Volvo Bus Corporation Presentation
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Volvo is considering launching an electric autonomous bus line in China. A presentation outlines Volvo's current situation, opportunities for growth through automation and electrification, safety considerations, and a strategic plan to rollout the bus line first in Wuhu, then Shenzhen, Shanghai, and Beijing. Financial projections estimate the bus line could generate CNY400 million in profits by 2021 while reducing emissions and saving lives.
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Volvo Bus Corporation Presentation
- 2. Launch your electric autonomous line in the heart of China First Class Innovation True Value World Impact
- 3. Principal Project Leader Consultant AdvisorsOur day in focus Historical performance teardown Be forward. Go forward. Roadmap for success Performance assessment, strategic fit in China Disaggregation of your ownership structure Set the vision forward Alignment of capabilities to execute the vision Precise go-to-market strategy Synthesis of all phases Capabilities Accountant Strategic Outlook First Class Innovation Joint Venture Roadmap
- 4. A quick focus on your situation Codes of success 1 Urban hybrid leader in: Gothenburg Edinburgh London Montréal Singapore E-Portfolio 7800 (Kunming) 7900 Hybrid (Gothenburg) Nova LFSe (Montréal) Volvo B9TL (HK & SG) 2 Operational Capacity 140,000 Plant area 2,500 Production capacity 1,200 Employees Shanghai Twin city 3 Q3 Earnings Capabilities Strategic Outlook First Class Innovation Joint Venture Roadmap
- 5. Macroeconomic scope and Q3 performance BUSES Lower volumes impacted profitability -7% Order intake -1.8% Operating margin 4% 1st Order: 7900 Electric Net order intake Number of buses Third Quarter % Change Total orders 2016 2015 1,987 2,147 First nine months % Change 7 2016 2015 6,375 5,763 11 Net sales & op. income Swedish Krone (M) Third Quarter % Change Asia 2016 2015 678 696 First nine months % Change 3 2016 2015 2,244 1,711 31 Total op. income 232 328 29 604 537 12 Capabilities Strategic Outlook First Class Innovation Joint Venture Roadmap
- 6. Breakdown of Volvo Buses The Volvo Group's mission is driving prosperity through transport solutions. In the city: Volvo Group is developing tomorrow’s public transport solutions. AB Volvo est. 1927 Volvo Bussar AB est. 1968 Sunwin JV with SAIC in China (2000) Subsidiary in Quebec, Canada (1993) Shanghai Green Bus JV with SAIC in China (2011) 1500 buses 120 electric 3 trials began this year in MontréalCONNECTED VALUE CHAIN Capabilities Strategic Outlook First Class Innovation Joint Venture Roadmap
- 7. Breakdown of Volvo Buses The Volvo Group's mission is driving prosperity through transport solutions. In the city: Volvo Group is developing tomorrow’s public transport solutions. AB Volvo est. 1927 Volvo Bussar AB est. 1968 Sunwin JV with SAIC in China (2000) Subsidiary in Quebec, Canada (1993) Shanghai Green Bus JV with SAIC in China (2011) 1500 buses 120 electric 3 trials began this year in MontréalCONNECTED VALUE CHAIN How can Volvo develop tomorrow’s transport solution? FOCUS QUESTION Capabilities Strategic Outlook First Class Innovation Joint Venture Roadmap
- 8. 1-3-1™ Can you see it, can you change it, can you sustain it? Routes 1 Strategy Scale: anticipated, invigorated, then dominated. BT OC EC 2 Speed: consolidated, accelerated, then dominated. 3 Start: created, proliferated, then dominated. 4 Shape: innovated, cultivated, then dominated. 5 Save: consolidated, recalibrated, then dominated. 1 3 1 Capabilities Strategic Outlook First Class Innovation Joint Venture Roadmap
- 9. 汇onverge A transformative stride forward in autonomous electric buses will propel Volvo to conquer the electric bus category in a thriving China that will yield CNY 400M in profits by 2021 and save up to 1000 lives per year.
