Automotive Infotainment & Telematics AND - Capital Markets Day 2017

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1 Automotive Infotainment & Telematics AND - Capital Markets Day 2017 November 6, 2017 Strategy Analytics, Inc 1

2 RICHARD ROBINSON Director Global Automotive Practice Previous: Alpine as HMI lead on Navigation and Infotainment Design November 6, 2017 Source: Infotainment & Telematics Service 2

3 AUTOMOTIVE PRACTICE SINCE 1988 LEADING-NAME CLIENTS ACROSS THE VALUE-CHAIN FIVE SERVICES TO COVER ALL AUTOMOTIVE OPPORTUNITIES 70% of Tier 1 Suppliers 90% of Major Auto Semiconductor Suppliers 70% of top OEMs November 6, 2017 Strategy Analytics, Inc 3

4 INFOTAINMENT & TELEMATICS AGENDA Next Generation Connected Vehicle Architecture Gen. 1.0 Market Status Gen. 2.0 Market Drivers Domain Convergence - Data Collection/Management Gen. 2.0 Data Management Opportunities Indirect Direct - Cloud based - AI & Digital Assistants Navigation: Autonomous vehicle Hybrid November 6, 2017 Source: Infotainment & Telematics Service 4

5 MARKET STATUS Telematics 1.0 business model Trying to monetize the consumer directly Too many de-activated subscriptions Free periods too short 6 months FREE! Only $10 per + = month! Market FAILURE November 6, 2017 Source: Infotainment & Telematics Service 5

6 MARKET STATUS IN-ACTIVE SUBSCRIPTIONS (CUMULATIVE) Source: Strategy Analytics Infotainment & Telematics Service November 6, 2017 Source: Infotainment & Telematics Service 6

MARKET STATUS INACTIVE SUBS = DEAD $$$ Over $19 Billion wasted 2011 2017 Source: Strategy

7 MARKET STATUS INACTIVE SUBS = DEAD $$$ Over $19 Billion wasted Source: Strategy Analytics Infotainment & Telematics Service November 6, 2017 Source: Infotainment & Telematics Service 7

8 TELEMATICS IS A VALUE ADD MORE OEM S OFFERING EXTENDED FREE TRIAL OEM Typical Players in U.S. OEM Market Network Speed 4G LTE 4G LTE 2.5G/3G/4G 2.5G 4G LTE 4G LTE 2.5G 3G 2.5G Embedded telematics is evolving to longer free trial period. Proprietary, TSP To Proprietary Proprietary SiriusXM Carrier * GM s OnStar Basic plan, and Mercedes mbrace Connect plan are free for 5 years with GM vehicles and Mercedes vehicles. Free Trial 6 Months 4 Years 6-12 Months 5 Years 5 Years* 1 Year 1 Year 5 Years* 1 Year B2C B2C B2C B2C B2C November 6, 2017 Source: Infotainment & Telematics Service 8

AUTOMOTIVE EMBEDDED MODEMS MARKET STATUS 2017 OEM SHIPMENT ATTACH RATE - EU Telematics Status EU - 2017 100% 90% 80%

Only 27% of vehicles will ship with embedded connectivity in 2017 France, UK and Germany: Have the highest adoption

9 AUTOMOTIVE EMBEDDED MODEMS MARKET STATUS 2017 OEM SHIPMENT ATTACH RATE - EU Telematics Status EU % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% France Germany Italy Spain UK Embedded Connectivity No Embedded Connectivity Italy: Only 27% of vehicles will ship with embedded connectivity in 2017 France, UK and Germany: Have the highest adoption with 40% to 42% in 2017 Spain: 32% of vehicles shipped in 2017 November 6, 2017 Source: Infotainment & Telematics Service 9

Unit Shipments (000's) AUTOMOTIVE EMBEDDED MODEMS GLOBAL ANNUAL SHIPMENTS 120.000 51% of vehicles shipped will have embedded modems 100.000 80.000 60.000 40.000 20.

10 Unit Shipments (000's) AUTOMOTIVE EMBEDDED MODEMS GLOBAL ANNUAL SHIPMENTS % of vehicles shipped will have embedded modems North America Europe South Korea Japan China India Russia Brazil Rest of World Non Connected Cars Telematics 1.0 Telematics 2.0 November 6, 2017 Source: Infotainment & Telematics Service 10

11 INFOTAINMENT & TELEMATICS AGENDA Next Generation Connected Vehicle Architecture Gen. 1.0 Market Status Gen. 2.0 Market Drivers Domain Convergence - Data Collection/Management Gen. 2.0 Data Management Opportunities Indirect Direct - Cloud based - AI & Digital Assistants Navigation: Autonomous vehicle Hybrid November 6, 2017 Source: Infotainment & Telematics Service 11

