Digital Auto Report 2023 How fast will the mobility ecosystem really transform? VOLUME 2 Volume 1 (April 2023) Digital Auto Report 2023 – Volume 2 ✔ Eleventh annual Digital Auto Report, developed by Strategy& and PwC ✔ Global consumer survey with a focus Understanding consumer preferences and implications • Consumer view – changing mobility preferences • Implications for auto players – interface, subscription and charging This report: Volume 2 Assessing global mobility market dynamics on the US, EU and China (n = 3,000) ✔ Quantitative market outlook up to 2035, based on regional structural analysis ✔ Interviews with industry executives at OEMs and suppliers, and with leading academics and industry analysts Digital Auto Report 2023 Volume 2 Strategy& Source: Strategy& • Trends – user experience, e-mobility, automated driving and smart mobility • Market outlook – penetration of technologies and mobility types • Economic opportunity – selected value pools in AD, EV and Smart Mobility 2 Future value creation in automotive depends on anticipating and prioritizing several technology trends New value Adoption 2025-35 Digital Trends Executive summary – Volume 2 Digital transformation is characterized by several key trends that demand CEO attention: • Geo-political powershifts: Chinese OEMs are asserting their dominance domestically and making inroads into the European market. Regulation in major markets e.g. on sustainability (CBAM), high tech (Chips Act), or privacy (GDPR) will likely force players to localize further in three regions (US, EU, CN) • Digital user experience: Balancing digital vehicle experience and customer satisfaction with the respective costs for the digital technologies remains key. OEMs should source tech capabilities via ecosystem partnerships, but need to avoid long-term dependencies • Digital in e-Mobility: Ample opportunities emerge around battery and charging value chains – OEMs should orchestrate their own platforms for partners to integrate and realize new service offerings. For suppliers this is an opportunity to increase their share of service-based, recurring revenues. • Automated driving: AD is gradually moving beyond experimental stages towards commercial viability in private and shared vehicles. Strong cost reduction is expected for L3/L4 AD technologies once scale-up kicks in • Smart mobility services: First players becoming profitable demonstrates feasibility of those business models when rigorously focusing on asset utilization • Total vehicle parc 2035 seen in Europe at 366m vehicles (vs. 352m in ’25), in the US at 359m (vs. 300m in ’25) and in China at 418m (vs. 364 in ’25) • All regions expected with similar strong increase of advanced vehicle connectivity – China at 94%, US at 93% and Europe at 81% by 2035 • BEV penetration in 2035 expected highest in Europe (96% of new vehicle sales), followed by China (81%) and the US (only 58%) – differences mainly due to different regulatory incentive schemes and industry structure (combustion engine industry in EU/US vs. EV industry in China) • Adoption of highly automated driving (L4/5) more conservative than in previous forecasts with 7% of new vehicle sales in EU and 9% in the US; Chinese expectations much more optimistic, driven by very ambitious government plans (36% in ‘35) • Mobility modes shift very slowly considering the overall mix – MaaS (e.g. taxi, hailing, robo-taxi) and VaaS (e.g. sharing, rental, subscription) are getting more popular, but are still only a fraction of total kilometers travelled (4% in GER, 3% in US, 5% in CN by ’35); private vehicles will remain the main mode in such a scenario For innovative market players, considerable revenue opportunities arise from these trends and market outlook, i.e.: • Digital e-Mobility value pools: $8bn (Europe | 2030) for selected software and hardware solutions • Electric Vehicle value pools: $760bn (Global | 2030) for EV powertrain & battery • Automated driving value pools: $81bn (EU, US, CN | 2035) for ADAS features value contribution to total vehicle sales • MaaS and VaaS value pools: $264bn (GER, US, CN | 2035) for combined MaaS and VaaS market Digital Auto Report 2023 Volume 2 Strategy& OEM = Original Equipment Manufacturer CBAM = Carbon Border Adjustment Mechanism GDPR = General Data Protection Regulation AD = Automated Driving MaaS = Mobility-as-a-Service VaaS = Vehicle-as-a-Service (B)EV = (Battery) Electric Vehicle ADAS = Advanced Driver Assistance System Note: Please refer to respective section for detailed assumptions and sources behind stated propositions Source: Strategy& 3 The digital transformation in the mobility industry is in full swing – multiple opportunities emerge for all players Digital trends in mobility Geo-political powershifts Digital user experience Digital in e-Mobility Automated driving Smart mobility services Chinese OEMs moved up to No. 1 car importer in Europe – vs. No. 8 in 2017 76% of auto leaders consider new collaboration models as key for winning vehicle OS $ ~8bn for digital e-Mobility opportunity by 2030 expected OEM revenues allocated to ADAS parts expected to reach $79bn by 2035 First global mobility operators profitable in 2023 (i.e. UBER, LIME) • New entrants emerge with focus on Digital and BEV • Digital experience is now crucial brand differentiator • AD is moving from trial to