- 10. 汇onverge 汇“exchange” Converge “reach a common result” Automated e-bus Baidu partnership Collaborative ecosystem Strategic expansion This is what you are going To CONVERGE Capabilities Strategic Outlook First Class Innovation Joint Venture Roadmap
- 11. Option Partner with the FAW Group1 Sell equity share to SAIC2 Open a new electric plant3 JV with Baidu 4 Synergy Medium ✖ Minimal ✖ Minimal ✖ High ✓ Considerations SOE: Expert in buses and well- established in China Higher bargaining power from SOE partnership Huge capital undertaking Differentiation based advantage that yields organic growth 4 best options to grow in China Capabilities Strategic Outlook First Class Innovation Joint Venture Roadmap
- 12. First class innovation through technology What the world can look like tomorrow And where YOU can fit in 2014: UBER PACT SIGNED CONGRATS! • Volvo XC90 SUV worth $300M • Autonomous cars ready in 2021 2015: PILOT PROJECT IN MONTREAL • 1/9 cities participating • Quick-charging stations • Ready in 2019 2016: FIRST AUTONOMOUS MINING TRUCK! • Boliden Mine in Kristineburg, Sweden • Tested under extreme conditions Automate Electrify True value • Sign a contract with Baidu to automate buses • Fully ready in 2021 • Leverage your Sunwin plant to produce the vehicles • Boost order-intake • Create jobs • 0 emissions, ↓Noise Pollution • Shanghai and Shenzhen special economic zones 汇onverge Capabilities Strategic Outlook First Class Innovation Joint Venture Roadmap
- 13. Why electric & automation 汇onverge Future benefitsImmediate benefits Safety 1 • Relieves the driver’s workload • No Blind spots – Relies on Sensors and Calculations Efficiency 2 • Predictive style saves wear and tear • 0 Fuel Consumption and fast charge Comfort 3 • Smooth and even drive • Decrease In Noise Pollution CO2 Free 1 • Zero-emission fleet • Saving Equivalent of 10.5M Cars on the Road Lower costs 2 • Less reliance on fuel • Savings of 13.46B USD from being fossil fuel free. Jobs 3 • IT, maintenance, specialist jobs Happier 4 • More revenue • Happier customers • Happier Government Capabilities Strategic Outlook First Class Innovation Joint Venture Roadmap
- 14. Why electric & automation Future benefitsImmediate benefits Safety 1 • Relieves the driver’s workload • No Blind spots – Relies on Sensors and Calculations Efficiency 2 • Predictive style saves wear and tear • 0 Fuel Consumption and fast charge Comfort 3 • Smooth and even drive • Decrease In Noise Pollution CO2 Free 1 • Zero-emission fleet • Saving Equivalent of 10.5M Cars on the Road Lower costs 2 • Less reliance on fuel • Savings of 13.46B USD from being fossil fuel free. Jobs 3 • IT, maintenance, specialist jobs Happier 4 • More revenue • Happier customers • Happier Government Why Baidu? FOCUS QUESTION 汇onverge Capabilities Strategic Outlook First Class Innovation Joint Venture Roadmap
- 15. Baidu JV and its benefits Automation push Baidu maps Technology • Signed a contract with BMW to automate cars • Signed a deal with Wuhu to build an autonomous zone • Competitive advantage: Baidu Maps’ platform has access to routing algorithms • Boost accuracy and safety • Driverless AI brain • Retain and create jobs • Ensuring safety on Chinese roads Strategic fit Safety research centre Automation technology 汇onverge R&D China Sweden Research Centre for Traffic Safety Capabilities Strategic Outlook First Class Innovation Joint Venture Roadmap
- 16. 汇onverge 汇onverge This is who you are going To CONVERGE with Drivers Riders Users Programmers Data analysts Technicians Traffic authority Transit authority State grid operators Public officials Manufacturers Engineers Volvo Management Capabilities Strategic Outlook First Class Innovation Joint Venture Roadmap
- 17. 汇onverge This is who you are going To CONVERGE with Drivers Riders Users Programmers Data analysts Technicians Traffic authority Transit authority State grid operators Public officials Manufacturers Engineers Volvo Management Capabilities Strategic Outlook First Class Innovation Joint Venture Roadmap Is it safe? FOCUS QUESTION 汇onverge
