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The Great Mobility Tech Race: Winning the battle for future profits

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Three major trends will converge over the next 10-15 years, profoundly changing the automotive industry.

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The Great Mobility Tech Race: Winning the battle for future profits

  1. 1. JANUARY 11, 2018 The Great Mobility Tech Race Winning the battle for future profits Research Highlights
  2. 2. Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. 1 SLIDESHAREProfitPools_mediapresentationdeckFINAL.pptx Executive summary Auto industry is facing unprecedented change; in technology, society and regulatory trends Automotive is being re-shaped by shifts towards electrification, self-driving vehicles and shared mobility This level of change is poised to have a significant effect on the vehicle and mobility market... ...but also on the players in the industry and their profitability Value creation is likely to shift away from traditional OEMs and move more towards suppliers And, there is a new set of technology players and profit pools that emerge driving new value in the space
  3. 3. Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. 2 SLIDESHAREProfitPools_mediapresentationdeckFINAL.pptx Three major trends will converge over the next 10- 15 years, profoundly changing the automotive industry
  4. 4. 3 Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. SLIDESHAREProfitPools_mediapresentationdeckFINAL.pptx The auto industry faces never-before seen change Technological Autonomous driving Connectivity Social Urbanization New way of working Sharing Regulatory City regulation Emission standardsIntegrated view necessary to assess implications Electrification
  5. 5. 4 Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. SLIDESHAREProfitPools_mediapresentationdeckFINAL.pptx Key change drivers reinforce each other—with large implications for the industry Share of on-demand Revenue pools Profit pools Share of EVsBattery costs Car sales volume Margin development TCO EV vs. ICE EV adoption curve AV adoption curve Self-driving taxi TCO (cost per km) SD taxi adoption barrier Industry trends Margins of comparables Energy prices CO2 emissions Gov. incentives & bans SD taxi utilization CAPEX requirements AV technology costs Share of AVs Key drivers Outputs Schematic
  6. 6. 5 Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. SLIDESHAREProfitPools_mediapresentationdeckFINAL.pptx 108 104 10 13 5 66 22 1 46 5 30 41 91 Car sales volume will stall—bringing decades of growth to an end Source: BCG analysis Vehicles for on-demand services New car salesTotal vehicle sales 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2020 20302010 First mass- produced car Golden 20ies Postwar boom years Oil crisis Chinese market opening up Global financial crisis Emergence of self- driving, on-demand mobility models Today New car sales (Global, in M units)
  7. 7. 6 Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. SLIDESHAREProfitPools_mediapresentationdeckFINAL.pptx Electrification, self-driving cars, and on-demand shared mobility offerings will change the face of the industry Share of new car sales Share of new car sales Share of on-road passenger miles Electrification will become more prevalent Self-driving cars will hit our streets in Shared mobility offerings will gain acceptance Source: BCG analysis 30% 14% 100% 1% 2035 100% 2030 100% 2025 100% 6% 2017 Electric vehicle (BEV) Plug-in hybrid (PHEV) Hybrid & mild hybrid (HEV) Gasoline & diesel 11% 12% 6% 2025 100% 2% 2030 100% 2035 100% 5%1% 2017 100% Human-driven cars Personal self-driving cars (L4/5) Self-driving taxis (L4/5) 18% 9% 100% 100% 2017 3% 4% 20352030 100%100% 2025 Personal car On-demand (from 2025 on: mainly self-driving)
