THINK ACT Automotive 4.0 | Roland Berger Strategy Consultants · and mobility experiences are now premiered at CES in Las Vegas, instead of at NAIAS in Detroit. The incum - bent manufacturers

Beyond MainstreaM

FeBruary 2015

Automotive 4.0Since Henry Ford introduced mass production, the automotive industry devel-oped in an evolutionary way into how we know today — With new technology, new players and new consumer needs, we might be on the verge of a revolution!

Automotive 4.0a disruption and

new reality in the us?

Automotive 3.0

Automotive 2.0

Automotive 1.0

Automotive 4.0The convergence of connected, shared, automated vehicles will result in a new reality that is more about how people are moved than what moves them p. 4

760,000 units Annual US sales could grow by 760,000 units to support Mobility-on-Demand services, even as the parc drops by 49 m p. 21

USD 192 bn Traditional OEM addressable markets will shrink, but new revenue pools of USD 113 bn from Mobility-on-Demand services and USD 79 bn from low cost pod manufacturing present large opportunities p. 28

Roland BeRgeR StRategy ConSultantS2

Automotive 4.0 at a glancep. 13

THE BIG 3

1

2

3

think actAutomotive 4.0

3


Roland BeRgeR StRategy ConSultantS

The news is full of transformative technology innova-tions and business models like advanced connectivity systems, innovative shared mobility concepts, and of course, self-driving cars being showcased and intro-duced around the world. Certainly the automotive in-dustry plays a big role, but tech companies and new entrants are increasingly becoming the driving forces behind these developments. It's interesting to observe that most of the innovations surrounding future vehicles and mobility experiences are now premiered at CES in Las Vegas, instead of at NAIAS in Detroit. The incum-bent manufacturers use Detroit to demonstrate the "here and now," but when it comes to painting a picture of the next generation, they're showcasing their con-cepts in Las Vegas and sharing the spotlight with every-one from tech companies to start-ups. Is this the first evidence of a major shift in the industry?

We've seen this type of fundamental change recently in industries including brick and mortar retailing, cell phone manufacturing and computer manufacturing. Once new players enter the value chain with innovative business models and game-changing technologies, the ensuing shake-up can leave prominent incumbents irrel-evant and facing consolidation or bankruptcy. The nu-merous trends impacting the automotive industry, ev-erything from powertrain electrification to retail concepts without dealerships, require the industry to respond — but it's the confluence of connectivity, shared mobility and automated driving that we believe will truly put the industry as it's known today to test.

The combination of these trends will enable the breakthrough of a new form of personal transportation that provides "Mobility-on-Demand" to consumers; where the click of an app on a smartphone summons a shared, automated vehicle. These technologies are al-ready bringing new players including tech giants, tele-coms and start-ups into the automotive industry. Given their competencies and business models, this is al-ready shifting the balance of power throughout the new automotive value chain.

Even though new entrants seem to be driving the change in the industry, the incumbent players are by far not as complacent as many people believe. OEMs offer innovative connected services and are amongst the leaders in new mobility services including car shar-ing. They've also been developing automated technol-ogy for over a decade already, focusing on driving the technology to market readiness in terms of reliability and system costs instead of highly visible showcases.

With changes to how consumers will buy and use vehicles, new technologies being introduced and strong new entrants making large investments into the market — there are big questions regarding what this all means for the incumbent industry players. How big is the change? How do profit pools shift? Who will win and who will lose?

This paper outlines the Roland Berger perspec-tive on the future state of personal transportation and quantifies the impact on profit pools and the Automotive OEMs.

The automotive industry is buzzing with innovative technologies and business models — Is this the usual marketing buzz or are we on the verge of an industry disruption?

4



evolution oF Automotive 4.0three Major evolutionary stages have classiFied the industry's

priMary structure and technologies as it developed FroM its Founding to today — autoMotive 4.0 will start the

next chapter

1

1900

source: roland Berger

Automotive 1.0

industry: vertically integrated oeMs

technology:Mass produced, low technology

Automotive 2.0

industry: Major automotive suppliers are formed

technology: Faster and better automobiles

Global vehicle output

5



2030 2060

Automotive 3.0

industry: globalization of oeMs and suppliers

technology: system electrification, improved safety and

efficiency advancement

Automotive 4.0

industry: convergence of automotive, tech and telecom

technology: automated driving, connectivity and shared mobility

6



entry of disruptive players with new business models that were better aligned with new consumer needs. then, margins began to fall for the incumbents with heavy baggage that were unable to adapt to the changes or unable to restructure to better focus on their core competencies. Finally, the "old" industry was hit with bankruptcies and consolidation.

one of the most prominent examples of an affected player is Kodak, which was unable to adapt after spending billions of dollars trying to transform itself, but was without a clear view of how to leverage its core competencies and new customer needs.

We've seen it before…in each industry illustrated in the table below, "the writing was on the wall." the incumbents were big, old and complacent, A leaving them susceptible to

History is ripe with references of industries impacted by new technologies and business models that al-lowed the entry of disruptive players. When this hap-pened, some incumbents adapted and thrived, while others perished.

Brick and mortar retailers were disrupted by online retailers like Amazon. Specialized retailers such as book stores were hit with both online retailing and tech-nology such as e-readers. The music industry was hit by Apple's iTunes. Many cell phone and PC manufacturers lost their markets to new, more complex ecosystems inclusive of contract manufacturers, operating system developers and exclusive application and content dis-tribution platforms. The list goes on from there.

The pattern of events that occurred in each of these industries is relatively consistent. First, there were advancements in technologies that enabled the

It happened before — Other industries have faced disruption, and players either adapted to survive or perished


A

we've seen it BeFore... and it's happening again

> connected vehicle > automated driving

technology change (product/process)

> Ms-dos > reverse eng. of Bios

> e-commerce > smartphone

> google, uber, etc. > tesla

entry of new, disruptive players

> acer > dell

> amazon > apple > samsung

> Multiple oeMs, suppliers and dealers

large incumbents with baggage

> hewlett-packard > iBM

> K-mart > Borders

> nokia > Motorola

new customer needs

> integrated service/ usage support

> integrated reviews > ease of shopping > larger availability

> integrated digital platform > digital consumer

PC manufacturing B&m retailing Cell phone manufacturing Automotive

7



missing consumer and technology trends. in each in-stance there were also new consumer needs, often consistent with their changing expectations driven by new technologies.

… and it's happening again we already see the emergence of a new paradigm with automotive interest and ownership steadily waning amongst younger consumers in developed markets. even the traditional ownership experience is being rev-olutionized by the new digital experience. some major automotive oeMs are proactively preparing for indus-try change by developing advanced technologies and acquiring innovative start-ups, whereas others are watching and waiting.

new players, including major telecoms, tech gi-ants, tech start-ups and even start-up oeMs have been rushing into the automotive industry pursuing new profit pools. the entry of these players is enabled by the introduction of new technologies including con-nected cars, automated cars, new propulsion systems and new materials.

