CONNECTED CARS & ITS NEW BIZ MODELS
An opportunity for the French Automotive Industry !
Prepared for PFA – Les RDV de la Filière Automobile
Rémi CORNUBERT
AUTOMOTIVE
© Oliver Wyman | Connected Cars Battle Fields.pptx
Evolution of a connected world
Driven by the rapid technology development, connectivity within different
ecosystems is accelerated, forming a connected world in the near future
Connected products
Connected systems
Connected life
Past
Today
Future
Source: Oliver Wyman
© Oliver Wyman | Connected Cars Battle Fields.pptx
1
Driving forces for in-vehicle connectivity
OEMs & dealers, authorities, private & commercial customers and finance &
insurance companies have different interests in driving in-vehicle connectivity
Drivers/consumers
Safety & security
Ubiquitous communication
Using instead of owning
…
Authorities
eCall, anti-theft solutions
Emission control
Road charging & traffic mgmt.
…
Driving in-vehicle connectivity
OEMs & dealers
Customer relationship mgmt.
Service & repair, warranty
…
Technology & infrastructure
I&C technology performance
& infrastructure
New power train technology
…
Commercial customers1
Improved efficiency & cost
optimization
Status & location monitoring
…
Finance & insurance comp.
Minimizing risks by monitoring
& control
Maintenance management
…
1 Fleet operators & cargo owners
Source: Oliver Wyman
© Oliver Wyman | Connected Cars Battle Fields.pptx
2
Connected car market
The rapid market penetration of vehicle connectivity opens up large business
opportunities for different industries in the coming years
Market fitment/penetration rates of smartphone and embedded connectivity units fitted to newly-assembled passenger
cars and light vehicles, 2007-2027, (%)
100,0%
Japan
North America
Western Europe
80,0%
China
Mercosur
60,0%
Central Europe
Korea
Russia
40,0%
India
20,0%
0,0%
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2022
2027
In 2027, a hundred percent penetration of in-vehicle connectivity units is expected in
all new sales vehicles in Japan, North America and Western Europe
Source: QUBE – just auto, Oliver Wyman
© Oliver Wyman | Connected Cars Battle Fields.pptx
3
Connected Cars market volume and development
The global number of cars with connectivity devices will rise to 210 million in
2016 – by then more than 80% of new vehicles sold will be connected cars
Telematics market coverage
Worldwide vehicle population,
2011-2016, in million units
Telematics market revenue
Worldwide market,
2011 – 2016, in billion USD
CAGR
36%
CAGR
22%
210
$40 bn.
18%
45
5%
x%
2016
2011
• Number of Connected Cars forecasted to grow strongly at ~36%
p.a yielding 210 million in 2016
• Shipments of OEM telematics
systems grow from ~26 mn. in
2011 to 70 mn units in 2016
(CAGR 22%)
• Aftermarket shipments of
telematics systems rise from 8 to
~16 million units in 2016 (CAGR
15%)
$15 bn.
2011
Comments
2016
• Overall market revenue will rise by
only 22% p.a. to 40 billion USD in
2016 - due to increasing number of
affordable non-embedded, hybrid
solutions (e.g. Ford SYNC)
% share of worldwide car fleet
Significant growth of telematics shipments & a global penetration of +80% in new vehicle sales
1 Telematics refers to embedded OEM and aftermarket systems (hardware plus included services) as well as hybrid systems based on smartphone connectivity
Source: ABI Research, BCC Research, iSuppli, Oliver Wyman analysis
Connected car service map – Regional disparity
Different focus and speed of service implementation in different regions are
driven by customer preferences, infrastructure and government policies
Connected car services global view
USA
Leading market
with strong players for
infotainment,
navigation & location
based services
Russia
Navigation service with
the highest growth; ERAGLONASS emergency
call system will be
mandatory in CVs by 2013
China
Positioning and
navigation for PVs and
CVs are currently the
main telematics
applications in China
Europe
Mandatory
implementation of eCall
system till 2015 boost
safety and remote
services
Brazil
Mandatory equipment of GSM/
GPRS anti-theft system, which
allows SVT and drives insurance
service and enables “pay as you
drive” tariff structures s
India
Fleet management
for CVs starts to pickup,
joint venture is built
between India & Russia
to provide navigation
services in India
Japan
Leading in smart &
real-time traffic
management based on
GPS / navigation
services and V2I
technology
