JANUARY 11, 2018

The Great Mobility Tech RaceWinning the battle for future profitsResearch Highlights

Copyri

ght

© 2

017 b

y T

he B

ost

on C

onsu

ltin

g G

roup,

Inc.

All r

ights

rese

rved.

1 SLID

ESH

ARE P

rofi

t Pools

_m

edia

pre

senta

tion d

eck F

INAL.p

ptx

Executive summary

Auto industry is facing unprecedented change; in

technology, society and regulatory trends

Automotive is being re-shaped by shifts towards

electrification, self-driving vehicles and shared mobility

This level of change is poised to have a significant effect on

the vehicle and mobility market...

...but also on the players in the industry and their

profitability

Value creation is likely to shift away from traditional OEMs

and move more towards suppliers

And, there is a new set of technology players and profit

pools that emerge driving new value in the space

Copyri

ght

© 2

017 b

y T

he B

ost

on C

onsu

ltin

g G

roup,

Inc.

All r

ights

rese

rved.

2 SLID

ESH

ARE P

rofi

t Pools

_m

edia

pre

senta

tion d

eck F

INAL.p

ptx

Three major trends will converge over the next 10-15 years, profoundly changing the automotive industry

3 Copyri

ght

© 2

017 b

y T

he B

ost

on C

onsu

ltin

g G

roup,

Inc.

All r

ights

rese

rved.

SLID

ESH

ARE P

rofi

t Pools

_m

edia

pre

senta

tion d

eck F

INAL.p

ptx

The auto industry faces never-before seen change

Technological

Autonomous

driving

Connectivity

Social

Urbanization

New way of

working

Sharing

Regulatory

City regulation

Emission standardsIntegrated view necessary

to assess implications

Electrification

4 Copyri

ght

© 2

017 b

y T

he B

ost

on C

onsu

ltin

g G

roup,

Inc.

All r

ights

rese

rved.

SLID

ESH

ARE P

rofi

t Pools

_m

edia

pre

senta

tion d

eck F

INAL.p

ptx

Key change drivers reinforce each other—with large implications for the industry

Share of on-demand

Revenue pools

Profit pools

Share of EVsBattery costsCar sales volume

Margin development

TCO EV vs. ICE

EV adoption curve

AV adoption curve

Self-driving taxi TCO(cost per km)

SD taxi adoption barrier

Industry trends

Margins of comparables

Energy prices

CO2 emissions

Gov. incentives & bans

SD taxi utilization

CAPEX requirements

AV technology costs

Share of AVs

Key drivers Outputs

Schematic

5 Copyri

ght

© 2

017 b

y T

he B

ost

on C

onsu

ltin

g G

roup,

Inc.

All r

ights

rese

rved.

SLID

ESH

ARE P

rofi

t Pools

_m

edia

pre

senta

tion d

eck F

INAL.p

ptx

108104

10

13

5

66

22

1

46

5

30

41

91

Car sales volume will stall—bringing decades of growth to an end

Source: BCG analysis

Vehicles for on-demand services New car salesTotal vehicle sales

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2020 20302010

First mass-

produced

car

Golden

20ies

Postwar

boom years

Oil

crisis

Chinese

market

opening up

Global

financial

crisis

Emergence of self-

driving, on-demand

mobility models

Today

New car sales

(Global, in M units)

6 Copyri

ght

© 2

017 b

y T

he B

ost

on C

onsu

ltin

g G

roup,

Inc.

All r

ights

rese

rved.