Winners adapt, survive and thrive although incumbent players often have baggage in the form of legacy business models, assets and technolo-gies that have become obsolete, they can B still be in the best position to be leaders in industries experienc-ing disruptive changes. incumbents are the players with existing brand recognition, market knowledge and assets that can be leveraged alongside innovative business models and technologies to offer their cus-tomers better solutions.

in the past, successful incumbents have re-fo-cused their operations around particular core compe-tencies, or have undergone complete transformations to focus exclusively on new business models. each in-dustry disruption and each player involved is unique, so the formula for survival varies heavily. however, in all cases survivors closely monitored consumer and technology trends, planned the best course of action well in advance, and then took action.

we already see some automotive oeMs leading the pack and investing heavily in new technologies and business models. this select group of oeMs may be better positioned to survive, but what should all other oeMs do to also be prepared for the coming changes?

B

results oF industry disruptions


2 Falling margins of most players in the "old" industry

> reduced participation in the "old" industry > gained market share in the "new" and profitable industry

> increased participation in the less profitable and shrinking "old" industry

Bankruptcy and consolidation within the industry

3 > consolidated relevant players > Maintained or increased margins

> Filed for bankruptcy > were acquired by new leaders

WinnerSiBmAppleAmazon

loSerS nokiaBorders

Gateway

1 changing value chain and new business models

> companies reinvented themselves, adapting to the new competitve environment

> companies did not adapt/kept investing in the "old" industry

8



There are over a dozen major trends currently develop-ing in the automotive industry. While some of them might change just a small portion of the automotive value chain, others (alone or together) could have a much broader impact. We identified fourteen of the most prominent trends surrounding the industry. How-ever, there are only three that have the necessary char-acteristics to cause disruption... C D

Over a dozen major trends will impact the future of the automotive industry — But only a few have the potential to reshape it completely

Shared mobility

car sharing and ride sharing

capturing young,

urban consumers

Start-up oems

entrepreneurial, tech-fo-

cused oeMs can build

highly-competitive vehicles

new retail

direct-to-consumer sales,

home deliveries, flagship

stores, brand boutiques

Shift to Asia

the largest automotive

market in the world is still

growing rapidly

Alternative fuels

natural gas, ethanol,

biodiesel usage have

geopolitical effects

Fuel cells

large investments target

sustainable, commercially

feasible powertrains

light-weighting

composites and new

metals change supply

chains, production

and maintenance

Source: Roland Berger

9



C

Major trends are already having a large iMpact throughout the industrytechnology changes throughout the vehicle, new experiences, new players, new business models and geographical shifts

low cost brands

dedicated emerging market

brands and models such

as renault-nissan's datsun

Powertrain electrification

xevs are required to meet

future emissions and

economy regulations

non-traditional entrants

Major tech and telecom

companies are investing in

advanced automotive solutions

Digital experience

new customer touchpoints

enabled by technology

Connectivity

v2v and v2x changes

vehicle usage and

transportation systems

Automated driving

adas developing to full automation;

new paradigm in driving

and transportation

Combustion engine

advancements

downsizing, thermal

efficiency, etc. improve

viability of engines

10



Most major trends, even though they would impact the industry, aren't disruptive. Mapping the potential im-pact of these trends along technology and value chain axes highlights those with disruptive potential.

The new retail trend, while using today's common-place technologies such as the internet, will have a pro-found impact on the value chain as it introduces new internet players and threatens to change retail and dis-tribution networks. Alternatively, even though fuel cells cause large, disruptive technology changes, they are on track to be executed mainly by incumbent players.

However, shared mobility, automated driving and connectivity are trends that change both technology and the value chain dramatically. Together, they have the power to reshape the entire automotive industry and the concepts of automotive ownership and mo-bility as we know them today.

Although the extent to which these trends would impact the industry is still unknown, the massive in-vestment by incumbent players and new entrants in each of these areas, as well as the regulatory atten-tion are indicators of their disruptive power.

The Three DisrupTive TrenDs

1) SAE automated driving classifications


DisruptiveiMpACt ON tHe vALue CHAiN

limitedimPACt ON tHe VAlUe CHAiN

Shift to Asia

Digital experience

Alternative fuels

Combustion engine

advancementLow cost brands

Automated driving

(levels 0-2)1)

Light-weighting

Fuel cells

Electrification

Start-upOEMs

Non-traditional entrants

Shared mobility

Automated driving

(levels 3-5)1)

Connectivity

Disruptive change in an expanded value chain Evolutionary change within incumbent value chain Disruptive change

D

disruptiveteCHNOLOGY CHANGe

iterativeteCHNOLOGY CHaNGe

New retail

11



Obviously we cannot predict the future. But our robust Roland Berger Scenario Planning Methodology en-ables us to manage uncertainties.

In our methodology, we identify key industry trends that could have the highest impact on the fu-ture states of the world and select highly uncertain drivers. These trends are then consolidated as axes to define unique and meaningful future worlds — each of the worlds is a possible reality for which play-ers in the industry must prepare.

When applying our scenario planning technique to the future of the automotive industry, automated driv-ing, shared mobility and connectivity came out as the most impactful industry trends. Wide-scale connectiv-ity is already a reality for many premium and some volume brands in developed markets, and every major telecom service provider in the US is actively pursuing this market. Therefore, there is low uncertainty that most vehicles in the US and other developed markets will be connected to high-speed and more reliable net-works in the foreseeable future.

High uncertainty trends

ShaRed MOBIlITyIndustry experts are certain that the shared mobility market will continue to grow in the foreseeable future. This trend will be greatly accelerated through auto-mated driving as it removes the driver, thereby dramat-ically reducing the cost of using shared mobility. yet,

high uncertainty still remains around rate of adoption and usage of Mobility-on-Demand services.

AutoMAteD DrivingWhile experts are also certain that fully-automated ve-hicles will eventually be available, the penetration of the technology is highly uncertain. the longer-term, steady state adoption level depends upon reduction in the cost of this technology, change in consumer mind-sets and development of necessary regulations. once regulations allow for autonomy, roland Berger expects there to be a long-term penetration level based on cost and consumer acceptance.

in an even longer-term scenario that may define yet another industry chapter, it's likely that autonomy will be federally mandated in certain driving situa-tions or locations due to safety considerations. How-ever, federally mandated automated technology is not considered in this study.

Shared mobility and automated driving are used as the fundamental drivers shaping four potential future worlds, while connectivity acts as an enabler for progression.

