SAE Government/Industry Meeting Sanjay Rishi Vice President & Global Automotive Industry Leader
A series of recent events have driven the automotive industry to focus on short term actions of survival Impact on Industry Major decline of yearly vehicles sales Economic Events Housing value depreciation Financial system meltdown Credit freeze Consumer confidence decline Fuel price fluctuations 2007 16.1m 2008 13.2m 2009e 10.5-11.0m Unpredictable demand of vehicle types small cars and large both desired based on gas price Inability for businesses to secure credit for capital investment Companies seeking federal loans Operational restructuring 116,500 jobs (14%) lost between Nov 2007 & Nov 2008 Sources: JD Power, Wall Street Journal 2
Past the near term challenges however, consumer demand will fuel innovation and growth in the automotive industry 125 executives 15 countries Emerging countries accounted for 27%: Brazil, Russia, India and China 69% - OEMs and suppliers Top 85% of auto companies (by revenue), including top 10 Other interviews: associations, government, academia, specialty, futurists 3
The future of transportation will have experienced a major shift by 2020 Most important external forces that will impact the industry Technology Progress Globalization Economies and Markets 56% 55% 48% 61% 60% Sustainability Concerns Government Influences New Consumer Corporate Social Responsibility Global Labor Force Personal Mobility 35% 34% 33% 14% 13% 11% 32% 31% 31% 26% 25% 22% 13% Source: Automotive 2020 Global Interviews (n=103) 2008 2020 4
The intelligent vehicle of 2020 will be. Green Powertrain & Energy Other Fuel Sources Varying levels of hybridization will be abundantly available through the vehicle base Stop/start micro-hybrid in entry level vehicles Mild to full hybrids in mid to high-scale vehicles Li-ion batteries will be the predominant form of energy storage Packaging and safety issues will be resolved, though standardization is still expected to be an issue Hydrogen fuel cell technology, in spite of development and investments, will have very limited penetration Infrastructure, storage, packaging, liquification and costs are key inhibitors Current generation bio-fuel and food-based ethanols are unsustainable and will succumb to evolution Cellulosic, waste based ethanols will attract investment Infrastructure readiness will pace adoption Sources: Automotive 2020 Global Interviews (n=103), Toyota Corporation, 2007. 5
The Heavy Truck and Heavy Equipment segments also provide significant opportunities for hybrid technologies Heavy Truck 10% of vehicles in the US are heavy trucks and account for 50% of the fuel consumption Public Buses benefit from tax regulations and alternatively powered buses have grown to over 3000 Heavy Truck segment stands to benefit especially from solutions that include hydraulic systems applications Heavy Equipment Hybrid development within this segment is in its early stages Caterpillar s electrically driven dozer, Volvo s wheeled loader, and Komatsu s hybrid excavator provide examples of significant fuel saving solutions 6
Sizeable investments will pay rich dividends towards sustainability.. but expectations will outpace achievements Global portfolio of new vehicle production in 2020 Source: Automotive 2020 Global Interviews (n=103) 7
The intelligent vehicle of 2020 will be. Connected Driver Assistance Safety Dynamic route guidance/navigation Data downloads (entertainment, media, home network, personal preferences) Electronic payments - toll, drive thru, parking, road pricing Intersection control violations Lane/road departure Road surface conditions 360/distance visions Service Remote vehicle diagnostics, prognostics and self healing Transfer of warranty based data Connected customer relations management Sources: Automotive 2020 Global Interviews (n=103), 2008 CAR Delphi Survey of the Telematics Industry (survey focuses availability in North America). 8
however, there is still much to overcome in delivering connectivity to the vehicle Rate the Factors in the Adoption of a Connected Vehicle Adoption of Standards Technology Capability Consumer Acceptance Data Management Auto Company Cooperation Data Ownership Government Investment Enabling the Vehicle Base 4.3 4.3 4.1 3.8 3.7 3.7 3.5 3.2 Competing companies require more collaboration and adoption of standards Technology is a key enabler to the success of connecting the vehicle Consumer acceptance will be driven by safety and cost requirements 1 2 3 4 5 Low High Source: Automotive 2020 Global Interviews (n=103) 9
A new battleground between economies, not corporations will define the next decade Innovation Regulatory bodies are aggressively incenting green and alternative powertrains Smaller engines Hybrids Job creation Emerging markets have a demographic advantage with a younger, highly educated workforce Jobs follow incentives Education The significant imbalance in technical skills will become even greater Manufacturing and engineering prowess will be directly proportionate to available qualified resources 10
Consumers will challenge auto companies with superior product knowledge and buying criteria often unrelated to vehicle features Rate the Change in Vehicle Buying Criteria 2008 2020 Change in Criteria from Current Substantial Moderate Limited Fuel Efficiency Eco-friendly Traffic congestion Personalization Safety Alt. Transportation Modes Lifetime cost of ownership Reliability Brand Price Values of the Company Other Taxation Increased The increased desire for ecofriendly, fuel efficient vehicles will bring new offerings that may be sold directly to consumers Alternative transportation, congestion and lifetime cost of ownership concerns open opportunity for access to a public garage that will be sold in different ways Traditional consumer buying criteria will still be important but will be less of a factor in the overall purchasing decision Source: Automotive 2020 Global Interviews (n=103) 0 1 2 Unchanged Moderate Significant 11
Changes in consumer buying criteria will drive entirely new personal mobility solutions Access to a garage of vehicles Purchase based on maximum needs Flexible access to other vehicles based on specific situation Promotes shift to more energy efficient vehicles New finance models for early adoption Subscription based pricing for garage Separate finance options for battery vs. vehicle Government incentives to promote development and adoption Source: Automotive 2020 Global Interviews (n=103) 12 Integration with multi-mode transportation Integration of multi-mode scheduling, access and payment Provide multiple routing options such as cost, green, congestion Supporting future lifestyles and mobility flexibility beyond the vehicle
Industry boundaries are vanishing and new business models will emerge at their intersections Data storage, analysis and disbursement for connected vehicles Government - Transportation - Energy - Safety Two-way, Internet-connected GPS navigation system Consumer Electronics Social Networks Automotive Geographies Other Industries - Telco - Software - Financial Services - Biotechnology Energy Energy storage and brokering Communities Electric car network 13
Digital infrastructure investment will drive the enablement of a smarter planet Every human being, company, organization, city, nation, natural system and man-made system is becoming interconnected, instrumented and intelligent. This is leading to new savings and efficiency but perhaps as important, new possibilities for progress. The world is flatter. The world is smaller. The world is getting smarter. Because it can be. Because it must. Because we want it to. 14
The time is now government and industry must act aggressively, actively and with immediacy Advance Mobility Transform Retail Simplify Complexity Partner Extensively Execute Globally Respond to the redefined reality of personal mobility Connect with the new consumer and build relationships through a new retail value proposition Harness the strength in standardization and commonality Seek out broader partnerships within and outside the industry to innovate Architect an optimal global presence and a unique socially responsible culture 15
SAE Government/Industry Meeting Sanjay Rishi Vice President & Global Automotive Industry Leader