pfa ow vehserviciel

© Oliver Wyman | Connected Cars Battle Fields.pptxAUTOMOTIVE

CONNECTED CARS & ITS NEW BIZ MODELSAn opportunity for the French Automotive Industry !

Prepared for PFA – Les RDV de la Filière Automobile

Rémi CORNUBERT

11© Oliver Wyman | Connected Cars Battle Fields.pptx

Evolution of a connected worldDriven by the rapid technology development, connectivity within different ecosystems is accelerated, forming a connected world in the near future

Source: Oliver Wyman

Connected products Connected systems Connected life

Past

FutureToday

2© Oliver Wyman | Connected Cars Battle Fields.pptx 2

Driving forces for in-vehicle connectivityOEMs & dealers, authorities, private & commercial customers and finance & insurance companies have different interests in driving in-vehicle connectivity

Driving in-vehicle connectivity

1 Fleet operators & cargo ownersSource: Oliver Wyman

Drivers/consumersSafety & security

Ubiquitous communicationUsing instead of owning

…

Finance & insurance comp.Minimizing risks by monitoring

& controlMaintenance management

…

OEMs & dealersCustomer relationship mgmt.

Service & repair, warranty…

AuthoritieseCall, anti-theft solutions

Emission controlRoad charging & traffic mgmt.

…

Commercial customers1

Improved efficiency & cost optimization

Status & location monitoring…

Technology & infrastructureI&C technology performance

& infrastructureNew power train technology

…


Connected car marketThe rapid market penetration of vehicle connectivity opens up large business opportunities for different industries in the coming years

Market fitment/penetration rates of smartphone and embedded connectivity units fitted to newly-assembled passenger cars and light vehicles, 2007-2027, (%)

In 2027, a hundred percent penetration of in-vehicle connectivity units is expected in all new sales vehicles in Japan, North America and Western Europe

Source: QUBE – just auto, Oliver Wyman

0,0%

20,0%

40,0%

60,0%

80,0%

100,0%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2022 2027

North America

Mercosur

Western Europe

Central Europe

Russia

Japan

China

India

Korea

2011 20162011 2016

Connected Cars market volume and developmentThe global number of cars with connectivity devices will rise to 210 million in 2016 – by then more than 80% of new vehicles sold will be connected cars

1 Telematics refers to embedded OEM and aftermarket systems (hardware plus included services) as well as hybrid systems based on smartphone connectivity Source: ABI Research, BCC Research, iSuppli, Oliver Wyman analysis

Telematics market coverageWorldwide vehicle population, 2011-2016, in million units

% share of worldwide car fleet

5%

18%

CAGR36%

Telematics market revenueWorldwide market,2011 – 2016, in billion USD

CAGR22%

$15 bn.

$40 bn.

45

210

Comments

• Number of Connected Cars fore-casted to grow strongly at ~36% p.a yielding 210 million in 2016

• Shipments of OEM telematics systems grow from ~26 mn. in 2011 to 70 mn units in 2016 (CAGR 22%)

• Aftermarket shipments of telematics systems rise from 8 to ~16 million units in 2016 (CAGR 15%)

• Overall market revenue will rise by only 22% p.a. to 40 billion USD in 2016 - due to increasing number of affordable non-embedded, hybrid solutions (e.g. Ford SYNC)

x%

Significant growth of telematics shipments & a global penetration of +80% in new vehicle sales


Connected car service map – Regional disparityDifferent focus and speed of service implementation in different regions are driven by customer preferences, infrastructure and government policies

LB services (location based services), CVs (commercial vehicles), PVs (passenger vehicles), SVT (Stolen vehicle tracking), GSM (Global System for Mobile Communication), GPRS (General Packet Radio Service) , GPS (Global Positioning System), V2I (Vehicle to infrastructure)Source: Desk research, Oliver Wyman

USALeading market with strong players for infotainment, navigation & location based services

BrazilMandatory equipment of GSM/ GPRS anti-theft system, which allows SVT and drives insurance service and enables “pay as you drive” tariff structures s

