Independent Research, Indispensable Results · • 1997 –Toyota Introduces The First...

PAGE 1Independent Research, Indispensable Results

Independent Research,

Indispensable ResultsA Transformative Shift Towards Electric Vehicles and Autonomy

PRESENTERS: GARRETT NELSON & ANGELO ZINO

DECEMBER 17, 2019


Agenda

• About CFRA

• Electric Vehicle Outlook

• Autonomous Vehicle Outlook

• Semiconductor Automotive Outlook

• Questions


Our History

More than 90 years of innovation and growth as an independent research firm.

CFRA

Founded

09’ 11’

201 20161927 1994 2006 2007 2009 2010 2013 2016 2019 Today

Legal

Edge

Launched

CFRA

Sold

To Risk

Metrics

S&P

Global equity coverage begins

MSCI

Acquired

Risk

Metrics

S&P Equity and Fund Research

Acquired by CFRA

CFRA

Acquired

from MSCI

CFRA

Is one of the world’s

largest Independent

research firms

CFRA

Acquired

First Bridge

Data


Proprietary Methodology Engine

CFRA blends fundamental equity with forensic accounting

• Weekly market commentary, sector insights and portfolio

guidance

• Robust analysis covering 11 sectors and 68 industries

• Unique holdings-based analysis covering 1,800+ ETFs and

mutual funds

• Qualitative research of 1,500 global companies; quantitative

coverage of 25,000+ global companies

• Diagnostic industry and company monitoring for risk

assessment

• Investigative insights utilizing forensic accounting, legal and

exception-based insights


Independence

Research is all we do.

CFRA does NOT manage money or make trades

Many independent investment research providers

claim to be free of conflicts but are NOT


Electric Vehicle Outlook

Garrett Nelson, Senior Equity Analyst


Electric Vehicles

Sources: CFRA, Pxhere.com.


A History of Electric Vehicles (EVs)

• Late 1820’s / Early 1830’s – Anyos Jedlik (Hungary) Invents First Small Scale EV, Robert

Anderson (Scotland) Develops First Crude EV

• 1889 – William Morrison Creates First Successful EV in U.S.

• 1900 – EVs Account For Roughly 33% of All Vehicles on the Road in U.S.

• 1901 – Ferdinand Porsche Invents First Electric Hybrid Car

• 1908 – Ford Introduces the Gas-Powered, Mass Market Model T

• 1913 – Ford Introduces First Conveyor Belt-Based Assembly Line, Significantly Reducing Costs

• 1910’s / 1920’s – Discovery of Cheap Texas Crude Oil Makes EVs Nearly Obsolete By 1935

• 1970’s – Clean Air Act is Passed, Oil Prices Soar, Reviving Interest In Alternative Fuel Vehicles

Sources: CFRA, U.S. Department of Energy.


A History of Electric Vehicles (EVs)

• 1990’s – New Government Regulations Renew Interest in EVs

• 1996 – GM Releases EV1 Which Quickly Gains A Cult Following But is Unprofitable

• 1997 – Toyota Introduces The First Mass-Produced Hybrid (The Prius)

• 2000’s – Oil Prices Soar, Again Reviving Interest In Alternative Fuel Vehicles

• 2003 – Silicon Valley Startup Tesla Motors Founded With Goal of Producing EVs

• 2008 – Tesla Introduces Roadster EV

• 2010 – Nissan Releases First EV (Nissan Leaf), GM Releases First Plug-In Hybrid (Chevy Bolt)

• 2010’s – Battery Costs Drop By 50% Due to Innovation and Investments By DOE

Sources: CFRA, U.S. Department of Energy.


Global EV Sales Being Driven by Battery EVs

0

1,000

2,000

3,000

4,000

5,000

6,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Battery Electric Vehicles Plug-In Hybrids

Global EV Sales Volume(units in thousands)

Global EV Stock(units in thousands)

• In 2018, global EV sales totaled 1.98M units (1.35M BEV and 630K PHEV), a 68% yr/yr jump, which increased total global EV stock to 5.12M units

– 78% growth for BEVs (Tesla Model 3 introduced in late 2017) and 50% for PHEVs

Sources: CFRA, EVAdoption.com.

8119

546

752

1,174

1,975

0

500

1,000

1,500

2,000

2,500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Battery Electric Vehicles Plug-In Hybrids


Consumer Reports Survey Results

• 36% of Prospective Car Buyers said they Would Consider Buying (31%) or Would Definitely Buy (5%) a Plug-in EV within the next two years

• Interest in owning an EV is highest among consumers with an annual income of $100,000+

• $100,000 or more - 39% (Would Consider Buying 34%, 5% Would Definitely Buy)

• $50,000-$100,000 - 38% (Would Consider Buying 33%, 5% Would Definitely Buy)

• Less than $50,000 - 32% (Would Consider Buying 28%, 4% Would Definitely Buy)

• Top factors that would make an EV purchase more likely:

• Lower purchase price - 59%

• Longer driving range - 51%

• Lower operating costs - 39%

• Shorter charging time - 36%

• 75% said that incentives and tax rebates for EVs should be available to all buyers; 63% said their state should make it easier for consumers to purchase EVs

Sources: Consumer Reports and Union of Concerned Scientists survey of 1,659 U.S. adults conducted between 4/8/18-4/19/19. Margin of error = 2.4%

.


