Back to the Future: The Road to Autonomous Driving

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A decades-old dream is on the verge of coming true. Autonomous vehicles (AVs) will hit the road as early as 2017, when several original equipment manufacturers (OEMs) and technology companies plan to launch pilot projects or roll out commercial vehicles with varying levels of self-driving capability. Mass adoption of self-driving technology will deliver tremendous economic benefits. But it will also disrupt business as usual for a wide variety of companies, including OEMs, mobility providers, and component makers. The coming AV era raises urgent questions for executives of these companies: What is the cost of these technologies and what are consumers willing to pay for them? How fast will mass markets adopt AVs and how might car sharing and societal shifts impact these introductions? What technological challenges must be overcome to enable fully autonomous driving? Where should OEMs and new entrants focus their R&D investments? And how should players in the AV market address consumer concerns around safety, lack of control, and the risks of faulty technology?

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Back to the Future: The Road to Autonomous Driving

  1. 1. Back to the Future: The Road to Autonomous Driving Selected highlights for SlideShare Excerpted from a press briefing in Detroit to preview an upcoming report January 8, 2015
  2. 2. 1 Copyright©2015byTheBostonConsultingGroup,Inc.Allrightsreserved. BCG study focused on likely market development based on technology options, cost dynamics, and consumer demand Development of autonomous vehicles is receiving increased attention • Major focus on technology development by OEMs, suppliers, tech companies, and academic institutions • Regulators in several countries are exploring approaches to address liability, certification, and regulatory issues surrounding AVs BCG's research focuses on the underlying economics and expected market adoption • Required technologies, availability, and cost evolution • Consumer demand in different use cases and willingness to pay • Adoption rates on new technologies in automotive Possible scenarios and their implications for key stakeholders • Forecast penetration levels through 2035 under different adoption scenarios • Deep dive on the impact of AVs on existing mobility modes • Implications for modes of transportation and other stakeholders Source: BCG
  3. 3. 2 Copyright©2015byTheBostonConsultingGroup,Inc.Allrightsreserved. Our key findings and beliefs on autonomous driving (I/II) Source: BCG analysis I The autonomous vehicle (AV) is becoming a reality The road to autonomous vehicles starts now, with the first partially autonomous vehicles coming on the market this year or next II Consumer demand is very high with 55% of U.S. drivers likely to consider buying a partially autonomous vehicle and 44% a fully autonomous one III …and up to 20% are willing to pay an extra $5,000 or more for autonomous driving features IV Similar levels of high interest for self-driving on highway, self-driving in traffic, self-driving along a single route (commuting) and autonomous valet parking V Lower insurance and fuel costs, along with increased safety, are the main reasons for purchasing
  4. 4. 3 Copyright©2015byTheBostonConsultingGroup,Inc.Allrightsreserved. Our key findings and beliefs on autonomous driving (II/II) Source: BCG analysis VI Our view, with select adoption scenarios Price to consumers is likely to start at or above $4,000 for one feature, suggesting a gradual adoption, initially in the premium segment VII Based on market economics, we expect a 12-13% global penetration of autonomous features by 2025, representing around a $42bn market for these features VIII The first fully autonomous vehicles should hit the road in 2025 at an increased sticker price of around $10,000 IX Penetration of partially and fully autonomous cars should plateau around 25% of the market, unless strongly supported by regulation X What it means for the industry With full autonomy, shared cars in mega cities (like New York and Paris) will be more economical than car ownership and will reduce traffic dramatically XI OEMs will have to carefully segment the market and adapt to new trade-offs consumers will make between autonomy and other vehicle features
  5. 5. 4 Copyright©2015byTheBostonConsultingGroup,Inc.Allrightsreserved. Note: n=1,510 Source: BCG U.S. self-driving cars survey, 2014 Customer willingness to buy autonomous cars is strong in the U.S. 164159 354 451 382 0 100 200 300 400 500 # of respondents Very unlikely UnlikelyNeutralLikelyVery likely 55% of respondents 306 221 318323 342 0 100 200 300 400 # of respondents Very unlikely NeutralLikelyVery likely Unlikely 44% of respondents Q: When you think about purchasing a vehicle in the future (up to ~5 years from now), how likely are you to consider purchasing a partially self-driving car? Q: When you think about purchasing a vehicle in the future (up to ~10 years from now), how likely are you to consider purchasing a fully self-driving car? 55% say they would buy a partially autonomous car 44% say they would buy a fully autonomous car