commercial modes • Geopolitical uncertainties force global OEMs and suppliers into de-risking • Truly intelligent assistants, smart materials, and ultrawide screens picking up • Rise of e-mobility drives demand for digital services and infrastructure provisioning • Smart mobility incl. micro, sharing, hailing, rental, on-demand, subscriptions • Governments protect home markets via ESG regulation (e.g. CBAM) • Value creation beyond core product differentiation still to be proven • Software opportunities around battery, charging equipment, charge point access, and energy mgmt. • Waymo and Cruise with first licenses in San Francisco • Multi-stakeholder platforms and standards just emerging Localized digital strategy for US, EU and China needed Digital Auto Report 2023 Volume 2 Strategy& Invest in partnerships to bridge lack of tech scale Consider access to digital e-mobility innovation via startups • Mercedes with first hands-off autobahn pilot (L3) • But AD regulation evolving very differently across regions With maturing AD tech, right go-to-market timing critical OEM = Original Equipment Manufacturer CBAM = Carbon Border Adjustment Mechanism AD = Automated Driving EGS = Environmental, Social and corporate Governance OS = Operating System Source: Strategy& • Adoption driven by integrated, multi-modal platforms with public transport, AD will be a boost • First players profitable, but only with revised city focus Integrate own mobility offers into other platforms for scale 4 The global powerplay is changing – while Chinese OEMs win at home and gain traction in EU, regulation tightens everywhere Changing global powershifts – example Chinese OEMs Car imports into Europe Car sales in China Passenger car imports in the EU by top 8 countries of origin in 2022 (country ranking vs. 2017) 8 522k China Turkey 452k →0 United Kingdom 441k 2 South Korea 411k Japan 391k United States Mexico 2 2022 50% Domestic (Chinese) 2 20% 37% 20% 31% German Others 2 EU regulatory challenges for non-EU OEMs 35% 44% 1 266k 181k 2017 →0 329k Morocco Passenger car sales in China by brand origin (2017 vs. 2022) In 2022, 35% of passenger cars sold in the EU were imported. EU regulations to slow down import quotas are expected (e.g., Carbon Border Adjustment Mechanism, Digital Product Passports, Data Privacy) Competitive disadvantages of Western OEMs in China Weaker authoritative support Harder-to-grasp local preference (e.g., selfie function in car) Intermediate access to local resources With the rise of Chinese OEMs, the global powerplay is changing once again. Regulation in major markets on sustainability (CBAM), high tech (Chips Act), transparency (Digital Product Passport) or privacy (GDPR) will likely force players to localize in three regions (US, EU, CN). Digital Auto Report 2023 Volume 2 Strategy& OEM = Original Equipment Manufacturer CBAM = Carbon Border Adjustment Mechanism GDPR = General Data Protection Regulation AD = Automated Driving Source: PwC Autofacts analysis, ACEA, EUROSTAT, CAAM; Strategy& 5 Vehicle user experience is becoming more personal and interactive – but some innovations result in higher complexity Digital user experience – trends and challenges Challenges 1 Not only commands, but actual conversations Implementation of ChatGPT technology in car voice interfaces 2 3 4 The physical is acquiring digital flexibility Smart materials allow physical surfaces to understand and react The touchscreen is taking over the dashboard Car dashboards are becoming ultra-wide entertainment systems Guidance right where you need it Augmented reality is becoming mature, and advanced • Safety: A more immersive interaction with the voice assistant could compromise the driver’s concentration • Data Privacy: Handling of personal data should be dealt with care, due to user trust and cyber security risks • Customer value: This nascent tech still needs convincing use cases to justify its cost to customers beyond novelty and differentiation • Usability: Surface-embedded smart controls require special design attention to ensure that users can locate and operate the interface • Safety: In order to minimize the risks of driver distraction as touchscreens grow in size and functionality, design for usability increases in importance • Energy efficiency: Bigger and more powerful infotainment system also requires more electricity, affecting the car range in EVs especially • Safety: Cluttered and poor design of AR interface could distract drivers from the road ahead; application might remain limited to passengers • Cost: AR technology in cars is still significantly more expensive than traditional displays Vehicle experience increasingly depends on digital technologies that only work at scale. OEMs must be laser focused on their experience differentiators and source tech capabilities (e.g. machine learning, operating systems or cloud storage) via ecosystem partnerships. Digital Auto Report 2023 Volume 2 Strategy& OEM = Original Equipment Manufacturer Source: Strategy& analysis 7 As OEMs go digital, their tech partner portfolio must balance fast go-to-market benefits with long-term dependencies Examples of OEM and technology player partnerships Front-end enablers GM Toyota Android (platform usage of Android Auto from 2024) BMW Arene OS (Toyota-owned multimedia system since 2021) (Toyota-owned real-time software