- 18. Individual competencies Safety synergies implementation Object detection, supervision, emergency measure China Sweden Research Centre for Traffic Safety Truck & UBER Synergistic competencies Baidu & BMW Combine safety information with Baidu Maps data Safety and zero- emission competitive advantage Strong selling point for municipalities Baidu Maps 汇onverge Capabilities Strategic Outlook First Class Innovation Joint Venture Roadmap
- 19. Safety implementation and benchmarks Detection, supervision, emergency measure, awareness Pre-emptive actions that assures safety* Action OD S EM Driver + Radar Uber Baidu Project China Sweden RC for TS Truck automation Number of minor accidents since existence* 0 CarBus 5 0 5 0 5 0 5 *Operation months for Uber, nuTonomy, Yutong, and EasyMile: 3, 3, 13, 18*Adapted from U.S. Department of Transportation AV Policy 汇onverge SA Improve Neutral Capabilities Strategic Outlook First Class Innovation Joint Venture Roadmap
- 20. Safety benchmarks Object detection, supervision, emergency measure Pre-emptive actions that assures safety* Action OD S EM Truck automation Baidu Project China Sweden RC for TS Uber Project Number of minor accidents since existence* 0 CarBus 5 0 5 0 5 0 5 *Operation months for Uber, nuTonomy, Yutong, and EasyMile: 3, 3, 13, 18*Adapted from U.S. Department of Transportation AV Policy How can Volvo leverage the country-to-country competition between China, Singapore, and the US to dominate the Chinese AB category? FOCUS QUESTION 汇onverge Capabilities Strategic Outlook First Class Innovation Joint Venture Roadmap
- 21. Big City rolloutShenzhen integration Staggered rural-to-urban strategic expansion First stop Wuhu Pilot with Baidu 1 Phase 2 3 Q1 2018 Q3 2018 Baidu buy-in • Baidu has an established position Plant proximity • JV Sunwin is 3.5 hours by car, 1 hour by plane (Google Maps) Smaller population • Ideal for pilot (rural to urban) • Less risk of accident and more flexibility in traffic 汇onverge Earnings in CNY (M) 2017 500 – 400 – 300 – 200 – 100 – 0 185 60 245 Pessimistic Optimistic Capabilities Strategic Outlook First Class Innovation Joint Venture Roadmap
- 22. Staggered rural-to-urban strategic expansion 汇onverge Tech hub and SEZ/SIZ • Baidu HQ synergy can be obtained by leveraging their tech High traffic transport hub • Bao’An International Airport • Shenzhen railway, HK buses Medium population • Ideal for phase 2 (rural to urban) Low competition • BYD 2,200 e-bus deal canceled Shenzhen Big City rolloutShenzhen integration Q1 2017 Wuhu Pilot with Baidu 1 Phase 2 3 Second stop Q3 2018 Earnings in CNY (M) 500 – 400 – 300 – 200 – 100 – 0 Pessimistic Optimistic Capabilities Strategic Outlook First Class Innovation Joint Venture Roadmap 2017 185 60 245 2018 300 60 360
- 23. Big City rolloutShenzhen integration Staggered rural-to-urban strategic expansion Q1 2017 Wuhu Pilot with Baidu 1 Phase 2 3 Q1 2018 Third stop 汇onverge Earnings in CNY (M) 500 – 400 – 300 – 200 – 100 – 0 Pessimistic Optimistic Shanghai then Beijing • Q3 2018: Shanghai • Q1 2019: Beijing Transport demand • Large working population Most congested cities • Traffic jams that lasts for days • Higher risk of accident, pollution Special Economic Zone • Ideal for commerce Capabilities Strategic Outlook First Class Innovation Joint Venture Roadmap 2017 185 60 245 2018 300 60 360 2019 340 90 430
- 24. Full financial capacity to grow and sustain 汇onverge Earnings in CNY (M) 2017 2018 500 – 400 – 300 – 200 – 100 – 0 Pessimistic Optimistic 2019 2020 2021 245 360 430 470 480 Assumptions 6.5% WACC 2-2.5k buses (2017) 15% CAGR (<2020) Total cars off the road (T) Pessimistic Optimistic Metric tons of CO2 Saved (M) 2017 2018 16 – 14 – 12 – 8 – 4 – 0 2019 2020 2021 1 2017– 2018 – 2019 – 2020 – 2021– 300 0 300 0 300 0 300 0 300 0 95 126 152 183 173 220 186 241 188 246 2 5 8 13 Capabilities Strategic Outlook First Class Innovation Joint Venture Roadmap