Predicting the future is impossible — But scenario planning helps to envision scenarios for possible future "worlds"

12



E

The paTh To auTomoTive 4.0using the high impact, high uncertainty trends as axes identifies a potential "Shared World" or an "automated World" that might exist in the mid-term prior to the long-term state of automotive 4.0


LowAu

tom

Ated

dr

ivin

g

Short-termToday to 2020

Mid-term2020-2030

Long-termPost 2030

Shared mobilityHigh

Low

High

Automotive 4.0SHAreD WorlD

toDAy'S WorlD AutomAteD WorlD

> shared mobility confined to early adopters in dense urban areas

> automated driving penetration primarily in flagship premium models

> sharing remains constrained by geography and/or consumer preferences

> autonomy achieves high penetration, even in volume vehicle segments which are primarily individually owned

> sharing proliferates throughout urban and some suburban areas with high acceptance of car/ride sharing services such as uber and lyft

> autonomy remains constrained by regulation, cost, technology development and/or consumer acceptance

> The convergence of high levels of shared mobility and automated driving introduces a new industry paradigm

Potential future worldsWe believe that each of these four worlds are possible realities, but that Today's World with limited penetra-tion of shared mobility and automated driving is only likely to remain in the short-term. The Shared World and Automated World are alternative potential mid-term states that are likely to exist based on the devel-opments of the uncertain aspects of the technologies

and business models. However, the long-term reality is most likely to be Automotive 4.0, resulting from the convergence of high penetration and technological so-phistication of both shared mobility and automated driving, all enabled by wide-scale connectivity E .

The next page takes a closer look at what we envi-sion Automotive 4.0 to look like.

CONNECTIV

ITY

13




Automotive 4.0 At A glAnceThe long-Term fuTure sTaTe of auTomoTive 4.0 will see The rise of shared and auTomaTed pods ThaT deliver

mobiliTy-on-demand. however, individually owned vehicles are sTill likely To lead in sales during The nexT chapTer of

The indusTry. The impacT on indusTry, major players and consumers will be wide reaching.

13Roland BeRgeR StRategy ConSultantS

Shared > Mobility-on-Demand pods

shared by communities

AutomAted > Driverless vehicles > Mobility services

delivered based on demand prediction

ConneCted > Wide-scale delivery of

content and services to vehicles

> V2V and V2X communication

Economic impact

> Value chain revenue shift

> New profit pools > Increase in

vehicle sales > Decrease in

vehicle parc

New coNsumerexperieNce

> Ultra-convenient mobility services delivered on-demand

> Fully-connected throughout mobility experience

Mobility-on-DeManD poDs > Represents a small but

significant share > Urban and longer distance

commuters > Lower cost > Shared and automated

IndIvIdually owned vehIcles

> Retain majority of sales > Multi-purpose vehicles > More premium features

and brands > Automated or

driver operated


Value chainimpact

> New requirements to deploy automated driving and mobility-related technologies

> New players offering connected services

> New large-scale fleet management requirements

14



ments, this adoption process will be delayed com-pared to developed markets. China has demonstrated strong interest in embracing new technologies for a societal benefit. Recently, it has mandated that at least 30% of government vehicles be electric by 2016 to combat pollution and reduce energy usage. More-over, surveys have shown the positive response and strong interest in automated driving technology in China, even when compared to the US and Europe. Therefore, China could be one of the leading markets for Automotive 4.0.

DemographicsEven though Mobility-on-Demand promises lower op-erating costs compared to that of taxis today (as no driver is required), our estimates indicate it would still remain more expensive than public transit. This rela-tively higher cost would prohibit certain population segments from actively participating in Mobility- on-Demand. With time, as the society at large reaps the initial benefits from Mobility-on-Demand, econo-mies of scale would further lower the cost, thereby in-creasing the share of the population that can partici-pate in Mobility-on-Demand.

Population densityAnother important factor determining penetration of Mobility-on-Demand pods and services in a region is population density. The efficient usage of Mobility- on-Demand requires convenient access and instant availability of shared mobility, which can only be feasi-bly implemented in areas with high population density

A key element of the future Automotive 4.0 world is the adoption of Mobility-on-Demand. But it will not happen everywhere to the same extent and at the same time. The level of market maturity and unique consumer preferences of a market, along with its de-mographics and population density within each geo-graphical area will result in varying penetration levels of Mobility-on-Demand. In developed markets such as the US, even before the onslaught of automated driving technologies, signs of change are already im-pacting vehicle ownership as consumers are meeting their transportation needs with services including Uber, Lyft and Zipcar. When this trend is accelerated with automated driving, we expect the end of the American two car household in many areas, as the "second car" might be partially substituted by Mobil-ity-on-Demand services.

Developed vs. emerging marketsIn its initial stages, Mobility-on-Demand will require a mature automotive market with advanced levels of automated driving and connected vehicle technolo-gies, regulations and consumer acceptance. Core users of Mobility-on-Demand also have to be willing to forego individual vehicle ownership and take part in the "sharing economy."

In emerging markets such as India and Brazil, con-sumers are still realizing the benefits of vehicle owner-ship which not only provide transportation, but also function as a sign of social status. Although we believe emerging markets will eventually migrate to Mobility- on-Demand services, perhaps mandated by govern-

The Automotive 4.0 world won't sud-denly appear everywhere — It will hinge upon market maturity, demographics and population density

15



F

vehicle usage in autoMotive 4.0 For representative householdsvehicle ownership and usage varies by geographic region

such as dense and sparse urban areas. Rural areas (and suburban to a lesser extent) have an intrinsic bar-rier to shared mobility as a result of greater distances between locations and users, causing longer wait times and farther unoccupied trips for the pods.

Taking the US as an example, the following defini-tions are used to classify geographies.

Dense urban areas, limited to large cities with high population densities. This includes NY, Chicago, Washington DC and San Francisco. Currently, only 7% of the US population lives in dense urban areas.

sparse urban areas, defined as large cities that are more spread out. This includes LA, Philadel-phia, Houston, and Milwaukee. Over 26% of the US population lives in sparse urban areas.

suburban areas, with lower population densities, that comprise approximately 50% of the US population.

rural areas, which account for 84% of land area in the US, but with very low population densities, only comprise 17% of the US population.

expected shifts in vehicle ownershipthe impact of automotive 4.0 would vary based on the geographic region F .

in dense urban areas, we expect some consumers to abdicate vehicle ownership and slowly migrate to Mobility-on-demand, reducing congestion from parked vehicles and searching for parking. corroborating this fact, a few major cities are already developing legisla-tion to control vehicle ownership.

in sparse urban areas, we expect consumers to own fewer personal vehicles as they supplement their individually owned vehicles with Mobility-on-demand to meet their transportation needs.

in suburban areas, we expect consumers to use Mobility-on-demand only in specific situations where it's feasible. therefore, we expect the decline in vehicle ownership to be less dramatic.

in rural areas, we expect the majority of vehicles to remain individually owned in automotive 4.0 as shared mobility cannot be efficiently deployed con-sidering the low population density.

high levels of individual ownership are likely to remain

reduction in individual vehicle ownership as some consumers are able to supplement their travel needs with Mobility-on- demand usage

large changes in vehicle ownership as many consumers eliminate their second car and heavily use Mobility- on-demand to alleviate congestion and ease travel

rurAlSuBurBAnSPArSe urBAnDenSe urBAn

changes in vehicle ownership stem from increasing usage of Mobility-on-demand, but existing public transit infrastructure enables its continued low-cost usage

Automotive 3.0

Automotive 4.0


illustrative individually owned vehicles per household

16



Assuming the Automotive 4.0 world will become reality, certain key questions are on the minds of executives within the industry

1. How are the key industry metrics impacted: number of drivers, sales, vehicle parc and vehicle ownership?

2. What will happen to today's vehicle portfolio?

3. Where are the risks and opportunities across the value chain?

4. Who can win in the Mobility- on-Demand space?

5. What are the major implications for OEMs?

17



claring a specific timeframe in which this state of the industry will exist, we're studying the point in time when shared mobility and automated driving are widely ac-cepted and available, although not mandated by law. The model also holds constant any changes outside of the major trends, and is therefore calculated based on the current demographics, population densities and ur-banization levels in the US as of 2014.

