reinventing mobility in the china context
DESCRIPTION
With the auto industry developments and the increasingly prevalence of the wireless internet and mobile devices, we expect that the Internet of Vehicles will create discontinuous opportunities for product and business model innovation. We believe the conditions in China – the world's largest auto market and the market with the largest number of both internet and "smart phone" users – will likely make it the incubator for rapid commercialization of such innovations. China's urban transportation challenge, the high rate of adoption of connected mobile devices, combined with the rapid and aggressive introduction of alternative mobility and vehicle ownership concepts from new entrants, will ultimately compress the time needed to commercialize smart, connected car technologies and related services. Such developments will dramatically alter not just the feature content of vehicles, but may also usher in a revolution to the business model of the automotive industry – where a model focused on "users of mobility services" could emerge as a real alternative to the traditional model of "car ownership".TRANSCRIPT
Reinventing Mobility in the China Context
Building the Internet of Vehicles &
Related Smart Car Technologies
August, 2014
The China Context
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• Following a decade of rapid growth, the China auto market sharply decelerated on 2011 and 2012 - with growth slipping to 2.5% and 4.3%, respectively. This brief slowdown was followed by 14% growth in 2013, with overall sales approaching 22 million units.
• While the market growth has been spectacular, we can expect growth rates in the future to be more moderate and sustainable – in line with GDP growth. Therefore, growth opportunities are still abundant, but not as easy as it has been until now.
• Both foreign and domestic brand vehicle manufacturers will seek to adjust to this new growth pattern while maintaining profitability. As a result, automakers and their partners must devise strategies to anticipate market trends and diversify profit streams to ensure future growth.
• The unique context of China’s urban transportation challenge, the high rate of adoption of mobile device connectivity, combined with the rapid and aggressive introduction of alternative mobility and ownership concepts will compress the time needed to commercialize smart, connected car technology and related services.
China is poised to revolutionize the 21st century global automotive industry, especially in the area of the Internet of Vehicles, making mobile vehicle connectivity
the next great frontier of automotive innovation
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Typical Mid-Sized Sedan
§ Over-engineered to meet almost all conceivable needs for transporting people and cargo over both short and long distances
– Weighs 20x as much as its driver
– Can travel 300 miles without refueling
– Is able to attain speeds well over 100mph
– Requires more than 100ft2 for parking
– Is parked more than 90% of the time
Personal Urban Mobility Device
§ Designed specifically for city-use to transport a few people and light cargo over short distances – Lower driving speeds in cities and V2V crash
avoidance technology reduce crash protection requirements and enable smaller and lighter vehicles
§ Demand for urban mobility will rise – 25 Megacities >10M inhabitants, doubling
every 15-20 years – Traffic jams have increased by 188% from
2007 to 2011
Source: Reinventing the Automobile (Mitchell, Borroni-Bird, Burns), Press Research, Gao Feng Analysis
China’s unique urban transportation challenges could create the potential for ultra-small personal urban mobility devices
Consumers are now presented with several options to satisfy their mobility needs – driven by disruptive yet innovative service providers
Alternative Ownership Concepts
Ownership Leasing / Long Term Rental
§ Focus on ownership
§ Focus on purchase price & residual value
§ Full car availability
§ Focus on total cost of ownership and residual value
§ Full car availability
Dealers, brokers Leasing, Fleet Management companies
Traditional OEM business Rental/Non-traditional
OEM business
Pay-per-use
Traditional short term rental
Taxi / chauffeur service
Non-car individual transport; e.g., scooter, bike
Car sharing / alternative ownership forms
Source: Gao Feng Analysis
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Regulatory requirements for sustainable development and consumer demand preferences will drive seven technology innovation frontiers
Innovation Drivers
Green mobility must be driven by regulatory push…
…while in-vehicle connectivity, safety and infotainment technologies are very much driven by consumer pull
Innovation in the seven technology frontiers can be accelerated with an overall vision and investment to create the ecosystem for smart, green, connected vehicles
Source: Gao Feng Analysis
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The China government plays a key role in shaping industrial development
Government’s Support to Auto Industry
Infrastructure Development
§ Government has been con/nuously guiding and suppor/ng the industry’s development across manufacturing and distribu/on
§ Highway network development provides founda/on for more motor vehicle-‐based based transporta/on
§ China is inves/ng in infrastructure to support industry development
Government is inves9ng to ensure the con9nuous growth of auto and emerging technology industries
Vehicle Manufactures
Infotainment
Facility Tele-‐ communica9on
Content Provider Mobility Internet