EuropeMandatory implementation of eCall system till 2015 boost safety and remote services

RussiaNavigation service withthe highest growth; ERA-GLONASS emergencycall system will be mandatory in CVs by 2013

ChinaPositioning and navigation for PVs and CVs are currently the main telematics applications in China

JapanLeading in smart & real-time traffic management based on GPS / navigation services and V2I technologyIndia

Fleet management for CVs starts to pickup, joint venture is built between India & Russia to provide navigation services in India

Connected car services global view


Competitive overviewDifferent players have entered the market, looking for growth opportunities as well as strategies to enhance existing business model

Key player groups and motivation

Player examples

Automotive OEM

Enhance car value proposition

• Increase car sales

• Protect car price

• Improve drive experience for customer retention

Strategic intent

Telematics device

supplier

Transform business model to integrated service provider

• Compensate eroding device business with new business opportunities

• Enhance device price & margin

Independent aftermarket

player

Improve customer acquisition and retention

• Increase parts and service sales

• Better customer retention

Fleet operator

Optimize existing business

• Increase fleet efficiency

• Reduce maintenance and breakdown costs

Bank, finance & insurance

Differentiate service and offerings

• Provide better offerings and services to customers

• Differentiation in sales


(Operation) software

player

Build car services as core business

• Generate new business

• Customer retention & cross selling

Network operator

Build new business &leverage existing strengths • Increase SIM-

card / connectivity sales

• Build platform and profit from B2B services

• Leverage existing strengths

Web service company

Grow existing business scale

• Increase number of users

• Develop new business based on strength

Mobile device player

Increase service revenue as platform provider• Increase

device sales• Increase

service revenue by revenue sharing with third providers

Not Exhaustive


Value chain of connected cars – 6 player groups OEMs, device & software providers, network operators, web service & content suppliers have positioned themselves along the value chain

1 Including all content suppliers around connected cars services, such as media, traffic information, logistic and transport information etc.Source: Oliver Wyman, Expert interviews

Web services players

Software providers

Network operators

Device companies

Auto OEM

Content suppliers1

1

2

3

4

5

6= Current compentence focus = Recent strategic moves/positionings

Provide integrated solutions to consumers from one hand based on selective strategic positioning and partnerships along the value chain

Supply integrated solutions to OEMs

Supply connectivity platform for all applications to OEMs and device companies

Develop own service platform and services

Supply connectivity platform with own services to OEMs and device companies

Increasingly build up own service platform to enhance sales channels

Cooperate with device and software companies to provide integrated

solutions to OEMs

CarContent Service Distribution Device

Content bundling

Content Perso-nali-

zationBilling

Service proces-

sing

Custo-mer data

mgmt.

Back-bone

Platform/channels

Connec-tion setup

Opera-ting

systemHMI

Deviceintegra-

tionContent providing

Softwaresolution

Car integra

-tion

Not Exhaustive


Strategic battle fields along connected cars value chain The recent strategic moves show two key battle fields around service platform with billing & the device solution including HMI & software solutions

1 Including all content suppliers around connected cars services, such as media, traffic information, logistic and transport information etc.Source: Oliver Wyman

Web services players

Software providers

Network operators

Device companies

Auto OEM

Content suppliers1

1

2

3

4

5

6= Current compentence focus

Supply connectivity platform with own services to OEMs and device companies

Increasingly build up own service platform to enhance sales channels

Cooperate with device and software companies to provide integrated

solutions to OEMs

CarContent Service Distribution Device

Content bundling

Content Perso-nali-

zationBilling

Service proces-

sing

Custo-merdata

mgmt.

Back-bone

Platform/channels

Connec-tion setup

Opera-ting

systemHMI

Deviceintegra-

tionContent providing

Softwaresolution

Car integra

-tion

Service platformB

• Customer service platform – who owns the platform/channels to generate additional value?