Value chain quantificationThe model analyzes the entire automotive value chain including component and material supply, vehicle pro-duction, vehicle distribution, vehicle financing, main-tenance, usage, insurance, mobility and connectivity. However, only component and material supply, pro-duction, distribution and mobility are discussed in this paper.

Three Automotive 4.0 scenariosConsidering the high degrees of uncertainty surround-ing the disruptive trends, we have considered three different scenarios in our model. Each scenario varies in a number of underlying assumptions. As an exam-ple, the "conservative scenario" assumes high technol-ogy prices for automated driving systems, resulting in low adoption. Alternatively, the "progressive scenario" assumes much more affordable prices, leading to higher adoption. The key assumptions in the three dif-ferent scenarios are outlined in the figure on the next page G . For the remainder of this document we use the progressive scenario of Automotive 4.0 to analyze the impact on the automotive industry.

Considering the complexity of the automotive industry, we made assumptions in order to focus the quantifica-tion on the impact of just the three disruptive trends. These assumptions were made around the market in focus, trends, timing and varying views of the future.

FocusThe US provides a focal point for the analysis as it's amongst the world's largest vehicle markets and is home to some of the world's largest tech companies entering automotive, innovative automotive OEMs and mobility start-ups, making it one of the first locations mobility will change and an indicator for the future of the industry globally. On the other hand, it has a high reliance on individually owned vehicles, as well as a wide-range of geographic regions making it an inter-esting test market for the impact of Automotive 4.0.

TrendsThe model calculates the impact of the three disrup-tive trends: connectivity, shared mobility and auto-mated driving. These trends have been identified to have the biggest impact throughout the automotive value chain. To analyze the true impact of just these disruptive trends, we held all other trends constant.

TimingPredicting the exact timing of Automotive 4.0 is not only a guessing game, but its development is going to be a gradual process that is highly dependent upon techno-logical development, demographics, geographies, so-cio-economic conditions and regulations. Without de-

To answers these questions, we selected the US market as an example and built a comprehensive model to estimate the quantitative impact

18



Each of the primary impacts to vehicle usage iden-tified would result in secondary impacts on markets and industry indicators throughout the automotive value chain. These include reduced insurance premi-ums from safer automated vehicles, increased average fuel economy from more efficient operation and in-creased average vehicle renewal rates from the more rapid mileage accumulation of shared vehicles than individually owned ones.

Finally, we calculated the ultimate impacts of these disruptions on key industry metrics such as sales vol-umes, revenues and profits for the different players throughout major sectors of the value chain.

The figure on the next page H illustrates the model and the development of selected primary, secondary and ultimate impacts on the industry.

Quantifying the impacts of Automotive 4.0To quantify the impacts of Automotive 4.0 within the automotive industry's value chain, we used geographi-cal characteristics, population demographics, sales volumes and profitability of different OEM groups and vehicle segments as inputs.

We then identified the areas where the disruptive trends would have primary impacts on how future vehi-cles and services are used and who uses them. This includes phenomenon such as substitution from public transit and short-to-medium distance rail and air travel into Mobility-on-Demand services, new "drivers" such as the youth and elderly that have previously been un-able to operate vehicles and a decrease in overall vehi-cle ownership from consumers choosing Mobility- on-Demand over individual ownership.


G

three autoMotive 4.0 scenariosassumptions change in each of the scenarios

1 % of users of shared mobility vs. individual ownership low medium High

2 number of users served by each shared mobility vehicle low medium High

3 % of people migrating from public transit to shared mobility

low medium High

4 % of people that become "drivers" due to the benefits of autonomy (e.g., youth, elderly, disabled)

low medium High

5 % of individually owned vehicles equipped with automated driving technology

low medium High

6 average increase in vehicle lifetime miles from accelerated accumulation of miles and efficient driving

low medium High

7 cost of automated driving technology High medium low

8 Base price of shared mobility pod High medium low

9 cost of shared mobility lowmediumHigh

ConservativeAssumption mid-range Progressive

19



H

calculating autoMotive 4.0Quantifying the primary, secondary and ultimate impact of the three major trends on the us automotive industry


Primary impact Secondary impact Ultimate impact

uS PoPulAtion DemoGrAPHiCS

uS

Geo

Gr

APH

iCAl

CH

ArAC

ter

iSti

CS

oem

Gr

ou

PS (preM

iuM

, volu

Me/preM

iuM

, volu

Me, lo

w co

st)

veHiCle SeGmentS(MoBility-on-deMand pods and individually owned vehicles)

scale affects Mobility-on- demand network; reduces

fleet management costs and improves service availability

average renewal rate increases

car sharing replacement rate increases Fuel economy increases

insurance premiums drop

scale affects automated technology costs

average lifetime miles increase

car owners choose automated option

car owners sell; choose Mobility-on-demand

substitution from public transit

subsitution from short-to- medium distance rail and

air travel

"drivers" increase from youth, senior citizens,

disabled, etc.

drop in car parc individually owned market becomes more premium

increase in total vehicle production

drop in average vehicle price

Mobility-on-demand shifts segments to M-o-d pods

20



highways, and to add more parks, walking areas and biking lanes in many urban areas. in addition to fewer parked cars that take up space while they are idle for most of the day, congestion will be improved by reduc-ing traffic from searching for parking and from auto-mated and v2v connectivity technologies. improving public transit requires substantial public investment, whereas more efficient usage of existing roadways that dominate the landscape and more efficient usage of vehicles that are otherwise parked are destined to be a win-win for all parties.

Automotive 4.0 Will reSHAPe veHiCle oWn-erSHiP in tHe uS, AltHouGH inDiviDuAlly oWneD veHiCleS Will Still remAin DominAnt K . the impacts of Mobility-on-demand services will first be seen in affluent, dense urban and sparse urban ar-eas, where people are more accustomed to shared vehicles, public transit and taxis. there will be a smaller impact in suburban and rural areas, where the lack of adequate population density makes Mobility-on-demand less feasible. in our progressive scenario, our model shows that nearly 28% of vehicle sales (in units) and 8% of the vehicle parc could be comprised of shared, automated pods, which would be concen-trated in urban areas.

however, it is important to note that even in areas ideal for Mobility-on-demand adoption, many us con-sumers will opt for individually owned vehicles for rea-sons including privacy, comfort and status. we expect that up to 36% of individually owned vehicles will be automated to ease the burden on drivers, especially those dealing with congestion and longer commutes.