Source: Gao Feng Analysis
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Promoting “smart traffic” solutions is an important agenda for the Chinese government
1995
§ The concept if “Smart Traffic” is first introduced to China. Mr. Shi, current chief of China smart traffic commiGee, is one of the people touch this new concept
1997
§ In Apr. 1997, the fist “Smart Traffic” forum in China is ini/ated in Beijing
2002
§ Government started to put “Smart Traffic” into the country development plan “9th 5-‐yr plan”. 2 small projects were related to this topic
§ More aGen/on on “Smart Traffic”, government upgraded the scale to medium level project in “10th 5-‐yr plan”
2006
2010
§ In Na/onal People Rep. commiGee, government formally iden/fies it as the strategic focus of its next 5 years economic planning
View of the Chinese Government
§ The central government continues the investment in the development of the Internet of Vehicles (IOV) - target of reaching the scale of 200M “Smart Vehicles” in 2020
§ Tier-1 and some tier-2 cities, including Beijing, Shanghai, Guangzhou, Wuhan, Shenzhen, and Xiamen all start to initiate the policy in Internet of Vehicles
Source: MIT Press, Press Research, Gao Feng Analysis
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Infotainment System Vehicle Connection Platform Smart Traffic
-As listed in the strategic focus of national development plan, government will provide up to 10B RMB subsidy in first batch to invest in this industry-
Officer from China Industry & Info Tech Ministry
-Telematics is the perfect integration of modern auto and service industries. There will be a new auto-based platform by which service is provided-
Chen Ke Wu, Chairman of Shanghai Navigation & Tech
Development Committee
And the Chinese internet giants are vying to create the ecosystem for the connected “Smart Car”
Source: Gao Feng Analysis
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For the future auto market, mobile connectivity will be “standard” for new models which attracts players from different fields
§ In-car intelligent technologies (infotainment and wireless internet connectivity) are not standard equipment today
§ Some major automakers have already
introduced the in-car intelligent systems, such as Onstar by GM, Sync by Ford and iDrive by BMW
Automakers
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§ Strong players such as Baidu, Google and Apple are actively entering into the IOV market
§ Smaller-sized companies are pursuing IOV
technology as well. One example: Qihoo 360, well known for antivirus software, is now developing IOV products.
Internet Technology Companies
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In-car System Manufacturers
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Main types of players in IOV industry
§ Most were the manufacturers of in-car navigation, entertainment and diagnostic systems. Now they calling themselves "IOV companies”, but they are most likely to be viewed by OEMs as traditional component suppliers.
Comments
§ Automakers have led initiatives to
develop in-car intelligent systems, mainly led by Tesla, BMW, GM and Ford
§ IOV is an big opportunity for IT companies to leverage consumer relationships and technology platforms to extend their reach into vehicles
§ The entry barrier of IOV technology is high, and smaller size companies do not have the capability to develop sophisticated products…and automakers tend to work with technology leaders
§ Manufacturers began to develop IOV products, but it is difficult to play an important role in major IOV market because of weak branding
Source: Gao Feng Analysis
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Recently, major Chinese internet services companies have cooperated with local and global automakers on IOV products
Auto Brands Internet Companies
Embedding Alibaba online functions into some of the
SAIC products such as navigation, online
entertainment systems, online shopping, and other information systems
The product will enable a data connection between a mobile device
and a vehicle with a Bluetooth or USB interface, allowing users to control the various applications
through the device
Major Functions
Internet Car
CarNet
Smart Device Link (SDL)
Product Type
Internet Car
Intelligent Interconnect
products
CarNet can be operated by an app on a mobile device, and the contents will be shown on the screen in car, and more functions will be developed based on this connection
Open-source version of
Ford’s AppLink system
Project Names
Source: Press Research, Gao Feng Analysis
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Aggressive internet and technology companies will rapidly develop the market and the relevant IOV technologies
Global IT firm’s focus on IOV and intelligent
technologies
The auto-related network infrastructure is being deployed
More IT players will come into IOV field
Higher level technologies for auto will be developed
by the internet giants
§ Apple and Mercedes-Benz, Ferrari, BMW announced an in-car networking and multimedia platform called CarPlay
§ Microsoft launched its first automobile industry innovation center in Changchun. The center will focus on the R&D of auto information system, cloud-based mobile Internet solutions, and big data applications
§ China Unicom has formed a strategic cooperation with Tesla, and will offer 3G and 4G service for cars sold by the Tesla in China
§ Tecent released its first Internet of Vehicles (IOV) hardware product Lubao box at the GMIC, and Lubao is an auto diagnosis system
