2016 Strategyand Connected Car Study Short FINAL

The 2016 Strategy& Industry Report on Emerging Technology

Connected Cars: Wheelspinning –Surviving the Auto Industry Turmoil

September 2016

www.pwc.com/digitalStrictly private and confidential

PwC Strategy& Connected Car Study 2016 2

The 2016 Connected Car report creates insights for an industry in turmoil

2016 Strategy& Connected Car Report

Key Facts

Business model change: How to make money from connected car services as an

auto OEM, both from direct sales of services and from indirect benefits

Market forecast: Our latest 5 years forecast on the revenue potential for auto OEMs

from the sale of connected car packages – by region, segments and type of package

Supply-side view: A perspective on the large-scale changes impacting the suppliers

of connected car technology, including new alliances, new players, new economics

and a view on what it takes to succeed

Market focus – China: A deep-dive look on China from two angles: the Chinese

consumer as the most sophisticated digital “millennial” and the Chinese internet/tech

firms claiming their stake in the digital transformation

Cybersecurity: A critical analysis of Cybersecurity in an age of technology

complexity and fragmentation – can it ever be achieved?

Future technologies: Closing off with a long-term view on how the technologies that

are in the labs and prototypes today will create the future driving experience 2030+

Main Contents 5th annual Connected Car

study, developed by PwC Strategy&

Global study, focus on US, Europe, China

5 year market forecasts and detailed pricing benchmarks

>100 interviews with key industry executives: OEMs, suppliers, academia, analysts

I have not failed. I’ve just found 10’000

ways that won’t work.

THOMAS A. EDISON

3PwC Strategy& Connected Car Study 2016

“

PwC Strategy& Connected Car Study 2016

Today’s Connected Car context: Chicane ahead – industry profits at risk

4

01


The automotive industry is in unprecedented turmoil

5

Technology drives a sustained shift in the design and function of the car

Today’s Connected Car propositions do not meet customer expectations: too expensive, complex, unsexy

Aggressive consumer electronics, software and digital players grab stakes – even building cars on their own

OEMs and their distribution networks digitize slowly – but there is significant insecurity on timing, skills, expected returns

OEMs and suppliers invest in downstream businesses such as ride-sharing as a defensive move against disruption


Autonomous + Electrification → Vertical integration

Mobility/ride-sharing/ride-hailing

Connected Services

Digital platforms

Reduced # of physical touchpoints

Always-on service relationship

Omnichannel, eCommerce and personalization

IT Transformation – in particular back-end

Data analytics

Industry 4.0 – horizontal and vertical integration

between suppliers and partners

Revolutionary Phase:Disruptive Change

Digital

Enterprise

Digital

Customer

Experience

Investment

Priority

Digital

Products

and

Services

#1

#2

#3

Technology drives a sustained shift in the design and function of the car; autonomous/electrified/connected is #1 investment priority of OEMs

6

Revolution of the Automotive Industry


Continued high level of innovation (and spending) in connected cars; however, high spending required just to keep up with competition

7

2015 2016

Partnerships M&A activities Digital features

Ecosystem, “over-the-air” update, HMI

CarPlay and Android Auto Autonomous driving

Mercedes me connect USA expansion Several ridesharing M&A

50% revenue in digital until 2020 Partnerships

Mobility services on- and off-board E-vehicles and autonomous driving

Q4Q3 Q1 Q2

“Over-the-air” flash update

SpotifyIn-car augmented

reality game

Google – QNX entertainment

software

Apple – iCar Lab in Berlin

End of nego-tiations Apple / BMW / Daimler

US ridesharingVia smart

ridesharing

Mercedes me connect USA

expansion

Limousine service as-a-service

Amazon / Microsoft

Zonar Systemstelematics

Samsung memory chip

QualcommDigital download

platform50% revenue in digital until 2020

Amazon/ DHL in-car delivery

NVIDIAreplaceable

graphics chip

Personalized digital companion

Baidu autonomous driving

DeezerMINI augmented

visionExtension of

i-models

Chevrolet Nowpredictive

maintenance

Cruise Automation

autonomous driv.