LB services (location based services), CVs (commercial vehicles), PVs (passenger vehicles), SVT (Stolen vehicle tracking), GSM (Global System for Mobile Communication), GPRS (General
Packet Radio Service) , GPS (Global Positioning System), V2I (Vehicle to infrastructure)
Source: Desk research, Oliver Wyman
© Oliver Wyman | Connected Cars Battle Fields.pptx
5
Not Exhaustive
Competitive overview
Different players have entered the market, looking for growth opportunities as
well as strategies to enhance existing business model
Key player groups and motivation
Telematics
device
supplier
Automotive
OEM
Mobile
device
player
(Operation)
software
player
Network
operator
Web service
company
Independent
aftermarket
player
Fleet
operator
Bank,
finance &
insurance
Player examples
Strategic intent
Enhance car
value
proposition
Transform
business model
to integrated
service provider
• Increase car
sales
• Protect car
price
• Improve
drive
experience
for customer
retention
• Compensate
eroding
device
business
with new
business
opportunities
• Enhance
device price
& margin
Increase
Build car
service
services as
revenue as
core
platform
business
provider
• Increase
• Generate
device sales new
business
• Increase
service
• Customer
revenue by
retention &
revenue
cross selling
sharing with
third
providers
Build new
business &
leverage
existing
strengths
Grow
existing
business
scale
• Increase SIM- • Increase
card /
number of
connectivity
users
sales
• Develop
new
• Build platform
business
and profit from
based on
B2B services
strength
• Leverage
existing
strengths
Improve
customer
acquisition
and retention
Optimize
existing
business
Differentiate
service and
offerings
• Increase
parts and
service
sales
• Better
customer
retention
• Increase
fleet
efficiency
• Reduce
maintenance
and
breakdown
costs
• Provide better
offerings and
services to
customers
• Differentiation
in sales
Source: Oliver Wyman
© Oliver Wyman | Connected Cars Battle Fields.pptx
6
Not Exhaustive
Value chain of connected cars – 6 player groups
OEMs, device & software providers, network operators, web service &
content suppliers have positioned themselves along the value chain
Content
Content
providing
Content
bundling
1 Auto OEM
2
Device
companies
3
Software
providers
4
Network
operators
Service
Content
Personalization
Customer
data
mgmt.
Distribution
Service
processing
Platform/
channels
Backbone
Billing
Device
Connection
setup
Operating
system
HMI
Device
integration
Car
integra
-tion
Provide integrated solutions to consumers from one hand based on selective strategic
positioning and partnerships along the value chain
Supply integrated solutions to OEMs
Supply connectivity platform for all applications
to OEMs and device companies
Cooperate with device and software
companies to provide integrated
solutions to OEMs
Develop own service platform and services
Supply connectivity platform
with own services to OEMs
and device companies
Web services
5
players
Content
6
suppliers1
Software
solution
Car
Increasingly build up own service platform to
enhance sales channels
= Current compentence focus
= Recent strategic moves/positionings
1 Including all content suppliers around connected cars services, such as media, traffic information, logistic and transport information etc.
Source: Oliver Wyman, Expert interviews
© Oliver Wyman | Connected Cars Battle Fields.pptx
7
Strategic battle fields along connected cars value chain
The recent strategic moves show two key battle fields around service
platform with billing & the device solution including HMI & software solutions
Content
Content
providing
Content
bundling
Service
Content
Personalization
Customer
data
mgmt.
Distribution
Service
processing
Platform/
channels
Billing
Backbone
Device
Connection
setup
Operating
system
Software
solution
Car
HMI
Device
integration
Car
integra
-tion
1 Auto OEM
2
Device
companies
B Service platform
A Device solution
Software
3
providers
4
Network
operators
5
Web services
players
• Customer service
platform – who owns the
platform/channels to
generate additional
value?
Content
6
suppliers1
• Solution design
(embedded vs. mobile
device solution)
Cooperate with device and software
companies to provide
integrated vs. Open
• Proprietary
solutions to OEMs
source operating system
for devices
Supply connectivity platform
with own services to OEMs
and device companies
Increasingly build up own service platform to
enhance sales channels
= Current compentence focus
1 Including all content suppliers around connected cars services, such as media, traffic information, logistic and transport information etc.