EVs: What The Experts Are Saying

• Former Fiat Chrysler Chairman & CEO Sergio Marchionne

– “I hope you don’t buy it (the Fiat 500e) because every time I sell one it costs me $14,000.” -May 21, 2014

– “I don’t know of a company that is making money selling electric vehicles unless you are selling them at the very, very high end of the spectrum.” -January 15, 2018

• Tesla CEO Elon Musk

– “You have to match the convenience of the gasoline car in order for people to buy an electric car.” -June 28, 2017

• Ford Chairman Bill Ford Jr.

– “Electrification is here to stay. History will show whether it was smart or not (to talk about plans) but it’s important to signal where we’re going.” -January 15, 2018


Expiring Tax Credits: Winners & Losers

• Internal Revenue Code Section 30D provides a federal tax credit for Qualified Plug-in Electric Vehicles

– EV purchases are eligible for a $7,500 federal tax credit until the manufacturer has sold a total of 200,000 eligible EVs on a cumulative basis for sales beginning January 1, 2010

• The credit begins to phase out over a 12-month period at the beginning of the second calendar quarter after the manufacturer has sold 200,000 vehicles, as announced by the IRS

– The credit declines to 50% of the original amount ($3,750) over the first six months and to 25% of the original amount ($1,875) over the following six months

• Companies which have sold 200,000 EVs and phase out period dates:

– Tesla: January 1, 2019 – December 31, 2019

– General Motors: April 1, 2019 – March 31, 2020

• Other automakers’ cumulative EV sales in U.S. (through 6/30/19):

– Nissan: 135,550 Ford: 116,926 Toyota: 104,375 BMW: 93,696

Sources: CFRA, IRS.gov, EVAdoption.com.


The Long List of Failed EV Start-Ups

• Fisker

• Coda

• Spyker Cars

• Detroit Electric

• Corbin

• Bright Automotive

• AMP

• Aptera

• Better Place

• Li-ion Motors

• HumanCar

• LeEco

Source: CFRA.

• Key Takeaway: The global auto industry is a highly competitive, cyclical, high fixed-cost,

and low-margin industry. The failure rate for new entrants is high.