Mobileyemapping

technology

Introduction of OnStar in Europe

Synchronossm-commerce

Connected services and apps Commercialization m-commerce

Recent Development Connected Car

Audi

Mercedes

Tesla

BMW

GM

Apple/

Google

MavenShared Service


OEM/Supplier view Customer view

Expensive and complex pricing

Complex / poor UX / uncool / HMI not competitive

Malfunctions / insufficient quality

Poor description

Blurry value add compared to smartphones

Today’s connected car services fail to meet anybody’s expectations –including customers’

8

High investments

Long time to market-readiness

Uncertain RoI

Totally differing skill sets

Challenges with impact on all company operations

New suppliers / competitors

Perceptions of the Connected Car


Suppliers, OEMs, tech firms increasingly compete on the same territory –redefining industry boundaries as they go

9

ConsumerServices (digital,cloud-based)

Supply-sideTechnologies

ADAS HMIConnectivity,

Computing & Cloud, Enabling Services

Infotainment

Connected Car Packages

Smart Mobility Services

Connected Car Features & Services

Consumer Connected Car Features

Commercial Connected Car FeaturesVehicle Management Features

SafetyAutonomous Driving

Car Sharing

Rental

Ride Sharing

Robotaxi Services

Travel: Hotels, Flights, Trains, C2C, ...

Content (Video, Music, ...)

Commerce, Payment

Communication, Social, Collaboration

Services: Health, Education, FinTech,...

Advertising

Enabling the use of consumer services

Fluid Boundaries

Other Services (used in-car)

Cars (Conventional or electrified), Pods, Personal Rapid Transit, ...

Current Roles (and

Strengths)

Internet & Tech

Companies;

Specialist

Service Firms

Auto

OEMs

Auto

Suppliers

Increasing

Competition

Increasing

Competition

Connected Car Technologies and Services


Despite modest R&D spending, Tesla has catapulted itself into the top three most innovative companies

10

Rank 2010 2011 2012 2013 2014 2015

R&D spending

1,000 rank 2015

% of revenue

2015

1 Apple Apple Apple Apple Apple Apple 18 3.3%

2 Google Google Google Google Google Google 6 14.9%

3 3M 3M 3M Samsung Amazon Tesla 273 14.5%

4General Electric

General Electric

Samsung Amazon Samsung Samsung 2 7.2%

5 Toyota MicrosoftGeneral Electric

3M Tesla Amazon 7 10.4%

6 Microsoft IBM MicrosoftGeneral Electric

3M 3M 80 5.6%

7Procter & Gamble

Samsung Toyota MicrosoftGeneral Electric

General Electric

36 2.9%

8 IBMProcter & Gamble

Procter & Gamble

IBM Microsoft Microsoft 4 13.1%

9 Samsung Toyota IBM Tesla IBM IBM 26 5.9%

10 Intel Facebook Amazon FacebookProcter & Gamble

Toyota 8 3.7%

Automotive OEM Major Technology companies

Source: Strategy& 2015 Global Innovation 1000 analysis

10 Most Innovative Companies

Comments

Top automotive companies mostly

absent from “most innovative” ranking

despite being top spenders

Toyota in steady decline, Tesla taking

share from all


Key Trends Automotive Digital Supply Market

The automotive supply chain is changing dramatically – driven by new entrants and big bets in new technology areas

11

Accelerated incorporation of more intelligent and connected features in the vehicle and

huge demand for advanced digital technology for safety, infotainment and convenience

New entrants from outside

the automotive are vying

for a piece of action

Traditional automotive

players betting on

new technologies

Traditional automotive players

working to obtain new and improved

capabilities

Technology enters the car that has roots in other industries (Consumer electronics, software, cloud)

Players from other industries benefit from scale and learning curve effects from outside the automotive industry

Gain access to relevant technologies that become increasingly important within the automotive

Make up for gaps in the technology portfolio and the innovation pipeline through acquisitions or partnerships

Capability gap around software development and artificial intelligence

Rapid innovation process for software in sync with hardware

Trial and error mentality vs. security culture


Source: Strategy& analysis, IHS, Statista

Entrance of Software and Consumer Electronics Players

Entrance by aggressive software and consumer electronics firms – with substantial scale advantages against traditional auto players

12

Sales of mobile electronics vs. car

Units sold (globally, in million)

725

495

305 286276260250230220

2 474645444646454443

1,5801,433 1,435

2014 2017*2016*2015

1,302

20132011

76

2010 2012

1,020

145

1,873

2018*

TabletsSmartphones Cars

Importance of electronics in the car is increasing

Technologies diffuse from consumer electronics

products into cars (e.g., touch screen, voice

recognition and gesture control) and technology

companies benefit from learning curve

Scale advantages for companies active in mobile

electronics

Examples of consumer electronics companies that

entered the automotive market: Apple, Google,

Samsung, LG


Investment from Tech Firms in Automotive

These firms acquire key talent from OEMs to augment their strengths

13

Organizational changes Talent R&D

Google Android Auto

Self-driving car project teams

Open Automotive Alliance

Hired former Hyundai and TrueCar

executive

>300 automotive related patents

(mostly autonomous)