Source: Oliver Wyman
© Oliver Wyman | Connected Cars Battle Fields.pptx
8
7 Service plays
7 service plays are emerged as battle fields, containing different business
designs competing to exert control and extract value
Definition and classification of
service plays
A Service play contains a bundle
of connected car services, which
– are based on a set of
telematics functionalities;
7 Service plays
Safety & remote service
1
A fully customized aftersales service portfolio could be offered based on the
eCall platform
Fleet management service
2
– belong to one self-contained
ecosystem;
3
– have access to the same
profit pools;
4
Telematics hardware penetration enables but not determines fleet
Management service penetration
Mobility service
Vehicle telematics will become additional platform for offering innovation
mobility services
Navigation & Location based service
N
– target the same customer
group;
– contains different business
designs tapping the same
power sources in the play
5
O
W
S
@
Increasing location based B2C and B2B opportunities have emerged
through enhanced navigation technologies
Infotainment service
Web-based information and entertainment services are offered in in-vehicle
environment
6
Insurance service
7
Payment & commerce Service
New policy offerings and differentiating customer services are enabled
based on better driver data base
Mobile payment services will be adapted and extended to in-vehicle use
cases
Source: Oliver Wyman
© Oliver Wyman | Connected Cars Battle Fields.pptx
9
Current competitor positioning
Different player groups currently focus on different plays, leveraging existing
assets, build up new competences to compete in different service ecosystems
Key player groups and motivation
Automotive
OEM
1
Safety &
remote
service
2
Fleet
management
service
3
Mobility
service
N
4
5
O
W
S
@
Telematics
device
supplier
Mobile
device
player
(Operation)
software
player
Independent
Network Web service aftermarket
Fleet
operator
company
player
operator
Finance,
bank &
insurance
Navigation &
Location
based service
Infotainment
service
6
Insurance
service
7
Payment &
commerce
Service
Focus plays
Related plays
Not yet active
Source: Oliver Wyman
© Oliver Wyman | Connected Cars Battle Fields.pptx
10
Business segments for connected services
Oliver Wyman evaluated 7 key service areas in a recent study – after sales
remote services with strong relevance and monetization potential for OEMs
Monetization potential of connected services, indicative
Fleet management services
• Approx. 4.3 mio fleet vehicles in approx. 1.6 mio company fleets in Germany
• Market for fleet management services in Germany with significant volume
Remote services for after sales
• eCall platform as a basis
• bCall and after sales remote services to secure the parts business as central profit driver
Insurance services
• New policy offerings/ differentiating customer services based on better driver data base:
pay as/ how you drive
• Worldwide volume of telematics-based insurance in 2020 widely exceeds 10 bn EUR6
Mobility services
• Intermodal services, new mobility concepts, car-sharing
N
O
W
S
Navigation & location-based services
• Recruitment bonuses, kick-backs esp. in B2B
Payment & commerce service
• Mobile payment services will be adapted and extended to in-vehicle use cases
@
Infotainment services
• Web-based information and entertainment services
© Oliver Wyman | Connected Cars Battle Fields.pptx
11
Success factors for connected car business models
Six major factors are essential for the successful introduction of new
connected car business models
1
Strong focus on marketable usecases based on core customer
pain-points
6
Incorporation of IT and security
expertise early in business model
definition (ability to implement)
5
Early definition of KPIs and
organizational setup to establish
sustainable business design
4
2
Holistic view on business models
across two levels: overall OEM
service strategy level and single
service level
3
Structured prioritization of
services to ensure business
model validity and OEM fit-tobrand
Strong focus on partner win-win
setup and detailed understanding of
payment mechanism as success
factors in online market places
Source: Oliver Wyman
© Oliver Wyman | Connected Cars Battle Fields.pptx
12
2
Willingness to pay for connected services
Customers have a limited willingness to pay for connected services –
particularly compared to other vehicle related payments
Direct willingness to pay (examples/segment averages)
in EUR, per month/service user in 2012
0
Smartphone apps
Online gaming subscription
Gaming apps (smartphone & tablet)
Add-ons for online gaming subscription
Online music download
Comprehensive coverage excl. collision
Online journalism
Paid services for data storage and e-mail
Traditional computer games
Automobile liability insurance
Internet and telephony
Comprehensive coverage
Online dating
Vehicle maintenance expenses
Connected services in vehicle
Automobile wear-and-tear repair
Fuel costs
Leasing instalment
© Oliver Wyman | Connected Cars Battle Fields.pptx
50
100
150
200
250
300
350
400
450
500
2
2
2
2
4
7
5
5
18
18
22
22
25
30
25 - 35
47
Rather small amounts
– do connected
services in vehicles
pay off?
