The State University of New York at Binghamton Global Strategic Management

Fall 2015

MOBILEYE: THE FUTURE

OF DRIVERLESS CARS Case Analysis Presentation

Wyatt A. Chartrand

Justin Wong

Mengyao Li

Yingli Sun

“Our vision. Your safety.”

Mobileye:The Future of Driverless Cars

Case Analysis Presentation

Global Strategic Management, Section 5The State University of New York at Binghamton

Wyatt A. Chartrand, A.S.

Business Administration, concentrating in

Finance and Consulting & Leadership

Justin Wong

Business Administration, concentrating in

Management Information Systems

and Marketing

Yingli Sun

Accounting, Concentrating in

Management Information Systems

Mengyao Li

Accounting

The LogiConsultants Team

Objective: Throughout this presentation, we will determine Mobileye’s strategic path for the short-term, mid-term, and long-term future, particularly in regards to the end goal of the development of a fully automated, driverless vehicle. We will do this using a variety of strategic analyses and relevant information, including:

• Background and History

• Internal Analysis

• External Analysis

• Alternatives

• Recommendations

• Implementations

• Concluding Analysis

• Question and Answer Session

• Supporting Materials

Executive Summary and Agenda

Founded in 1999 by Ammon

Shashua and Ziv Aviram.

Products adopted by

BMW, GM, and Volvo in

2007.

Invested in by Goldman Sachs

in 2007 at a $500 million

valuation.

Background and History

Largest U.S.

IPO by an

Israeli company

in 2014.

Posted first

profit in 2013

with net

income of $20

million.

Future development of driverless

cars

Strengths

• First mover.

• Large head start in the market, especially technically.

• High margins to date.

• Unique, crucial data.

• Strong portfolio of patents.

• Little of the overhead associated with its tier 1 counterparts.

• Focused product offering.

Weaknesses

• Lack of profitability to date.

• Projected losses or low projected profit in the future.

• Uncertainty regarding future profitability.

• Issues with the accuracy and materiality of their financial reporting.

• Some debt.

Internal Analysis

External Analysis

Opportunities

• Increased demand for and adoption of mobileye’s products by the original equipment manufacturers (OEMs).

• Positioned to sell to most of the industry, boosting market share further.

• Government mandating of safety technology.

Threats

• Cheaper aftermarket competitors

• Alternative technologies such as RADAR, LIDAR, and “fusion systems.”

• Some OEMs such as Toyota operate as competitors by developing in-house solutions.

• Likely government regulation of completely autonomous vehicles.

Strategic Partnerships

OEM Pricing

Strategies

Aftermarket Product

Strategies

• Google

• Tesla

• Premium

Pricing

• Discounting

• Retain High End

• Diversify Down to

Lower End

• Strategically partner with Tesla instead of Google but retain customer relations with Google, as Tesla’s goals, timetables, and position in the market suit Mobileye better than Google’s current position.

Strategic Partnership

• Retain premium pricing and do no discounting in order to avoid price erosion and maintain image as a premium, safe product.

OEM Pricing Strategy

• Keep high-end products and diversify into lower ends by introducing a $200+ product of slightly lower quality to capture a larger portion of the broader market, boosting sales and revenue.

Aftermarket Product Strategy

Recommendations

Arenas

Staging

Differentiators

VehiclesEconomic

Logic

• OEM and aftermarket products

and distribution channels.

• High end for OEMs, domination

of entire market for aftermarket

products.

• Largely concentrated in North

America, but ultimately globally

• Proprietary software technology.

• End goal of driverless

vehicles to be achieved

by partnership with

Tesla.

• Investment in marketing

• Increases in R&D and

strategic hiring.

• Cutting edge product quality

and correspondingly premium

price points.

• Image positioning through

strategic marketing efforts.

• Staging to take place in

one-, three-, five-, and ten-

year increments.

• End goal of driverless

vehicles to be achieved at

the end of the staging

process.

• Premium prices due to

quality, which will lead

to higher margins than

competitors.

• Proprietary software and

unique data support

premium pricing,

increasing revenue.

Retention of premium pricing will keep revenues steady in accordance with Mobileye’s 2012 to 2013 growth rate of an 18.34 multiplier, according to Exhibit 6a of the case study. Even a growth of half that ($300 million) would be substantial

Financial results regarding the new, less expensive aftermarket product will be determined by the new price point multiplied by units sold.

Regarding Mobileye’s recommended alliance with Tesla, no short-term financial profits are likely as a direct result of the partnership, but long-term results could be large. Current number not projectable based on the nature of the recommendation and the available data.

Expected Financial Results

$600

Million in

Revenue

$200+ X

Units

?

Implementations

1 Year Goal

Enter the low end of the

aftermarket and retain

the high end, increasing

sales in both.

3 Year Goal

Develop strategic

partnership with

Tesla.

5 Year Goal

Work with Tesla to begin

development of

increasingly autonomous

driving systems.

10 Year Goal

Bring driverless car

to the market

alongside Tesla.

1.

• Formulate and begin development of a slightly lower quality $200+

aftermarket product.

2.

• Increase the marketing budget over 2013’s budget specifically for this new

product.

3.

• Hire new talent to support these implementations, especially marketing

MBAs.

4.

• Enter the lower-end aftermarket with the introduction of this $200+

product.

5.

• Grab market share quickly with an aggressive, fast entry strategy for this

end of the market.

Year 1 Implementations

Partnership with Tesla

Poach talent from rival technology firms for software engineers and data analysts

from Wall Street firms.

Strategically utilize Tesla’s resources to synergistically work towards the goal of a

driverless car.

Year 3 Implementations

Year 5 to 10 Implementations

Driverless Vehicles

Partner with Tesla, not Google

Aftermarket Diversification

Premium OEM Pricing

To Sum

Questions?

Thank You!

Supplementary Slide 1

Supplementary Slide 2

Supplementary Slide 3

Google’s premature position

on driverless cars to date:• 2009: Tested self-driving

technology with the Toyota

Prius on freeways in California.

• 2012: Tested with Lexus

RX450h; Completed over

300,000 miles of testing on

freeways.

• 2014: unveiled an early

construction of their new

prototype vehicle.

Supplementary Slide 4

Chartrand, Wong, Mengyao, and Li 1

Works Cited

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<http://www.researchinchina.com/Htmls/News/201409/36482.html>.

"Google Self-Driving Car Project." Google. Google, n.d. Web. 19 Nov. 2015.

<https://www.google.com/selfdrivingcar/>.

Johnson, Angela. "Four things to know about Mobileye." Marketwatch. Marketwatch, Inc., 1

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"Quarterly Results." Mobileye. Mobileye, 2014. Web. 19 Nov. 2015.

<http://ir.mobileye.com/investor-relations/financial-information/quarterly-

results/default.aspx>.

Chartrand, Wong, Mengyao, and Li 2

"Tesla's research and development expenses from FY 2010 to FY 2014 (in million U.S.

dollars)." Statista. Statista, n.d. Web. 19 Nov. 2015.

<http://www.statista.com/statistics/314863/research-and-development-expenses-of-

tesla/>.

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Yoffie, David. Mobileye: The Future of Driverless Cars. Watertown: Harvard Business Review,

2015. 1-24. Print.