- 25. More urgent Less urgent Immediate Future 40% 40% 20% Initiate pilot: university, railway, airport, local routes Select leadership Interim assessment: net sales, market share Shenzhen: sell to Shenzhen Western Bus Co. Big city rollout: work with local authorities in Shanghai & Beijing Enhance technology: extend life of batteries, wireless charging platforms Phase I Phase II Phase III 汇onvergeThis is how you are going To CONVERGE Capabilities Strategic Outlook First Class Innovation Joint Venture Roadmap
- 26. 汇onverge Increase safety and save lives Carbon neutral Generate CNY 400M in profits Forerunner in automation
- 27. Presentation: Current situation 1-3-1 Approach Opportunity Statement Alternatives Benefits of Automation & Electric Why Baidu Converging Environmental Factors Safety Safety Benchmarks Wuhu Expansion Shenzhen Expansion Shanghai & Beijing Expansion Financials Implementation Safety Levels of Automation Technology Electric Bus Benefits Automation Benefits Truck Platooning True TCO & Diesel Trends Towards Electric Trends Towards Automation List of Companies in Automation Cost of Batteries Turn Key Contract Specs Financials Market Penetration Income Statement Environmental Benefits Global Market Share Cost of One Bus Chinese Executive Why The Executive? Cultural Structure Volvo Hofstede’s 3 Dimensions Customers & Competitors Chinese Customers Competition Volvo Rankings in Heavy Transport Contingency & Baidu Contingencies & Setbacks Didi Partnership Volvo Academic Partners Miscellaneous Marketing Wuhu & BMW Volvo Shared Value & Structure Global Group Business Model Bus Sales Globally Health Problems China 汇onverge
- 28. 4 levels of autonomous driving 3 ”80% of All Car crashes are caused by human error”
- 29. Manufacture then install Phase I Phase II Turn-key contract specifications 汇onverge
- 30. Our Customers Wuhu Transportation Shanghai Shenzhen Beijing Your partners in each region 汇onverge
- 32. Potential setbacks and how to address them Baidu rejection Accident Chinese political risk • Partner with Didi: large transport base • Go-at-it-alone with university partnership • Transparency with the media • Focus on improving the technology • Focus on safety and alignment with political agendas Production shortage • Produce parts in nearby plants in Australia Volvo must be the fore-runner in the AB category in order to win. Mitigating Factors 汇onverge
- 33. The Volvo Group’s academic partners o Chalmers University of Technology, Gothenburg, Sweden (T, R) o University of Skövde, Sweden (R) o School of Business, Economics and Law, Gothenburg, Sweden (T) o Mälardalen University, Västerås/Eskilstuna, Sweden (R) o INSA Lyon, France (T, R) o EM Lyon, France (T) o North Carolina State University, US (T) o Penn State University, US (T, R) o Tsinghua University, Beijing, China (T) o Tongji University, Shanghai, China (T) R = Preferred Research Partner T = Preferred Talent Partner Volvo’s research & development capabilities 汇onverge
- 34. Who are the TRUE competitors? 汇onverge Overall competition Future outlook on competitors • Likely to increase since many players are trying to get into the EV/AV space • Competition is moving from price to technology focus— positive impact on op. margins Volvo to win category • Develop and launch autonomous bus ahead of competition • Work with local partners Player Assessment Impact ABEB World’s first autonomous bus in trial • Likely to launch in the next 3 years in China Launched CityPilot • Autonomous bus from Schiphol to Haarlem Electric buses are not gaining traction • Focused more on EV Gaining traction in China and world • SZ deal cancelled • Liverpool deal signed for 12 buses (10/24/16)
- 35. Pollution, high stress level, and traffic congestion Are key drivers of rising health & wellness solutions Pollution Stress Congestion • 2015 was the “worst” year in Chinese pollution history • Beijing issued its first red alert • Migration from low-skill labour to middle-skill labour with a fast pace of life lead to illness • Beijing and Shanghai ranks highest in most congested city contributing to pollution 汇onverge
