Anil Valsan

The long and shortfor the automotiveindustryShifting from transactionalto customer-centric

Page 2 Getting under the hood with automotive market researchJune 2015, London

Agenda

Global automotive market overview

Mobility, connectivity and changing customerneeds

Paradigm shift in automotive retail

Considerations for the market research industry


Global automotive market overviewKey factors signalling the urgency to change faster

• Industry likely to witness more change in the next 5 years than in the last 15 years• Retail experience will need to transform• Increase in disruptors from outside the auto ecosystem

• Stakeholders (shareholders, regulators) wield significant influence, demanding performanceand transparency

• China, US and Western Europe are likely to drive volumes for the industry over the mediumterm, however double digit sales growth likely only in select emerging markets

• Global automakers see the need to adjust their business models to the new normal in Chinabased on moderate sales growth over the next decade

• Our analysis of the automotive C-suite’s agenda indicates majority of the organisations lackpreparedness, execution and resource alignment to enable faster change


Agenda






Shift in consumer preferences

Shift in consumers’ mobility preferencesForcing a change in way we envision mobility

Increasingvehicle

ownershipand running

costs

Growinginternet andsmartphonepenetrationwith declinein prices and

easyaccessibility

Governmentand

automakersfocus on

enhancedsafety, fuel

efficiency anddriving

assistance

Improvingquality and

availability ofboth publicand private

sharedtransportoptions

Environment-related

régulationsand concerns

– pollution,climate

change etc.

Key drivers ofchange

Vehicleownership

Vehicle access (carsharing, leasing)

Ownership prideand socialstatus

Optimization ofpurchase andrunning cost

Basicconnectivity

Need to stayconnected –always andeverywhere

Averse to high costsof safety andalternate powertrainvehicles

Open to trying thealternative vehiclesand accessing best-in-class safety features

From… …to


9-13cars replaced on the road

by each shared car1

4mdrivers expected to belong

to car-sharing servicesGlobally in 2020 (from

<1m in 2013) 2

$6.2bexpected Global revenuefrom car-sharing marketin 2020 (from <$1b in

2013)3

Asset base

Type ofcustomer

Crowd-sourced

Company-owned

Individual Business

Source: 1Transportation Sustainability Research Center at UC Berkeley; 2Automotive-IQ; 3Navigant Research; Note: *car sharing companies

Rising trend of collaborative consumption is driving the demand for car-sharing services, to combat the increasingcongestion and rising cost of ownership

Market indicators

Impact Considerations

OEMs

Dealers

Move from ‘ownership’to ‘access’, to causedecline in sales

Rising bargaining powerof CS*, as they expandfleet

►New type of players to pose as potential threat asthey look to build relationships with customers

‘Product-centric’to ‘solutions-oriented’

Expanddemographic bypositioning CS*as customers

Enableconnectivity tomake vehiclesshare-ready

Tie-up with OEMsto provide car-sharing services

Leverage customer interactionsto gauge the kind of mobilitysolutions needed

Sharing economy driving the demand for car-sharingOEMs and dealers to re-consider business strategies amidst an evolving businessenvironment

Page 7 EY presentation at MOVE 2014 summit

Connectivity to play a key role in enabling mobility integrationAutomotive industry is still looking for viable business models

Connectivity and car-web integration offer the possibility to redesign how vehicles interact with cities and, as such,have the ability to transform urban mobility

Disruptive innovation to enable profitable business strategies

Vehicle to-grid benefits

“It’s about connecting thecar to the house …”

“Price of the vehicle to goup, but the cost of

mobility will go downsignificantly”

“Most of the telematicsvalue resides in the

services likesmartphones”


Automotive C-suite’s value proposition agendaMeeting connectivity, efficiency expectations and overhauling digital experiencecritical to enhance value proposition

31%feel well-prepared

B. In-vehicle features andfunctions

78%expect demandfor in-vehiclefeatures/functionssupports theirvalue proposition

Demand for greater connectivity/ infotainment, smartphonecompatibility

Demand for fuel efficiency, loweremissions

Features driven by regulations(Emission, fuel consumption,safety)

Key driving factors


Only

C. Digital experience andtransactions

66%expect demand fordigital experiencesupports theirvalue proposition

OnlyKey driving factors

Role of digital/online resources ininfluencing customer choices

Convergence of digital and retailvehicle buying experience



Only50%expect financingand pricingsupports theirvalue proposition

D. Financing, pricing,affordability

Key driving factors

Incentives and vehicle pricing

Bundled service offering (finance,insurance, service and fleetmanagement)

Innovative financing and retailmodel for electric and hybridvehicles

84%expect demand formobility servicesand vehicle typessupports theirvalue proposition

A. Demand evolution —mobility and vehicle types

Key driving factors

Demand for used cars

Demand for corporate carsharing programs and fleetmanagement solutions

Demand for multi-modal urbantransport integration


Agenda






Automotive retail in the futureEvolving from bricks-and-mortar to an omni-channel strategy

Shifting from product-driven to a customer-centric approach

Offering mobility services based value propositions instead ofownership

Providing seamless brand experience across channels

Consumers will no longer have a need for a traditional dealership


The paradigm shift in auto retailing over the next decade will bebased on five key pillars

Focus oncustomer-centricity

Emergence ofnew value

propositions

Improving thedigital

experienceNew channels

to reachconsumers

Develop aseamlesscustomer

experienceacross allchannels

23

4

1 5


Agenda





Page 13 EY presentation at MOVE 2014 summit

In the mobility eco-system, the debate is open on who owns thecustomer

Telematics solutionproviders

…focus on packagingdata and information in ameaningful way

Energy and powerutility players

…can provide integratedhouse and car electricitypackages

Telecom serviceproviders andchipmakers

…trying to identifyadditional roles to playbeyond the data carrier Cities

…are competing on bestvalue proposition for cleanair, finance, investmentsand talent

TechnologistsGoogle, Microsoft,Apple and more..

…are developing theoperating landscape toguide the customers inthe new ecosystem

E-payment, NFCtechnology and

travel informationplatforms

…enable real-timeinformation and one-stopand contactless paymentsystems

Collaboration

Competition

Vehiclemanufacturers and suppliers

Mobility redefines the waymanufacturers are able to interact

with their customers to deliverservices in non-traditional ways


Key considerations

To build profitable customer relationships, automakers and dealers need to undertakeunprecedented change management in collaboration with other stakeholders in theautomotive ecosystem to:

• Design and deliver differentiated customerexperiences

• Introduce customized mobility solutions andintegrated service packages

• Identify, design and roll out innovative formats ofretail for a well-informed customer

• Craft a holistic digital and social media strategy• Manage brand experience through multiple touch

points with customers


Thank you for your attention! Anil ValsanLead AnalystAutomotive & Transportation

Ernst & Young1 More London PlaceLondon SE1 2AF

Phone +44 207 951 6879Mobile +44 7903 206464Email [email protected]

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