Evolution of Mobility – New Business Models and Impact on the Value Chain

Kaushik Madhavan, Mobility Practice

November 2016

2

Transformational Shifts Reshaping the Future of Mobility

VW Dieselgate & Electrification

Connectivity

New Business Models

Integration of Vehicle Systems

Cognitive Eraand Autonomous

Mobility

Health Wellness and Wellbeing in

Cars

Industry 4.0

Digitization of Auto Retail

3

Over the Air

Updates

Augmented and

Virtual Reality

Continuous processing of real-time information

to windshield

Smart compression and high internet speeds will reduce update

times by 50%

High to Fully

Automated Driving

Over 2 Gb data needs to be harnessed at a

given point. Needs 5G speed

Implication: 5G and Satellites boom will make our cars cognitive and intelligent

Source: Frost & Sullivan

4

Sub Trend: Autonomous Cars - $60bn per annum market opportunity in 2030

Human MachineChange in Responsibility

Level 0 Level 1 Level 2 Level 3 Level 4

No Assist

Early Warning Systems

Traffic ControlAwareness for

TakeoverGeneral Awareness

Full Autonomous Driving

Level 5

Current Level

5 million 2 million15 million 1 millionNew

Vehicles40 million

20302025201820162011

Feet Off

Hand Off

Eyes OffMind Off

Brain Off

5

Future of Delivery Case Study ; Amazon Prime - AirspaceAmazon proposes a 200-foot designated airspace – between 200 and 400 feet from the ground – to be reserved for drone flights,

Amazon Airspace Design for Small Drone Operations

No Fly Zone

High-Speed Transit

Low-Speed Localized Traffic

500 ft / 152 m 500 ft / 152 m

400 ft / 122 m

200 ft / 61 m 200 ft / 61 m

Predefined Low Risk Location

400 ft / 122 m

Integrated Airspace

6

The Five Pillars of Digitization For The Automotive Industry to Reach Nirvana

Mobility as a service

Digital retailing and VRM

Connected and

automated car

Industry 4.0Connected

supply chain

7

Digitization of the Retail NetworkGlobal Online Retail Sales To Reach $6.9Trillion By 2025 Accounting for 23% of Total Retail

Source: Frost & Sullivan

$11.8 Trillion

$30 Trillion

$23.1Trillion

$10.25 Trillion

$6.9Trillion

$0.9 Trillion

Online Sales Non-Online Sales

9%

95%

23%

77%

2015 2025

United States

24%

18%

ChinaUnited

Kingdom

GermanyJapan

26%

15%

10%

$19Trillion

8

Digital Flagship Stores Lifestyle Stores Pop Up Stores

On-line retailing 3rd Party Online StoresMobile retailing

Bricks n clicks in Car Retailing

9

Digitalization of the Aftermarket Parts Market€5bn worth of parts sold on-line and expected to grow four folds by 2020 in EU

~€141 B

~ € 5 B

~3 % of total

aftermarket

2013 2020

~$166 B

~ € 18 B

4X

UK2013 Parts

eRetail Share: 4.9%

France2013 Parts

eRetailShare: 5.8%

Germany2013 Parts

eRetailShare: 5.7%

Automotive Parts and Service eRetailing Market: Online Parts vs. Total Aftermarket, Europe, 2013 and 2020

Note:. All figures are rounded. The base year is 2013. Source: Frost & Sullivan

Total Aftermarket Online

Italy2013 Parts

eRetailShare: ~2%

10Confidential

Scaling up of Trifecta Vehicle designOEMs are adopting a triple crossover vehicle design to provide optimal cabin space with maximum vehicle performance.

SUVSedan

Hatchback

Minivan

Trifecta Body Type 1

Body Type 2

Body Type 3

Example

1 Sedan Minivan SUV Tesla Model X

2 Minivan SUV Hatchback Volvo V40cc

3 SUV Hatchback Sedan Suzuki SX4

4 Hatchback Sedan Minivan Mercedes B Class

GLA A Class

H-RV CRZ

Insight Model X

The Trifecta proposition , where more 3 traditional body styles are crossed for a “hybrid”.

Luxury OEMs differentiating lower segment vehicle models through trifecta design

Volume OEMs adapting trifecta design in SUV/Higher segment models

OEMS adapting trifecta design to electric and hybrid vehicles for better aerodynamics

11Confidential

Mobility Business Models - Traditional Carsharing’s Untapped Potential The global car sharing market has grown by over 30% over the past year to reach 8 million members today

LatinAmerica

216,743 291 612

AsiaPacific

2**3.09Million

36,660 38~127

NewEntrants

No. ofUsers

No. ofcars

Carsharing

OperatorsCities

NorthAmerica

41.6Million

24,644 38~127

Europe

3.16Million

50,041 197~1,305 6

2025

2025

2025

2025

11.04Million

137,367

7.22Million 90,382

17.30Million

186,746

419,522 4,983

12Confidential

Sub Trend: Proliferation of the e-Hail Concept One in Two taxis are now connected to a tech platform