…And Discontinued Models

Discontinue BEV/

Manufacturer Brand Model Date PHEV Type

General Motors Chevy Volt 2019 PHEV Hatchback

Volkswagen Audi A3 Sportback e-tron 2019 PHEV Sedan

General Motors Cadillac CT6 2019 PHEV Sedan

Ford Ford Focus Electric 2019 BEV Hatchback

Ford Ford C-Max 2018 PHEV Hatchback

General Motors Cadillac ELR 2017 PHEV Coupe

Daimler Mercedes-Benz B250e 2017 BEV Hatchback

Renault-Nissan-Mitsubishi Mitsubishi iMiEV 2017 BEV Subcompact

General Motors Chevy Spark 2016 BEV Subcompact

Toyota Toyota Prius PHV 2016 PHEV Hatchback

Honda Honda Accord 2015 PHEV Sedan

Honda Honda Fit 2014 BEV Subcompact

Toyota Toyota RAV4 EV 2014 BEV SUV

Coda Coda Coda 2013 BEV Sedan

Fisker Fisker Karma 2012 PHEV Sports car

Tesla Tesla Roadster 2012 BEV Sports car

Toyota Toyota RAV4 EV 2003 BEV SUV

Ford Ford Ranger 2002 BEV Pickup

General Motors General Motors EV1 1999 BEV Coupe

General Motors Chevy S-10 Electric 1998 BEV Pickup

Note: BEV = Battery Electric Vehicle, PHEV = Plug-In Hybrid Electric Vehicle



25 New EV Models To Debut in U.S. in 2020

Availability Model BEV/ Range Estimated

Manufacturer Brand Model Date Year PHEV Type (miles) MSRP

Aston Martin Aston Martin RapidE 2020 2020 BEV Sedan 200+ $250,000

BMW BMW iX3 2020 2021 BEV SUV 210 $50,000

BMW BMW X5 2020 2021 PHEV SUV 40 $62,000

BMW Mini Cooper S E 2020 2020 BEV Hatchback 114 $37,500

Bollinger Bollinger B1 2020 2020 BEV Pickup/Worktruck 200 $60,000

Daimler Mercedes-Benz EQC 2020 2020 BEV SUV 225 $75,000

Fiat Chrysler Jeep Renegade PHEV 2020 2020 PHEV SUV 25 $28,000

Fiat Chrysler Jeep Wrangler PHEV 2020 2021 PHEV SUV 25 $35,000

Fiat Chrysler Maserati Levante 2020 2021 PHEV SUV 25 $90,000

Ford Ford TBD 2020 2021 BEV SUV 300 $45,000-$48,000

Ford Ford Escape 2020 2020 PHEV SUV 30 $35,000

Geely Volvo XC40 2020 2021 BEV SUV 222 $58,000

Geely Polestar Polestar 1 2020 2020 PHEV Sport coupe 65 $155,000

Geely Polestar Polestar 2 2020 2021 BEV Sedan 275 $63,000

Hyundai Kia Soul 2020 2020 BEV CUV 243 $36,000

Hyundai Kia Stonic 2020 2020 BEV SUV 190 $26,000

Renault-Nissan-Mitsubishi Mitsubishi Outlander 2020 2020 PHEV SUV 38 $36,000

Rivian Rivian R1T 2020 2021 BEV Pickup 230-400 $70,000-$100,000

Tesla Tesla Model Y 2020 2020 BEV CUV 300 $48,000

Toyota Toyota RAV4 2020 2020 PHEV SUV 30 $32,000

Volkswagen Audi Sportback e-tron 2020 2020 BEV Sport coupe 275 $90,000

Volkswagen Audi e-tron GT 2020 2020 BEV Sedan 248 $90,000

Volkswagen Bentley Bentayga Hybrid 2020 2020 PHEV SUV 31 $190,000

Volkswagen Porsche Taycan 2020 2020 BEV Sports car 250 $80,000

Volkswagen Volkswagen I.D. 4 2020 2020 BEV CUV 260 $45,000

Note: BEV = Battery Electric Vehicle, PHEV = Plug-In Hybrid Electric Vehicle



The Next Decade: Estimated 2030 EV Sales

2030E U.S. 2030E U.S. EVs as % of

Manufacturer Vehicle Sales EV Sales U.S. Vehicle Sales

BMW 360,000 72,000 20%

Fiat Chrysler 2,100,000 105,000 5%

Ford 2,600,000 130,000 5%

General Motors 3,000,000 72,000 2%

Honda 1,650,000 247,500 15%

Hyundai-Kia 1,300,000 65,000 5%

Mercedes-Benz 380,000 95,000 25%

Nissan 1,600,000 320,000 20%

Tesla 850,000 850,000 100%

Toyota 2,450,000 220,500 9%

Volkswagen 630,000 157,500 25%

Volvo 80,000 40,000 50%

Total 17,000,000 2,374,500 14%

• In the U.S., EV market share is expected to increase from 2.5% of overall vehicle sales to roughly 14% by 2030

– Tesla and Volvo (Geely) likely to have the greatest EV exposure

– Germany’s “Big Three” automakers expected to make major EV push

Sources: CFRA, Edison Electric Institute (EEI).


EVs: Concluding Thoughts

• EV sales will surge in the coming years as prices drop closer to parity with gas-powered vehicles and charging times improve

– $225 billion will be spent to develop more than 200 new plug-in vehicles through 2023, a figure that doesn’t include hybrids

• We predict that most vehicles will flop, while others will fare better from a sales perspective

– Price and range will be the two most important factors in determining success; tax credits also important

• We think a diversified approach to EVs makes the most sense and don’t expect EVs to be a profit driver for most automakers

• We think future oil prices and global GDP growth are the two biggest factors that will affect future EV development

Sources: CFRA, Alix Partners.


Autonomous Vehicle Outlook

Garrett Nelson, Senior Equity Analyst


Autonomous Vehicles

Sources: CFRA, Pxhere.com.


The Five Levels of Automation

Where we are today:

Somewhere between Levels 2 & 3

Sources: CFRA, Society of Automotive Engineers (SAE).


The Case ForAutonomous Vehicles (AVs)

• Safety

– 36,560 people died and many more were seriously injured in U.S. motor vehicle crashes in 2018

– 94% of serious motor vehicle crashes are caused by human error

• Economic & Societal Benefits

– Motor vehicle crashes cost $242 billion in economic activity (including $57.6 billion in lost workplace productivity) and $594 billion due to loss and decreased quality of life due to injury, according to a 2010 study

– Drivers could be working or doing something more productive

• Efficiency & Convenience

– Americans spend about 54 hours per year stuck in traffic, on average

– Lower fuel costs and vehicle emissions

• Mobility

– Currently 49 million Americans age 65+ and 53 million with some form of disability


Vehicle Safety Still Improving Absent AVs

• The number of U.S. fatalities per 100 million vehicle miles traveled has also fallen steadily from the peak of 24.09 in 1921 (the first year of statistics) to 1.13 in 2018

• Motor vehicle fatalities have also fallen steadily since peaking at 54,589 in 1972 to 36,560 in 2018 due to new safety technology (ABS, airbags,etc.)

Annual U.S. Motor Vehicle Fatality Rate(fatalities per 100 million vehicle miles traveled; 1921-2018)

Annual U.S. Motor Vehicle Fatalities(1921-2018)

0

10,000

20,000

30,000

40,000

50,000

60,000

1921

1925

19

29

1933

1937

1941

19

45

1949

1953

1957

1961

1965

1969

19

73

1977

1981

1985

19

89

1993

1997

20

01

2005

2009

2013

20

17

Sources: CFRA, National Highway Traffic Safety Administration.

24.09

(1921)

1.08(2014)

1.13(2018)

0

5

10

15

20

25

1921

1925

19

29

1933

1937

1941

19

45

1949

1953

1957

1961

1965

1969

19

73

1977

1981

1985

19

89

1993

1997

20

01

2005

2009

2013

20

17


The Case Against Autonomous Vehicles

• Safety

– Humans are extremely good drivers and vehicles are safer than ever• Right now, humans are involved in fatal collision once every 100 million miles

traveled (a 99.999999% safety rate)

• AVs won’t be accepted until they’re as safe as human drivers

• Vehicle safety has improved dramatically

• Economic & Societal Costs

– Technological development costs are incredibly expensive• November 2018 - Volkswagen announces plans to spend $50 billion by 2023 on

new plants, electric cars, autonomous driving and mobility services

• October 2019 - Hyundai announces plans to invest $35 billion into “future mobility technology” by 2025

• Cybersecurity

– The more “connected” a cars is, the more easily it can be hacked


A Level 5 Automated Vehicle

Infiniti QX Inspiration Concept Vehicle

Sources: Garrett Nelson, CFRA, North American International Auto Show (NAIAS) 2019.