Apple Building secretive automotive

division

Hired ~1,000 automotive engineers

Hired former CEO of Mercedes-Benz R&D

Hired Tesla’s top autonomous engineer

Opened new “top-secret” R&D lab

Have ~40 automotive related patents,

e.g. programmable touch screens and

automatic environment configuration

Samsung Created automotive division Employs ~20 people on infotainment

Trained 50 executives in autonomous

Reallocates substantial funds into

auto R&D

All players benefit from their experience in the consumer

electronics industry and the deep knowledge of the

customer preferences

Source: Strategy& analysis, industry interviews

“Our impression was that these companies can do more and know more than we had previously

assumed. At the same time they have more respect for our achievements than we thought”

Dieter Zetsche, CEO Daimler, 2016


Lyft

GM

Didi

SidecarCruise

Automation

Apple

Apple invested $1 billion in

Chinese ride-hailing

company Didi, which

partners with Lyft

GM invested $500

million in Lyft and bought

Cruise Automation for $1

billion

VW hired the head

of Apple’s car

project who

previously worked

at Daimler

Finally, we observe strong venturing into mobility-related M&A and talent deals – with high risk of failure

14

Google

FCA

Toyota

Tata

Microsoft

Uber Nokia

HERE

Daimler

Car2Go

RideScout

MyTaxi

Blacklane

Scoop

DriveNow

Baidu

BMW

VW

Gett

DFKI

Uber hired

Google’s VP of

engineering

Uber hired Ford’s

head of electronic

systems engineering

to become VP of

global vehicle

programs

Daimler founded

Car2Go and

acquired MyTaxi

and RideScout

Daimler invested

in Blacklane, an

app for booking

chauffeurs

VW, BMW and

Daimler partnered

to buy Nokia’s

HERE maps

DriveNow is a joint

venture between

BMW and Sixt

Rent a Car

VW invested $300

million in taxi-

hailing company

VW owns a stake

in the German

Research Center

for Artificial

Intelligence (DFKI)

Investment Partnership Personnel move Failed talks

Rideshare company Carmaker Technology company

Emerging Entanglements between OEMs and Mobility/Rideshare Firms

Source: Bloomberg

Multiple investments by OEMs and suppliers

Need for OEMs for a binary decision: all-in or get out

Many OEMs are unlikely to be successfully learning the tricks of service platforms

Uncertain margin potential: it could be a high-value-add data-driven or a low-margin retailing of commodity products business

Key Observations

Ford


Smoking the tires? Predictions for the automotive industry in the digital change

15

02


We expect a major profit squeeze for traditional players

16

Profit pools to OEMs decline from ~70 to <50% of industry value driven by technology

Light vehicle revenues from connected services grow from $53bn in 2017 to $155.9bn in 2022

~40% will be included in the car’s list price; other 60% will mostly compensate the erosion of today’s cash cow extras

By 2022, 50% of potential will be in volume segment; this drives down prices and risks differentiation; margins shrink, R&D soars

For 2020-2030, autonomous will be most valuable feature to a car’s price and the competitive focus

Mobility services will outperform industry growth; OEMs will not learn the tricks of service platforms; margin potential uncertain

China’s digital customer hotbed, government support, technological drive will lead to strengthened role in building the connected car


Profit pool available to today’s OEM/suppliers will shrink from 70% to 50%

17

11%

11%

5%

20%

2015

~ 400

41%

16%

11%

14%

14%

100%

2030

~600

29%

10%

10%

2030

~7,800

44%

13%

7%

10%

14%

8%

12%

14%

7%7%

10%

2015

~ 5,000

49%

100%

Insurance

Supplier (Tech/ Software)

Suppler (HW)

Financing

Aftermarket

Vehicle sales

Shared mobility

Digital services

REVENUE:

Share addressable by (today’s) OEM model declining to < 70%

Share addressable by new entrants (digital services, mobility, new

technology supply, fintech, start-up EV players) growing to > 45% or

3.5trn$

PROFITS:

Share addressable by OEM declining from ~70% to <50%

Share possibly captured by new entrants growing to 60% or 360bn$

Note: Non-consolidated view: supplier value pools not eliminated from vehicle/aftermarket revenues to show full industry value pools

Source: IHS, Autofacts, Frost & Sullivan, KPMG, HBR, Bain, McKinsey, NHTSA, Technavio, National Automobile Dealers Association, OEM reports, Capgemini, Thomson Reuters, Gartner, Oxford Economics, Strategy& analysis

Revenue scenario (bn$) Profits scenario (bn$)

Automotive Industry – Global Value Pool Shifts


While connected car 2022 market value almost triples 2017’s potential ...

