
Global annual shipments of OBDII devices remain in the single-digit millions. However, this seemingly modest figure obscures the significant market potential for companies adept at establishing subscription-based revenue streams, particularly serving small and medium-sized fleets. Even established automakers like Honda, Volkswagen, and Ford have explored aftermarket OBDII offerings, with varying degrees of success. Notably, Volkswagen has deployed OBDII devices in hundreds of thousands of its corporate lease vehicles, primarily across Europe.
While wireless carriers such as Telefonica, T-Mobile, Verizon, AT&T, and Sprint continue to target consumer applications, predominantly focusing on tracking and vehicle-based Wi-Fi, the B2B market segment remains a substantial source of demand. Despite not always translating into massive device sales volumes, sectors like insurance, while exhibiting some ambivalence towards OBDII for tracking and usage-based insurance, cannot disregard the cost-effectiveness and simplicity of OBDII-driven insurance solutions offered by companies like Progressive.
Companies like Munic, alongside OBDII specialists like Danlaw and Voyomotive, continue to tap into profitable niches within the connected car aftermarket, even with device sales volumes in the limited six-figure range. The viable business models these companies have cultivated, concentrating on fleet management and usage-based insurance, are sufficient to sustain and even amplify interest in the OBDII market.
Ultimately, the enduring allure of the OBDII aftermarket stems from the vast installed base of hundreds of millions of vehicles worldwide already equipped with OBDII ports. This expanding target market represents a significant opportunity, attracting consumer-focused devices available in retail channels. The reality is that the OBDII market can indeed be a profitable niche for operators with a well-defined business model. Munic may very well be positioned as one of those successful operators. Long live OBDII! Long live Munic!
