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Future of MobilityDisruptive Technologies Create New Realities

October 30th, 2019

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39,000+400+ 11th

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Automotive clients Ranked 11th largest CPA and consulting firm in the U.S.

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Data Analytics

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Case study: Disruptive technology

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2 Mobility

Where is the automotive industry going? Megatrends to understand

1 Autonomy

3 Electrification

4 Manufacturing the vehicle

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Modeling the Future

Non-linear exponential Growth of Mobility

• Mobility forecasting model has been based on

differentiated addressable markets, adoption

timing and willingness to pay for new

technology

• Uptake phases: Innovators, Early Adopters, Early

Majority, and Late Majority, and Laggards

Traditional forecasting models for technology growth are limited due to their linear nature. The Plante Moran model utilizes non-linear

projections for disruptive technology based upon algorithms (e.g. differential equations) which are driven by market based model inputs.

Consumer Uptake - Phases ofNew Technology

Innovators

Early Adopters

Early / Late Majority

Laggards

Output InputDrivers

Autonomous

• OEM autonomous commercialization plans• Added cost of autonomy to customers• Customer willingness to pay for autonomy• Autonomous technology maturity• Government autonomous regulations

Mobility

• Autonomous vehicles as % of vehicle parc• Vehicle miles traveled

• Passenger and commercial vehicles

• Competitive market passenger miles• Domestic airline, bus, transit, rail, other

• Autonomous enabled miles• Unlicensed population, increased access to young and

elderly, increased miles from lives saved

• Use of autonomous vehicles % shared vs private• Annual utilization of shared and private vehicles

• Miles and % of 24hr day

• Life of vehicle in total miles traveled• Life in years of shared and private vehicles

• Total Lifetime Miles/ Avg Annual Miles

66

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050

Ve

hic

le M

iles

Tra

ve

led

(B

illio

ns)

Mobility Projections (U.S.)Vehicle Miles Traveled Drive Vehicle Demand

Private - Autonomous Shared - AutonomousNon Autonomous

Vehicle Type Key

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50

100

150

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2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050

Ve

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arc

(Mill

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2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050

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ale

s (M

illio

ns)

Vehicle Miles Traveled Vehicles in Operation (VIO)

Annual New Vehicle Sales

• Growth in miles traveled will be driven by autonomous vehicles capturing competitive and untouched markets• Vehicles in Operation decrease over time due to the increased utilization and efficiency of shared autonomous vehicles • Introduction of autonomy increases annual sales and shifts customer base from private ownership to shared ownership

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Electrified Vehicle Projections (U.S.)Adoption will Accelerate

Model Inputs Factors

Market Dynamics

• Lower fuel and electricity cost• Improving electric infrastructure• EVs available in most vehicle segments

Government Regulations

• CAFE requirements • Government incentives for infrastructure and EV

purchases• 11 States adopting Zero Emissions vehicle

standards

Technology Advances

• Electrification cost becomes comparable to ICE over time

• ICE cost grows due to fuel efficiency requirements

Customer Perception

• Social pressure to reduce emissions• Range anxiety declines with increase battery

efficiency and reduced costsSource: Plante Moran

Mix of electrified powertrains steadily replace internal combustion engines over the next 20 years until cost, regulations and technology advances drive the rapid adoption of battery electric vehicles

EV Model DriversVehicle Powertrain Projections

0

5

10

15

20

25

2017 2022 2027 2032 2037 2042 2047

Ve

hic

le S

ale

s (M

Un

its)

ICE HEV PHEV BEV

Note: Hydrogen fuel cell propulsion technologies did not have significant volume in projections, due to uncertain infrastructure for fueling and product costs.

Projected PHEV/BEV

Market Share:2030 – 20%2040 – 53%2050 – 88%

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Mobility business model driversTransportation behavior will change

Shared mobilityPrivate vehicle ownership

Today Future

Buying vehicles Buying miles

Vehicle price Asset efficiency

How we consume transportation

How we buy transportation

OEM response

New Mobility Business Model Prerequisites

1. Longer Vehicle Life:

• Enabled by enhanced engineering, advanced materials and manufacturing

• Metric – miles driven

2. Vehicle Uptime (Availability):

• Enabled by rigorous preventative maintenance regime

• Metric - % availability (uptime)