18

Automotive Industry – Global Value Pool Shifts

17.6

(33%)

20.7

(39%)

14.3

(27%)

155.9

42.8

(27%)

54.9

(35%)

2022 FC

CAGR24.3%

58.2

(37%)

2017 FC

52.5

17.7

(39%)

2015

10.5

(23%)

16.8

(37%)

35.5

8.3

(23%)

45.0

13.6

(38%)

13.6

(38%)

2016

Autonomous DrivingSafety Connected Services

= Compound Annual Growth Rate; Source: Strategy& analysis


Source: Strategy& analysis

2017-2022 Market Forecast by Volume/Premium Segment

... most growth happens in the volume segment – at the expense of margins

19

52.5

0

20

40

60

80

100

120

140

160

In bn$

Premium

33.8

(64.4%)

Volume

18.7

(35.6%)

Total

155.9

0

20

40

60

80

100

120

140

160

Premium

77.8

(49.9%)

Volume

78.1

(50.1%)

Total

In bn$

20222017

Connected car packages today focused on premium vehicles ($33.8bn, i.e. 64.6% in 2017)

Volume market overtakes premium by 2022: 50.1% of the total potential

76.5% of connected car packages sold in the market will be volume-centric at lower prices in 2022 (62.3% in 2017).

Key Observations


Small cars increase share in connected car sales – adding to price pressure

20

Volume Premium

$10.3bn(55%)

$8.4bn(45%)

$6.2bn(18%)

$27.6bn(82%)

$52.0bn(67%)

$26.0bn(33%)

$23.3bn(30%)

$54.5bn(70%)

Mid

-Larg

eS

mall-

co

mp

act

2017 2022 2017 2022


2017-2022 Market Forecast by Car Size

Global market potential today geared to premium mid-large cars (~28bn$, more than 50% of the global total)

Mid-term, shift to mostly smaller brands

Key Observations


Connected Car Package Sales

For this, OEMs need to successfully sell >300 million connected car packages

21

2017

2018-2021

2022[ mn/year]

Connected Car packages sold per

month end of 2016

1.4mn/month 8.2mn/month

Connected Car packages sold per

month end of 2022

~6 x

Connected Car

Package Sales

from 2017-2022 In 2016, 1.4mn connected car packages

have been sold monthly globally

By 2022, this will have to increase almost 6 times to 8.2mn packages sold per month

Few OEMs, NSCs or dealers are ready for the resulting massive sales and distribution challenge; in particular, volume players, but also in-house IT seem in many cases unequipped to deliver the services at the right level of quality

In total, approx. 321mn packages will have to be sold between start of 2017 and end of 2022

Key Observations


Rank Company2015 R&D

Spending ($B)

Change from

2014% of revenue

1 Volkswagen 15.3 13% 5.7%

2 Samsung 14.1 5% 7.2%

3 Intel 11.5 9% 20.6%

4 Microsoft 11.4 9% 13.1%

5 Roche 10.8 8% 20.8%

6 Google 9.8 24% 14.9%

7 Amazon 9.3 41% 10.4%

8 Toyota 9.2 1% 3.7%

9 Novartis 9.1 -8% 17.3%

10 Johnson & Johnson 8.5 4% 11.4%

11 Pfizer 8.4 26% 16.9%

12 Daimler 7.6 9% 4.4%

13 General Motors 7.4 3% 4.7%

14 Merck 7.2 -4% 17.0%

15 Ford 6.9 8% 4.8%

16 Sanofi 6.4 1% 14.1%

17 Cisco 6.3 6% 13.4%

18 Apple 6.0 35% 3.3%

19 GlaxoSmithKline 5.7 -7% 15.0%

20 AstraZeneca 5.6 16% 21.4%

Honda fell to #21 $176.5 9% 8,4%

Avg. new car price mostly flat

Investment into new digital technology primarily

a defensive element/ substitutes legacy features

2017

8%

50,862$

2022

52,899$

14%

High likelihood that R&D/M&A will eventually squeeze OEM profits

22

Significant Expansion of R&D (but low differentiation) Limited Returns Tomorrow

Remaining CarConnected Car Features

New car price in premium segment

Source: Strategy& 2015 Global Innovation 1000 analysis, Bloomberg data, Capital IQ data


Autonomous will reshape the industry; but full version not before 2025

23

2025 and

Beyond2020-20252015-20202005-2015Pre 2005

Early-stage single-function technologies (Adaptive Cruise Control)