> 2,000,000 500,000 - 2,000,000 < 500,000Number of Connected Vehicles

Taxi Industry: Snapshot of Key Taxi Apps, Global, 2015

Source: Frost & Sullivan

Europe

More than 4 million users

10 million users

LATAM

17 million users

1 million users

SE Asia

250 million users

25 million users

Asia Pacific

40,000 monthly users

350,000 users

USA

More than 8 million users

631,000 users

13Confidential

Sub Trend: OEMs moving toward CAAS – car as a service –Case Study: Daimler (Moovel gmbh) Daimler’s mobility services have reached over €100mn in revenue in 2014 and, the company has targeted revenues of €800mn by 2021/2022

Carsharing

Ride sharing

Smart Parking

Integrated Mobility

Public Transportation

Urban Logistics

Taxi & Chauffeur

14Confidential

VW Dieselgate reshaping the auto landscape VW and the global automotive Industry

is shifting gears to a electrified future (2025 and beyond) as a more sustainable solution.

e-Golf(all-electric hatchback)

Audi A3 e-tron(sporty plug-in

hybrid),

Golf GTE (companion plug-in

hybrid model).

Battery pack of varying capacity, an 85-kW electric motor

system, and/or a motor-integrated version of its DSG.

• Tiguan crossover

• Larger mid-size SUV.

Others (Planned PHEVs).

2012-2015 Beyond 2016

MQB

Flexibility in packaging

afforded by:

-MQB platform

-Vehicle-electrification

toolkit

15Confidential

Macro Economic Parameters directly impacting the Automobile IndustryArgentina, Algeria and Columbia are the upcoming economies within the set of 20 countries

16Confidential

Total PV Parc vs. Component Potential vs. Sales CAGRUkraine has high potential, however the last 5 years CAGR is negative

Size = Component Potential 2014 in US$ Million

PV Vehicle Parc 2014

Sale

s C

AG

R %

, (

2009 -

2014)

(16)

(14)

(12)

(10)

(8)

(6)

(4)

(2)

0

2

4

6

8

10

12

14

16

18

20

22

24

(50,00,000) 0 50,00,000 1,00,00,000 1,50,00,000 2,00,00,000 2,50,00,000 3,00,00,000 3,50,00,000 4,00,00,000 4,50,00,000 5,00,00,000

Egypt (399.9)

Ghana (167.6)

Algeria (283.4)

Colombia (368.0)

Chile (315.9)

Peru (231.2)

Panama (38.2)

Mexico (4,981.4)

Argentina (1,302.5)

Ukraine (778.7)

Russia (4,414.6)

Kazakistan (433.9)

Uganda (114.8)

Tunisia (112.5)

Tanzania (100.9)

South Africa (609.2)

Nigeria (891.9)Morrocco (105.7)

Kenya (266.4)

Brazil (4,170.0)

Total PV Aftermarket Potential

$ 20.1 Billion

17Confidential

Total CV Parc vs. Component Potential vs. Sales CAGRColombia has the highest CAGR in last 5 years

CV Vehicle Parc 2014

(6)

(4)

(2)

0

2

4

6

8

10

12

14

16

18

20

22

24

11,000,00010,000,0009,000,0008,000,0007,000,0006,000,0005,000,0004,000,0003,000,0002,000,0001,000,0000-1,000,000

Peru (363.5)

Panama (63.7)

Mexico (6,373.8)

Colombia (772.5)

Chile (81.8)

Brazil (4,608.6)

Argentina (958.0)

Ukraine (1,101.7)

Russia (2,431.3)Kazakistan (434.5)

Uganda (117.7)

Tunisia (171.0)

Tanzania (70.0)

South Africa (634.2)

Nigeria (406.6)

Morrocco (152.1)

Kenya (128.0)

Ghana (60.1)

Egypt (240.0)

Algeria (280.9)

Sale

s C

AG

R %

, (

2009 -

2014)

Total CV Aftermarket Potential

$ 19.5 Billion

Size = Component Potential 2014 in US$ Million

18K02A-18

Aftermarket Outlook—Trends Impacting Vehicle Service

Service bay of the future are going to evolve under influence of both vehicle as well as market related trends

Connected VehiclesTelematics, Remote

diagnostics

Electric VehiclesPlug and play components

ElectronicsIncreased complexity

Regulatory Environment

Free competition

Increasing Average Vehicle Age

Long maintenance spend life

Technician Skill GapService inefficiency

Light WeightingMaterials unfriendly to

repairs

Eye on ConveniencePower to the hand (hand held tools for technicians)

Note: Images have been used for illustration purpose alone. Source: Frost & Sullivan

Veh

icle

Sid

eM

ark

et

Sid

eGlobal Automotive Aftermarket Outlook: Top Trends Impacting Vehicle Service Bay of the Future, 2015

19K02A-18

Aftermarket Outlook— Future Service Delivery Models

Technology will be at the core of any evolution in future service delivery

Mobile ServicingQuick Fit DIY SupportRemote Diagnostics

Service Aggregators Mobile Applications Handheld Tools Telematics

Service Delivery Models

Service Delivery Enablers

Diagnostics, TabletsService booking, DIY Corner Connected ToolsOnline presence

Global Automotive Aftermarket Outlook: Future Service Delivery Enablers and Models