platform) Android (future usage of Android Auto & vw.OS (VW-owned OS platform) Blackberry QNX (supply of safety-certified Thundersoft (collab. for Chinese market) Harman (supply of open ecosystem for Apps) embedded software integrated in vw.OS) Compute Platform Qualcomm (strategic collaboration on digital cockpits, telematics systems and ADAS) Oracle (offboard - strategic collaboration on high performance workloads) No partner for onboard announced Qualcomm (strategic collaboration with focus on automated driving functions up to L4) Vector (supply of automotive ethernet) Android (platform usage for infotainment, Qualcomm (strategic collaboration with focus Android App store designed for BMW) on automated driving functions) (platform usage of Android Auto in BMW OS8) QNX/ Blackberry (supply of safety-certified Intel/ Mobileye (strategic collaboration for embedded software) autonomous driving platform) MB.OS (announced Mercedes-owned OS Unity Mercedes (strategic partnership to enable infotainment applications on new MB.OS) Android (strategic collaboration on SDV Renault Ultifi (GM-owned software platform), Redhat (strategic collaboration on SDVs) Lexus Google Apps) VW Operating System (OS) offboard & onboard applications) Valeo (supply of on-board application software) Amazon (strategic collaboration on software Stellantis solutions starting in 2024) Digital Auto Report 2023 Volume 2 Strategy& platform) QNX/ Blackberry (supply of safety-certified embedded software) Nvidia (strategic collaboration on SDVs, future focus on AI applications) digital architecture for SDVs) Valeo (Supply of SDV components incl. HPCs) Qualcomm (strategic collaboration with focus Mobile Drive (strategic collaboration together Qualcomm with Foxconn on in-vehicle user experiences) (strategic collaboration on digital experience) Android (announced strategic partnership on next-gen. vehicle architecture) OEM = Original Equipment Manufacturer SDV = Software Defined Vehicle HPC = High Performance Computer Source: Strategy& analysis as of August 2023; OEM / software provider press releases Selecting the right partners across tech domains is essential to deliver winning digital experiences & services Front-end partnerships visible to end users must be carefully curated to control customer access & experience For OS and compute platform partnerships guardrails needed to avoid dependency on few dominant players ADAS = Advanced Driver Assistant System 7 USD ~8bn+ digital e-Mobility Europe1 opportunity in 20302 – OEMs to build own platforms and drive use cases w/partners Digital opportunities in e-Mobility Battery ID and related services EU market size2 (2030) Smart charging equipment Charge point access software Charge point management software Up to USD 0.5bn3 USD 5.8bn USD 0.9bn Digital ID for batteries containing data about performance and manufacturing history, increasing transparency across the battery value chain Smart charging hardware equipment to optimize the charging process and interact with the electric grid, user preferences, and other external factors Software platforms and mobile apps that facilitate the interaction between EV owners and the charging infrastructure Software platforms designed to manage, operate and optimize charging networks, as well as enhancing the efficiency of charging services • Battery passports/digital battery twin • Intelligent wall boxes/charging cables • Search and access to charge points • Lifecycle documentation (ownership, status, performance, certification) • Intelligent high power chargers − Grid interaction and peak-shaving − Battery storage and V2G integration − Remote monitoring and maintenance − Smart building/vehicle interaction • Reservation and booking systems • Real-time condition monitoring for reliable and robust operation • Residual value calculation • Lifecycle optimization • Warranty management and insurance USD 1.4bn • Enable electricity sales • Authentication and access control • Payment/ERP and other user system integration • Billing and payment systems • Power/load management • Customer service (user session) • Customer service (troubleshooting) • Energy and cost tracking • Fleet management integration A diverse range of players are trying to develop software and solutions to capitalize on the digital opportunities in e-Mobility – OEMs should focus on developing a platform where others integrate, driving use cases through partnerships Digital Auto Report 2023 Volume 2 Strategy& EV = Electric vehicle OEM = Original Equipment Manufacturer ERP = Enterprise Resource Planning 1) EU (27+2) + UK + EFTA 2) Estimated 2030 revenues. Smart charging equipment includes hardware revenues 3) EV battery certificate and lifecycle optimization services only Source: Strategy& analysis 8 Successful EV charging software covers operations and power mgmt. for CPOs, as well as access and payment for end users EV charging software – functionality and value chain Types of charging software 1 Operations software Main focus on charge point operations Vehicle type 2 Roaming software Power management software 3 Main focus on optimization Charge point EMSP software Charge point management software ISO/IEC 61851 OCPP 1.6 DC station • Real-time condition monitoring • Reliable and robust operation EMSP software OICP DIN SPEC 70121 AC station OCPP B2C Roaming Wall