  6. 6. 5 Copyright©2015byTheBostonConsultingGroup,Inc.Allrightsreserved. Lower insurance, increased safety, and highway driving cited as top 3 reasons to buy partial AVs in the next ~5 years 113 116 152 174 221 234 238 262 268 293 320 326 331 335 372 396 418 0 50 100 150 200 250 300 350 400 450 # of respondents Can drop off my kids without me Allows me to carpool more often Allows me to save money through car sharing Can drive around elderly people Lower/more predictable maintenance costs than non-AVs Novelty of driving in a SDC Drops me off, finds a parking spot, and parks on its own Helps environment by driving a car that has low emissions Drives on dedicated lanes to SDCs where traffic is fluid Is safer than non-SDCs Lower insurance costs than non-SDCs Allows multi-tasking/ productivity while vehicle drives Switches to self-driving mode during traffic Tax breaks are provided for purchasing a SDC Has highest safety ratings from government agencies Offers better MPG than non-SDCs Switches to self-driving mode on freeways Q: Which of the following are reasons why you said you are [very likely/likely/neutral] to purchase a partially self-driving car? Note: n=1,187 Source: BCG U.S. self-driving cars survey, 2014
  7. 7. 6 Copyright©2015byTheBostonConsultingGroup,Inc.Allrightsreserved. Q: Which of the following are reasons why you said you are [very likely/likely/neutral] to purchase a fully self-driving car? Similarly, increased safety, lower insurance, and higher productivity are top reasons to buy full AVs in the next ~10 yrs 103 113 131 164 204 212 214 237 251 271 273 274 275 281 292 323 337 0 50 100 150 200 250 300 350 Can drop off my kids without me Allows me to carpool more often Allows me to save money through car sharing Can drive around elderly people Lower/more predictable maintenance costs than non-AVs Helps environment by driving a car that has low emissions Novelty of driving in a SDC Drops me off, finds a parking spot, and parks on its own Drives on dedicated lanes to SDCs where traffic is fluid Tax breaks are provided for purchasing a SDC Offers better MPG than non-SDCs Switches to self-driving mode during traffic Switches to self-driving mode on freeways Has highest safety ratings from government agencies Allows multi-tasking/productivity while vehicle drives Lower insurance costs than non-SDCs Is safer than non-SDCs # of respondents Note: n=983 Source: BCG U.S. self-driving cars survey, 2014
  8. 8. 7 Copyright©2015byTheBostonConsultingGroup,Inc.Allrightsreserved. Many customers are willing to pay over $5K for AV features 1. Represents responses to the question "The next time you plan to purchase a new vehicle, how likely would you be to consider buying the vehicle described?" with answers of "Very likely, likely, neutral, unlikely, very unlikely." Note: n=1,510 Source: BCG U.S. self-driving cars survey, 2014 6040200 Yes 53 50 51 54 57 0 20 40 60 80 Very interested Somewhat interested Searches for parking spot and self-parks 67 Drives itself in heavy traffic 64 Drives itself on a specific route 66 Drives itself on highway 67 Consider buying all features1 51 37 47 9 8 52 48 29 15 16 17 15 13 7 6 9 9 2 6 8 7 11 13 16 17 19 26 30 50 1000 % of respondents 2 2 3 Over $5K$3-$4K $4-$5K$2-$3K $1-$2K $1K or less Consumers undecided about preferred autonomous feature ~50% willing to pay for these features... ...and many above the $5K price point
  9. 9. 8 Copyright©2015byTheBostonConsultingGroup,Inc.Allrightsreserved. Hardware: Some sensor costs are on the critical path GPS (global positioning system) combined with readings from tachometers, altimeters and gyroscopes to provide the most accurate positioning Cost: $80-$6,000 Lidar (light detection and ranging) monitor the vehicle's surroundings (road, vehicles, pedestrians, etc.) Cost: $90-8,000 Central computer analyzes all sensor input, applies rules of the road and operates the steering, accelerator and brakes Cost: ~50-200% of sensor costs Ultrasonic sensors to measure the position of objects very close to the vehicle Cost: $15-$20 Radar sensors monitor the vehicle's surroundings (road, vehicles, pedestrians, etc.) Cost (Long Range): $125-$150 Cost (Short Range): $50-$100 Odometry sensors to complement and improve GPS information Cost: $80-$120 Video cameras monitor the vehicle's surroundings (road, vehicles, pedestrians, etc.) and read traffic lights Cost (Mono): $125-$150 Cost (Stereo): $150-$200 Source: Expert interviews; company information; BCG analysis xx – 2014 costs xx – Expected cost in next ~3 years (cost estimates are highly variable as different technical specifications are used in different applications)