Automotive 4.0 could Allow 32 million Ad-ditionAl people to become "drivers" i . This significant change will occur for two main reasons. First, Automotive 4.0 has the ability to attract consumers from individual vehicle ownership, from public transportation and even from short-to-medium distance rail and air travel — why spend four hours commuting, in airports and on airplanes to travel up to 300 miles when Mobility- on-Demand can pick you up and take you to your desti-nation in the same time while you work or relax in a com-fortable, private setting?

Second, early teens and many others will be able to ride in vehicles without depending on licensed driv-ers — why would parents carpool to Saturday morning soccer practice when teens can travel independently while being monitored for safety?

Automotive 4.0 could increAse AnnuAl ve-hicle sAles by 760,000, even As the cAr pArc drops by 49 million units J . The fundamental concept behind the industry quantification is that vehi-cle sales are correlated to miles traveled in vehicles, not to who owns or operates the vehicle. Provided that Mobility-on-Demand is convenient enough that using shared vehicles won't reduce the miles consumers travel in vehicles, this is how the vehicle parc will shrink without negatively impacting sales. Additionally, due to the added "drivers" in Automotive 4.0 and the ultra-convenience of the service, overall annual sales will need to grow to meet this added demand.

The reduction in parc will likely have large con-sumer and municipal support, as there are already ef-forts underway to improve congestion on roads and

Question #1 —How are key industry metrics impacted: number of drivers, sales, vehicle parc and vehicle ownership?

21



Impact on current vehIcle volumes and drIvers wIth automotIve 4.0

Here is How tHe current market would look witH HigH penetra-tion of connectivity, automated driving and sHared mobility

i J

source: press articles, annual reports, us census, nhtsa, Fhwa, ihs, automotive Fleet, roland Berger

Premium Volume Mobility-on-Demand pods Premium Volume Mobility-on-Demand pods

annual sales voluMe in the us [M units]

> increase in premium segment vehicles and sharp decline in volume segment

> new segment of Mobility-on-demand pods would cater to shared mobility

2.02.8

14.8 9.8

5.0

16.817.6

auto 3.0 auto 4.0

vehicle parc in the us [M units]

> 49 m fewer vehicles in the parc

> sharp decline in volume segment

> each shared vehicle would replace up to 8 individually owned vehicles

auto 3.0 auto 4.0

42.5

147.8

15.4

205.8

30.1

224.3

254.4

total "drivers" in the us By region [M]

> greater participation across demographic groups and substitution from other modes of transportation add 32 m new "drivers"

Dense urban Suburban

Sparse urban Rural

auto 3.0 auto 4.0

17.667.0

121.5

43.0

249.1

12.352.4

110.9

41.2

216.8 > significantly greater participation of the youth (early teens) and elderly (65+)

total "drivers" in the us By age group [M]

0-14 25-54 65+

15-24 55-64

auto 3.0 auto 4.0

7.738.9

121.3

37.8

43.4

249.1

35.1

110.4

34.3

37.0

216.8

2

22



K

classiFication oF geographic regionsall counties are classified into dense urban, sparse urban, suburban and rural based on population density

MoBilit y as a Function oF deMographics

us sales voluMe across diFFerent geographic regions in autoMotive 4.0 [M units]

us vehicle parc across diFFerent geographic regions in autoMotive 4.0 [M units]

rural (0-100) [people per sq. miles] suburban (100-1,200) [people per sq. miles]

sparse urban (1,200-5,000) [people per sq. miles] dense urban (>5,000) [people per sq. miles]

shared individually owned

source: press articles, us census, nhtsa, Fhwa, ihs, automotive Fleet, roland Berger

0.1%1.2%14.7%84.1%

3,531,932

area [sq. miles]

7.1%26.6%

48.9%

17.3%

316,128,839

population

ruralrural suburbansuburban sparse urban

sparse urban

dense urban

dense urban

0.70.4

1.1

0.23.0

3.3 1.045.9

46.9

1.8

7.0

8.86.3105.4

111.7

2.2

2.2

4.4

6.433.7

40.1

1.75.4

7.1

23



smaller group of more demanding customers. we envi-sion that this segment will be providing services at a level that can be compared to today's "black cars," while the large majority of the pods can be compared to to-day's "yellow cabs."

"Premiumization"For many consumers, Mobility-on-demand services and automated technologies will reduce insurance and maintenance expenses. Many households will also change from two or three individually owned vehicles to just one, supplementing their needs with Mobility- on-demand. in this scenario, families would have more money available for their fewer vehicles, which would allow them to increase the premium features and op-tions they choose, or even trade-up to premium brands.

Connected, automated experienceregardless of ownership status, connected and auto-mated vehicles will enable a new transportation experi-ence where consumers can work, be entertained, or even rest depending upon distraction regulations. this will drive interior changes including improved visual dis-plays as big as the windshield, seats with footrests that fully recline and even large workspaces that unfold. users could even see blinds to close over windows and seats that rotate 360 degrees for communal activities. some leading companies already have concept vehicles that demonstrate these features, such as the Mer-cedes-Benz's F 015 luxury in Motion. this new consumer mobility experience opens large new revenue streams for equipment manufacturers and service providers alike.

Shared, automated pods will quickly become an impor-tant part of the market comprising up to 28% of annual units sold, driving a major shift in vehicle segments. The largest change will be an entirely new vehicle category comprised of Mobility-on-Demand pods. As technolo-gies enable reductions in mobility expenses for consum-ers, they will be able to spend more money on the vehi-cles that they own, resulting in individually owned vehicles becoming more premium. Finally, connected services and automated driving promise a whole new travel experience which would have implications on fea-tures and interiors of today's vehicles.

Pods for Mobility-on-DemandThe majority of today's smallest modern vehicles used in developed markets still need to serve as the primary mobility mode for their owners, resulting in added size and features to address various usage needs. However, shared pods can be designed around specific applica-tions. One such application could be one-to-two person short-distance trips with little-to-no utility required. This would enable greater optimization of the vehicle's form, features and cost. We've already seen how some play-ers envision these pods in Chevy's EN-V 2.0, Toyota's i-ROAD and Google's driverless car. Besides the short-distance pods, larger pods would also exist designed for more comfortable medium-to-long distance travel or to provide service for larger groups. Although the majority of pods could belong to the low cost segment, a smaller segment of more premium pods could also exist. The pods in this premium segment would be more comfort-able and have more features to meet the needs of a

Question #2 —What will happen to today's vehicle portfolio?

