What is telematics?

In its broadest sense, telematics is the joining of two sciences: telecommunications, a branch of technology including phone lines and cables, and informatics, such as computer systems. While the term originated in the 1970s to describe the marriage of computers and communication networks, it is now most commonly used in reference to fleet telematics solutions utilized in commercial vehicles. 

Wireless telematics devices and other “black box” technologies collect and transmit data on vehicle use, maintenance requirements and automotive servicing. A popular option for modern companies is to utilize fleet management software, which is a branch of telematics, to coordinate the vehicles they manage and gain a comprehensive view of the health, profitability and productivity of their entire fleet. 

How does telematics work?

At its core, a telematics system includes a vehicle tracking device that allows the sending, receiving and storing of data. It connects via the vehicle’s own onboard diagnostics (OBD-II) or CAN-bus port.

The primary hardware component is the Telematics Control Unit (TCU). Think of the TCU as the "brain" of the system; it is a device that collects and governs the transmission of data. The hardware components of a TCU include:

• GPS Receiver: For precise location tracking.
• SIM Card / Onboard Modem: To enable communication through a wireless cellular or satellite network.
• Connection Port: OBD-II or CAN-BUS interface.
• Accelerometer: To detect harsh driving events like rapid acceleration or hard braking.

This device collects GPS data and an array of vehicle-specific data and transmits it to a centralized server. This is known as telemetry. The server interprets the data and enables it to be displayed for end users via secure websites and apps optimized for smartphones and tablets.

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How are telematics devices installed?

Many modern commercial vehicle manufacturers install embedded GPS tracking and telematics systems directly in their fleet vehicles. If a vehicle does not come with this technology pre-installed, aftermarket GPS devices are available. These can be battery-powered or powered via the vehicle’s own internal electrical system.

Some original equipment manufacturers (OEMs), including Volvo, Mack, Ford and GM, also partner with telematics providers to provide a seamless end-user experience. In the coming years, the automotive industry will continue to develop smart cars and capitalize on the Internet of Things (IoT) landscape to help connect vehicles to cities and smart traffic technologies.

How can my fleet use telematics systems?

Telematics solutions can integrate with existing applications and systems to enable an array of use cases for fleets of all sizes, including:

• Vehicle tracking: Vehicles can be tracked using a combination of GPS satellites and receivers, cellular networks and cloud computing. A GPS receiver downloads information from satellites and processes it for use with applications such as driver GPS navigation systems. It also transmits that information via a cellular network to the web servers used by office-based staff, where it can be used to dispatch the nearest driver to a new job.
• Trailer and asset tracking: Fleets can attach GPS trackers that transmit telematics data to trailers and other non-motorized assets, ensuring they don't go missing, as well as use them to route drivers directly to stationary trailers. Drivers can tag locations in their GPS unit when unhitching a trailer, and those coordinates can be easily passed on, allowing them to route directly to the trailer. The system can also be set up so that an instant alert is sent to a manager's mobile device should a trailer or asset be moved without authorization. For comprehensive asset strategies, view our asset utilization and productivity guide.
• Maintenance improvements: Vehicle maintenance and asset lifecycle management can be improved by using fleet telematics to track hours-of-use records and schedule preventative maintenance, as well as help keep tabs on warranty recovery, engine hour tracking and service records tracking. Fleet managers can decrease expenses and keep vehicles in safe operating condition by staying on top of engine diagnostics, including battery voltage, coolant temperature, powertrain malfunctions, intake valve issues, oxygen sensor problems, and more.
• Safety tracking: Managers can use fleet telematics to monitor vehicle speed and location, as well as harsh driving events and seat belt use. Telematics provides a digital blueprint of every aspect of a vehicle’s operation, helping fleet managers understand where improvements can be made in accident prevention measures and driver safety standards.
• Video telematics: Modern telematics platforms now incorporate AI-powered dashcams—both forward-facing and driver-facing—to provide visual context for road events. This allows managers to distinguish between reckless driving and necessary defensive maneuvers that might trigger a harsh braking alert. It provides the "why" behind the data, allowing for more effective driver coaching.

Learn how a fleet telematics solution can give you the insights you need to transform your business using our buyers guide.