12 MARKET DRIVERS GEN 2.0 TELEMATICS ARCHITECTURE IoT OEMs Headunit/ Cloud Cockpit Domain Controller Cloud Smart Antenna OTA Telematics ECU Cockpit Domain Controller Smart Antenna Telematics ECU Gen 2.0 ADAS Powertrain Ethernet Powertrain ECU ADAS ECU Chassis ECU Body ECU Body Chassis November 6, 2017 Source: Infotainment & Telematics Service 12

13 GEN. 2.0 MARKET DRIVERS DATA COLLECTION AND MANAGEMENT Driver data Personal account information, personal contacts, payment information, driving behavior data, biometric data, personal preferences data (e.g. HVAC settings, seat position, audio source preferences, etc.), app/feature usage data, microphone data, incabin camera data, in-cabin sensor data (e.g. seat sensors) Vehicle data inspection/regulatory data, collision/forensic (e.g. EDR) data, diagnostic/trouble code data (e.g. OBDII/ EOBD data), proprietary OEM data, sensor data, parts performance data, emissions data, vehicle security data (e.g. firmware/software security information) Content data media (music, video), POI data, other types of data provided and/or owned by third parties V2X data Wireless network condition information, connected device information (e.g. smartphones, docked tablets) V2V data, IoT data (e.g. connections to smart home devices or EV charging stations), Location/GNSS data, other satellite connectivity data, infrastructure data (e.g. toll ECU data) Environmental data Physical road conditions (e.g. ice, potholes), weather, traffic, road hazards/furniture, outside temperature, available parking spaces November 6, 2017 Source: Infotainment & Telematics Service 13

14 GEN. 2.0 MARKET DRIVERS DATA COLLECTION AND MANAGEMENT Sample Use Cases - Analyze UI usage UX Enhancement - Analyze in-vehicle app usage - Learn driver/passenger preferences - Enhance services (e.g. concierge service) based on analysis of usage data - Analyze driving style to improve autonomous driving systems performance - Monitor wireless network conditions to troubleshoot connectivity issues Process Improvement - Get ahead of recalls/warranty exposure - Make changes on the production line - Streamline OEM parts inventories and deliveries - Collection of high-resolution location data to enable autonomous driving - Ensure compliance with changing global regulatory environment - Testing/simulation (potentially in near real-time when 5G networks become available) Monetization - Direct sale of data to third-parties (e.g. retailers, insurers, government entities, media companies, telecom operators, etc.) - Targeted marketing efforts (e.g. dealer CRM, eventually advertising) - Provide fleet-related data to third parties (e.g. vehicle load /weight conditions, location, fuel usage, driver/passenger identification, etc.) for direct or indirect monetization November 6, 2017 Source: Infotainment & Telematics Service 14

15 GEN. 2.0 MARKET DRIVERS SOFTWARE RECALLS Number of Automotive Software-Related Recalls in U.S., Typical (Non-OTA) software updates cost between $300 - $600 per vehicle. ~ $3 Billion spent by OEMs to do (non-ota) software updates in the US alone in 2016! Source: CX3 Marketing November 6, 2017 Source: Infotainment & Telematics Service 15

2020 2020+ TBD TBD TBD TBD TBD TBD TBD 2020+ TBD TBD TBD TBD TBD TBD TBD TBD

16 OTA OEM IMPLEMENTATION STATUS OEM Telematics Control Unit Infotainment System Powertrain/ Safety All ECUs Wi-Fi TBD TBD 2017 TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD November 6, 2017 Source: Infotainment & Telematics Service 16

17 GEN. 2.0 MARKET DRIVERS OVER THE UPDATE BUSINESS MODELS Business Models Subscription: Subscriptions are generally annual or quarterly (depends on OEM) and pricing is either per vehicle module being updated or per vehicle. This generally applies when providers are selling to OEM customers. All subscription models include separate one-time NRE for integration and either include upkeep/maintenance fees with the subscription price or charge a separate annual fee. Per Campaign: Some OEMs only want to pay per OTA update campaign, but this is less common as most are realizing they ll want to send multiple campaigns. Pricing is per vehicle module. This generally applies to OEM customers. Licensing OTA Components: Some companies license their OTA update solution, or specific OTA update platform components/modules, to customers, allowing them to run the platform or components on either the customer s or provider s servers, depending on preference. The license fee is either a one-time fee or an annual fee. Revenue Share: A future model under consideration by OTA solution providers is to share revenue with OEMs that charge for software/feature upgrades. November 6, 2017 Strategy Analytics, Inc 17

GEN. 2.0 DATA MANAGEMENT OPPORTUNITIES Vehicle manufacturers (OEM s) are looking to exploit vehicle data Requirement: Understand how people drive and monetize their interests 1.