ADAS systems get bundled together; and costs decline in price (<$1000 for past functionality)

ADAS bundles include multifunction systems; price for Level 1 and 2 systems continues to fall

Multi-function systems become more capable; Cloud and external systems play a greater supporting role

Full autonomy is introduced; driverless cars gradually take hold; cloud services are now vital

Regulatory framework develops

Technical

Capability

Cost and Go-

to-Market

Adoption

Costly standalone options ($1500+)

Top of Premium segment only (Mercedes S600, Lexus LS)

Availability on mainstream brands

Single-function systems usually standard equipment on premium brands

Single-function systems

Multi-function systems become available (Level 2); move toward semi-autonomous driving (Tesla Autopilot)

Migration to standard or low-cost equipment on mainstream brands; 55% of all global vehicle sales expected to have some ADAS capability by 2020

Premium segment close to full autonomy but still needs driver (Level 3); 71% of vehicles sold in 2025 expected to have some ADAS capability

By 2030, adoption of full autonomy is expected to be <30%; coexistence with non-autonomous cars will be a factor for years afterward

Systems are cost-engineered for mass adoption, but number of systems increase; overall cost goes up

Expected Timeline Autonomous Driving

Autonomy as key defining feature of car competition between 2020 and 2025

Adoption will start from top premium brands but quickly trickle down

Key Observations



Consumers look forward to autonomous – supporting bullish scenarios

24

Q: Willingness to buy a fully-autonomous car

Autonomous – Consumer Preferences (Example China)

85%

36%

49%

Extremely eager

to have one

Eager to

have one

Q: How are you most likely to spend your time using a fully-autonomous car?

Sleep/rest

Office work

Meeting

Spend time with my family

Still would like to keep an eye on road

Dine

20%

Entertainment

32%

21%

35%

35%

55%

58%


However, even by 2025, only ~8% of new vehicles will be truly autonomous

25

5645

32

21 3650

16 230

0

20

40

60

80

100

120

Level 3

Level 4

Level 2

113

2025

100

3 0

Level 1

Level 0

2014

85

80

Millions of Vehicles

71

2020

ADAS Penetration – Global(by NHTSA Autonomy Level, Millions of Vehicles)

Source: IHS Automotive ADAS Report, Strategy& analysis


Autonomous Driving Evolution of Technologies

... and Autonomous eventually shifts towards a commodity as well

26

2016 2020 2025Pre-Collision Braking

Lane Keeping Assist

Adaptive Cruise Control

Blind Spot Monitoring

Cross-Traffic Alert

Adaptive High Beams

Automated Lane Change

Traffic Sign Recognition

Assistive Parking

Traffic Jam Assistant

Highway Autopilot (Single-Lane)

Fully Autonomous Valet Parking

Predictive Suspension Damping

Predictive Gear Change

Intersection Movement Assist

Urban Autopilot

Predictive Automated Re-Routing

Full AutonomyConceptual design

Development Level 1 implemented in 100% of cars; Level 2 and

Level 3 available in all segments New cloud-based services available, e.g. predictive

re-routing Big drop in prices for sensors and components;

change in vehicle architecture

Volume Segment

Premium Segment

Today Volume segment: single-function systems, e.g.

adaptive cruise control (Level 1) Premium segment: multi-function systems, e.g.

traffic jam assistant (Level 2) or semi-autonomous (Level 3); sensors are widely used

Fast development of technology


China will eventually take a stronger role in global connected car innovation, putting further pressure on established players

27

Chinese digital consumers

Millennials covering almost 1/3 of total

China population grew up with the

Internet, and they are heavy users of all

things digital

About 92 percent of Chinese aged 18 to

30 own smartphones, well above the

global average of 67 percent

Government support

In 2015, country’s State Council

announced 10-year plan, called ‘Made in

China 2025’, with the goal of

transforming the country into an

innovation hub

The Chinese government is very actively

supporting domestic companies working

on connectivity and renewable-energy

technologies, with the hope of making

them industry leaders, both locally and

globally

Tech firm push

New Entrants disrupt the mobility concept

in China and directly compete with OEMs

for customers and customer data

Two of the country’s largest tech

companies, Baidu and Alibaba, are

already pushing hard to develop their own

platforms for connected cars

Key Factors Driving Connected Car


Push to pass: Prescriptions for OEMs and suppliers to grow in a commoditizing world

28

03


What should OEMs and suppliers do?