Telematics beyond the fleet

Telematics applications have expanded into several other sectors outside of traditional commercial fleet management:

• Usage-Based Insurance (UBI)/Telematics Insurance: Insurance companies use telematics data to monitor driver behavior, allowing them to more accurately determine risk factors and adjust premiums based on actual performance rather than general demographics. See how driver scores and video help lower insurance and accident liability.
• Connected Services and Smart Cities: Beyond individual vehicles, telematics is a cornerstone of the Internet of Things (IoT). In a smart city ecosystem, anonymized telematics data helps urban planners optimize traffic flow, reduce congestion, and support car-sharing initiatives. By connecting vehicles to infrastructure—such as smart traffic lights—telematics helps create a more efficient and sustainable transportation network.
• Regulatory Compliance: Telematics plays a critical role in facilitating Hours of Service (HOS) compliance via Electronic Logging Devices (ELDs), ensuring drivers remain within legal driving limits for safety and accountability.

4 benefits of telematics in business operations

Telematics technology can help fleets achieve operational improvements in key areas:

1. Decreased fuel costs

Telematics can help identify areas of waste, such as vehicle idling or fuel slippage, and allow fleet managers to address them promptly, positively impacting fuel efficiency and the bottom line. It also can help management plan the most efficient route for each driver to reduce unnecessary mileage.

2. Improved safety

Continuous feedback regarding driving behavior lets fleet managers coach drivers and reduce unsafe driving habits such as speeding or harsh braking. Improvements can be made based on actionable, data-based reports that highlight driver performance and support new safety targets.

3. Elevated productivity

With near real-time telematics data, drivers can help avoid traffic delays and plan for inclement weather. Back-office managers can quickly and easily attribute any new or additional site visits to the nearest vehicle and instruct them on the most efficient route to get there.

4. Better payroll management

By tracking the precise time a vehicle starts at the beginning of the day to the moment it shuts down, fleet managers have an accurate, automated record of how long an employee worked. This helps business owners verify that employees are paid accurately for the hours they work while eliminating unnecessary time spent manually matching up timesheets to job tickets.

To see specific telematics use cases for your sector, view our industry applications.

Is telematics expensive?

It depends on the fleet management solution. Bare bones GPS tracking on a map is a relatively cheap option but provides very little actionable insight. Coupling a fully integrated fleet telematics solution with other technologies such as electronic logging devices (ELDs), dashcams, smart route planning, and advanced driver management costs more up front but provides a much bigger ROI. 

Better fleet visibility helps take stock of what a fleet has and how it’s being used. Customizable dashboards can make it easy to review progress towards KPIs or budgets, with near real-time fleet analytics provided by the fleet tracking system. In the long term, GPS fleet tracking can help uncover hidden costs while revealing potential for greater productivity and efficiency throughout an entire organization; which is well worth the investment. 

One company, Benson Systems, was able to reduce their insurance premiums by an estimated 15-20% using a telematics system. "Technicians know they're being watched through AI," says Dave Powell, Quality Assurance and Safety Director. "They know that they're being monitored, so they are less likely to drive recklessly.”

Want to calculate just how much a fleet telematics solution can help your fleet save? Calculate your savings potential now.

The future of telematics

Telematics is poised for exponential growth as new applications are developed to take advantage of modern GPS units and the widespread use of mobile devices. The next phase of the industry involves deep integration with ERP (Enterprise Resource Planning) and WFM (Workforce Management) systems. By merging vehicle data with back-office business software, companies can automate almost every aspect of their field operations. Additionally, more original equipment manufacturers (OEMs) are embedding these systems directly into vehicles at the factory level, ensuring that connectivity is a standard feature rather than an aftermarket add-on.

Telematics FAQs

• What is telematics in a car? It is the use of a device to monitor location and vehicle data, transmitting it to a central server for the owner or manager to review.
• What does telematics mean for insurance? It means your driving habits (speed, braking, time of day) directly influence the cost of your premium.
• Is telematics the same as GPS? No. GPS provides location data, whereas telematics involves the communication and interpretation of that data along with vehicle diagnostics.
• Is a telematics box the same as a black box? Yes, "black box" is a common term for the device (TCU) installed in a vehicle to collect telematics data.
• Can telematics lower your car insurance premiums? Yes, safe drivers often qualify for significant discounts by proving their safety through telematics data.

Now that you know the answer to “What is telematics,” are you ready to see for yourself how a fleet telematics solution from Verizon Connect can give you the insights you need to transform your business? Request a demo today.