box Energy markets • Optimize energy distribution • Cost reduction 2 Digital Auto Report 2023 Volume 2 Strategy& EV driver Mobile 1 Power management software Commercial vehicle User frontend Roaming services OICP EV battery Main focus on authentication, charging sessions and customer app EMSP-related software Operations software Passenger vehicle 4 Main focus on publishing POI data and processing charge detail records • Access to charge points • Enable electricity sales • Payment/ERP integration 3 Web portal RFID 4 B2B/G 4 EV = Electric vehicle SW = Software CPO = Charge Point Operator DC = Direct Current AC = Alternating Current EMP = E-Mobility Service Provider ERP = Enterprise Resource Planning RFID = Radio Frequency Identification B2C = Business to Consumer B2B/G = Business to Business/Government OCPP = Open Charge Point Protocol OICP = Open Intercharge Protocol Source: Desktop research, Strategy& analysis 9 Automated driving is slowly moving from trial to commercial – but in different ways for private and shared vehicles Automated driving – latest commercial developments Private vehicles (exemplary ADAS functionalities) Shared vehicles (current developments) ADASLevel Level 0 Robotaxi Level 2 BMW 5 series Pre-collision braking/forward collision braking ✓ ✓ Cross-traffic Alert ✓ ✓ Predictive and adaptive cruise control ✓ ✓ Assistive parking – driver assisted ✓ ✓ Lane keeping assist ✓ ✓ Blind spot monitoring ✓ ✓ Assistive parking – remote parking/key parking ✓ ✓ Automated lane change/lane changing assist ✓ ✓ Traffic jam assistant ✓ ✓ ADAS functionalities ✓ Level 2+ Highway driving assist up to 130 km/h Level 3 Emergency assistant ✓ Hands-off traffic jam assist ✓ Highway autopilot (single-lane) ✓ Taxi services, last mile mobility Robo shuttle Shared transport of people on a defined route or demand service shuttle service in defined areas Tele-operated vehicles Intersection movement assist Level 4 Fully automated valet parking/ driverless parking ✓ Urban autopilot/fully automated urban driving Level 5 Full autonomy Digital Auto Report 2023 Volume 2 Strategy& Concierge service for car sharing vehicles • Robotaxis entering commercialization (Cruise, Waymo, Baidu, Pony.ai), expanding to more cities (e.g. San Francisco) • As supplier, distinguish between premium OEM components and low-cost systems for mass market • However, some angry citizens in the U.S. aim to block these vehicles in traffic • As OEM, commercialize first L2+ features in premium vehicles and gradually expand to other segments • In Germany, Sixt Robotaxi with Mobileye and NIO gained approval in Munich • While European cities often still deploy pilot projects, commercial operations in private areas/industrial sites already active • New robo-shuttles that require less infrastructure are expected to increase the appeal of the vehicle in upcoming years • Vay sends driverless cars to customers, that are operated remotely and is aiming to gather data for faster deployment of automated driving vehicles • Deutsche Telekom and Mira jointly launched a pilot project for teleoperated driving in Bonn OEM = Original Equipment Manufacturer ADAS = Advanced Driver Assistance System AD = Automated Driving Source: Strategy& analysis OEMs/Suppliers Level 1 Mercedes S Class Implications for … • Provide "on-demand" solutions (e.g. pay per use) allowing customers to develop trust in advanced AD functions while also offsetting high initial component/ technology costs over the lifecycle • Maintain AD architectures in a modular and flexible fashion to ensure their reusability in various vehicle types, including e.g. (robo-) shuttles • Aim for rigorous cost-down once scale-up kicks in (L4 ADAS material cost target at $2.840 in 2030) 10 Learnings from first wave of hype show that mobility players need to focus on asset utilization instead of differentiation Smart mobility – learnings and recommendations Emerging dominant ways to play Learnings from first hype wave EBIT Margin (%) 2019 2020 2021 2022 -50 -100 -150 -200 offering of technology solutions that enable businesses, cities, and transportation providers to develop own branded mobility applications/ services.(e.g. Trafi Whitelabel, Moovit) Uber DiDi Integrated “super”-apps • Only play games you can win – Leave countries with limited success and divest non-strategic business units (see UBER) consolidation of the most prominent local shared mobility providers in a few apps (e.g. in Germany FreeNow, Sixt with Miles, Bolt) • Increase user loyalty – Consider “Amazon Prime“-like memberships (e.g. UberOne) and AI-enabled customer care Global aggregator • Use assets wisely – strategic use of own assets (vs. partner integration) in the light of increased capital costs and integration of public transport (see FreeNOW) Combination/comparison of shared mobility offerings from several providers, allowing users to seamlessly find, unlock and pay (e.g. Cogo mobility) OEM = Original Equipment Manufacturer MaaS = Mobility-as-a-Service AD = Automated Driving Source: Strategy& analysis • Collaboration partner of mobility service operators: integrate own fleets in “super”-apps/broader mobility ecosystem • Three-wheeled/micro-car provider: offer different, purpose-build vehicle types that match future needs Lyft -250 Digital Auto Report 2023 Volume 2 Strategy& OEMs 2018 Suppliers 2017 • Adaptive market strategist: adopt agile market strategies and offer shared fleets with flexible ownership models (subscriptions, shared leasing, pay-as-you-go) and dynamic pricing Local MaaS platforms Mobility Service Operators 2016 0 Implications for… • Modular platform provider: design modular vehicle platforms ensuring easy adaptation to different mobility use cases • Key technological components provider: develop standardized critical technologies e.g. automated driving systems, advanced connectivity solutions, energy storage • Robo-taxi/shuttle provider: prepare for adding AD fleets (robo-taxis, robo-shuttles) to the service offering • Collaboration partner of local MaaS provider: partner with MaaS platform provider to optimize customer-centric offerings and include public transport 11 Despite various digital growth opportunities, OEM focus their investments on e-mobility, while Tech and VC firms go broader Investment allocation by mobility topic and player type OEM Tech player Venture capital 7% 22% 25% 29% 40% 43% 49% 73% 67% 70% 30% 79% 33% 27% 16% 14% 16% 8% 5% 14% 3% 6% 2019 2020 2021 2022 Electric Automated Connected 16% 9% Q1 2023 2019 2020 20% 2021 27% 55% 59% 29% 21% 29% 30% 7% 6% 19% 17% 5% 11% 14% 2020 2021 2022 Q1 2023 7% 14% 20% 5% 26% 10% 13% 2022 Q1 2023 2019 5% Shared OEMs clearly focus on electric mobility and keep “lights on” with automated driving; shared mobility did not recover since the pandemic Digital Auto Report 2023 Volume 2 Strategy& 39% 63% 24% 18% 7% 47% 27% 23% 12% 45% 47% Tech players still bullish on automated driving and active in electric mobility; only few new investments in connected and shared VCs rebalance their investment portfolio from automated to electric mobility; while staying active also in shared – although less than 2019 OEM = Original Equipment Manufacturer EV = Electric Vehicle VC = Venture Capital Source: Strategy& analysis; Pitchbook; Factiva Included companies (for OEM and Tech Player Analysis): Volkswagen Group/Porsche/Toyota Motor Corporation/General Motors Company/Hyundai Motor Group/Hyundai/ Kia Motors Corporation/Ford Motor Company/Stellantis/Renault-Nissan/Renault/Nissan/Mitsubishi Motor/BMW Group/Mercedes-Benz Group/Honda/SAIC/Volvo (for OEM)/Apple/Microsoft/Alphabet/Google/Waymo/Tencen Alibaba Group/Amazon/Uber Corporation/Baidu/Meta/Samsung/Xiaomi/Dell; Analyzed fields for Venture Capital Investments (in Pitchbook): “Autonomous Cars”/“Car Sharing” or “Ride Sharing”/“Electric Vehicle”/“Connected Car” or “Connected Mobility” or “Connected Vehicles” 12 Weitere Design-Vorschläge folgen von VCS creative Modeling the future based on key trends and adoption drivers Digital Auto Report 2023 Volume 2 Strategy& 13 The PwC Strategy& mobility demand outlook builds on different adoption assumptions per region Key adoption assumptions Connected • • • • C1 mandatory in EU since 2018 (eCall initiative) C2 (3G/4G) standard in more cars since late 2010s OTA functionality assumed to work with C2/WiFi C3 (5G) penetration expected with uptake of L4 AD or active 5G push by telcos (after 2028) • • • • No C1 required but all cars have basic connectivity C2 (3G/4G) standard in most cars since 2010 OTA functionality assumed to work with C2/WiFi C3 (5G) penetration expected with uptake of L4 AD or active 5G push by telcos (after 2028) • • • • Development is supported by governmental policy ~90% of low price cars to be connected by 2026 C2 (3G/4G) standard in mid-/high-class cars today OTA expected to work with C2/WiFi – already at 55% of new car sales in 2022 Electric • • • • Restrictive ICE regulation in EU (ICE ban by 2035) TCO parity of BEV vs. ICE for most cars by 2025 Sufficient BEV raw materials & production capacity Sufficient ramp-up of charging infrastructure despite some delays in 2025-2030 • No ICE ban at national level for next 15 years, but incentive programs for BEVs planned until 2032 Production capacity sufficient for moderate demand Charging infrastructure in the central US insufficient ZEV states lead with higher BEV shares • • • • • No ICE ban at national level for next 15 years Strong demand for segments with TCO parity Sufficient BEV raw materials & production capacity Charging infrastructure in rural areas insufficient High volume A-segment for urban mobility • • • • Uniform EU regulations with the UNECE 2x PEP cycles until prices at mass adoption level L3 adoption first in premium vehicle segments L4 adoption first at scale for robo-taxis/shuttles in large cities where infrastructure build-out pays off • • • • Different L4 regulations at state-level next 5-10 yrs 2x PEP cycles until prices at mass adoption level L3 adoption first in premium vehicle segments L4 adoption first at scale for robo-taxis/shuttles in large cities where infrastructure build-out pays off • Supportive nationwide regulation for L4 with policy to reach 20% L4 new vehicle sales by 2030 L3 adoption first in premium vehicle segments L4 adoption in taxis delayed given lower cost advantage due to lower driver wages than in EU/US • Rising cost for private car ownership (higher vehicle prices/energy prices/taxation) Higher public transport funds improve its offering Regulation increasingly incentivizing shared modes • Rising cost for private car ownership (higher vehicle prices/energy prices/taxation) Cities will increasingly push for