  10. 10. 9 Copyright©2015byTheBostonConsultingGroup,Inc.Allrightsreserved. OEM costs are expected to decline at 9% for fully AVs and 4- 10% for partial AVs over the first 10 years on the market 10 5 0 Introductory OEM pricing ($k/vehicle) Fully autonomous 6.5 3.3 Urban autopilot 3.7 1.8 Highway autopilot with lane changing 3.8 1.9 ~$2.0K Autonomous valet parking ~$5.7K 1.3 0.7 ~$3.4K Traffic jam autopilot ~$10K 2.2 1.1 Single lane highway autopilot ~$5.5K 2.5 1.3 ~$3.8K OEM total cost Markup Expected year of introduction 2016 2017 2017 2018 2022 2025 Cost at end of 10 yrs after introduction ($k) ~1.6 ~1.3 ~0.5 ~1.8 ~2.3 ~2.7 Global cumulative volume in 10 yrs, including year of introduction (M) ~9 ~11 ~12 ~32 ~62 ~38 OEM total cost CAGR% decrease -4% -6% -10% -7% -5% -9% Note: Costs shown in figure are estimated costs to OEMs at time of launch of feature. A typical OEM is assumed to have a 10% market share. Total R&D costs are amortized over total OEM volumes for each system in the first 5 years. Source: BCG analysis Partial AV features Fully AV
  11. 11. 10 Copyright©2015byTheBostonConsultingGroup,Inc.Allrightsreserved. AVs have the potential to reach ~25% market penetration 100% = ~10M1 addressable global market for a typical OEM in 2018 1. Forecasted market for new car sales in 2018 = 100M, in 2025 = 110M. Market share of a typical OEM = 10% 2. Data based on BCG U.S. self-driving cars survey, 2014 3. Total R&D costs are amortized over total OEM volumes for feature in the first 5 years 4. Illustrative example for partial autonomous systems shown using highway autopilot with lane changing, with expected launch in 2018. Skimming pricing strategy of ~1.5% year-on-year assumed for analysis. Source: BCG U.S. self-driving cars survey, 2014; BCG analysis; IHS 0 10 20 30 40 50 60 8 6 4 2 0 $K/car for highway autopilot with lane changing New car sales penetration (%) OEM component + R&D costs3 OEM component costs Consumer willingness to pay2 Market penetration peaks around ~26% R&D cost per unit3 = $146 0 10 20 30 40 50 60 8 6 0 4 2 $K/car for fully autonomous New car sales penetration (%) Market penetration peaks around ~27% Lower hardware costs for partial AVs4 allow faster adoption at introduction Higher hardware costs for full AVs slow down adoption in first few years R&D cost per unit3 = $457
  12. 12. 11 Copyright©2015byTheBostonConsultingGroup,Inc.Allrightsreserved. By 2035, 12 million full AV units could be sold a year globally Market for partial and full AV features expected to grow from ~$42B in 2025 to ~$77B in 2035 Represents 12M full AVs and ~18M partial; ~$77B market for AV features in 2035 1. Based on adoption rate of Adaptive Cruise Control ADAS feature and Cruise Control following introduction of first feature within any category (ACC and Auto Parallel Park for ADAS in 2006, Single Lane Highway Autopilot for partial AV in 2016, and full AV introduction in 2025; AV categories reach 25% market cap per cost and consumer willingness economics; 2. Based on IHS forecasts through 2026; 2027 through 2030 based on 2017-2026 CAGR and then steady volume from 2031-2035 3. Sales market size estimated as cost per unit of feature X volume of feature sold in year X markup for that year. Markup for a feature in a given year is estimated by linear interpolation from 50% in year of introduction to 0% in year 17 after introduction. Source: just-auto Jul-2014 market analysis, LMC Automotive, IHS Global Standards, BCG analysis 2035 global sales Share (%) Volume (M) Sales3 ($B) 15.0% 18.4 38 9.8% 12.0 39 Estimated global new light vehicle sales: ~122M2 Estimated global new light vehicle sales: ~111M2 2025 global sales Share (%) Volume (M) Sales3 ($B) 12.4% 13.9 36 0.5% 0.6 6 Total $42bn $77bn 0 10 20 30 40 50 203520252015 Penetration of new vehicle sales (%) In 2035, 25% of market to be AV sales with 15% partial and 10% full AV systems Fully AVPartial AV 2025 penetration • Partial AVs: 12.4% • Fully AVs: 0.5% 2035 penetration • Partial AVs: 15.0% • Fully AVs: 9.8%
  13. 13. 12 Copyright©2015byTheBostonConsultingGroup,Inc.Allrightsreserved. Authors of the study Upcoming BCG report will be available on bcgperspectives.com in Q1 of 2015 Thomas Dauner Global Leader of BCG's Automotive practice and a Stuttgart-based Senior Partner BCG Stuttgart +49 170 334 7414 dauner.thomas@bcg.com Xavier Mosquet North America Leader of BCG's Automotive practice and Managing Director of the Detroit office BCG Detroit +1 248 688 3450 mosquet.xavier@bcg.com

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