  8. 8. 7 Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. SLIDESHAREProfitPools_mediapresentationdeckFINAL.pptx We looked at three scenarios for how the industry could develop and focused on the most likely one Source: BCG analysis Conservative Decrease 2% p.a. Decrease 5% p.a. (2025–2035) Hesitant Gas down, electricity up (gas: $1.50/ gallon; electricity: 0.15 $/kWh) Deployable for mass use in cities by 2027 Targets are relaxed Worked out by 2027 Aggressive Decrease 10% p.a. Decrease 20% p.a. (2025–2035) Rapid Gas up, electricity down (gas: $3.50/ gallon; electricity: 0.10 $/kWh) Deployable for mass use in cities by 2021 Targets are tightened Worked out by 2021 Selected drivers Battery costs Autonomous Vehicle components costs Consumer EV adoption Energy prices (gas, electricity) Commercial deployment of self-driving on-demand services CO2 emissions regulation (e.g., CAFE) AV legislative framework Most likely Decrease 5% p.a. – in line with consensus estimates Decrease 12% p.a. (2025–2035), in line with similar technologies Gradual - driven by steady infrastructure expansion Constant (gas: 2.50 $/gallon; electricity: 0.12 $/kWh) Deployable for mass use in cities by 2025 Currently expected regulation Worked out by 2025 Modeled scenario
  9. 9. Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. 8 SLIDESHAREProfitPools_mediapresentationdeckFINAL.pptx Profit pools will grow in areas where incumbents do not possess competitive advantages
  10. 10. 9 Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. SLIDESHAREProfitPools_mediapresentationdeckFINAL.pptx The mobility industry will continue to grow, but profit pools will shift to new technology 380 60% 40% 2030 336 74% 26% 2025 303 83% 2035 +2.9% p.a. 17% 2017 226 99% 1% Emerging profit pools (incl. AV & BEV component suppliers, BEV car sales, data & connectivity and on-demand mobility) Classic profit pools (incl. classic component supply, ICE car sales, financing and aftermarket) Profits, $billion Revenues, $trillion 3.7 4.7 5.3 5.8 Source: BCG analysis AV=autonomous vehicles; BEV=battery-powered electric vehicles; ICE=internal combustion engine
  11. 11. 10 Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. SLIDESHAREProfitPools_mediapresentationdeckFINAL.pptx < 0 < 01154247967 Today, the long-established car business is driving industry profits Profit pools – today (2017, in $B)  $226 billion ~7% ~9%~5% < 0%~13% n/a < 0%~10% Average profitability (RoS) Emerging profit poolsTraditional profit pools AV and BEV components Aftermarket Data & Connectivity On-demand mobility 'Classic' components New car sales (BEV) New car sales (ICE & hybrids) Financing Source: BCG analysis
  12. 12. 11 Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. SLIDESHAREProfitPools_mediapresentationdeckFINAL.pptx But future growth takes place in fields in which auto players do not possess competitive advantages Profit pools - future (2035, in $B) Emerging profit poolsTraditional profit pools 2017 AV and BEV components Aftermarket Data & Connectivity On-demand mobility 'Classic' components New car sales (BEV) New car sales (ICE & hybrids) Financing  $380 billion ~8%~4% ~3%~13% ~14% ~10%~10% Average profitability (RoS) ~6% 2035 70 (+3) 26 (+25) 60 (-19) 21 (+21) 66 (+12) 28 (+27) 76 (+76) 33 (+9) Source: BCG analysis
  13. 13. 12 Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. SLIDESHAREProfitPools_mediapresentationdeckFINAL.pptx We expect a significant structural shift in profit pools New-car sales stall after 2025 as on-demand models in cities pick up New-car sales margins structurally decline with electrification and higher share of fleet business With growth of AV and BEV components, value creation shifts further away from OEMs to suppliers Aftermarket business negatively affected by switch to electrified vehicles (EVs), but effect comes slowly On-demand mobility explodes, as self-driving cars make services affordable and convenient New profit pools in data & connectivity emerge, taking off with self- driving cars
  14. 14. Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. 13 SLIDESHAREProfitPools_mediapresentationdeckFINAL.pptx Substantial investments will be necessary to unlock growth areas They include • AV technology • Battery production capacity • Charging infrastructure • Self-driving taxi fleets