18 GEN. 2.0 DATA MANAGEMENT OPPORTUNITIES Vehicle manufacturers (OEM s) are looking to exploit vehicle data Requirement: Understand how people drive and monetize their interests 1. Indirect data management: Data brokerage through 3 rd parties Backend Process/Logistics 2. Direct data management: Wallet on wheels Ecommerce platforms in the car Ecommerce platforms on Smartphones 3. Cloud Services & AI/Digital assistants Amazon web services etc. Alexa, Cortana, etc. November 6, 2017 Strategy Analytics, Inc 18

INDIRECT DATA MANAGEMENT OTONOMO Industry Example: Otonomo s Car Data Exchange and Marketplace Provides a marketplace where OEMs can manage vehicle data

19 INDIRECT DATA MANAGEMENT OTONOMO Industry Example: Otonomo s Car Data Exchange and Marketplace Provides a marketplace where OEMs can manage vehicle data collection and sell data to third parties Current OEM client is Daimler Interest from 7 other automakers Delphi Investment November 6, 2017 Strategy Analytics, Inc 19

DIRECT DATA MANAGEMENT PLATFORM BMW CAR DATA BMW launched its CarData platform on May 30, 2017, in Germany: Provides customers with access to their vehicle data when requested Complies with the EU s

20 DIRECT DATA MANAGEMENT PLATFORM BMW CAR DATA BMW launched its CarData platform on May 30, 2017, in Germany: Provides customers with access to their vehicle data when requested Complies with the EU s General Data Protection Regulation (GDPR) Provides a platform where third-party companies can make use of aggregated vehicle data BMW stated 8.5 million BMW Group vehicles on roads can potentially share data with this platform Source: BMW November 6, 2017 Strategy Analytics, Inc 20

through OnStar Go Honda in-vehicle fuel and parking payment demo at CES 2017 Partnered with Visa, fuel pump

21 OEM DATA MANAGEMENT PLATFORM VEHICLE E-COMMERCE/WALLET ON WHEELS General Motors OnStar Go e-payment integration OEM partnered with Masterpass to enable payments to merchants offering products and services through OnStar Go Honda in-vehicle fuel and parking payment demo at CES 2017 Partnered with Visa, fuel pump vendor Gilbarco Veeder Root, and parking services company IPS Group to enable drivers to pay for fuel and parking 21

22 FROM CALL CENTERS TO AI/CLOUD A.I. Call Center IoT Wi-Fi November 6, 2017 Source: Infotainment & Telematics Service 22

23 OEMS INFOTAINMENT AI PARTNERSHIPS OEM Digital Assistant Status BMW/MINI Amazon Alexa, Microsoft s Cortana Alexa Launched (BMW Connected App for Alexa), Alexa in all BMW/MINI models by mid-2018, Cortana Demonstrated Ford Amazon Alexa Planned launch in Ford electrified models GM IBM Watson, used with OnStar Go backend Launch was planned for early 2017 Honda Hyundai HANA, proprietary assistant developed in partnership with SoftBank Google Assistant, Amazon Alexa Concept demonstration Google Assistant Launched in Genesis, Alexa Launched in 2017-MY vehicles and select 2016-MY vehicles Mercedes Google Assistant, Amazon Alexa Both planned for launch sometime 2017 Nissan Microsoft s Cortana, Amazon Alexa Cortana planned launch; Alexa - launched (2017, 2018-MY) Toyota Line s Clova, YUI, proprietary digital assistant technology 2018 for Clova, YUI concept demonstration Volkswagen Amazon Alexa Planned, launch date not yet announced November 6, 2017 Source: Infotainment & Telematics Service 23

24 INFOTAINMENT & TELEMATICS AGENDA Next Generation Connected Vehicle Architecture Gen. 1.0 Market Status Gen. 2.0 Market Drivers Domain Convergence - Data Collection/Management Gen. 2.0 Data Management Opportunities Indirect Direct - Cloud based - AI & Digital Assistants Navigation: Autonomous vehicle Hybrid November 6, 2017 Source: Infotainment & Telematics Service 24

25 AUTONOMOUS IS A SOFTWARE PROBLEM Source: Strategy Analytics Autonomous Vehicles Service Many cars with hardware: Few cars SAE L4 or above September 2017 Copyright Strategy Analytics

NAVIGATION ISSUES FOR FULLY AUTOMATED DRIVING Accuracy & Update Frequency Fail Safe At present, if the map has an error then the human driver is able to make a decision as to the best way to proceed.