Source: Frost & Sullivan

Connected Store

20K02A-18

Vehicle Sales in the Middle East — Review…oil prices and limited government investment negatively impacting vehicle sales in 2016 in the GCC countries; in Yemen,

Syria and Iraq market potential already reduced to half, however, in most of the ME countries we expect nearly double digit growth from 2017

1.8 2.2

1.2

1.9 0.2

0.3

3.2

4.4

-

1.0

2.0

3.0

4.0

5.0

2015 2020f*

Sale

s in

Mill

ion U

nits

Light Vehicle Sales, Middle East, 2015-2020f

GCC Iran RoME Total

• We are expecting overall CAGR of 9.1%

• The GCC countries likely to grow at 8.5%CAGR, however 2016 would see decline in vehicle sales, a recovery is expected 2017 onwards

• Iran is ready to lead the region with near double digit growth expected in next 5 years

• RoME is mainly driven by market recovery in Jordan and Lebanon. We also expect Yemen to get back to business as usual by 2018 (pertinent to note that Yemen sold 22,355 vehicles in 2014 which has come down to 7,760 in 2015, similar was the case with Iraq with 44% drop in overall sales [year on year])

• At overall level RoME likely to post +14% CAGR by 2020

Source: Frost & Sullivan Analysis(*) f=forecast; GCC = Gulf Cooperation Council CAGR = Compound Annual Growth Rate

21K02A-18

Spare Parts Demand in the Middle East…total spare part demand in Middle East estimated at US$ 12.98 billion (2015), expected to reach US$ 17.27 billion by 2020

…part per vehicles are highest in UAE (US$ 512) with an overall average of US$ 373

7.19

9.84

4.67

5.951.11

1.48

12.98

17.27

0.00

5.00

10.00

15.00

20.00

2015 2020f*

Spare

Part

Valu

ein

US

$

Spare Parts Market, Middle East, 2015-2020f

GCC Iran RoME Total

• The overall Middle East spare part industry expected to grow at CAGR 5.9% (15-20)

- The GCC = 6.5% CAGR- Iran = 4.9% CAGR- RoME = 6.0% CAGR

• Parts Per Vehicles (PPV) estimated at $493 for the GCC, $277 for Iran and $333 for RoME, overall we are expecting 4-5% increase in PPV by 2020.

• In the GCC, Saudi Arabia and UAE together dominate 72.5% market share where as RoME led by Jordan and Lebanon with +70% market share

Note: For Iran it includes part fitted with locally assembled vehicles whereas for all other countries it is replacement demand

Source: Frost & Sullivan AnalysisThe market revenue does not include labor and accessories f=forecast

22K02A-18

Spare Parts Demand—Channel Analysis (excluding Iran)…6 routes exist for supply of parts in the Middle Eastern Aftermarket with increasing competition from Branded and Other After Market Parts

Parts Supply

Genuine Parts

Branded Aftermarket Parts

Other After Market Parts

Imports

Counterfeit

System Suppliers

Note : OES – Original Equipment SparesOE Parts – OE fitted brands supplied in independent after marketAlternate parts – Brand other than OE brand supplied in the independent after marketSpurious – Products which are not original and branded as original popular brands in the marketImports – It includes domestic imports, which means a part is directly getting imported from the country of origin without involving

local operation other supplier System suppliers – They supply the brand under their name eg. Bosch braking products – Example : Bosch Chassis Systems

supplying brake components

Domestic Imports

34.5%

23.4%

13.1%

12.8%

14.1%

2.1%

Total Value: $8.30 billion (excluding Iran) Iran details not known, almost 60% of parts are imported from China and most of those are low quality parts

Note: All figures are rounded. The base year is 2015. Source: Frost & Sullivan Analysis

The Genuine Parts, Branded Aftermarket Parts are the categories accounts for nearly 58% in total part sales

23

How OEMs Will Differentiate Their Brand In Future (to 2025)

23

DESIGN & STYLING

DRIVING DYNAMICS SAFETY

SUSTAINABILITY &ENVIRONMENT

AUTOMATED MOBILTIY

QUALITY & RELIABILITY

COMFORT & CONVENIENCE

COST OF OWNERSHIP

CONNECTED MOBILTIY

HEALTH, WELLNESS

& WELLBEING

PRE 2000 TODAY FUTURE

24

21st Century Utilities: What is the Future ?

Source: Frost & Sullivan

Big data? Healthcare?

Mobility?

Media?

25

Your Partner in Mobility

Contact

Kaushik MadhavanDirector Mobility Practice – Middle East & South Asia

E-mail : kaushik.madhavan@frost.com

India Mobile : +9884131560

50 Years of Excellence:

“We Accelerate Growth”

Visit us at www.frost.com

Contact

Subhash JoshiAssociate Director Mobility Practice – Middle East & South Asia

E-mail : subhash.joshi@frost.com

UAE Mobile : +971 567686450