Device solutionA

• Solution design (embedded vs. mobile device solution)

• Proprietary vs. Open source operating system for devices


Definition and classification of service plays

7 Service plays


A Service play contains a bundle of connected car services, which

– are based on a set of telematics functionalities;

– belong to one self-contained ecosystem;

– have access to the same profit pools;

– target the same customer group;

– contains different business designs tapping the same power sources in the play

1

2

3

4

5

6 Insurance service

7 Payment & commerce Service

N

O

S

W

@

Safety & remote serviceA fully customized aftersales service portfolio could be offered based on the eCall platform

Fleet management serviceTelematics hardware penetration enables but not determines fleet Management service penetration

Mobility serviceVehicle telematics will become additional platform for offering innovation mobility services

Navigation & Location based serviceIncreasing location based B2C and B2B opportunities have emerged through enhanced navigation technologies

Infotainment serviceWeb-based information and entertainment services are offered in in-vehicle environment

New policy offerings and differentiating customer services are enabled based on better driver data base

Mobile payment services will be adapted and extended to in-vehicle use cases

7 Service plays7 service plays are emerged as battle fields, containing different business designs competing to exert control and extract value


Automotive OEM

Telematics device

supplier

Mobile device player

(Operation) software

playerNetwork operator

Web service company

Independent aftermarket

playerFleet

operator

Finance, bank &

insurance

1Safety & remote service

2Fleet management service

3 Mobility service

4Navigation & Location based service

5 Infotainment service

6 Insurance service

7Payment & commerce Service

Current competitor positioningDifferent player groups currently focus on different plays, leveraging existing assets, build up new competences to compete in different service ecosystems

Key player groups and motivation


N

O

S

W

@

Focus plays Related plays Not yet active


Payment & commerce service• Mobile payment services will be adapted and extended to in-vehicle use cases

Business segments for connected services Oliver Wyman evaluated 7 key service areas in a recent study – after sales remote services with strong relevance and monetization potential for OEMs

N

O

S

W

Monetization potential of connected services, indicative

Fleet management services• Approx. 4.3 mio fleet vehicles in approx. 1.6 mio company fleets in Germany• Market for fleet management services in Germany with significant volume

Navigation & location-based services• Recruitment bonuses, kick-backs esp. in B2B

Remote services for after sales• eCall platform as a basis • bCall and after sales remote services to secure the parts business as central profit driver

Mobility services• Intermodal services, new mobility concepts, car-sharing

Insurance services• New policy offerings/ differentiating customer services based on better driver data base:

pay as/ how you drive• Worldwide volume of telematics-based insurance in 2020 widely exceeds 10 bn EUR6

@ Infotainment services• Web-based information and entertainment services


Success factors for connected car business modelsSix major factors are essential for the successful introduction of new connected car business models


12

4

5

6

3Strong focus on partner win-win setup and detailed understanding of payment mechanism as success factors in online market places

Strong focus on marketable use-cases based on core customer pain-points

Early definition of KPIs and organizational setup to establish sustainable business design

Holistic view on business models across two levels: overall OEM service strategy level and single service level

Incorporation of IT and security expertise early in business model definition (ability to implement)

Structured prioritization of services to ensure business model validity and OEM fit-to-brand


Willingness to pay for connected servicesCustomers have a limited willingness to pay for connected services –particularly compared to other vehicle related payments

Direct willingness to pay (examples/segment averages)in EUR, per month/service user in 2012

47

302522221818

55742222

0 50 100 150 200 250 300 350 400 450 500

Leasing instalmentFuel costs

Vehicle maintenance expenses

Automobile wear-and-tear repairConnected services in vehicle

Online datingComprehensive coverage

Internet and telephonyAutomobile liability insuranceTraditional computer games

Paid services for data storage and e-mailOnline journalism

Comprehensive coverage excl. collisionOnline music download

Add-ons for online gaming subscriptionGaming apps (smartphone & tablet)

Online gaming subscriptionSmartphone apps

25 - 35

>200>>

Rather small amounts – do connected

services in vehicles pay off?