SLID

ESH

ARE P

rofi

t Pools

_m

edia

pre

senta

tion d

eck F

INAL.p

ptx

Electrification, self-driving cars, and on-demand shared mobility offerings will change the face of the industry

Share of new car sales Share of new car sales Share of on-road passenger miles

Electrification will

become more prevalent

Self-driving cars will hit

our streets in

Shared mobility offerings

will gain acceptance

Source: BCG analysis

30%14%

100%

1%

2035

100%

2030

100%

2025

100%

6%

2017

Electric vehicle (BEV)

Plug-in hybrid (PHEV)

Hybrid & mild hybrid (HEV)

Gasoline & diesel

11%

12%6%

2025

100%

2%

2030

100%

2035

100%

5%1%

2017

100%

Human-driven cars

Personal self-driving cars (L4/5)

Self-driving taxis (L4/5)

18%9%

100% 100%

2017

3% 4%

20352030

100%100%

2025

Personal car

On-demand(from 2025 on: mainly self-driving)

7 Copyri

ght

© 2

017 b

y T

he B

ost

on C

onsu

ltin

g G

roup,

Inc.

All r

ights

rese

rved.

SLID

ESH

ARE P

rofi

t Pools

_m

edia

pre

senta

tion d

eck F

INAL.p

ptx

We looked at three scenarios for how the industry could develop and focused on the most likely one

Source: BCG analysis

Conservative

Decrease 2% p.a.

Decrease 5% p.a. (2025–2035)

Hesitant

Gas down, electricity up (gas: $1.50/

gallon; electricity: 0.15 $/kWh)

Deployable for mass use in cities by

2027

Targets are relaxed

Worked out by 2027

Aggressive

Decrease 10% p.a.

Decrease 20% p.a. (2025–2035)

Rapid

Gas up, electricity down (gas: $3.50/

gallon; electricity: 0.10 $/kWh)

Deployable for mass use in cities by

2021

Targets are tightened

Worked out by 2021

Selected drivers

Battery costs

Autonomous Vehicle components

costs

Consumer EV adoption

Energy prices (gas, electricity)

Commercial deployment of

self-driving on-demand services

CO2 emissions regulation (e.g., CAFE)

AV legislative framework

Most likely

Decrease 5% p.a. – in line with

consensus estimates

Decrease 12% p.a. (2025–2035), in

line with similar technologies

Gradual - driven by steady

infrastructure expansion

Constant (gas: 2.50 $/gallon;

electricity: 0.12 $/kWh)

Deployable for mass use in cities by

2025

Currently expected regulation

Worked out by 2025

Modeled scenario

Copyri

ght

© 2

017 b

y T

he B

ost

on C

onsu

ltin

g G

roup,

Inc.

All r

ights

rese

rved.

8 SLID

ESH

ARE P

rofi

t Pools

_m

edia

pre

senta

tion d

eck F

INAL.p

ptx

Profit pools will grow in areas where incumbents do not possess competitive advantages

9 Copyri

ght

© 2

017 b

y T

he B

ost

on C

onsu

ltin

g G

roup,

Inc.

All r

ights

rese

rved.

SLID

ESH

ARE P

rofi

t Pools

_m

edia

pre

senta

tion d

eck F

INAL.p

ptx

The mobility industry will continue to grow, but profit pools will shift to new technology

380

60%

40%

2030

336

74%

26%

2025

303

83%

2035

+2.9% p.a.

17%

2017

226

99%

1%

Emerging profit pools (incl. AV & BEV component suppliers, BEV car sales, data & connectivity and on-demand mobility)

Classic profit pools (incl. classic component supply, ICE car sales, financing and aftermarket)

Profits, $billion

Revenues, $trillion

3.7 4.7 5.3 5.8

Source: BCG analysis

AV=autonomous vehicles; BEV=battery-powered electric vehicles; ICE=internal combustion engine

10 Copyri

ght

© 2

017 b

y T

he B

ost

on C

onsu

ltin

g G

roup,

Inc.

All r

ights

rese

rved.

SLID

ESH

ARE P

rofi

t Pools

_m

edia

pre

senta

tion d

eck F

INAL.p

ptx

< 0 < 01154247967

Today, the long-established car business is driving industry profits

Profit pools – today (2017, in $B)

$226 billion

~7% ~9%~5% < 0%~13% n/a < 0%~10%

Average profitability (RoS)

Emerging profit poolsTraditional profit pools

AV and BEVcomponents

AftermarketData &

ConnectivityOn-demand

mobility'Classic'

componentsNew car sales

(BEV)New car sales(ICE & hybrids)

Financing

Source: BCG analysis

11 Copyri

ght

© 2

017 b

y T

he B

ost

on C

onsu

ltin

g G

roup,

Inc.