24



on-demand services, which is expected to become a usd 113 bn opportunity. therefore, the core value chain in the automotive industry could grow from usd 531 bn in automotive 3.0 to usd 624 bn in automotive 4.0.

the mobility-related services market within the automotive industry is defined as transportation needs that are met with non-individually owned light vehicles. today's mobility market, comprised of taxis, limos, rental cars and car sharing services, is likely to be substituted to a large extent with Mobility-on-de-mand services.

however, many of the capabilities required to de-liver Mobility-on-demand are the same or adjacent to today's mobility market. in addition to fleet manage-ment and member or customer fulfillment services, Mobility-on-demand players require competencies in location-based, real-time demand prediction and ser-vices integration with customer data, preferences and other mobility modes. the overall mobility market is estimated to increase by usd 90 bn to become a usd 113 bn opportunity in automotive 4.0 m .

Even with shrinking markets across the majority of the value chain, the industry shake-up creates op-portunities for players active in all sectors to re-posi-tion themselves L .

Major downside risk will be posed to the ac-tual vehicle manufacturing and assembly market, which is estimated to shrink by over USD 33 bn. Even though volumes will increase to meet the demands of new "drivers," the drop in average vehicle price due to the share of purpose-built, lower priced pods will drive the overall reduction.

Vehicle distribution is expected to shrink by USD 2 bn, primarily due to sales of Mobility-on-Demand pods that will be B2B, and are likely to have a lower margin than sales in the individually owned market. This is due to Mobility-on-Demand service providers having buyer power in negotiating the purchase of large quantities of vehicles, similar to today's rental car companies.

Moreover, if the service providers are OEMs, vehi-cle sales and distribution outlets will not be necessary. In either case, OEMs might need to re-think and re-fo-cus their sales and distribution strategies.

Major upside opportunity in the core auto-motive value chain will be seen in components and materials which are estimated to grow by over USD 15 bn. Despite the lower component and material cost of pods (comprising nearly 28% of all vehicle sales vol-umes), the increase in market size stems from the new hardware and software required for automated vehi-cles (estimated to be around USD 26 bn).

Automotive 4.0 extends the value chain that OEMs can par ticipate in by providing Mobility-

Question #3 —What are the risks and opportunities across the value chain?

25



new value chain

m

the MoBilit y MarKet could grow By usd 90 Bnvalue-add by elements of the us mobility market1) [usd bn]

l

iMpact across the value chainvalue-add by activity in the us value chain [usd bn]

source: press articles, annual reports, us census, nhtsa, Fhwa, ihs, aaa, nada, automotive Fleet, sBd, roland Berger


1) includes all oeM value-add; marketing, development, etc.

1) considers only value-add items; does not include fuel, depreciation, insurance, parking etc.; 2) Maintenance is not included; 3) Based on 2013 figures of Zipcar, uber, car2go, drivenow, lyft, sidecar, etc.

Mobility-on-demand services distribution Manufacturing & assembly1) component and material supply

taxi and limo2) rental car car/ride sharing3) Mobility-on-demand services

Core value chain

21268

242

19235

19

113

235

257 257242

268 21 531 15 -33-2 511

113 624

Auto 3.0

Auto 3.0

Auto 4.0

Auto 4.0

814

23 -8-14

-1

113

1

26



however, in this scenario oeMs would have to pro-vide adequate coverage in key markets, and be able to deploy enough vehicles in the right place at the right time to meet customer's needs in real-time. this would not only be a challenge for premium brands that are leading the charge today, but also for volume brands in the future, potentially limiting their engagement to a few key areas or cities per market.

Scenario 2 — third parties winas generations and consumer expectations change, many consumers will care more about the conve-nience and user experience of the app they use for Mobility-on-demand than the vehicle brand that is providing the service. surveys already show that many consumers have better brand experiences with apple and google than with oeM brands, and feel the tech companies can provide more reliable automated and mobility solutions than oeMs. tech companies are al-ready making inroads as mobility providers — google Maps route options already include driving, walking, public transit or an uber. the door is open for third party players to get a foothold in mobility, and they are moving quickly.

Besides tech companies, this scenario also holds opportunities for rental car companies to leverage their footprints and strengths in fleet management to be a successful part of the Mobility-on-demand services ecosystem. if third parties win, which could be a complex combination of tech players, rental car companies, new mobility players and perhaps tele-

One of the major battles leading up to Automotive 4.0 lies in which players, OEMs or third parties, are able to establish themselves as the primary providers and consumer-facing brands for Mobility-on-Demand ser-vices. This would have direct implications on the power balance in the value chain and on profit mar-gins, possibly reducing some of the present OEMs to being contract manufacturers. Although two potential scenarios can be imagined depending on who domi-nates this Mobility-on-Demand battle, we believe that the end state will be a hybrid model where OEMs and third parties coexist and share the profits arising from Automotive 4.0 N .

Scenario 1 — OEMs winThe major investments being put forth mainly by Premium OEMs today will soon be followed by many other leading and Volume OEMs. As these players be-come increasingly active in new business models and technologies including car sharing, taxi apps, multi-modal navigation systems, connected solutions, auto-mated driving and other innovative mobility solutions, the likelihood that they can grab a share of the future mobility market improves.

Further adding to their ability to capture this market is the strong association for consumers between vehi-cles and today's automotive brands. Therefore, they are well-positioned but need to act in order to provide for the changing needs of their customers, capture the next generation's imagination and extend their scope from vehicles to mobility.

Question #4 —Who can win in the Mobility-on- Demand space?

27



The reality could also be a "co-exis-tence" where both OEMs and third parties participate in Mobility-on-Demand — Either as partners or competitors.

coms, they will have buying power to source vehicles from low cost vehicle manufacturers or to squeeze margins from volume vehicle suppliers. This will create a more dynamic industry that will require players to re-structure and re-position to be successful.

Despite the rise of Mobility-on-Demand, the majority of vehicle sales would still remain to consumers who in-dividually own their vehicles. Furthermore, the individu-ally owned market is expected to become more pre-mium owing to the gradual disappearance of the second car per household in many geographies and demo-graphics. Therefore, OEMs have to make major strategic positioning decisions now on their product portfolio and extent of participation in the mobility market.

n

two potential scenariosimplications for key players in each potential scenario


1. oems win 2. third parties win > oeMs strengthen and further perpetuate their position as the dominant players in the auto industry

> M-o-d becomes another platform to market, brand and test new vehicle concepts and features

> oeMs use customer data/intelligence to target customer groups with specific vehicles

> Branding remains a key differentiator among oeMs

> third parties promote and strengthen their own consumer-facing brands

> consumers are less interested in which oeM manufactured the pod

> scope for cross-selling and targeted advertising of products and services grows with tightly integrated mobility and consumer technology experiences

> cost, convenience and low wait times becomes the key differenti-ators among service providers

Co-eXiStenCe

28



low Cost oemslow cost oeMs focus on achieving the lowest possible cost vehicles. this is because their capabilities and brands have developed to serve the more price sensi-tive markets that they compete in. these players are not currently active in most highly developed markets such as the us, but many of them are looking for op-portunities to enter these markets.

mobility-on-Demand servicesBesides vehicle production, oeMs have the opportu-nity to enter or expand in Mobility-on-demand ser-vices in automotive 4.0. they may do so by develop-ing their own Mobili t y-on-demand ser vices independently, through partnerships or through ac-quisitions. entering this new market may be essential for the oeM types facing shrinking segments. how-ever, becoming successful in delivery of technolo-gy-intensive consumer facing services will require transformative changes to the organizations, pro-cesses and mindsets of most oeMs.