The Global Auto Market: A Snapshot

TOTAL VEHICLE SALES BY REGION

(for the year ended, in millions of vehicles)

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

U.S. 11.772 13.041 14.786 15.883 16.843 17.846 17.866 17.551 17.701 17.277 16.966

North America 12.859 14.204 15.598 17.527 18.765 19.910 21.175 21.497 21.120 20.613 20.242

South America 5.516 5.980 6.144 6.265 5.565 4.514 4.052 4.334 4.604 4.655 4.525

Europe 18.809 19.740 18.663 18.343 18.588 19.036 20.135 20.755 20.698 19.870 19.175

China 18.062 18.505 19.306 21.984 23.499 24.662 28.028 28.879 28.081 25.273 24.464

Japan 4.956 4.210 5.370 5.376 5.563 5.047 4.970 5.234 5.272 5.193 5.141

Asia, Oceania & Middle East 35.192 35.405 38.226 40.579 42.557 43.411 46.858 48.315 47.410 43.523 42.522

Africa 1.251 1.447 1.569 1.654 1.718 1.550 1.314 1.137 1.236 1.211 1.189

Total 74.972 78.170 82.129 85.606 88.338 89.685 93.856 95.661 95.056 89.871 87.652

% Change

U.S. 10.8% 13.4% 7.4% 6.0% 5.9% 0.1% -1.8% 0.9% -2.4% -1.8%

North America 10.5% 9.8% 12.4% 7.1% 6.1% 6.4% 1.5% -0.4% -2.4% -1.8%

South America 8.4% 2.7% 2.0% -11.2% -18.9% -10.2% 6.9% 7.7% 1.1% -2.8%

Europe 5.0% -5.5% -1.7% 1.3% 2.4% 5.8% 3.1% -0.4% -4.0% -3.5%

China 2.5% 4.3% 13.9% 6.9% 4.9% 13.7% 3.0% -2.8% -10.0% -3.2%

Japan -15.1% 27.5% 0.1% 3.5% -9.3% -1.5% 5.3% 0.7% -1.5% -1.0%

Asia, Oceania & Middle East 0.6% 8.0% 6.2% 4.9% 2.0% 7.9% 3.1% -0.9% -8.2% -2.3%

Africa 15.6% 8.5% 5.4% 3.9% -9.8% -15.2% -13.5% -2.4% -2.0% -1.8%

Total 4.3% 5.1% 4.2% 3.2% 1.5% 4.7% 1.9% -0.6% -5.5% -2.5%

Global Market Share %

U.S. 15.7% 16.7% 18.0% 18.6% 19.1% 19.9% 19.0% 18.3% 18.6% 19.2% 19.4%

North America 17.2% 18.2% 19.0% 20.5% 21.2% 22.2% 22.6% 22.5% 22.2% 22.9% 23.1%

South America 7.4% 7.7% 7.5% 7.3% 6.3% 5.0% 4.3% 4.5% 4.8% 5.2% 5.2%

Europe 25.1% 25.3% 22.7% 21.4% 21.0% 21.2% 21.5% 21.7% 21.8% 22.1% 21.9%

China 24.1% 23.7% 23.5% 25.7% 26.6% 27.5% 29.9% 30.2% 29.5% 28.1% 27.9%

Japan 6.6% 5.4% 6.5% 6.3% 6.3% 5.6% 5.3% 5.5% 5.5% 5.8% 5.9%

Asia, Oceania & Middle East 46.9% 45.3% 46.5% 47.4% 48.2% 48.4% 49.9% 50.5% 49.9% 48.4% 48.5%

Africa 1.7% 1.9% 1.9% 1.9% 1.9% 1.7% 1.4% 1.2% 1.3% 1.3% 1.4%

Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Source: International Organization of Motor Vehicle Manufacturers; CFRA estimates for 2019-2020

Sources: CFRA estimates for 2019-2020, OICA.


How Long Will it Take to Get to Level 5?

Forecasted Annual Global Sales

of Level 5 Autonomous Vehicles(millions of units)

14

13

32

50

68

0

10

20

30

40

50

60

70

2025 2030 2035 2040 2045 2050

• LMC Automotive forecasts that global sales of Level 5 AVs will total 1M in

2025 and increase to 68M in 2050

Sources: CFRA, LMC Automotive.