3. Vehicle Utilization:

• Enabled by matching riders with vehicles – right place, right time

• Metric - % of day vehicle is utilized

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By 2050, disruptive changes in the industry will drive significant shifts in how transportation is consumed

New vehicle sales

$610B

Used vehicle sales

$685B

Gas/diesel/ electricity

$254B

Insurance$234B

Financing$120B

Repair/ maintenance

$72B

Public transit/ car rental/taxi

$119B

Mobility as a Service (MaaS)*

$27B

Other$271B

2017$2.4 Trillion

New vehicle sales

$625B

Used vehicle sales

$679B

Gas/diesel/ electricity

$209B

Insurance$253B

Financing$119B

Repair/ maintenance

$79B

Public transit/ car rental/taxi

$117B

Mobility as a Service (MaaS)*

$176B

Other$255B

2027$2.5 Trillion

Minimal change

New vehicle sales

$867B

Used vehicle sales

$165B

Gas/diesel/ electricity

$189B

Insurance$173B

Financing$153B

Repair/ maintenance

$233B

Public transit/ car rental/taxi

$17B

Mobility as a Service (MaaS)*

$3.4T

Other$590B

2050$5.7 Trillion

Large growth and shifts

*Mobility as a Service (MaaS) – only includes transportation revenue miles. Other mobility revenue streams included in Other.

U.S. mobility revenues Transportation spend projections reflect disruptive changes

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Pay for Miles Business ModelConceptual Impact

• The pay for miles based mobility model upsides:

• Potential for increased margins

• Recurring, fee based revenue

• Reduced earnings volatility to support investment planning

• Reduced cyclicality

• The pay for miles based mobility model downsides :

• Deferred return on capital

• Risk of asset underperformance

The pay for miles business model is driven by price per mile, vehicle utilization and asset longevity:

Vehicle Retirement -300,000 Miles

Impact of increased utilization on vehicle sales vs miles sales business models

Business model breakeven point–180,00 miles @ 20 cents per mile

Years

$K

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Pay for Miles Business ModelLimiting Downside Risk

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Mile

s (m

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U.S. Passenger Vehicle SalesSource: Wards Auto

U.S. Passenger Vehicle Miles TraveledSource: U.S. DoT

- 11 %

- 36 %- 2 %

1 %

2 % - 2 %

• Miles traveled has historically been less volatile than vehicle sales

• In all recent US vehicle sales downturns miles travelled has either increased or only slightly declined:

• 1991

• U.S. passenger vehicle sales decreased 11%• U.S. passenger miles traveled increased 1%

• 1995

• U.S. passenger vehicle sales decreased 2%• U.S. passenger miles traveled increased 3%

• 2003

• U.S. passenger vehicle sales decreased 2%• U.S. passenger miles traveled increased 2%

• 2008-2010

• U.S. passenger vehicle sales decreased 36%• U.S. passenger miles traveled decreased 2%

- 2 %

3 %

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Now

Current State

Business model Vehicles produced

Economic

Model

Customers

Product

Development

Lifecycle

Capabilities

Product

Future

Miles driven

Private owners “MaaS” fleet operators

One time product sales Mileage based annuity revenue stream

Multiple platforms requiring major redesign 7-8 year development cycle

Skateboard platform requiring refresh design 2-3 year development cycle

OEM internal RD&E – duplicative, costly, viewed as a market differentiator.

Manufacturing is core competency

OEMs focus on mobility and customer experience. RD&E and manufacturing

shifts to proven, capable suppliers

Differentiated designs, ICE components, mechanical focus, many parts per

vehicle

Modular design for component replacement, electrified powertrains, autonomous capability, connected technology, less parts per vehicle

Evolution of the automotive model4 Ways Suppliers will be Disrupted

How Suppliers Are Paid

What Speed Suppliers Operate

What Suppliers Make

What Suppliers Do

Supplier Disruptions Factors

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Evolution of the Powertrain

Component Transition and Elimination

Onboard Charging ModuleDC/DC Converter

Inverter

Traction Motor

Battery Pack

Fuel System

Air Intake System

Exhaust System

Engine

Transmission

ICE Powertrain Components EV Powertrain Components

Market Shifts

• Converging disruptions (autonomy, sharing and powertrain efficiency) will increase the

pace of adoption of electrification

• Powertrain components will transition to EV specific technology over time, eliminating

demand for many types of products throughout the vehicle

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Evolution of the Automobile Chassis