Figure o shows the revenue and profit pools from vehicle production and Mobility-on-demand services in automotive 3.0 and automotive 4.0. although the overall revenue and profit pools do not change dra-matically, there are major shifts in the industry, lead-ing to varying implications for each oeM type. there-fore, the remainder of the document is structured to study these implications — vehicle production, Mobil-ity-on-demand and key strategic actions — for each oeM type separately.

Although the world will be different for many market players in Automotive 4.0, in this paper we focus on the effects for different OEMs types as they are the key fo-cal point within the automotive industry. In this context, we segmented today's major OEMs into four types with unique strengths and challenges in Automotive 4.0.

Premium OEMsPremium OEMs are players that focus exclusively on the premium class in each vehicle segment (e.g., Daimler, BMW). While these players have expanded their portfolios in recent years, they remain focused on the upper price range and technology innovation.

Volume/Premium OEMsVolume/Premium players are the largest OEMs globally in scale and scope, with wide-portfolios encompass-ing the entire volume and premium segments (e.g., VW/Audi, Toyota/Lexus). These players are uniquely positioned due to the presence of both their major vol-ume brands and their premium brands, which com-mand substantial shares (greater than 10%) of their total US revenues.

Volume OEMsVolume OEMs focus primarily on wide-scale mid-market portfolios, often with more than one brand in the vol-ume segment (e.g., Ford, FCA). These OEMs often also have premium brands, but the key differentiator to the Volume/Premium OEMs is that their premium brands comprise less than 10% of their total US revenues.

Question #5 —What are the major implications for OEMs?

3

29



o

revenue and proFit pools For oeMsautomotive 4.0 increases the overall revenue and profit pool through Mobility-on-demand services


annual us sales [usd Bn] annual us proFits [usd Bn]

Premium OEMs Mobility-on-Demand Volume OEMs Volume/Premium OEMs Low Cost OEMs

auto 3.0 auto 3.0auto 4.0 auto 4.0

623.6

42.0

165.4

323.6

531.0

15.1

9.9

4.4

29.4

112.8

79.4

233.4

135.1

63.0

12.7

3.2

10.9

8.1

6.5

41.4

30



Premium oemspremium oeMs are in a strong position to benefit from the "premiumization" trend and to capture a portion of the Mobility-on-demand market P .

vehicle productionpremium oeMs' primary target revenue pool from vehi-cle production increases significantly from usd 42 bn in automotive 3.0 to usd 63 bn in automotive 4.0 — driven mainly by "premiumization" and an increase in individually owned vehicle prices from the added auto-mated technology. But premium oeMs may find in-creased competition in their segment as volume/ premium oeMs would most likely strengthen their pre-mium brands and even volume oeMs could strive to "premiumize" their offering to offset the pressure in the volume segment.

MoBility-on-deMandpremium oeMs are well positioned to be successful with Mobility-on-demand services considering their existing lead due to recent large investments in this space, as well as their brand attractiveness with early adopters — the young, urban, and affluent. however, their lack of scale may create a challenge to efficiently offer Mobility-on-demand in a broad way.

Key strategic actions > continue to strengthen premium positioning and

expand product portfolio to fully leverage "premi-umization" trend

> establish or expand Mobility-on-demand solutions and ensure a high level of integration/convenience to expand premium positioning throughout the whole customer experience

> Focus Mobility-on-demand offerings in high-im-pact areas or address scale issues with partner-ships while ensuring a premium experience

P

revenue and proFit pools For preMiuM oeMs oeMs with majority of revenues from premium brands


annual us sales [usd Bn]

annual us proFits [usd Bn]

Premium OEMs Mobility-on-Demand Others


42.0Premium BrAnDS

531.0

4.4Premium BrAnDS

29.4

623.6

112.8moBility- on-DemAnD

63.0Premium BrAnDS


6.5Premium BrAnDS

41.4

31



volume/Premium oemsvolume/premium oeMs cover a wide range of market segments. therefore, they are well positioned to capital-ize on "premiumization" with their strong premium brands and also compete effectively in Mobility-on-de-mand services with the scale of their volume brands. however, success in either of these domains requires substantial investment Q .

vehicle productionvolume/premium oeMs house a wide-range of brands belonging to both premium and volume segments — on average, premium accounts for 20% of us reve-nues. therefore, while premium segment revenues in-crease from automotive 3.0, their volume segment revenues drop, leading to an overall decrease of usd 30 bn. this decline can be counteracted by cap-turing greater market share in the premium segment and/or by participating in Mobility-on-demand.

MoBility-on-deMandvolume/premium oeMs have the scale and efficient manufacturing capabilities required to deploy Mobility- on-demand fleets on a large scale. however, they need to make investments in mobility technologies to keep pace with premium oeMs and tech companies and be able to deliver these new services.

Key strategic actions > Further strengthen premium brands to capitalize

on the "premiumization" trend > catch-up to the premium oeMs and tech players

in the Mobility-on-demand race > consider repositioning volume brands up-market

to remain attractive with customers moving into premium segments

> Focus on volume segments that are less cannibal-ized by Mobility-on-demand (e.g. suvs) or move into lower price segments with pod manufacturing while adapting the business model accordingly to remain profitable

Q

revenue and proFit pools For voluMe/preMiuM oeMs oeMs with premium brands representing 20% of us revenues on average


auto 3.0



Volume/Premium OEMs Mobility-on-Demand Others

auto 3.0auto 4.0 auto 4.0

132.4volumeBrAnDS

531.0

6.4volumeBrAnDS

29.4

623.6


87.9volumeBrAnDS


3.7volumeBrAnDS

41.4

33.0PremiumBrAnDS

3.5PremiumBrAnDS

47.2PremiumBrAnDS

4.4PremiumBrAnDS

32



306.4volumeBrAnDS

531.0

13.5volumeBrAnDS

29.4

623.6112.8moBility- on-DemAnD

208.2volumeBrAnDS


8.6volumeBrAnDS

41.4

17.2PremiumBrAnDS

1.7PremiumBrAnDS

25.2PremiumBrAnDS

2.3PremiumBrAnDS

volume oemsoeMs with mainly mid-market positioning are the most impacted in automotive 4.0. they will be sandwiched be-tween premium oeMs leveraging the "premiumization" trend, low cost oeMs grabbing market share in the pod segment and new entrants in Mobility-on-demand ser-vices. volume oeMs will have to make strategic decisions to either develop into more premium segments, move down-market to develop low cost pods, or develop a ho-listic and seamless offering of products and services to lead the charge in the future automotive 4.0 world r .

vehicle productionvolume oeMs, which also have premium brands but with smaller shares, would see a threat in production as rev-enues from the volume segment shrink from usd 306 bn to usd 208 bn, driven by lower vehicle ownership and "premiumization." the increase from their premium brands would not compensate for such a decline. vol-ume oeMs may need to consider consolidation of exist-ing brands and entering the low cost segment by manu-facturing Mobility-on-demand pods — either to serve their own or third parties' Mobility-on-demand services.