AVs: What The Experts Are Saying – Prior to 2019


– “Self-driving technology is almost at a point when owners will be able to fall asleep in their cars and wake up at their destination. I think that’s about two years (away).” -October 10, 2014

• Argo AI CEO Bryan Salesky

– “We’re still very much in the early days of making self-driving cars a reality.” -October 16, 2017

• Waymo CEO John Krafcik

– “Fully self-driving cars are here…It’s not happening in 2020, it’s happening today.” -November 7, 2017

– “Autonomy always will have some constraints.” -November 13, 2018

• General Motors Chairman & CEO Mary Barra

– “We’ve taken the steering wheel and pedals from the AV because we believe we’ll be able to deploy this in 2019 safely.” -January 16, 2018


AVs: What The Experts Are Saying – 2019

• May Mobility CEO Edwin Olson

– “Because self-driving cars are only about 0.01% as good as human drivers today, robotaxis are likely to be a fantasy until 2035.” -February 27, 2019

• Ford CEO Jim Hackett

– “We overestimated the arrival of autonomous vehicles.” -April 9, 2019


– “Next year, for sure, we’ll have over 1 million robotaxis on the road.” -April 22, 2019

• Nissan technology expert Tetsuro Ueda

– “To develop the more advanced Level 3 hands-free automated driving technology, Nissan will need at least until the late 2020s.” -June 16, 2019


AVs: What The Experts Are Saying – 2019

• Waymo Chief External Officer Tekedra Mawakana

– “I think the change that I’ve observed over the past year is we’ve gone from a lot of hype that was sort of unmanageable honestly…A lot of hype was so mismatched to what’s happening in the real world…Now I think the focus is still very enthusiastic, but also more grounded.” -October 22, 2019

– “This is probably the greatest technological challenge of our generation.” -October 22, 2019

• Zoox Co-founder & CTO Jesse Levinson

– “Tesla vehicles are not going to be able to drive themselves in 2020 (as promised by Elon Musk). The vehicles don’t have enough sensors or computers to do that given any remotely known technology that exists that humans have ever created.” -October 22, 2019

– “Elon would need to come up with 4 or 5 orders of magnitude more performance out of systems…Somehow he would need to make 50 years more progress. It’s not happening.” -October 22, 2019

• Apple Co-founder Steve Wozniak

– “I stepped way back on this idea of Level 5. I’ve really given up. I don’t even know if that will happen in my lifetime.” -October 23, 2019


Autonomy: Significant Obstacles Remain

• Technological

– Bad weather

– Uneven terrain

– Difficulty identifying and anticipating movement of moving objects

• Legal / Regulatory

– No federal standards to replace state laws/voluntary guidelines

– Insurance liability

• Public Perception

– Consumer distrust

– Cybersecurity fears


Autonomy: Differing Views on Technology


– “LiDAR (Light Detection and Ranging) is a fool’s errand. And anyone relying on LiDAR is doomed. Doomed. Expensive sensors that are unnecessary.” -April 22, 2019

• The Verge

– “Practically every other company trying to bring self-driving cars to the road — including Ford, Uber, Waymo, and GM Cruise — relies on a suite of sensors comprised of LiDAR, cameras, and radar.” -April 24, 2019

• Cornell Associate Professor of Computer Science Kilian Weinberger

– “The common belief is that you couldn’t make self-driving cars without LiDAR. We’ve shown, at least in principle, that it’s possible.” -April 25, 2019

• Investors Business Daily– LiDAR works in every lighting condition but suffers in scenarios like snow.” -May 24, 2019


LiDAR: Boom or Bust?

• The majority of automakers are going “all in” on high-cost LiDAR

technology, which stands for Light Detection and Ranging

– This technology uses laser sensors to create 3D maps of their surroundings, measuring

objects’ distance via the speed of light

• Tesla is taking “the road less traveled” from a technology standpoint

– Tesla technology uses two stereo cameras mounted to either side of rearview mirror to record

roads


AVs: Concluding Thoughts

• Level 5 autonomous vehicles are much farther in the future than most experts thought a few years ago

– Progress toward Level 5 will be gradual

• We think global GDP growth is the single biggest factor that will affect future AV development

– R&D costs associated with AV technology are massive and will likely be the first to be cut from budgets in the event of a downturn

• AV development costs will continue to weigh on consolidated earnings for major automakers

– If excluding AV losses, Ford’s EBIT would have been 14.3% higher and GM’s EBIT would have been 8.4% higher in the first nine months of 2019

Sources: CFRA, Company reports.


EVs & AVs: Winners & Losers

• Winners

– TSLA• First-mover advantage with attractive combination of price and range

• In-house AV technology development and frequent over-the-air Autopilot software updates

– European Automakers• Popularity of EVs in many European countries and companies such as Volkswagen, Volvo (Geely), BMW

and Daimler expected to pick up significant market share in U.S.

– Those still eligible for full $7,500 U.S. federal tax credit

– EVs: Light duty trucks (SUVs/crossovers/pickups) with a compelling mix of price and range• Popularity of category - 69.2% of U.S. new vehicle sales in 2018 (up from 47.5% in 2009)!

• Losers

– The “Big Three” U.S. Automakers• EVs: lack of sales traction from recent models, playing “catch up” with product pipeline

• AVs: Going “all in” on LiDAR technology

• AV segments have become a significant drag on overall earnings

– An EBIT drag of 8.4% for GM and 14.3% for F in the first three quarters of 2019

Sources CFRA, Company reports.


Semiconductor Automotive Outlook

Angelo Zino, Vice President


Automotive – The Next Big Tech Device

• Three Megatrends driving demand for semiconductors:

– Shift to autonomous vehicles

– Electrification of the car

– The ongoing evolution towards a more connected vehicle

• Automotive semiconductor demand to outgrow the broader industry by 2x through 2022.

• Areas of Focus: Infotainment Systems, Safety, Powertrain, Battery Management, Body/Lighting Control, and Autonomous features.

• Fully autonomous features years away but semi-autonomous features already driving content growth (e.g. Tesla Autopilot).