>200
>>
13
Not Exhaustive
Business Design Archetypes for OEMs
Selected examples
1
2
OEM proprietary service
platform
Solution design
2
Level 1 - Business design archetypes overview
Business models need to be discussed for overall OEM connected cars
business as well as for specific services with in the portfolio
Embedded
solution
BMW connected drive
GM OnStar
4
Mobile device
solution
3
OEM customized service
platform based on
standard solutions
OEM customized service
platform based on open
source solution
Implemented
in Daimler &
Chrysler cars
(Integrated solution by Cooperation of IBM, Hughes, Oracle)
(By cooperation of Deutsche
Telekom & Continental)
5
OEM proprietary device
with exclusive service
platform
6
OEM proprietary device
with standard service
platform
Proprietary control
OEM common device
with 3rd party service
platform
Platform play
Operating model
Source: Oliver Wyman
© Oliver Wyman | Connected Cars Battle Fields.pptx
14
Not Exhaustive
Value streams of service offerings
(examples)
Provided by
OEM
Third-party
(IT companies, telcos etc.)
OEM
Paid by
2
Level 2 – Monetizing of connected car services
Six general revenue models are identified to monetize service offerings in the
connected cars, serving OEMs, private, commercial and business consumers
Private & commercial
vehicle consumer
1
• Internal efficiency
improvement
(Internal cost reallocation,
subsidies etc.)
4
• License fees
(one time, ongoing etc.)
2
• Increased device margin
(at vehicle sales)
5
• Service fee
(subscription/purchase cost
etc.)
6
• Advertising fee
• Service fee
(subscription/purchase/
registration fee etc.)
Other business customers
(IT companies, telcos,
business customers etc.)
3
• Shared revenue
(provision, supplier fee etc.)
• Service fee
(subscription/purchase cost
etc.)
Source: Oliver Wyman
© Oliver Wyman | Connected Cars Battle Fields.pptx
15
Not Exhaustive
2
Connected car services – Strategic decision criteria
Strategic positioning of Automotive OEMs in connected services is
determined by five key decision criteria
Decision criteria
Market observations
• Service-Follower - Offering of established 3rd
party services, (e.g. Renault, Fiat)
• Innovator - Advanced mobility solutions with
complex backend processes (e.g. VW Parking
pilot, Audi, BMW)
A
Innovation power
Service value and user experience are key
innovation areas
B
Strategic control
Control of services & data to define customer
experience and to leverage customer insights
• Data as commodity - Data control with partners
to reduce costs (e.g. Renault, Fiat)
• Data as core business - Data leverage for
secondary business opportunities (e.g. BMW
TeleServices)
C
Solution architecture
Business model and service ambition drive
proprietary elements and backend complexity
• Standard - Integrated/tethered solutions with 3rd
party backend
• Proprietary - Embedded solutions with complex
custom backend
D
Organization/ skills
Strategic priorities and capability needs determine
functional anchoring vs. dedicated resource pools
• Min. use of resources - leverage of functional
competencies (e.g. VW)
• Dedicated Unit : PSA has a specific unit
• Build-up of skills - Dedicated resource
pools/competence center (e.g. Daimler, BMW)
E
Cooperation model
Complex ecosystems emerging with tech and SI
players building reference cases as service
aggregators
Source: Oliver Wyman Connected Car Study, OEM websites
© Oliver Wyman | Connected Cars Battle Fields.pptx
Examples
• Turnkey solution - e.g. Android based (e.g.
Atos/Renault), Windows OS based (e.g.
Microsoft/Fiat, Ford), Apple OS – CarPlay (Ferrari,
PSA..)
• Extended workbench solution - e.g. BMW
WirelessCar)
16
Examples
C
Potential solution – Business dimensions
A wide variety of possibilities along all business dimensions need to be
considered
Customer
targeting
Services
Engineering
App on bring in
mobile phone
Fleet services
Private customers
Technology
platform
New connected
services platform
App on Clickin/Cradle for
phone/pad
Route planning
• Clear
understanding
of feasible
solution
architectures
OEM Apps
Processing
management
Dealerships
Results
• Compatibility
check with
product
portfolio
Android / iOS
Accounting
Industry & service
provider
X
(Customer-)
communication
X
Information service
Car rental
Custom build bringin
X
Standard
X
Custom build with
(OBD) adapter
X
Proprietary
Price modeling
• Identification of
customer
segments
Tom Tom bring-in
Corporate clients
General navigation
Embedded special
purpose
Asset/Car sharing
etc.
Infotainment
Embedded multi
purpose
• Clear Go/NoGo decision
by each
dimension
App development /
IT
• etc.
etc.