Changing Requirements for Common, Modular

Skateboard

Skateboard

Skateboard

Pickup Application

SUV Application

Shuttle Bus Application

Electric Vehicle Skateboard ChassisICE Chassis

• Vehicle differentiation requirements for end customers decline

• Utilitarian applications provide broader, common customer experience through

autonomous, shared, electrified vehicles

Variable Skateboard Applications

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Evolution of the Interior Space

Shifting Expectations of the User Experience

• Interior focus still in the cockpit, but with more technology available

• Interior features widespread use of accent color and soft surfaces

• Focused on convenience and safety

• Mid-segment standard technologies include:▪ In-dash displays ▪ Bluetooth connectivity ▪ Basic driver assistance systems

• Interior physical features highly streamlined

• Focused on personalization, connectivity, driver information, appearance, and safety

• Technology features to be carried over in future vehicle generations:

▪ Smart surfaces (not physical switches)

▪ Ambient lighting

▪ Ambient and slim HVAC outlets

▪ More and larger touch screens

▪ Natural voice recognition and gesture control

• Interior design is used to differentiate their vehicles in the market

2025 and Beyond“Autonomous and Shared”

2020 – 2025“Personalized and Connected”

2015 – 2020Current Interiors

2000 – 2015Traditional Interior of the Past

• Interior is the “3rd living space”• Advancement of personalized and connected

technology

• Interior is the focus of the user experience and the primary human machine interface (HMI)

• Vehicle adapts to the user by automatically making adjustments to match user preference (e.g. temperature)

• Interior maximizes user enjoyment and satisfaction through their experiences inside –air, light, touch

2008 Chevrolet Trailblazer SS 2018 Chevrolet Equinox Mercedes-Benz F 015 Luxury in Motion Concept2018 Tesla Model 3 Featuring Next Gen Design / Technology

• Cockpit focus to layout of the interior

• Interiors are largely monochromatic, feature widespread use of plastics and limited use of soft surfaces

• Introduction of advanced technology includes: ▪ Graphics capable LCD displays ▪ Partially reconfigurable instrument clusters ▪ In-dash navigation

• Technology was introduced in premium vehicles in the early 2000’s and migrated to mid-segment vehicles through 2017

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Future Value Chain for mobilityDriving role changes throughout the Value Chain

Seamless capabilities from Manufacturing to Mobility will require tightly integrated, real time information

Vehicle and Supplier Manufacturing(including Engineering)

MaaS and Mobility Operations

Ownership

&

Financing

Vehicle

Owners• Fleets• Private• Fractional

Financing• Loans• Leases• Subscription• Pay per mile

Insurance• Personal• Vehicle• Ride

Mobility Services Provider• Pay per ride/sharing• Freight/package service• Specialized mobility services• Mobility technology broker/interface

Connectivity• V2V communications• Telecommunications access• Vehicle data – OTA updates, monitoring• In-vehicle infotainment services

Mobility Operations Services• Vehicle maintenance and repair• Vehicle staging – cleaning, replenishing,

charging, scheduling, storage• Vehicle roadside assistance• Passenger biometrics support

Mobility Infrastructure• Parking location, availability, price• Traffic flow, route optimization• Vehicle to infrastructure (SmartCity)

Key Vehicle Manufacturing Characteristics• Utilitarian styled vehicles

• Common platform architectures

• Modular design for component replacement

• High volume production for cost efficiencies

Powertrain – ICE and EV Chassis Interiors ExteriorsElectronics &

AutonomousOther

Systems/Components

• Electrified powertrains

• Autonomous capability

• Connected technology

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Are you positioned for the future?Using a structured evaluation approach

“Vision Creation”

Plante Moran’s Strategic Planning Model

“Plan and Implement”

• Is the Company’s product portfolio structured to adapt to the future trends ?

• Does the Company have the capabilities to adjust to changing market demand and role in the value chain?

• Does the company have the right relationships throughout the value chain?

• Is the company capitalized properly to meet the investment needed to compete?

• Does the Company have a clear strategy to address future market challenges?

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Contact information

Mark BarrottPrincipal

Strategy Practice

mark.barrott@plantemoran.com

+1 248 223-3272

Visit plantemoran.com/automotive for more information.