  15. 15. 14 Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. SLIDESHAREProfitPools_mediapresentationdeckFINAL.pptx 4. Self-driving taxi fleet Cumulated investment, in $B >72M self-driving taxis produced For reference: $1,800B = 4.3% of cumulated OEM car sales revenue through 2035 3. Charging infrastructure Cumulated investment, in $B > 38M additional public charging spots For reference: $130B = 40% of German Federal Budget 2017 2. Battery prod. capacities Cumulated investment, in $B “57 additional Giga-factories” For reference: $220B = 13% of battery supplier revenue through 2035 1. AV technology (R&D) Cumulated investment, in $B > 5,000 additional engineers required For reference: $45B = 1.7% of cumulated OEMs R&D expenses through 2035 45 220 130 1,800 AV and BEV components Aftermarket Data and connectivity ‘Classic’ components New car sales (BEV) New car sales (ICE and hybrids) Financing On-demand mobility Cumulated investment through 2030 Cumulated investment through 2035 Substantial industry wide investments required to unlock growth areas: >$900B through 2030 (> $2.4T through 2035) Source: BCG analysis
  16. 16. 15 Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. SLIDESHAREProfitPools_mediapresentationdeckFINAL.pptx OEMs face a ‘double whammy’ challenge: margins will decline while growth areas require new investments Source: BCG analysis Simulated effect on OEM profitability in the medium-term While profit goes down… ...Investments will need to go up Ø OEM CAPEX/revenue 8.0% 6.8% ~ +1%pt 6.6% ~ -1%pt Ø OEM RoS 5.5% 2017 20252017 2025
  17. 17. Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. 16 SLIDESHAREProfitPools_mediapresentationdeckFINAL.pptx searched for: strong kid Market landscape is transforming, with new tech players having good chance to gain momentum
  18. 18. 17 Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. SLIDESHAREProfitPools_mediapresentationdeckFINAL.pptx Shift in market structure expected Mobility industry in the future End userCities Digital integrators On-demand platforms ... OEMs Source: BCG analysis Cities: Emerge as new relevant players, with a strong influence on future urban mobility Digital integrators: Tech giants natively integrate services— and capture the customer interface On-demand platforms: Broker autonomous on-demand rides OEMs: Face stronger suppliers and risk losing the customer interface Suppliers: Electronics and software become crucial— newcomers find themselves in strong positions e.g., Bosch, Continental, Nvidia, LG, Delphi, ZF e.g., VW BMW Daimler GM Google Apple Tencent Suppliers
  19. 19. 18 Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. SLIDESHAREProfitPools_mediapresentationdeckFINAL.pptx Large option space for industry players still exists Traffic management and infrastructure integration On-demand platform On-demand fleet management (ops, financing) Data and connectivity services Autonomous driving software and data HD maps AV sensors and ECUs EV batteries and components EV charging infrastructure Not exhaustive Source: BCG analysis Mobility services Auto makers Suppliers Cities
  20. 20. 19 Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. SLIDESHAREProfitPools_mediapresentationdeckFINAL.pptx Author team and regional experts Selected publications and research Thomas Dauner Senior partner BCG Stuttgart Carsten M. Schaetzberger Partner BCG Stuttgart Nikolaus S. Lang Senior partner BCG Munich Rolf Kilian Senior partner BCG Stuttgart Andreas Jentzsch Partner BCG Munich Thomas Palme Principal BCG Stuttgart Michelle Andersen Partner BCG Detroit Philipp Sadek Associate BCG Vienna Davide Di Domenico Partner BCG Milan The Reimagined Car: Shared, Autonomous, and Electric A report by BCG December 2017 Connected Vehicles and the Road to Revenue An article by BCG December 2017 Self-Driving Vehicles, Robo-Taxis, and the Urban Mobility Revolution A report by BCG and the World Economic Forum July 2016 To request more information on this research, please contact BCG-Info@bcg.com. To request a media interview, please contact Eric Gregoire at gregoire.eric@bcg.com. To discuss the findings with a BCG expert, please contact Irene Perzylo at perzylo.irene@bcg.com. Making Autonomous Vehicles a Reality: Lessons from Boston and Beyond A report by BCG and the World Economic Forum October 2017

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