All r

ights

rese

rved.

SLID

ESH

ARE P

rofi

t Pools

_m

edia

pre

senta

tion d

eck F

INAL.p

ptx

But future growth takes place in fields in which auto players do not possess competitive advantages

Profit pools - future (2035, in $B)

Emerging profit poolsTraditional profit pools

2017

AV and BEVcomponents

AftermarketData &

ConnectivityOn-demand

mobility'Classic'

componentsNew car sales

(BEV)New car sales(ICE & hybrids)

Financing

$380 billion

~8%~4% ~3%~13% ~14% ~10%~10%

Average profitability (RoS)

~6%

2035

70

(+3)

26

(+25)

60

(-19)

21

(+21)

66

(+12)

28

(+27)

76

(+76)

33

(+9)

Source: BCG analysis

12 Copyri

ght

© 2

017 b

y T

he B

ost

on C

onsu

ltin

g G

roup,

Inc.

All r

ights

rese

rved.

SLID

ESH

ARE P

rofi

t Pools

_m

edia

pre

senta

tion d

eck F

INAL.p

ptx

We expect a significant structural shift in profit pools

New-car sales stall after 2025 as on-demand models in cities pick up

New-car sales margins structurally decline with electrification and

higher share of fleet business

With growth of AV and BEV components, value creation shifts further

away from OEMs to suppliers

Aftermarket business negatively affected by switch to electrified

vehicles (EVs), but effect comes slowly

On-demand mobility explodes, as self-driving cars make services

affordable and convenient

New profit pools in data & connectivity emerge, taking off with self-

driving cars

Copyri

ght

© 2

017 b

y T

he B

ost

on C

onsu

ltin

g G

roup,

Inc.

All r

ights

rese

rved.

13 SLID

ESH

ARE P

rofi

t Pools

_m

edia

pre

senta

tion d

eck F

INAL.p

ptx

Substantial investments will be

necessary to unlock growth areas

They include

• AV technology

• Battery production capacity

• Charging infrastructure

• Self-driving taxi fleets

14 Copyri

ght

© 2

017 b

y T

he B

ost

on C

onsu

ltin

g G

roup,

Inc.

All r

ights

rese

rved.

SLID

ESH

ARE P

rofi

t Pools

_m

edia

pre

senta

tion d

eck F

INAL.p

ptx

4. Self-driving taxi fleetCumulated investment, in $B

>72M self-driving taxis produced

For reference:

$1,800B = 4.3% of cumulated OEM car sales revenuethrough 2035

3. Charging infrastructure

Cumulated investment, in $B

> 38M additional public charging spots

For reference:

$130B = 40% of German Federal Budget 2017

2. Battery prod. capacities

Cumulated investment, in $B

“57 additional Giga-factories”

For reference:

$220B = 13% of batterysupplier revenue through 2035

1. AV technology (R&D)

Cumulated investment, in $B

> 5,000 additional engineers required

For reference:

$45B = 1.7% of cumulated OEMs R&D expenses through 2035

45 220 130 1,800

AV and BEVcomponents

AftermarketData and

connectivity‘Classic’

componentsNew car sales

(BEV)New car sales

(ICE and hybrids)Financing

On-demandmobility

Cumulated investment through 2030 Cumulated investment through 2035

Substantial industry wide investments required to unlock growth areas: >$900B through 2030 (> $2.4T through 2035)

Source: BCG analysis

15 Copyri

ght

© 2

017 b

y T

he B

ost

on C

onsu

ltin

g G

roup,

Inc.

All r

ights

rese

rved.