29

1. Need to think of connected/autonomous car as a transformation of the business, not as extra features

2. Choose where you compete; if so: accelerate innovation, skills change-over, partnerships; Many may decide to leave the field to others

3. Do not enter businesses that require a scale you don’t have; rather provide seamless integration convenience

4. Form tech partnerships in areas that require fast time-to-market; Invest in selective M&A; Innovate in-house where you have lead-time

5. Accelerate shift to software, services, partnership-based models; resolve infighting between traditional and “digital” R&D


Digital technologies drive a business transformation (and are not just extra features); the faster will beat the bigger

30

Technology Shifts and Business Model Implications

Cloud and IoT Global and instant services

Separation of services, data, SW and HW

Analytics, machine learning

Dynamic intelligence

Automated predictive actions

Digital access to end customer

Direct access to end customers

Higher customer interaction frequency

APIs and Platform Models

Shared investments

Shorter time-to-market & fast entry

Asset-light Businesses

Low invest and global scale

Instant access to capabilities

“Digital”

Technologies

... leading to ...


Auto manufacturers need to shift their biz model from one-off transactions to customer lifetime value, simplicity and experience bundles

31

Current/Legacy Paradigm

Product/

Feature

Focus on the physical product;

Product/driver more important

than the person

Transaction

(Volume × Price)

Success (and company KPIs)

focused on transactional sales

and high sales volumes

Yield Management

Thinking on product lines and

features driven by need to

maximize yield from customers

Long tail

Complex options sets allow

self-selected adjustments of cars

to individual preferences

Future Target Approach

Service

Develop recurring services that

provide lifecycle benefits on top of

the physical product

Relationship (CLV)

Develop customer lifetime value

through emotional relevance and

cross-/upselling

Simplicity of

Experience

Focus on very few mainstream

offerings that cover 90% of the

population with maximum ease

Bundles

Think about experience bundles

that combine the strongest assets;

kill the rest of complexity

Paradigm Shift in the Automotive Industry


Sale of Connected

Car Packages to

Consumers (mostly

one-off bundled with

the car)

Today‘s Cash Flow OpportunityAttractiveness

Use of Connected

Car data to

increase efficiency,

quality and product

differentiation

Defend list price

levels through

differentiation from

connected services

and customer lock-

in/loyalty

Establish a two-

sided ecosystem

of consumer

services and earn a

revenue share

Digital option

value: build a

„digital customer

base“ that may be

monetized through

future, as yet

unknown business

models

OEMs need to understand the trade-offs between monetization levers; in particular, long-term opportunities are different from short-term cash cows

32

+ + + +

Connected Car Value Creation Levers


Choose carefully whether you compete in smart mobility

33

Organized P2P E-Hailing CarpoolingParking-

sharingIntermodal

Ride-hailingCar-sharing

Company’s

owned fleet

available for

part-time

renting

Either station

based or free

floating

Existing car

owners make

their vehicles

available for

others to rent

for a short

periods of time

Ordering a

transportation

pick up via

virtual devices

Typical for in-

city travels

(mainly taxy

rides)

Booking seats

on private-car

routes for

town-to-town

travels

Private parking

spaces renting

for short

periods of

time, typically

below a day-

long

Combination

of multiple

ways of public

and private

transportation

Enables door-

to-door

traveling

Alternatives to Car Ownership

• Initial car-sharing models have had generally limited impact on global car markets so far except in few specialized pockets

• Key motivation so far in combination of reducing CO2 footprint and acquiring younger customers for premium cars

• Emergence of ride-hailing, parking apps and intermodal approaches has led to significant growth of asset-light service models

Key Observations



3rd party ride-hailing firms have more scale, scope and speed

34

Uber PoolUber Rush &

Uber Cargo

Uber Eats &

Uber EssentialCarpooling

Parking-

sharingIntermodal

Carpooling

Split the cost of

a ride with

strangers

Goods delivery

Offered in

partnership with

shops

Food and basic

need items

delivery service

Offered in

partnership with

shops

allows

passengers to

view news and

weather

forecasts during

journey

Offers

advertisers

platform for

product

placement

Provides

merchants with a

software that

enables delivery

of goods within

one hour

Mytaxy

integrated to the

multimodal

platform Moovel,

which also owns

the car sharing

service Car2Go


Diversification Moves by Selected Ride-Hailing Firms

• Leading ride-hailing firms will continue to be faster and operate at more scale:

– Geographic scale

– Globally uniform and multi-brand operations

– Functional scope by venturing into logistics, B2B use cases

• OEMs and suppliers will have a hard time matching these efforts

Key ObservationsUBER MyTaxi


Source: Bloomberg, publications, analyst estimates, Strategy& estimates and analysis; Note: latest available data, partially 2015, partially 2016