• More advanced approaches (graphics processing units/GPUs) offer upside, with a fully autonomous car adding over $10K in technology software/hardware.


Semiconductor Industry Breakdown By Category

Computing, 30%

Wireless, 31%

Consumer, 12%

Industrial, 11%

Automotive, 12%

Wired, 4%

Source: CFRA, IDC


Semiconductor Content Growth Per Vehicle

Source: CFRA


A Bifurcated Market For Semiconductors (Content Per Vehicle)

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2016 2017 2018 2019 2020 2021 2022 2023

Luxury Average StandardSource: CFRA


Semiconductor Categories Inside The Vehicle

CATEGORY SENSORS THINK - CONTROLLER ACTIONS

Cellular

Wifi, BT, GNSS, NFC

Smart Car Access

V2X

Radar

Camera

Lidar

Motion & Pressure

Speed

Ultrasonic

Temp, Light, Humidity

Switch Panels

Radio & Audio

Touch Displays

Voice Recognition

Source: CFRA, NXPI

Engine, Transmission, Brake, Battery

Management, Steering, Airbag, Suspension

Body & Comfort Body Controller

Connected

InfotainmenteCockpit Controller eCockpit, Amplifiers

HVAC, Interior Lighting, Doors, Seats,

Steering Wheel, Mirrors, Wipers, Sunroof

Connectivity Connectivity Controller

Autonomy (ADAS)Sensor Fusion & Planning

Controller

Powertrain &

Vehicle DynamicsPowertrain Controller


Electrification of Powertrains Boost Semiconductor Volume

• A Battery Electric Vehicle (BEV) adds about $450 of semiconductor content

relative to combustion engines.

• Improving mix towards electric vehicles over time results in greater revenue

for chipmakers.

• Battery management solutions among fastest growth areas.

Combustion

Engine (ICE) Mild Hybrid Full Hybrid

Plug-in

Hybrid

Range

Extended EV

Battery Electric

Vehicle (BEV)

Combustion Engine ●●●● ●●●● ●●● ●●● ●● -

Main Electric Charging? No No No Yes Yes Yes

Electric Traction - 10-20kW 15-60kW 40-80kW 40-80kW >80kW

Added Semiconductor Value - $200 $350 $400 $425 $450Circles dictate importance of combustion engine in vehicle.

Source: CFRA, NXP Semiconductors


ADAS LEVEL DEFINITIONS AND POTENTIAL CONTENT GROWTH

Level Description Human Role Vehicle Role $ Content Increase

0 None All driver control No autonomous functions No Automation

1 Limited + Safety Almost all driver control ABS, traction control +$100

2

Limited , Active

Safety,

Convenience

Mostly driver controlLane keeping, emergency braking, adaptive cruise

control, parking assist+$150

3Significant

Autonomy

Driver can disengage

completely at times

Advanced controls in simple conditions (highway,

slow-moving congention, good weather)+$600

4 High AutonomyDriver not needed in some

locations or conditions

Full conditional autonomous capabilities, more

difficult conditions/locations not autonomous+$900

5Complete

AutonomyNo driver needed

Autonomous driving in all locations/conditions

possible, driver controls (brakes, steering wheel)

not necessary

+$1,200

Source: CFRA, LMC Automotive, NXPI


Sensor Units In Autonomous Cars

Level 1/2 Level 3 Level 4/5

Silicon Value $100 - $150 $600 $900 - $1,200

Sensor Units Units Units

Radar 1 to 3 4 to 6 6 to 10

Camera 1 At least 4 6 to 8

Lidar NA 0 to 1 1 to 3

V2X NA 0 to 1 1 to 2

Source: Strategy Analytics, NXPI

• Cameras and sensors give a self-driving car “eyes” --- beneficiaries include Ambarella, NXP Semiconductors, QUALCOMM, and Analog Devices, among others.

• Processing chips serve as the artificial brains --- NVIDIA and Intel look to make progress but in different ways.

• Radar winning the race over Lidar.

• Radar and camera sensors seen

as generating the most volume.

• Vehicle-to-everything (V2X)

communication to benefit from

5G adoption.


Understanding The Function of Different Sensors

Source: CFRA, Ansys


Comparing “The Eyes” of Self-Driving Vehicles

RADAR LIDAR Cameras

Low Resolution Higher Resolution Highest Resolution

Works by sending out radio waves that bounce off

distant surfaces.

Uses laser light pulses to scan the surroundings of

the vehicles.

Provides wide angle views of close-up

surroundings and longer, narrower views of

what is ahead.

Most common uses include adaptive cruise control,

automatic emergency, braking blind-spot detection,

parking aid, collision avoidance and obstacle detection.

Millions of laser signals per second fired - reflects

off object surfaces and used to create a 3D model

of the vehicle surroundings.

Cameras are placed all around self-driving

vehicles and able to read road

signs/markings.

Strength: Can see hundreds of yards out and detect

size/speed.

Strengths: Able to depict if an object is a bicycle or

motorcycle or if a pedestrian is facing forward or

backward – can better predict an object behavior.

Strengths: Best option to get accurate view of

surroundings

Drawback: can't see detail; not able to detect the

identity of objects.

Drawback: most expensive option and doesn’t

work well in bad weather.

Drawback: Doesn’t work well in all weather

conditions.