- 36. Three main trends indicate a shift in trajectory Of the electric transit vehicle category Climate change and noise control • China is trying to curb pollution • Mostly noisy diesel buses Early adopters: smaller cities • Wuhu is to establish an autonomous driving zone • California: 0 emission fleets “Once you go electric, you don’t go back” • Technological capabilities have caught up to replace diesel/bio • A bus starts and stops 500 times in a single route (source: Proterra), vibrations that can shake buildings • ”Key EV Project” to subsidies to auto manufacturers • Willingness is demonstrated by cities to trade up for better buses • “Thousand of Vehicles, Tens of Cities” • Shenzhen EV charging pilot: 78 public charging stations • Low turnover for buses are attractive to transit companies • 15 years of life cycle use 汇onverge
- 37. Diesel buses True TCO of Volvo Electric Buses True TCO of Volvo Automated Electric Buses Cost of Automation Benefits of Automation • Virtually no Traffic in the LT • Significant cost savings 汇onverge
- 39. Forbes 汇onverge City Lab Volvo Group
- 40. 汇onverge
- 41. 汇onvergeWuhu Article - Driverless Vehicles
- 44. 汇onvergeEnvironmental & Saving Lives 0 5 10 15 2016 2017 2018 2019 2020 2021 2022 Metric Tons of CO2 Saved (Millions) Pessimistic Optimistic 0 200 400 600 800 1000 1200 2016.5 2017 2017.5 2018 2018.5 2019 2019.5 2020 2020.5 2021 2021.5 Total Number of Cars Off the Road (Thousands of Cars) Pessimistic Optimistic
- 45. Europe 29% North America 45% South America 6% Asia 13% Africa and Oceania 7% Bus Sales by Region 汇onverge
- 46. • English • Further business relationships • Benefits outweigh costs • Cultural/Language Barriers • Current Executive Structure: Majority Europeans Chinese Executive 汇onverge
- 47. • Volvo Group – subsidiary of Zhejiang Geely (Prior : Ford) • Headquarters Sweden : owned by Swedish interest • Swedish-individualist • Chinese- collectivist • Diminishes risk of Culture Clash • Ex.: Presence of Lawyer is disrespectful Volvo – Executive – Brand 汇onverge
- 49. Sustainable transport Shared value Responsible behaviour 汇onvergeGlobal Group - Business Model
- 50. 汇onvergeVolvo’s Shared Value & Structured Approach
- 51. Technological marketing push Technology push vs. market pull Need R&D with Baidu Trials in cities Market to other cities Expressed Market Need R&D Trials in cities Market according to need
- 53. 汇onvergeElectric Bus Specifics (Extra) LONG-TERM • No Emissions • No Noise Pollution • No Need for Fuel • Costs = Hybrid Diesel • Saving Money on Gas 13.46B • 1 Min Charge = 10 min of driving with Volvo’s batteries. 6Min to full charge • Latest Technology (most developed) with Proterra reaches 350 Miles per charge Benefits
- 54. Benefits of Automation + Safety Benefits LONG-TERM • Decreased emissions because of no Slow/stop • Faster Destination Speeds • 80% of Accidents caused by Human error Reduced down to virtually 0% • Traffic Virtually Eliminated • Very Useful in High Population Areas like Beijing 汇onverge
- 55. 汇onvergePartnership with Baidu & Equity 40% 40% 20% Equity Volvo SAIC Baidu Why Partner? • Previous Experience partnering with BMW - European Car Manufacturer • We can leverage our brands • Save on Cost • We offer a product that will save them millions in R&D and a very large global brand in the bus industry
- 56. 汇onvergeContingency to Baidu Partnership DIDI – Uber of China • Creates bus routes and initiates them using the app. • One stop customizable route • Proof of concept: 80% Customer retention rate so far • Partner with us for automation and for electric bus services.
- 57. 汇onvergeGlobal market share Frost & Sullivan
- 58. 汇onvergeCost of one bus Frost & Sullivan
Editor's Notes
- 28 football fields
- As you guys can see China’s Culture and Sweden’s Culture very different. I would like to draw your attention to Long Term Orientation . Power Distance and Individualism.