26 NAVIGATION ISSUES FOR FULLY AUTOMATED DRIVING Accuracy & Update Frequency Fail Safe At present, if the map has an error then the human driver is able to make a decision as to the best way to proceed. This normally works but even with human processing skills we still see events where a vehicle as taken an inappropriate or incorrect route Fail Safe?? Minute-by-minute updates will be required to account for unexpected road closures etc. Destination Entry Currently: Navigation systems are excellent for getting within a few tens of metres of our destination. Future: For fully automated driving we will need to potentially specify a much more accurate destination, and have a co-ordinated handover to a parking mode if the vehicle is to wait for us TomTom Level 3 Proposal: Have a traditional route option and an autonomous route option (with limited/no driver interaction) Traffic conditions, simpler, longer? Source: ranker.com September 2017 Copyright Strategy Analytics

ROLE OF MAP / NAVIGATION IN LOCATING SELF-DRIVING VEHICLES IS STILL UNCLEAR It is generally agreed that any self-driving vehicle needs to be able to locate itself with an accuracy of around 10 cm A

27 ROLE OF MAP / NAVIGATION IN LOCATING SELF-DRIVING VEHICLES IS STILL UNCLEAR It is generally agreed that any self-driving vehicle needs to be able to locate itself with an accuracy of around 10 cm A blend of technologies will be required: HD Maps / On-board sensors? Satellite positioning? Dead-reckoning? No agreement on exactly how to blend Maps: what s the balance between survey vehicle and user-generated content? Sensors: Do we use all of RADAR, LiDAR (current), Camera etc.? Or just a subset? Satellite positioning: Is current consumer-grade sufficient? IMU (Inertial Measurement Units): Are today s MEMs-based units good enough? Source: TomTom June 2017 Copyright Strategy Analytics

Map Real time (Environmental) Lane fusion Sensor data

28 HIGH-PRECISION ALL THE TIME Integrated inputs from: Highly Automated Driving/ADAS Domain Navigation UI HD Map Real time (Environmental) Lane fusion Sensor data Camera/Lidar/Radar August 2017 Copyright Strategy Analytics

29 HIGH-PRECISION LOCATION DEMAND High-precision location assumed to be required for all L3 and greater applications, and on increasing number of L2 Cadillac CT6 uses LiDAR-based map data (Trimble GPS, Geodigital maps) August 2017 Copyright Strategy Analytics

30 HYBRID NAVIGATION Varying approaches: 1. Map data is embedded & Data services are cloud-based Traffic, parking, fuel station, etc. Many OEMs using this approach. 2. On-demand/dynamic downloading of map data Incremental and regional map data via over-the-air update platform AND Map fusion Elektrobit, TomTom, etc. use NDS. 3. Offload all map data and data layers/services to the cloud Mapbox s original approach Tesla s approach using Google Maps 30

31 HYBRID NAVIGATION Types of Data to Offload to Cloud: 1. Non-essential data with larger storage requirements: 3D buildings Satellite imagery 2. Dynamic data/services: Real-time lane-level information closures & road hazards POI data affected by time of day (e.g. business hours, open hours) Fueling/charging station availability and pricing Traffic incident and flow information - Decode on server not IVI unit Parking data - availability of on-street & garage parking Weather service and road weather data - upcoming road segments Toll road information 31

32 HYBRID NAVIGATION Cloud Services Considerations: 1. Maintenance downtime not allowed System must be available at all times 2. Fault tolerant delivery of map updates & data services Mechanism must be in place for rolling updates 3. System must scale New processing nodes must be made automatically Need access to data centers in all service regions 32

Toyota has moved to cloud-based maps for Entune 3.0 Dynamic Navigation, via the Toyota Smart Center 3.

33 HYBRID NAVIGATION Automaker views: 1. Many OEMs still have legacy, physical-media-based map update business segments Ford, Hyundai, VW, etc. 2. Toyota has moved to cloud-based maps for Entune 3.0 Dynamic Navigation, via the Toyota Smart Center 3. File size and processor issues Large file sizes are a challenge Less-capable infotainment processors still make embedded map updates slow Legacy vehicle architectures (using CAN) are not suitable for highdata-volume (OTA) updates 33

34 HYBRID NAVIGATION: MARKET REQUIREMENTS 1. Personalization of destinations and routes System should learn drivers routes and destinations over time Should learn preferred POIs Should be able to support dynamic re-routing based on calendar appointments 2. Long-term predictive traffic for departures, routing, and ETAs HERE claims it can predict traffic conditions up to 12 hours in advance 3. Enhanced navigation should offer lane-level guidance Show correct lane vehicle must be in to take a given highway exit Show correct lane to avoid road hazards 4. Use of sensor data Real-time sensor data would be available on-board/embedded Sensor data can also be crowdsourced and processed in the cloud for delivery to vehicles on network (e.g. camera data, such as with Mobileye s REM platform) 34

35 Any Questions? Richard Robinson June 2017 Copyright Strategy Analytics

36 November 6, 2017 Strategy Analytics, Inc 36 Automotive Infotainment & Telematics

Roger C. Lanctot Director, Automotive Connected Mobility

Roger C. Lanctot Director, Automotive Connected Mobility Roger Lanctot has 25+ years of experience as a journalist, analyst and consultant advising electronics companies, car companies, wireless carriers,