Source: CFRA


Vehicle-to-Everything (V2X)

• V2X – The passing of information to any entity/object that may affect the

vehicle and vice versa.

• Two main components:

– Vehicle-to-vehicle (V2V) - vehicles to communicate with one another.

– Vehicle-to-infrastructure (V2I) - vehicles communicate with external systems such as

streetlights, buildings and even cyclists or pedestrians.

• A complement to radar/lidar/cameras.

• Resistant to interference and inclement weather.

• Will help bring the concept of smart cities to reality but a very long timeframe.

• 5G will help adoption of C-V2X; Qualcomm a key player.


All About The Computing Platform

• Computing at the Edge – Data Centers with wheels.

• GPUs and ASICs appear best positioned.

Graphics Processing Unit

(GPU)

Application Specific

Integrated Chip (ASIC)

Field Programmable

Gate Array (FPGA)

Central Processing Unit

(CPU)

Best computational power

and ideal for deep

learning.

A cheaper option once in full

production.

Flexible programming

makes it ideal for

prototyping.

Processing power not as

great as GPUs.

GPUs likely to be the

industry standard for AI in

the vehicle.

Extremely difficult to create

and high upfront costs.

Less powerful and more

costly than ASICs.

Unlikely to work on a

standalone basis for

Level 4 and Level 5

vehicles.

NVIDIA the dominant

playerTesla

FPGA leaders include

Xilinx, Intel and Lattice

Semiconductor.

Intel

Source: CFRA


How Autonomous Cars Function

• Map Building

– Lidar and camera technology are best for scanning surroundings

– Processors aggregate the sensor, GPS and IMU inputs to build the map

• Path Planning

– Find the safest and quickest route to a location

– Navigate through obstacles and be able to change lanes/pass vehicles.

– Essentially, like a GPS system and extremely short-range plans (seconds) are updated

continuously.

• Perception/Obstacle Avoidance

– Processors use AI/machine learning to identify objects and predict their behavior.

– Constant communication with other vehicles and adjustments will be made when issues arise.


Leading Providers of Autonomous Capabilities

• Tesla and Waymo have a first mover advantage but the field is likely to quickly catch up.

• Other Technology companies (e.g. Apple) poised to enter the space over time.

• Ridesharing players will likely be among the earliest adopters.

Tesla Waymo NVIDIA

Utilizes real-world data to create a self-

driving car (access to all vehicle

movements/decisions).

Most of the data generated via

simulators.GPU hardware/software supplier.

Utilizes only cameras and radar; no Lidar. Leverages Lidar technology.Commercially sells its own ready-

made simulator (Constellation).

The brain is an internally developed

processor (ASIC).

Utilizes a GPU and paving the way

for more Tech companies to

participate.

Will lower barriers to entry for the

auto industry.

Source: CFRA and NXP Semiconductors


Connected Infotainment Systems Maturing

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

2018 2019e 2020e 2021e

eCockpit, Headunit Radio, Audio

• Infotainment market maturing but greater demand for e-cockpits and relatively low

penetration rates in China provide additional room for growth.

• More advanced e-cockpit systems could include gesture sensors so that passengers in the

back seat can use motions to control music or the radio.

• Increasing displays are being sold in a

vehicle (front and rear screens).

• On the radio side, new audio

applications coming (e.g. active noise

cancellation, engine sound

enhancement, more channels and

high-end applications).

$, Billions)

Source: CFRA and NXP Semiconductors


Top 20 Global Chipmakers –Auto Exposed Likely to Outperform

0%

20%

40%

60%

80%

100%

Wireless Wired Industrial Consumer Computing AutomotiveSource: CFRA, IDC


Mapping The Automotive Chip Suppliers (U.S. Coverage)

Ticker Company Name

Auto % of

Sales Connectivity

Autonomy

(ADAS)

Powertrain &

Vehicle

Dynamics

Body &

Comfort

Connected

Infotainment

ADI Analog Devices, Inc. 16% X X X X X

AMBA Ambarella, Inc. 20% X

AVGO Broadcom Inc. 1% - 2% X

CREE Cree, Inc. 5% - 10% X

CY Cypress Semiconductor Corporation 38% X X

DIOD Diodes Incorporated 10% X X X

INTC Intel Corporation 1% - 2% X

LSCC Lattice Semiconductor Corporation 15% - 20% X X

MPWR Monolithic Power Systems, Inc. 14% X X X

MRVL Marvell Technology Group Ltd. ≥5% X

MXIM Maxim Integrated Products, Inc. 25% X X X

NVDA NVIDIA Corporation 8% X X

NXPI NXP Semiconductors N.V. 48% X X X X X

ON ON Semiconductor Corporation 32% X X X

QCOM QUALCOMM Incorporated 2% X

TXN Texas Instruments Incorporated 20% X X X X

Exposure to Category

CFRA, S&P Global Market Intelligence


Questions


The content of this Presentation and the opinions expressed herein are those of CFRA based upon publicly-available information that CFRA believes to be reliable but are subject to change without notice.