shared modes (higher parking fees, city tolls, restricted lanes) Limited improvement/funding for public transport • • • • Automated Smart Mobility • • • • • • • Digital Auto Report 2023 Volume 2 Strategy& • • Moderate increase of private car ownership cost Growing population share of first-time car owners Massive push of mega cities for shared modes Ongoing massive invest for urban public transport C1 = Minimum connectivity (eCall with SIM card at 2G), C2 = Advanced connectivity (infotainment/OTA at 3G/4G), C3 = Ultimate connectivity (next gen streaming/AD at 5G – incl. V2X) OTA = Over-The-Air, AD = Automated Driving, ICE = Internal Combustion Engine, BEV = Battery Electric Vehicle, ZEV = Zero Emissions Vehicle, TCO = Total cost of ownership, PEP = Product Engineering Process 14 Total car parc growth strongest in China; almost every new car to be electric by 2035 in Europe; automation push in China Total vehicle parc and technology penetration of new car sales (in million, %) New LV Sales (million) Total LV Parc (million) Advanced connectivity 352 15.4 52% 359 366 15.4 15.8 70% 81% 300 323 16.5 16.1 55% 359 387 30.7 418 33.1 70% 85% 94% 40% 58% 364 28.9 75% 17.1 93% (C2-3, % new LV sales) Electric vehicles 32% 66% 96% 17% 41% 58% 81% (BEV, % new LV sales) Automated driving (L4/L5, % new LV sales) Digital Auto Report 2023 Volume 2 Strategy& 0% 1% 7% 0% 3% 9% 3% 2025 2030 2035 2025 2030 2035 2025 C2 = Advanced connectivity (infotainment/OTA at 3G/4G), C3 = Ultimate connectivity (next gen streaming/AD at 5G – incl. V2X) LV = Light Vehicles = Cars + Light Commercial Vehicles < 6t GVW BEV = Battery Electric Vehicle L4/5 = Level 4/5 automated driving Source: PwC Autofacts® Mobility Demand Model, Strategy& 18% 2030 36% 2035 16 Significant growth in connectivity levels are expected in key regions; a quarter of the car parc in China will be C3 by 2035 Total vehicle parc and connected car share (in million units, %) 352 6% 0% 359 13% 1% 366 300 323 3% 0% 16% 2% 23% 21% 14% 44% 359 364 387 15% 2% 18% 7% 19% 38% 51% 57% 73% 69% 52% 42% 2030 Non-Connected C1 2035 C2 2025 2030 2035 18% 54% 36% 10% 11% 2030 2035 62% 7% 26% 17% 2025 25% 32% 14% 418 2025 C3 C0 = Not connected, C1 = Minimum connectivity (eCall with SIM card at 2G), C2 = Advanced connectivity (infotainment/OTA at 3G/4G), C3 = Ultimate connectivity (next gen streaming/AD at 5G – incl. V2X Source: PwC Autofacts® Mobility Demand Model, Strategy& Digital Auto Report 2023 Volume 2 Strategy& Vehicle connectivity is becoming increasingly important and is playing a substantial role in remaining competitive among other OEMs. A greater share of C2-C3 connectivity is forecasted for the US and China, on account of more advanced software and automated driving features. 16 BEVs will represent >90% of new car sales in Europe and >80% in China; followed by the US with ~60% by 2035 New vehicle sales by powertrain (in million units scaled to 100%) 15.4 15.4 15.8 16.5 16.1 0% 1% 2% 0% 17% 2% 0% 32% 12% 17.1 28.9 30.7 33.1 2% 0% 0% 0% 40% 41% 1% 81% 8% 2% 57% 38% 26% 81% 9% 96% 56% 58% 58% 66% 9% 51% 33% 5% 14% 2030 2035 1% 1% 2025 ICE (incl. HEV) 2030 PHEV 2035 BEV 2025 2030 2035 2025 FCEV ICE = Internal Combustion Engine HEV = Hybrid Electric Vehicle PHEV = Plug-in Hybrid Electric Vehicle BEC = Battery Electric Vehicle FCEV = Fuel Cell Electrc Vehicles Source: PwC Autofacts® Mobility Demand Model, Strategy& Digital Auto Report 2023 Volume 2 Strategy& Firm regulatory push by the EU will promote mass adoption of BEVs in the region. At the same time, China and the US are also heavily incentivizing the sale and local production of BEVs. Government policies and growing consumer acceptance will continue to play a key role in the electrified future. 17 Market diffusion of BEVs likely to move from the premium towards volume and entry segments Global eMobility diffusion across vehicle classes 5 Premium city BEV 6 Electrification Global revenue1 in % in bn USD Green rocket 75% 3 4 Volume Mass BEV • Premium to lead electrification • Technological and commercial advancement to grow BEV share further ~267 • By 2030, the volume segment expected to be a strong driver for BEV sales and reach brink of large-scale diffusion • From 2030 onwards, majority of vehicles forecasted to be electric ~92 50% ~27 1 2 Entry BEV Rational green 33% ~44 A/B C/D Passenger car segment Digital Auto Report 2023 Volume 2 Strategy& E/F 2022 BEV 2030 ICE ICE = Internal Combustion Engine BEV = Battery Electric Vehicle 1) Powertrain revenue (incl. battery) Source: Strategy& Powertrain Study 2023 2022 Comments ~378 Allrounder BEV Entry Vehicle price class Premium 2030 powertrain portfolio ~114 2030 • Gap between premium and entry electrification expected to persist beyond 2030, owing to price sensitivity • From 2030 onwards, cost decreases anticipated to facilitate electrification 20 Europe and US show moderate automated driving adoption; China’s forecast very optimistic based on government’s plans New vehicle sales by SAE level (in million units scaled to 100%) 15.4 15.4 1% 0% 5% 1% 15.8 7% 10% 16.5 16.1 1% 0% 3% 5% 17.1 28.9 30.7 9% 3% 12% 18% 14% 33.1 36% 36% 99% 99% 93% 82% 93% 77% 85% 48% 46% 17% 2025 L0-2 2030 L3 2035 2025 2030 2035 2025 2030 2035 L4-5 SAE = Society of Automotive Engineers AD = Automated Driving Source: PwC Autofacts® Mobility Demand Model, Strategy& Digital Auto Report 2023 Volume 2 Strategy& Automated vehicles need to overcome various technological and legal hurdles to get road ready. Moreover, consumers are still skeptical about the novel technology. However, AD is slowly moving from trial to commercial. High AD adoption expected in China, with significant policy support and 5G coverage. 