SLID

ESH

ARE P

rofi

t Pools

_m

edia

pre

senta

tion d

eck F

INAL.p

ptx

OEMs face a ‘double whammy’ challenge: margins will decline while growth areas require new investments

Source: BCG analysis

Simulated effect on OEM profitability in the medium-term

While profit goes down… ...Investments will need to go up

Ø OEM CAPEX/revenue

8.0%6.8%

~ +1%pt

6.6%

~ -1%pt

Ø OEM RoS

5.5%

2017 20252017 2025

Copyri

ght

© 2

017 b

y T

he B

ost

on C

onsu

ltin

g G

roup,

Inc.

All r

ights

rese

rved.

16 SLID

ESH

ARE P

rofi

t Pools

_m

edia

pre

senta

tion d

eck F

INAL.p

ptx

searched for:

strong kid

Market landscape is transforming, with new tech players having good chance to gain momentum

17 Copyri

ght

© 2

017 b

y T

he B

ost

on C

onsu

ltin

g G

roup,

Inc.

All r

ights

rese

rved.

SLID

ESH

ARE P

rofi

t Pools

_m

edia

pre

senta

tion d

eck F

INAL.p

ptx

Shift in market structure expected

Mobility industry in the future

End userCities

Digital integrators

On-demand platforms

...

OEMs

Source: BCG analysis

Cities:

Emerge as new relevant players, with a

strong influence on future urban mobility

Digital integrators:

Tech giants natively integrate services—

and capture the customer interface

On-demand platforms:

Broker autonomous on-demand rides

OEMs:

Face stronger suppliers and risk losing the

customer interface

Suppliers:

Electronics and software become crucial—

newcomers find themselves in strong

positions

e.g., Bosch, Continental, Nvidia, LG, Delphi, ZF

e.g., VW BMW Daimler GM

Google Apple Tencent

Suppliers

18 Copyri

ght

© 2

017 b

y T

he B

ost

on C

onsu

ltin

g G

roup,

Inc.

All r

ights

rese

rved.

SLID

ESH

ARE P

rofi

t Pools

_m

edia

pre

senta

tion d

eck F

INAL.p

ptx

Large option space for industry players still exists

Traffic management and infrastructure integration

On-demand platform

On-demand fleet management (ops, financing)

Data and connectivity services

Autonomous driving software and data

HD maps

AV sensors and ECUs

EV batteries and components

EV charging infrastructure

Not exhaustive

Source: BCG analysis

Mobility

services

Auto

makers

Suppliers Cities

19 Copyri

ght

© 2

017 b

y T

he B

ost

on C

onsu

ltin

g G

roup,

Inc.

All r

ights

rese

rved.

SLID

ESH

ARE P

rofi

t Pools

_m

edia

pre

senta

tion d

eck F

INAL.p

ptx

Author team and regional experts Selected publications and research

Thomas DaunerSenior partner

BCG Stuttgart

Carsten M. Schaetzberger Partner

BCG Stuttgart

Nikolaus S. Lang Senior partner

BCG Munich

Rolf KilianSenior partner

BCG Stuttgart

Andreas JentzschPartner

BCG Munich

Thomas PalmePrincipal

BCG Stuttgart

Michelle AndersenPartner

BCG Detroit

Philipp Sadek Associate

BCG Vienna

Davide Di DomenicoPartner

BCG Milan

The Reimagined Car: Shared,

Autonomous, and ElectricA report by BCG

December 2017

Connected Vehicles and the Road to

RevenueAn article by BCG

December 2017

Self-Driving Vehicles, Robo-Taxis, and the

Urban Mobility RevolutionA report by BCG and the World Economic Forum

July 2016

To request more information on this research, please contact BCG-Info@bcg.com.

To request a media interview, please contact Eric

Gregoire at gregoire.eric@bcg.com.

To discuss the findings with a BCG expert, please

contact Irene Perzylo at perzylo.irene@bcg.com.

Making Autonomous Vehicles a Reality:

Lessons from Boston and BeyondA report by BCG and the World Economic Forum

October 2017