This Presentation has not been submitted to, nor received approval from, the United States Securities and Exchange Commission or any other regulatory body. While CFRA exercised due care in compiling

this Presentation, CFRA AND ALL RELATED ENTITIES SPECIFICALLY DISCLAIM ALL WARRANTIES, EXPRESS OR IMPLIED, to the fullest extent permitted by law, regarding the accuracy,

completeness, or usefulness of the information contained herein and assumes no liability with respect to the consequences of relying on this information for investment or other purposes. No content herein

(including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof may be modified, reverse engineered, reproduced or distributed

in any form by any means, or stored in a database or retrieval system, without the prior written permission of CFRA. This Presentation shall not be used for any unlawful or unauthorized purposes. CFRA

and its third-party providers, as well as its and their directors, officers, shareholders, employees or agents, do not guarantee the accuracy, completeness, timeliness or availability of this Presentation.

CFRA's primary financial data provider is S&P Global Market Intelligence. FOR RECIPIENT'S INTERNAL USE ONLY.

Certain information in this presentation is provided by S&P Global, Inc. and/or its affiliates and subsidiaries (collectively “S&P Global”). Such information is subject to the following disclaimers and notices:

“Copyright © 2019, S&P Global Market Intelligence (and its affiliates as applicable). All rights reserved. Nothing contained herein is investment advice and a reference to a particular investment or security,

a credit rating or any observation concerning a security or investment provided by S&P Global is not a recommendation to buy, sell or hold such investment or security or make any other investment

decisions. This may contain information obtained from third parties, including ratings from credit ratings agencies. Reproduction and distribution of S&P Global’s information and third party content in any

form is prohibited except with the prior written permission of S&P Global or the related third party, as applicable. Neither S&P Global nor its third party providers guarantee the accuracy, completeness,

timeliness or availability of any information, including ratings, and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of

such information or content. S&P GLOBAL AND ITS THIRD PARTY CONTENT PROVIDERS GIVE NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES

OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE AND ALL S&P INFORMATION IS PROVIDED ON AN AS-IS BASIS. S&P GLOBAL AND ITS THIRD PARTY CONTENT

PROVIDERS SHALL NOT BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, EXEMPLARY, COMPENSATORY, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES, COSTS, EXPENSES,

LEGAL FEES, OR LOSSES (INCLUDING LOST INCOME OR PROFITS AND OPPORTUNITY COSTS OR LOSSES CAUSED BY NEGLIGENCE) IN CONNECTION WITH ANY USE OF THEIR

INFORMATION OR CONTENT, INCLUDING RATINGS. Credit ratings are statements of opinions and are not statements of fact or recommendations to purchase, hold or sell securities. They do not

address the suitability of securities or the suitability of securities for investment purposes and should not be relied on as investment advice.”

CFRA, CFRA Accounting Lens, CFRA Legal Edge, CFRA Score, and all other CFRA product names are the trademarks, registered trademarks, or service marks of CFRA or its affiliates in the United

States and other jurisdictions. CFRA Score may be protected by U.S. Patent No. 7,974,894 and/or other patents. Copyright © 2019 CFRA. All rights reserved.

Disclosures


This Presentation is published and originally distributed by Accounting Research & Analytics, LLC d/b/a CFRA (“CFRA US”), with the following exceptions: In the UK/EU/EEA, it is published and originally

distributed by CFRA UK Limited (company number 08456139 registered in England & Wales with its registered office address at New Derwent House, 69-73 Theobalds Road, London, WC1X 8TA, United

Kingdom), which is regulated by the Financial Conduct Authority (No. 775151), and in Malaysia by CFRA MY Sdn Bhd having Company No. 683377-A and regulated by Securities Commission Malaysia,

No. CMSL/A0181/2007 (“CFRA Malaysia”). CFRA Malaysia is a wholly-owned subsidiary of CFRA US. These parties and their subsidiaries maintain no responsibility for CFRA reports or materials

redistributed by third parties such as brokers or financial advisors.

Past performance is not necessarily indicative of future results. This Presentation may contain forward-looking statements or forecasts; such forecasts are not a reliable indicator of future performance.

This Presentation is not intended to, and does not, constitute an offer or solicitation to buy and sell securities or engage in any investment activity. This Presentation is for informational purposes only.

Recommendations in this Presentation are not made with respect to any particular investor or type of investor. Securities, financial instruments or strategies mentioned herein may not be suitable for all

investors and this material is not intended for any specific investor and does not take into account any investor's particular investment objectives, financial situations or needs. Before acting on any

recommendation in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice.

Additional information on a subject company may be available upon request.

The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and S&P Global Market Intelligence. GICS is a service mark of MSCI and S&P

Global Market Intelligence and has been licensed for use by CFRA.

Any portions of the fund information contained in this Presentation supplied by Lipper, A Thomson Reuters Company, are subject to the following: “Copyright 2019 © Thomson Reuters. All rights

reserved. Lipper shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.”

The information provided in this communication is solely for educational purposes and should not be construed as advise or an investment recommendation. Fidelity Investments is a separate company,

unaffiliated with CFRA. There is no form of partnership, agency affiliation, or similar relationship between CFRA, nor is such a relationship created or implied by the information herein. Fidelity Investments

has not been involved with the preparation of the content supplied by CFRA and does not guarantee or assume any responsibility for its accuracy or completeness.

Copyright © 2019 CFRA. All rights reserved. CFRA and STARS are registered trademarks of CFRA.

Disclosures, continued.

Date post:	28-Feb-2020
Category:	Documents
Upload:	others
View:	0 times
Download:	0 times

Independent Research, Indispensable Results · • 1997 –Toyota Introduces The First...

Documents