19 OEM revenues allocated to AD features expected to reach $81 bn by ‘35; L4 revenues to quickly outperform L3 once available Automated driving – market outlook Revenue potential1) (AD features value contribution to total vehicle sales based on bottom-up estimation, in bn USD) ∑ $81bn 27 18 13 11 3 8 13 6 9 6 8 2 22 15 • The forecast reflects the additional revenues of OEMs through new ADAS components (sensors, actuators, computers, wiring harness, HMI, ...) in the vehicles • Revenue potential based on bottom-up / supply-side development (not top-down government targets) 20 13 Comments 4 9 34 10 7 • Strong increase of L3 applications expected in North America, China and EU, beginning 2026 • Push of L4 applications expected with increased use of highway pilots and valet parking in China and EU 18 2025 L0-L2 Digital Auto Report 2023 Volume 2 Strategy& L3 2030 2035 PC L4 AD = Automated Driving OEM = Original Equipment Manufacturer Source: Strategy& HMI = Human Machine Interface 22 Mobility behaviors vary greatly by region – US car dominated, Germany and China more walking, biking & public transport Trips by mobility mode (in million trips per day, scaled to %) 261 13% 1% 0% 54% 257 228 13% 1% 0% 54% 12% 2% 1% 1,171 1,256 1,344 5% 1% 2% 5% 1% 2% 5% 2% 2% 1,029 1,193 1,384 26% 28% 30% 0% 5% 0% 5% 0% 6% 37% 34% 31% 8% 8% 9% 24% 24% 24% 2025 2030 2035 53% 87% 87% 87% 21% 21% 21% 11% 11% 10% 2% 3% 2% 3% 1% 3% 2025 2030 2035 2025 2030 2035 Public transport Mobility-as-a-Service Vehicle-as-a-Service Private vehicle [e.g. bus, train] [e.g. taxi, hailing, robo] [e.g. sharing, rental, subscription] [e.g. own vehicle] Micro (walk) Micro (bike) Source: PwC Autofacts® Mobility Demand Model, Strategy& Digital Auto Report 2023 Volume 2 Strategy& The most frequently used mobility modes vary across the analyzed markets – while the Americans predominantly use private vehicles, Germans and Chinese also often take the public transport, or walk and ride bikes for a fair share of their trips. 21 Without fundamental change of market conditions, new modes MaaS and VaaS will stay below 5% in overall mobility mix Distance travelled by mobility mode (in billion person-kilometer travelled per day scaled to %) 3.1 20% 1% 0% 72% 3.1 2.8 20% 2% 0% 71% 20% 18.8 20.2 21.6 5% 1% 1% 5% 1% 2% 4% 1% 2% 16.4 17.8 20.7 59% 60% 60% 1% 3% 1% 3% 1% 4% 33% 32% 31% 2% 2% 92% 70% 92% 92% 3% 3% 3% 3% 3% 3% 0% 0% 0% 0% 0% 0% 3% 1% 3% 1% 3% 1% 2025 2030 2035 2025 2030 2035 2025 2030 2035 Public transport Mobility-as-a-Service Vehicle-as-a-Service Private vehicle [e.g. bus, train] [e.g. taxi, hailing, robo] [e.g. sharing, rental, subscription] [e.g. own vehicle] Micro (walk) Micro (bike) Source: PwC Autofacts® Mobility Demand Model, Strategy& Digital Auto Report 2023 Volume 2 Strategy& Mobility modes have been diversifying since the Covid pandemic, when digital services and innovative ways to travel were in high demand. Today, MaaS and VaaS are ever more popular, especially for urban transport. Nevertheless, long-distance travel will continue to depend on private cars. 22 In such a conservative base scenario, MaaS and VaaS revenues will grow moderately to $264bn in DE, US and China by ‘35 Mobility-as-a-Service (MaaS) and Vehicle-as-a-Service (VaaS) market outlook Total revenue potential (in bn USD) ∑ $264bn Comments • Outlook reflects the revenue potential of Mobility-as-aService (e.g. (robo)-taxi, ride hailing) and of Vehicle-as-aService (e.g. sharing, rental, subscription) 5 6 23 16 12 5 11 9 14 151 119 119 75 60 44 59 84 67 82 88 90 75 81 82 6 7 8 2030 2035 2025 Mobility-as-a-Service Vehicle-as-a-Service [e.g. taxi, hailing, robo] [e.g. sharing, rental, subscription] Digital Auto Report 2023 Volume 2 Strategy& MaaS = Mobility-as-a-Service VaaS = Vehicle-as-a-Service Source: Strategy& • Market size is driven by expected kilometer traveled per mode and corresponding service price per kilometer • German and US market both with relevant share of VaaS (requiring active driving by the customer), while China with significantly higher share of passive mode MaaS at relative lower prices (given lower driver cost & cultural habits) • Growth of MaaS segment driven by better integration of multi-modal offerings and expected moderate uptake of robo-taxis after 2030 allowing decreasing km-prices • Growth of VaaS segment driven by increasingly attractive car subscriptions and more flexible booking options in “super apps” offering different service options in one place • Stronger uptake in revenues expected once robo-taxis are deployed at scale for majority of trips / use cases after 2035 25 Smart mobility ecosystem evolution prompts societal trade-off discussions that are essential for a sustainable transformation Trade-offs regarding smart mobility vision Progressive view User Multimodal mobility incl. convenient, fast travel within and between major cities to reduce individual carbon footprints, promote efficiency, accessibility and equity Efficient public transport complemented