…
Source: Oliver Wyman
© Oliver Wyman | Connected Cars Battle Fields.pptx
17
Examples, anonymized and simplified
D
Organization / skills – Responsibilities across functional silos
Organizational set-ups for Connected Car services vary by OEM and the
experimentation will continue
Organizational units with dedicated responsibility for Connected Car services
Cross-sectional
function
connected
services
Premium
OEM 1, EU
Premium
OEM 2, EU
Development
(E/E)
Lead from
customer
perspective
(requirements)
Implementation of
innovations,
provider
management
Services as
innovative
cross-sectional
function (SI)
Volume
OEM, Asia
Volume
OEM, EU
Productmanagement
Dedicated
cross-sectional
function arising
End-to-end complete distribution
Serial
implementation in
coordination with
SI
In coordination
with R&D
End-to-end
responsibility
for connected
services
Currently
product
management
in lead
Implementation of
innovations,
provider
management
Purchasing
Production
Accountability to
provider
management,
also operations
Substantial contribution to implementation
Sales
IT
Procedural
support in sales’
services
Support with
software
expertise
Sales’ services
and in-house call
centre
Selective support
with software
expertise
Selective support
with software
expertise
Cooperation
Source: Oliver Wyman
© Oliver Wyman | Connected Cars Battle Fields.pptx
18
Not Exhaustive
E
Cooperation models – Platform partners / core cooperations
Integrated, connected services require a complex ecosystem of providers
to be launched and managed
• Integrated, connected
services require a complex
ecosystem of providers
Device
Manufacturers
(Automotive/CE)
Content/
Social
Media
Providers
App
Developers
(OS, UI, APIs)
• Integrated provisioning is still
premature, with mostly
closed ecosystems emerging
Connected Car
Ecosystem
Technology
Providers
(Telematics,
Payment)
• Individual aspects of
connected driving experience
are well established
Distributors
(App Stores)
System
Integrators
Infrastructure
(Carriers,
Cloud)
• Device manufacturer’s, tech
and SI firms with the ambition
to act as “aggregators”
• OEM will need the capability
to build and integrate a
portfolio of partners suited to
serve the specific service
aspiration
Source: Oliver Wyman analysis
© Oliver Wyman | Connected Cars Battle Fields.pptx
19
New business model for Connected Car Services
Disruptive changes to business model pose central challenges to the OEMs
and their organizational structures
Customers
Customer access
High expectations by
increasing connectivity in
daily life (Smartphones,
Tablets, …)
Numerous new competitors
fighting for access to customer
(internet player, IT-specialists,
service provider,…)
Regulation
Regulation actively
steers towards safety
and sustainability (eCall, Emissions, Traffic
management, …)
§
Software/ Service
orientation
New business
model around
Connected Car
Services
Plan Build Run
Technology
Technology has reached
sufficient maturity level
(Bandwidths, performance,
hardware costs,…)
Real-time operation of
services and short product
life cycles (Service portfolio,
continuous software
updates, …)
Business Case
€
Transactional direct
refinancing from customer not
sufficient (innovative payment
models, holistic
consideration,…)
OEMs have to adapt their business design, strategy & organization to a completely
new business model
Source: Oliver Wyman project example
© Oliver Wyman | Connected Cars Battle Fields.pptx
20
Preliminary
Key challenges to OEMs organizational structures
Disruptive changes towards a service oriented organization pose central
challenges to OEMs
Traditional OEM organization
Organization
Lifecycle
R&D R&D
process
Products
Product Line 1 Line 2 Line 3
mgmt.
R&D
Production and Purchasing
Sales
After Sales
Finance
…
?
• ~ 5 vehicle types per line
• 5 yrs. development, 7 yrs. production
• 20-30 services
• < 1 yr. development, update every 3 months
• Standard R&D process
• Ongoing development/improvement
• Plan/ Build/ Run (or Scrum)
• Hardware centered
• Bill-of-material and component mgmt.
• Solution centered
• Mgmt. of software, services and functions
Purchasing • Traditional large Tier 1 supplier
Customer
access
Connected service organization
• OEM  dealer  customer
• Dealer manages sales & support to customer
• Multiple content provider, start-ups, service
integrators
• OEM  customer
• Direct customer management (contracts, sales
& support)
Source: Oliver Wyman
© Oliver Wyman | Connected Cars Battle Fields.pptx
21
Connected Cars
But this is a true business opportunity for the French automotive industry
•
Rules of the game are being redefined
•
Services around connectivity is a growth lever
•
There is no clear winning model yet
•
Connected cars allow to reconnect directly with final customer
•
A new ecosystem is emerging
•
French players are already in the game with some nice moves, products & services
•
France has so many assets...
Let’s transform it together now !!!
Automotive