§ Qihoo 360 is a software company known for its antivirus software, and they are developing similar products for in-car systems
§ LeTV and BAIC are proposing a cooperation on connected cars
§ As direct competitors, both Google and Baidu are developing driverless vehicles and the related Vehicle to infrastructure technologies
§ Currently both companies have developed in-car network systems, and cooperated with several major automakers
Source: Press Research, Gao Feng Analysis
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Like O2O for other markets, IOV O2O will bring online customers to offline businesses
Navigator/ Map Beyond basic route navigation, information about the shopping, parking, and other surroundings will bring online customers to offline, such as Baidu Maps for Baidu CarNet
Insurance
Others
Aftermarket Service
Car owners will purchase insurance based on the driving record which can be diagnosed by the in-vehicle system
Embedding aftermarket service information into in-vehicle systems will be an efficient connection for both car owners and service providers
IOV applications will be the extension of today’s mobile device O2O Apps, which will be also an major extension of e-commerce
For future, more O2O applications will be developed once the IOV products become
more completed and more widely used, and currently this
is still an emergent market
Functions of IOV O2O for Future
IOV O2O Functions for future
O2O
Source: Gao Feng Analysis
O2O = Online to Offline
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Currently many major Asian and Western auto OEMs are focusing on mobile connectivity and IOV (1/2)
§ The content and functions directed to the 8-inch screen includes the most frequently used applications, such as navigation maps. A selection of vehicle-centric apps is pre-loaded onto the system. Owners can also download, update and sync personal apps through their smart phones and USB drives
Infiniti
CASE STUDY
G-Book
§ “MZD Connect” system is a consumer device based telematics solution that builds on a 7-inch touch screen display. By connecting a smart phone, the system can provide services like navigation, internet browsing and a weather application
Mazda
§ Toyota and Lexus have demonstrated a 4G Wifi G-Book concept to illustrate its 4G strategy. The 4G-Wifi hotspot inside the vehicle allows up to the eight mobile devices to be connected to the internet and stream movies and videos while on-the-go
Toyota/ Lexus
Infiniti Intouch MZD Connect
Asian OEM’s Work on Mobile Connectivity and IOV
Source: Gao Feng Analysis
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Currently many major Asian and Western auto OEMs are focusing on mobile connectivity and IOV (2/2)
§ The Mini in-car intelligent system (Paceman) which offers smart phone integration in the vehicle and gives access to Mini specific applications such as Mission Control, Dynamic Music, Driving Excitement and Minimalism Analyzer
MINI/ BMW
CASE STUDY
§ OnStar by GM has introduced an upgraded voice recognition system, a new generation mobile connection App with a new visual design and a new security service
§ The upgraded voice recognition system includes the new “Traffic on Demand” service that enables subscribers to obtain real-time traffic information by voice
GM
§ Ford has introduced its SYNC and SYNC AppLink technologies, and allowed consumers to control their favorite smart phone apps through voice commands
Ford
Onstar SYNC iDrive
Western OEM’s Work on Mobile Connectivity and IOV
Summary & Conclusion:
• A structural shift of economic power from West to the East is taking place, with stunning economic growth most evident in China over the past 20 years.
• China has emerged as the world’s largest automotive market since 2009 and remains the growth engine of the global automotive industry.
• The world has entered a new era since 2008, with over half of the world population now living in cities, and this increasingly urbanized world challenges the established set of paradigms for personal and commercial transportation, especially in the densely populated urban centers in China.
• As the leading automotive market, China is poised to revolutionize the global automotive industry, especially in the area of the Internet of Vehicles, making mobile vehicle connectivity the next great frontier of automotive innovation.
The rapid embrace of mobile connectivity by Chinese mobile device users, combined with the commercial aggressiveness of China’s internet giants
will create conditions conducive to the rapid commercialization of smart connected car technologies.
Such developments will dramatically alter not just feature content of vehicles, but also usher in a revolution to the business model of the automotive industry
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Gao Feng’s heritage and our deep roots in China
§ Our name Gao Feng 高風 is taken from the Song Dynasty Chinese proverb Gao Feng Liang Jie 高風亮節
§ Gao Feng denotes noble character while Liang Jie refers to a sharp sense of integrity
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§ Officially launched on April 1st, 2014, Gao Feng is a pre-eminent strategy and management consulting firm with roots in China and global vision, capabilities, resources and network
§ Specialized in helping clients to address their most difficult and strategic issues, e.g., game-changing strategy, alignment of global operating models with local China conditions, addressing transformational needs and challenges, bridging gaps across different cultures for effectiveness, and assisting Chinese companies to become international
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