by smart cargo solutions to enable people-centered cities with a focus on green spaces, clean air and minimal noise New jobs, e.g., in battery production, resulting from new technologies and better job accessibility for the underprivileged, previously deterred by high commute costs Decentralized market power to engage diverse players, promoting tailored local mobility solutions and competition, with an emphasis on digital sovereignty Openness to new technology, despite risks and setbacks, to achieve rapid learning effects for long-term improvement 87% of mobility trips by car in the US Multimodal mobility vs. private car ownership 43 megacities are expected by 2030 City Economy $264 bn. MaaS & VaaS market in DE / US / CN by 2035 New opportunities vs. status quo Risk of job losses in the combustion engines and supplies sector from lower ICE vehicle sales and employment cutbacks due to advanced automation, e.g. due to automated driving Business Decentralized vs. centralized power Technology Openness vs. skepticism Space and infrastructure requirements to meet traditional driving preferences and allow personal car ownership to fulfil desire for personal freedom Car-centric cities with infrastructure to support BEVs and autonomous options incl. multiple lanes and parking spaces to preserve individual mobility Human vs. car centric city 35% expect AI to harm their career in next 5 years Conservative view 84% in GE, 71% in US, 19% in CN feeling not comfortable using a fully autonomous car Power concentration of few major players to provide technology and mobility solutions, achieving cost efficiency via economies of scale Concerns related to surveillance, data privacy, cybersecurity, and automated driving accidents, due to immature tech, e.g.,robo-taxis Overcoming societal status-quo orientation requires a concerted effort in effective regulatory frameworks & incentives as well as ongoing stakeholder dialogues and communication Digital Auto Report 2023 Volume 2 Strategy& ICE = Internal Combustion Engine Source: Strategy& research, Digital Auto Report 2023 Vol1 / Vol2, UN report 26 In summary, there are very specific strategic priorities for each mobility player group to stay competitive in the future Recommendations for mobility value creation Automotive OEMs Automotive suppliers Mobility service providers Customer experience and activation Own the digital experience Define brand defining moments along customer journey and use digital technologies for differentiation Provide modular platforms Design modular vehicle platforms ensuring easy adaption to different mobility use cases and clients Increase loyalty and asset utilization Consider memberships (e.g. UberOne) to create ‘stickiness’ and focus on asset utilization over differentiation Opportunity and value creation Orchestrate e-Mobility & AD services Build proprietary platforms integrating battery and charging solutions; test AD monetization via various schemes (one-off, on-demand, subscription) Become AD enabler at the right time Capture momentum from 5G penetration and China’s recent pushes to position as AD enabler Prepare for the AD era Be ready to add AD fleet (-components) e.g. robo-taxis/shuttles to the service offering when the time is right Partnering and tech capabilities Bridge technology capability gaps Count on best-in-class tech capabilities of partners to balance cost and customer satisfaction; but go multipartner to avoid dependencies Enable ecosystem as integrator Integrate own mobility products into other platforms for scale (e.g. white label) and support integration of different ecosystems (-solutions) Collaborate for MaaS success Partner with MaaS platform provider to optimize customer-centric offerings and include public transport Digital Auto Report 2023 Volume 2 Strategy& AD = Automated Driving MaaS = Mobility-as-a-Service Source: Strategy& 27 Network contacts Jörg Krings Dr. Andreas Gissler Jonas Seyfferth Hartmut Güthner Dr. Jörn Neuhausen Thilo Bühnen joerg.krings@ strategyand.de.pwc.com andreas.gissler@ strategyand.de.pwc.com jonas.seyfferth@ strategyand.de.pwc.com hartmut.guethner@ strategyand.de.pwc.com joern.neuhausen@ strategyand.de.pwc.com thilo.buehnen@ pwc.ch Automotive Europe Digital Transformation Connected and Smart Mobility Automated Driving Alternative Powertrains Mobility Venturing Contributors Leonardo Amico Tobias Karl Kunal Arora Tobias Killmeier Nicola Becht Kolja Lichtenthäler Karolina Blinova Tym Pieglowski Akshay Singh Steven Jiang Milos Bartosek Steven van Arsdale Jørgen Frost Bø Dr. Philipp Rose akshay.singh@ pwc.com steven.jiang@ strategyand.cn.pwc.com milos.bartosek@ pwc.com steven.james.van.arsdale@ pwc.com Sin It Foong Ashley L Zhang Nisella Guo Malien Zehnpfenning Automotive US Automotive China Infrastructure Deals PwC Autofacts® Lead Analyst Carl Heselschwerdt © 2023 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. Mentions of Strategy& refer to the global team of practical strategists that is integrated within the PwC network of firms. For more about Strategy&, see www.strategyand.pwc.com. No reproduction is permitted in whole or part without written permission of PwC. Disclaimer: This content is for general purposes only, and should not be used as a substitute for consultation with professional advisors. Digital Auto Report 2023 Volume 2 Strategy& 18