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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
PwC Strategy& Connected Car Study 2016
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
PwC Strategy& Connected Car Study 2016
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
PwC Strategy& Connected Car Study 2016
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/
MavenShared Service
PwC Strategy& Connected Car Study 2016
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
PwC Strategy& Connected Car Study 2016
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
PwC Strategy& Connected Car Study 2016
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
PwC Strategy& Connected Car Study 2016
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
PwC Strategy& Connected Car Study 2016
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
PwC Strategy& Connected Car Study 2016
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
PwC Strategy& Connected Car Study 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
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
PwC Strategy& Connected Car Study 2016
Smoking the tires? Predictions for the automotive industry in the digital change
15
02
PwC Strategy& Connected Car Study 2016
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 $155.9bn in 2022
~40% will be included in the car’s list price; other 60% will mostly compensate the erosion of today’s cash cow extras
By 2022, 50% of potential will be in volume segment; this drives down prices and risks differentiation; margins shrink, R&D soars
For 2020-2030, autonomous will be most valuable feature to a car’s price and the competitive focus
Mobility services will outperform industry growth; OEMs will not learn the tricks of service platforms; margin potential uncertain
China’s digital customer hotbed, government support, technological drive will lead to strengthened role in building the connected car
PwC Strategy& Connected Car Study 2016
Profit pool available to today’s OEM/suppliers will shrink from 70% to 50%
17
11%
11%
5%
20%
2015
~ 400
41%
16%
11%
14%
14%
100%
2030
~600
29%
10%
10%
2030
~7,800
44%
13%
7%
10%
14%
8%
12%
14%
7%7%
10%
2015
~ 5,000
49%
100%
Insurance
Supplier (Tech/ Software)
Suppler (HW)
Financing
Aftermarket
Vehicle sales
Shared mobility
Digital services
REVENUE:
Share addressable by (today’s) OEM model declining to < 70%
Share addressable by new entrants (digital services, mobility, new
technology supply, fintech, start-up EV players) growing to > 45% or
3.5trn$
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
PwC Strategy& Connected Car Study 2016
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
PwC Strategy& Connected Car Study 2016
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
PwC Strategy& Connected Car Study 2016
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%)
$54.5bn(70%)
Mid
-Larg
eS
mall-
co
mp
act
2017 2022 2017 2022
Source: Strategy& analysis
2017-2022 Market Forecast by Car Size
Global market potential today geared to premium mid-large cars (~28bn$, more than 50% of the global total)
Mid-term, shift to mostly smaller brands
Key Observations
PwC Strategy& Connected Car Study 2016
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
PwC Strategy& Connected Car Study 2016
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
PwC Strategy& Connected Car Study 2016
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
Source: Strategy& analysis
PwC Strategy& Connected Car Study 2016
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%
PwC Strategy& Connected Car Study 2016
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
PwC Strategy& Connected Car Study 2016
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
PwC Strategy& Connected Car Study 2016
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
PwC Strategy& Connected Car Study 2016
Push to pass: Prescriptions for OEMs and suppliers to grow in a commoditizing world
28
03
PwC Strategy& Connected Car Study 2016
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
PwC Strategy& Connected Car Study 2016
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 ...
PwC Strategy& Connected Car Study 2016
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
PwC Strategy& Connected Car Study 2016
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
PwC Strategy& Connected Car Study 2016
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
Source: Strategy& analysis
PwC Strategy& Connected Car Study 2016
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
Source: Strategy& analysis
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
PwC Strategy& Connected Car Study 2016
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
PwC Strategy& Connected Car Study 2016
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
PwC Strategy& Connected Car Study 2016
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)
PwC Strategy& Connected Car Study 2016
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.
PwC Strategy& Connected Car Study 2016
Further data
40
Appendix
A one or two sentence
summary of the first
point you would like to
make in the
introduction.
A one or two sentence
summary of the second
point you would like to
make in the
introduction.
A one or two sentence
summary of the
third point you would like
to make in the
introduction.
PwC Strategy& Connected Car Study 2016
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%
PwC Strategy& Connected Car Study 2016
Differentiation of Connected Car Packages
Deep-Dive in key connected services areas
42
Connected Car Packages
Smart Mobility Services
Connected Car Features & ServicesConsumerServices (digital,cloud-based)
Supply-sideTechnologies
ADAS HMI
Connectivity, Computing &
Cloud, Enabling Services
Infotainment
Connected Car Packages
Smart Mobility Services
Connected Car Features & Services
Consumer Connected Car Features
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
Consumer Connected Car Features
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
…