2


Level 1 - Business design archetypes overviewBusiness models need to be discussed for overall OEM connected cars business as well as for specific services with in the portfolio

Business Design Archetypes for OEMs Selected examples


Mobile devicesolution

Embedded solution

Solu

tion

desi

gn

Operating modelProprietary control Platform play

OEM proprietary service platform

OEM customized service platform based on standard solutions

OEM customized service platform based on open source solution

OEM proprietary device with exclusive service platform

OEM proprietary device with standard service platform

OEM common device with 3rd party service platform

1 2 3

4 5 6

BMW connected drive

(Integrated solution by Co-operation of IBM, Hughes, Oracle)

(By cooperation of Deutsche Telekom & Continental)

GM OnStar

Implementedin Daimler & Chrysler cars

2Not Exhaustive


Level 2 – Monetizing of connected car servicesSix general revenue models are identified to monetize service offerings in the connected cars, serving OEMs, private, commercial and business consumers

Value streams of service offerings(examples)

OEM Third-party

(IT companies, telcos etc.)

OEM • Internal efficiency improvement(Internal cost reallocation, subsidies etc.)

• License fees (one time, ongoing etc.)

Private & commercial vehicle consumer

• Increased device margin (at vehicle sales)

• Service fee(subscription/purchase/ registration fee etc.)

• Service fee(subscription/purchase cost etc.)

Other business customers

(IT companies, telcos, business customers etc.)

• Shared revenue(provision, supplier fee etc.)

• Advertising fee

• Service fee(subscription/purchase cost etc.)

Paid

by 2

3

4

5

6

Provided by

1


2Not Exhaustive


Decision criteria Market observations Examples

Innovation powerService value and user experience are key innovation areas

• Service-Follower - Offering of established 3rd

party services, (e.g. Renault, Fiat)• Innovator - Advanced mobility solutions with

complex backend processes (e.g. VW Parkingpilot, Audi, BMW)

Strategic controlControl of services & data to define customer experience and to leverage customer insights

• Data as commodity - Data control with partners to reduce costs (e.g. Renault, Fiat)

• Data as core business - Data leverage for secondary business opportunities (e.g. BMW TeleServices)

Solution architectureBusiness model and service ambition drive proprietary elements and backend complexity

• Standard - Integrated/tethered solutions with 3rd

party backend• Proprietary - Embedded solutions with complex

custom backend

Organization/ skillsStrategic priorities and capability needs determine functional anchoring vs. dedicated resource pools

• Min. use of resources - leverage of functional competencies (e.g. VW)

• Dedicated Unit : PSA has a specific unit• Build-up of skills - Dedicated resource

pools/competence center (e.g. Daimler, BMW)

Cooperation modelComplex ecosystems emerging with tech and SI players building reference cases as service aggregators

• Turnkey solution - e.g. Android based (e.g. Atos/Renault), Windows OS based (e.g. Microsoft/Fiat, Ford), Apple OS – CarPlay (Ferrari, PSA..)

• Extended workbench solution - e.g. BMW WirelessCar)

Connected car services – Strategic decision criteriaStrategic positioning of Automotive OEMs in connected services is determined by five key decision criteria

A

B

C

D

E

Source: Oliver Wyman Connected Car Study, OEM websites

2Not Exhaustive



ServicesCustomer targeting

Engineering Technology platform

X

Fleet services

Processing management

Route planning

Accounting

(Customer-)communication

Information service

Price modeling

General navigation

Asset/Car sharing

Infotainment

Private customers

Dealerships

Industry & service provider

Car rental

Corporate clients

etc.

App on bring in mobile phone

App on Click-in/Cradle for phone/pad

Custom build bring-in

Custom build with (OBD) adapter

Embedded special purpose

Embedded multi purpose

OEM Apps

New connected services platform

Android / iOS

Standard

Proprietary

Tom Tom bring-in

App development / IT

etc.

X X X X

…

Results

• Clear understanding of feasible solution architectures

• Compatibility check with product portfolio

• Clear Go/No-Go decision by each dimension

• Identification of customer segments

• etc.