300m30m 60m 75m 100m 1900m 1600m 800m 300m

Transactions/

Rev Share

Transactions/

Rev Share

Transactions/

Rev Share

Subscription Subscription Advertising Advertising Hardware/

Software/

Services

eCommerce/

Hardware/

Services

User

Base

Business

Model

Market

Cap 36bn68bn 25bn 50bn 9bn 570bn 300bn 600bn 330bn

Comparison of Market Cap/User and Revenue/User (2015/2016)

Mobility M&A is very expensive – multiples far in excess of other digital

35

760

190300

85

660

425

120

1,100

2,300

350290

10401790

151

130

x18 x150 x28 x7 x5 x8 x19 x3 x3

Market

Cap/User

Sales/

User

Successful mobility players with outsized market cap/ user

Value expectation attracts best talent and smart capital

Long-term growth fantasy further supported by autonomous driving

Key Observations

Uber Didi Airbnb Netflix Spotify Google Facebook Apple Amazon


On the supply side, beware new competitors’ agility, focus and resources

36

Large and slow

Complex dependencies between suppliers

Fragmented core competencies

Lack of skills in new technologies

Less customer centricity

Regulated

High cash flows

Small and agile

Highly integrated

Dynamic integration on software level – “API”

Technology and software driven best-in-class talents

Strong human-centered design

Less regulated

Continuous pursuit of new profit potentials

OEMs/ Traditional Suppliers

New Competitors

Advantages of New Competitors Compared to OEMs for Digital Challenges


Emerging Cooperations of OEMs with Tech/CE Firms – Examples

Continue to accelerate “new” of technology partnerships/ break old ones

37

ADAS Infotainment HMI Communication,

Computing

& Cloud

Enabling Services

Connected Vehicle

Services

Connected Device

Services

OEMs GM: Cruise Automation (2016)Audi/Daimler/BMW: Here (2015)Volvo: Peloton (2015)BMW & Intel & Mobileye (2016)Hyundai & Cisco (2016)GM & Mobileye (2015)VW & Mobileye (2015)Audi & NVidia (since 2005)Bosch & TomTom (2015)

Ford: Livio (2013)Audi & NVidia (since 2005)

Daimler & Qualcomm (2015)Hyundai & Cisco (2016)Toyota & KDDI Corp (2016)

Volvo & Microsoft (2015)Nissan & Microsoft Azure (2016) Ford & Microsoft Azure (2015)BMW & Pivotal (2015)Ford & State Farm (2012)

GM: Sidecar (2016)Daimler: mytaxi (2014)BAIC: Didi Kuaidi (2015)BMW: RideCell (2014)BMW: Zendrive (2014)Ford: Pivotal (2016)GM: Lyft (2015)GM: Telogis (2014)Toyota: Uber (2016)VW: Gett (2016)Toyota & Microsoft (2016)BMW & Microsoft (2016)Seat, Samsung, SAP (2016)BMW & Baidu (2015)

Traditional

Suppliers

ZF: TRW (2015)Continental: Elektrobit (2015)Continental: ASC (2016)Delphi: Ottomatika (2015)Bosch: ADASWorks (2016)Delphi: Quanergy (2015)Valeo & Mobileye (2015)

Harman: S1NN (2014)Harman: Symphony Teleca (2015)Harman: aha (2010)Continental: Elektrobit (2015)Harman & Luxoft (2011)Harman & Microsoft (2016)

Continental: Elektrobit (2015)Valeo & Safran (2013

Bosch: ProSyst (2015)Valeo: Peiker (2015)

Harman: TowerSec (2016)Harman: Redbend SW (2015)Valeo & Capgemini (2015)

Harman: Aditi (2015)

New entrants

from outside

automotive

Nvidia: ADASWorks (2016)Panasonic: Ficosa (2014)Google: FCA (2016)

Others include:ADASWorks, Baselabs, Vector, Velodyne, Wind River

Others include:Apple, Google, Baidu

Intel: Omek (2013)

Others include:Kyocera, LG, Fujitsu, Toshiba, Atmel,

Cisco, NXP: Cohda Wireless (2013)

Others include:Kymeta, Cohda Wireless, Veniam,

Verizon: Hughes (2012)Airbiquity & Arynga (2016)

Others include:Airbiquity, Progressive, Verisk, Allstate, Trimble, Fleetmatics, Pivotal, SiriusXM

Airbiquity & Arynga (2016)Daimler Moovel & IBM (2014)

