August, 2014 
Reinventing Mobility in the China Context 
Building the Internet of Vehicles 
& 
Related Smart Car Technolog...
The China Context 
2 
• Following a decade of rapid growth, the China auto market sharply decelerated on 2011 and 2012 - 
...
3 
China’s unique urban transportation challenges could create the 
potential for ultra-small personal urban mobility devi...
Consumers are now presented with several options to satisfy their 
mobility needs – driven by disruptive yet innovative se...
5 
Regulatory requirements for sustainable development and consumer 
demand preferences will drive seven technology innova...
6 
The China government plays a key role in shaping industrial 
development 
Government 
is 
inves9ng 
to 
ensure 
the 
co...
7 
Promoting “smart traffic” solutions is an important agenda for the 
Chinese government 
§ In 
Apr. 
1997, 
the 
fist 
...
8 
And the Chinese internet giants are vying to create the ecosystem 
for the connected “Smart Car” 
Infotainment System V...
9 
For the future auto market, mobile connectivity will be “standard” 
for new models which attracts players from differen...
10 
Recently, major Chinese internet services companies have 
cooperated with local and global automakers on IOV products ...
Aggressive internet and technology companies will rapidly develop 
the market and the relevant IOV technologies 
11 
Globa...
Like O2O for other markets, IOV O2O will bring online customers to 
offline businesses 
12 
Navigator/ Map 
Beyond basic r...
CASE STUDY 
13 
Currently many major Asian and Western auto OEMs are focusing 
on mobile connectivity and IOV (1/2) 
Infin...
14 
Currently many major Asian and Western auto OEMs are focusing 
on mobile connectivity and IOV (2/2) 
Western OEM’s Wor...
Summary & Conclusion: 
• A structural shift of economic power from West to the East is taking place, with stunning economi...
addressing transformational needs and challenges, bridging gaps across different cultures for 
effectiveness, and assistin...
17 
Contact us 
Please feel free to contact our automotive team leaders: 
Bill Russo Managing Director and Auto Practice L...
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Reinventing Mobility in the China Context

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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".

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Reinventing Mobility in the China Context

  1. 1. August, 2014 Reinventing Mobility in the China Context Building the Internet of Vehicles & Related Smart Car Technologies
  2. 2. The China Context 2 • 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
  3. 3. 3 China’s unique urban transportation challenges could create the potential for ultra-small personal urban mobility devices 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
  4. 4. 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 Pay-per-use Traditional short term rental Car sharing / alternative ownership forms Taxi / chauffeur service Non-car individual transport; e.g., scooter, bike Rental/Non-traditional OEM business Source: Gao Feng Analysis 4
  5. 5. 5 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
  6. 6. 6 The China government plays a key role in shaping industrial development Government is inves9ng to ensure the con9nuous growth of auto and emerging technology industries 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 Vehicle Manufactures Infotainment Facility Content Provider Tele-­‐ communica9on Mobility Internet Source: Gao Feng Analysis
  7. 7. 7 Promoting “smart traffic” solutions is an important agenda for the Chinese government § In Apr. 1997, the fist “Smart Traffic” forum in China is ini/ated in Beijing 1995 1997 § 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 § More aGen/on on “Smart Traffic”, government upgraded the scale to medium level project in “10th 5-­‐yr plan” 2002 2006 § Government started to put “Smart Traffic” into the country development plan “9th 5-­‐yr plan”. 2 small projects were related to this topic 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
  8. 8. 8 And the Chinese internet giants are vying to create the ecosystem for the connected “Smart Car” 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 Source: Gao Feng Analysis
  9. 9. 9 For the future auto market, mobile connectivity will be “standard” for new models which attracts players from different fields Main types of players in IOV industry § 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 1 § 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 2 In-car System Manufacturers 3 § 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
  10. 10. 10 Recently, major Chinese internet services companies have cooperated with local and global automakers on IOV products Internet Companies Auto Brands Major Functions 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 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
  11. 11. Aggressive internet and technology companies will rapidly develop the market and the relevant IOV technologies 11 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
  12. 12. Like O2O for other markets, IOV O2O will bring online customers to offline businesses 12 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
  13. 13. CASE STUDY 13 Currently many major Asian and Western auto OEMs are focusing on mobile connectivity and IOV (1/2) Infiniti § 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 Asian OEM’s Work on Mobile Connectivity and IOV Toyota/ Lexus G-Book Mazda § “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 § 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 MZD Connect Infiniti Intouch Source: Gao Feng Analysis
  14. 14. 14 Currently many major Asian and Western auto OEMs are focusing on mobile connectivity and IOV (2/2) Western OEM’s Work on Mobile Connectivity and IOV MINI/ BMW § 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 CASE STUDY GM § 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 Ford § Ford has introduced its SYNC and SYNC AppLink technologies, and allowed consumers to control their favorite smart phone apps through voice commands Onstar iDrive SYNC
  15. 15. 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 15
  16. 16. addressing transformational needs and challenges, bridging gaps across different cultures for effectiveness, and assisting Chinese companies to become international 16 Gao Feng’s heritage and our deep roots in China § 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, § Examples of high-impact work led by our team of experienced advisors: - Organization and process design for leading luxury auto OEM - Due diligence on Chinese business operations for a leading Japanese OEM - Commercial vehicle entry strategy for a leading commercial vehicle maker in China - China strategic planning for a major global automotive parts supplier § 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 § We believe this principle lies at the core of management consulting – a truly trustworthy partner who will help clients tackle their toughest issues
  17. 17. 17 Contact us Please feel free to contact our automotive team leaders: Bill Russo Managing Director and Auto Practice Leader bill.russo@gaofengadv.com Edward Tse Founder and CEO edward.tse@gaofengadv.com Chee Kiang Lim Principal ck.lim@gaofengadv.com Or, contact us in Beijing, Hong Kong and Shanghai at: Hong Kong: Gao Feng Advisory Company Level 3, Three Pacific Place 1 Queen’s Road East Admiralty, Hong Kong Tel +852 2588 3554 Fax +852 2588 3499 Shanghai: Gao Feng Advisory Company Level 20, The Center 989 Changle Road Shanghai 200031, P.R. China Tel +86 21 5117 5853 Fax +86 21 5116 6899 Beijing: Gao Feng Advisory Company Suite 703, Tower B, Winterless Center 1 West Dawang Road Chaoyang District Beijing 100026, P.R. China Tel +86 10 8557 0676 Fax +86 10 8557 0670
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