MoBility-on-deMandwhile volume oeMs have the scale and low cost man-ufacturing capabilities to deploy fleets of pods, they need to invest in technology to become providers of Mobility-on-demand services. those investments can include developing offerings independently or using M&a to quickly establish a leading position.

Key strategic actions > strengthen premium segment coverage > Focus volume segment exposure on less

cannibalized segments > enter Mobility-on-demand pod production with

new business models > consider partnerships with tech players to

participate in Mobility-on-demand services > consider entering Mobility-on-demand services

independently by investing in advanced technolo-gies and innovative start-ups

r

revenue and proFit pools For voluMe oeMs oeMs with premium brands representing only 5% of us revenues on average

Volume OEMs Mobility-on-Demand Others





33



323.6531.0

29.4

623.6


79.4m-o-D PoDSBrAnDS


3.2m-o-D PoDSBrAnDS

41.4

low Cost oemswhile low cost oeMs are currently not active in the us and most developed markets, they will have an oppor-tunity to enter these markets in a major way by supply-ing vehicles to either tech players or oeMs who are not well positioned to produce purpose-built mobility vehi-cles at a low enough cost S .

vehicle productionlow cost pods could be a large market in the us — up to usd 79 bn in revenues and accounting for nearly 28% of all vehicle sales volumes. this is the space that low cost oeMs are best suited to address considering their existing capabilities. they can do so by supplying to either oeMs or tech companies active in Mobility- on-demand services. Margins can be expected to be low considering the commoditized nature of these low cost pods, as well as possible competition from vol-ume oeMs trying to enter this space.

MoBility-on-deMandlow cost oeMs do not stand a good chance to inde-pendently enter Mobility-on-demand services consid-ering their current absence from developed markets. therefore, their participation in Mobility-on-demand would mostly likely be through vehicle production serv-ing a Mobility-on-demand service provider.

Key strategic actions > actively engage the biggest movers in mobility —

tech players and premium oeMs for partnership opportunities

> demonstrate the required quality while meeting the right cost target for pod manufacturing

> demonstrate a willingness to be a non-consumer facing brand, which provides entry into developed markets and longer-term opportunities to play other roles or develop solutions for emerging markets

S

revenue and proFit pools For low cost oeMs low cost oeMs are currently not present in the us, but can play an important role in the manufacturing of M-o-d pods

Low Cost OEMs Mobility-on-Demand Others





34



solutions. However, they will face intensified competi-tion as other OEMs move upmarket. They will have to find solutions to cope with their limited scale and hence limited market coverage to offer broad coverage of mobility services. Volume/Premium OEMs will have to strengthen their premium offerings, while also fo-cusing volume products in areas least cannibalized by Mobility-on-Demand. Their scale positions them for strong market coverage within Mobility-on-Demand, but they will have to catch up to Premium OEMs and tech players currently dominating the space.

Volume OEMs face the biggest challenge in Automo-tive 4.0 as their primary market shrinks; they could con-sider combinations of developing further into the pre-mium segment, leveraging manufacturing efficiencies for low cost Mobility-on-Demand pods or transforming their business models from manufacturing to providing holistic mobility solutions. Low Cost OEMs can seize the opportunity to enter the market by partnering with tech players offering Mobility-on-Demand or even Premium OEMs to develop Mobility-on-Demand pods.

In the face of the biggest disruption the automotive industry has ever seen, the race is on to capture future customers and profits — but winners and losers in Au-tomotive 4.0 will be separated by their readiness to adapt and ability to transform their business models. Authors: Marc Winterhoff, Dagan Mishoulam,

Konstantin Shirokinskiy, Venkata Chivukula, Neury Freitas

the winners in the new Automotive 4.0 world will be those best prepared for the disruptive trends and able to adapt or transform their business models to capture next generation customers and new profit pools

automotive 4.0 will transform the way we think about the production, ownership and usage of vehicles. this new paradigm is driven by the confluence of three dis-ruptive trends: connectivity, shared mobility and auto-mated driving. Besides highly automated and con-nected vehicles, a new Mobility-on-demand service offering will become an integral part of tomorrow's individual transportation, comprising a market of usd 113 bn in the us.

our scenario-based model shows that we might see the "demise of the second car" in american house-holds as shared Mobility-on-demand pods reduce in-dividual ownership and shrink the vehicle parc by up to 19%. in contrast to the common belief of many ana-lysts, we expect vehicle sales to grow by over 700,000 vehicles as the ultra-convenience of Mobility-on-de-mand drives substitution from other transportation modes and grows the pool of people able to operate vehicles. up to 28% percent of vehicles sold in this new reality could be pods, purpose-built for Mobility- on-demand. at the same time we expect an acceler-ated "premiumization" trend for individually owned ve-hicles. even though the entire industry will be im-pacted, focusing on just the oeMs shows varying con-sequences depending upon their market positions.

premium oeMs are positioned to benefit from "pre-miumization" and their strong brands allow them to draw customers into their own Mobility-on-demand

www.think-act.com


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Roland Berger Strategy Consultants

Shared mobility

Shared mobility: where vehicles are shared and mobility offerings are used jointly will see rising revenues and growing customer numbers in the period through 2020. We anticipate annual growth rates of up to 35 percent in the new business fields around car, bike and ride sharing and shared parking. In a clear sign that this market trend is taking off, the number of market players in the segment is growing. Besides innovative start-ups, greater quantities of established companies like auto makers, transportation and logistics firms and airlines are entering the fray.

AUTOMOTIVE INSIGHTS 02.2014 One of the most exciting questions for the global automotive industry is the direction developments in the BRIC countries are headed. The decisive issues are whether — and, if yes, how — "B", "R" and "I" can find their way out of crisis mode and back onto a general growth path, and whether China, whose car market now makes up a good quarter of the global total, can continue to offer stable development. With the precursors to slower growth already emerging in the core markets of Europe, the United States and Japan, automakers and suppliers need to know for sure whether they can rely on the BRIC markets in the future.

Autonomous Driving

Autonomous driving has the potential to fundamentally transform the automotive industry in the coming years — be it through innovative software technolo-gies and vehicle models or new ways of using cars, such as "Mobility on Demand." The expectation is that cars will be able to drive completely autonomously from 2030 onward, without the driver taking an active role. The market potential for the automotive industry is huge.

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THINK ACT Automotive 4.0 | Roland Berger Strategy Consultants · and mobility experiences are now premiered at CES in Las Vegas, instead of at NAIAS in Detroit. The incum - bent manufacturers