Others include:Uber, Lyft, Airbiquity, Dash, Apple, Google, Contigo, mycartracks, iTrack

Legend: Select market players Buyer: Target (Year) Investor: Company (Year) Partner & Partner (Year)


Get in touch

38

Marco Fischer

Director PwC China

Joachim Mohs

PartnerPwC Germany

Jonas Seyfferth

PrincipalStrategy& PwC Germany

Felix Kuhnert

Partner PwC Germany

Alex Koster

PartnerStrategy& PwC Switzerland

Evan Hirsh

Principal Strategy& PwC US

Dietmar Ahlemann

PartnerPwC Germany

Stefan Bratzel

DirectorCenter of Automotive Management

Richard Viereckl

Senior PartnerStrategy& PwC Germany

Key Contributors 2016 Connected Car Study

PwC Strategy&

Thank you!

39

© 2016 PwC. All rights reserved. Not for further distribution without the permission of PwC. “PwC” refers to the network of member

firms of PricewaterhouseCoopers International Limited (PwCIL), or, as the context requires, individual member firms of the PwC

network. Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not

provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it

control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or

omissions of any other member firm nor can it control the exercise of another member firm’s professional judgment or bind ano ther

member firm or PwCIL in any way.


Further data

40

Appendix

A one or two sentence

summary of the first

point you would like to

make in the

introduction.


summary of the second

point you would like to

make in the

introduction.


summary of the

third point you would like

to make in the

introduction.


West EUGlobal market share

34.1% (2017)

↓ 33.1% (2022)

N5Y Market Forecast on a Regional Level (2017-2022)

West EU and USA remain largest single markets

41= Compound Annual Growth Rate; Source: Strategy& analysis

USAGlobal market share

36.7% (2017)

↓ 32.6% (2022)

JapanGlobal market share

5.7% (2017)

↑ 6.2% (2022)

BRICGlobal market share

23.5% (2017)

↑ 27.3% (2022)

52.8

17.9

0

20

40

60

In bn$

2017 2022

+24.2%

+

50.8

19.3

0

20

40

60

2022

+21.4%

2017

In bn$

9.63.0

0

20

40

60

In bn$

2022

+26.2%

2017

42.6

12.4

0

20

40

60

20222017

In bn$

+28.0%


Differentiation of Connected Car Packages

Deep-Dive in key connected services areas

42



Connected Car Features & ServicesConsumerServices (digital,cloud-based)

Supply-sideTechnologies

ADAS HMI

Connectivity, Computing &

Cloud, Enabling Services

Infotainment



Connected Car Features & Services


Commercial Connected Car Features

Vehicle Management Features

SafetyAutonomous

Driving

Car Sharing

Rental

Ride Sharing

Robotaxi Services

Travel: Hotels, Flights, Trains, C2C, ...

Content (Video, Music, ...)

Commerce, Payment

Communication, Social, Collaboration

Services: Health, Education, FinTech,...

Advertising

Enabling the use of consumer services

Fluid Boundaries

Other Services (used in-car)

Cars (Conventional or electrified), Pods, Personal Rapid Transit, ...

Autonomous Driving Real-time-Onboard-Navigation

Direct traffic interaction

Motorway assistant/pilot

Congestion assistant/pilot

Park assistant/pilot

Driver monitor / Fatigue assistant

Traffic sign detection/recognition

Active driving assistance

Adaptive cruise control

…

Safety eCall / bCall

Automatic collision detection

Geo Track/ Fence

Passenger-initiated emergency assistance

Central danger warning

Automatic standstill braking

Collision protection

Collision Car-to-Car communication

Vital assistant

…

NON EXHAUSTIVE


Commercial Connected Car Features

Vehicle Management Features Analyzing driving behavior

(forward-looking, fuel efficient driving)

Breakdown support/ roadside assist

On-the-go driver communication

Real-time data access/monitoring

Recall Management

Car sharing assistant

Car sharing assistant

Cost-optimized refueling

Communication Wi-Fi Hotspot

Intermodal mobility planning / booking

Intermodal route planning / routing

Ad hoc carpooling

Fleet optimization

Fleet performance reporting

Business functions

Business functions

eMobility solutions

Navigation

Insurance

Communication

Payment/tolling

Walk-to-car directions

Live vehicle tracking

Remote vehicle control (e.g. locks, starter)

….

Driving behavior based leasing

Personal cloud

Well-being

Home integration

…

Contacts, calendar

Customized promotions

…

2016 Strategyand Connected Car Study Short FINAL

Documents

Transcript of 2016 Strategyand Connected Car Study Short FINAL