Examples

Potential solution – Business dimensionsA wide variety of possibilities along all business dimensions need to be considered

C


Examples, anonymized and simplified

Premium OEM 1, EU

Organizational units with dedicated responsibility for Connected Car services

Premium OEM 2, EU

Volume OEM, Asia

VolumeOEM, EU

Cross-sectional functionconnected services

Services as innovative cross-sectional function (SI)

Dedicated cross-sectional function arising

Product-management

Lead from customer perspective (requirements)

In coordination with R&D

Currently product management in lead

Development (E/E)

Implementation of innovations, provider management

Serial implementation in coordination with SI

End-to-end responsibility for connected services

Purchasing

Accountability to provider management, also operations

Production Sales

Proceduralsupport in sales’ services

Sales’ services and in-house call centre

IT

Support with software expertise

End-to-end complete distribution Substantial contribution to implementation Cooperation

Implementation of innovations, provider management

Selective support with software expertise

Selective support with software expertise


Organization / skills – Responsibilities across functional silosOrganizational set-ups for Connected Car services vary by OEM and the experimentation will continue

D


Cooperation models – Platform partners / core cooperationsIntegrated, connected services require a complex ecosystem of providers to be launched and managed

E

• Integrated, connected services require a complex ecosystem of providers

• Individual aspects of connected driving experience are well established

• Integrated provisioning is still premature, with mostly closed ecosystems emerging

• Device manufacturer’s, tech and SI firms with the ambition to act as “aggregators”

• OEM will need the capability to build and integrate a portfolio of partners suited to serve the specific service aspiration

Source: Oliver Wyman analysis

Content/Social Media

Providers

Technology Providers

(Telematics, Payment)

System Integrators

Infrastructure(Carriers,

Cloud)

Distributors (App Stores)

AppDevelopers

(OS, UI, APIs)

DeviceManufacturers

(Automotive/CE)

Connected CarEcosystem

Not Exhaustive


CustomersHigh expectations by increasing connectivity in daily life (Smartphones, Tablets, …)

TechnologyTechnology has reached sufficient maturity level(Bandwidths, performance, hardware costs,…)

RegulationRegulation actively steers towards safety and sustainability (e-Call, Emissions, Traffic management, …)

New business model around Connected Car

Services

Source: Oliver Wyman project example

§

€Business CaseTransactional direct refinancing from customer not sufficient (innovative payment models, holistic consideration,…)

Customer accessNumerous new competitors fighting for access to customer (internet player, IT-specialists, service provider,…)

RunBuildPlan

Software/ Service orientationReal-time operation of services and short product life cycles (Service portfolio, continuous software updates, …)

New business model for Connected Car ServicesDisruptive changes to business model pose central challenges to the OEMs and their organizational structures

OEMs have to adapt their business design, strategy & organization to a completely new business model



Key challenges to OEMs organizational structuresDisruptive changes towards a service oriented organization pose central challenges to OEMs

Line 3Line 1 Line 2R & D

Production and PurchasingSales

After SalesFinance

…

Product mgmt.

Traditional OEM organization

Lifecycle • ~ 5 vehicle types per line• 5 yrs. development, 7 yrs. production

• 20-30 services• < 1 yr. development, update every 3 months

R&D process • Standard R&D process • Ongoing development/improvement

• Plan/ Build/ Run (or Scrum)

Products • Hardware centered• Bill-of-material and component mgmt.

• Solution centered• Mgmt. of software, services and functions

Purchasing • Traditional large Tier 1 supplier • Multiple content provider, start-ups, service integrators

Customer access

• OEM dealer customer• Dealer manages sales & support to customer

• OEM customer• Direct customer management (contracts, sales

& support)

R&D

Connected service organization

?

Preliminary

Organization

Connected CarsBut this is a true business opportunity for the French automotive industry

• Rules of the game are being redefined

• Services around connectivity is a growth lever

• There is no clear winning model yet

• Connected cars allow to reconnect directly with final customer

• A new ecosystem is emerging

• French players are already in the game with some nice moves, products & services

• France has so many assets...

Let’s transform it together now !!!

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