zero dollar car: why technology companies are focussing on the auto industry

All rights reserved. @2015. Ellis & Associates.

I’m not a car guy; I’m a software

guy and I work with cars. November 11, 2015

All rights reserved. @2015. Ellis & Associates. Slide 2 of 16

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Who am I?

I’m a developer.


Why suppliers are engaged in the automotive segment

~100 Million new vehicles sold every year

~1 Billion vehicles on the road today

~1 Trillion $ in yearly revenues are projected to be generated in the automotive segment in 2020


• A 2013 study by IHS Automotive predicted that "connected car systems will yield approximately $14.5 billion in revenue from automotive data … by 2020."

What’s the big deal?

• Data found in the connected car come from: diagnostics, location, user experience/feature tracking, adaptive driver assistance systems/autonomy and more.

• When people are out driving, they're likely on their way to purchase something, or at least to stop off at, say, a Starbucks for a coffee.

User data based on location, intentions, and preferences is gold to marketers and money to anyone that can harvest, analyze, and process it.


Many are interested in automotive data…

Representative sample only. Not intended to imply a complete list of companies.

http://www.google.com/url?url=http://en.wikipedia.org/wiki/File:Starbucks_Coffee_Logo.svg&rct=j&frm=1&q=&esrc=s&sa=U&ei=3XrGVIHrPImyoQSR2IDgBA&ved=0CBgQ9QEwAQ&usg=AFQjCNHsG7l5DHsaQHaTfhfroLe82l6oHA

http://www.google.com/url?url=http://www.techyville.com/2012/12/news/did-you-know-mcdonalds-logo-is-recognized-more-than-the-holy-cross/&rct=j&frm=1&q=&esrc=s&sa=U&ei=knrGVIPGOtDioATczYHQDA&ved=0CB4Q9QEwBA&usg=AFQjCNE95byHy5NWuQadD-5A2DEFcJ2DDQ


How they are getting it today…

There are significant challenges with OBD dongles.


Drivers & Occupants are Captive Audience • Cars are inherently mobile with Americans spending an

average of 1.2 hours a day traveling between locations and an average of 38 hours a year stuck in traffic.

• OEMs are beginning to respond with solutions that leverage cellular technologies as part of their long-term strategy for infotainment systems. • Current dashboard infotainment systems are mostly terrible

and are very limited in capability compared to counterparts such as the smartphones and phablets.

Data Source: GSMA, 2014

OEM actions to date are piece meal and continue to focus on initial owner, not long-term value of vehicle & customer.


What are you worth (just your internet traffic)?

Data Source: PrivacyFix, E&A 2013

Note – single desktop, does not include work issued laptop, home laptop, mobile phones, iPad_1, iPad_2 etc.

~$5,500


It is therefore no wonder Apple & Google are doing what they are doing.

But what are they doing?


Chevy MyLink

Cadillac CUE

Kia UVO

Mercedes mBrace2

Toyota Entune

Audi Connect

OnStar

25+ Connected

Solutions


One solution, all vehicles


Chevy MyLink

Cadillac CUE

Kia UVO

Mercedes mBrace2

Toyota Entune

Audi Connect

OnStar

Toyota

Chevy

Kia

Cadillac Audi

Mercedes

GM


What will be the impact on devices? Hardware High. Expect higher-end components and faster refresh rate.

Display High. Expect higher-end components and richer characteristics.

OS Minimal other than pricing pressure.

Phone Minimal other than pricing pressure.

Connectivity High. Expect higher-end technologies (e.g., USB 3.0, NFC, WiFi Direct).

Media Medium. Continued OEM solution but pricing pressure will be high.

Navigation High. Continued OEM solution but pricing pressure will be high.

Loyalty High. Continued deterioration of the OEM brand as customers increasingly interact with their digital mobile life ecosystem.


What will be the impact on ecosystems? media consumption Going hard after the establishment

gaming Going hard after the establishment

social networking Required for completeness; but desire stickiness

blogging Minimal impact

email Minimal impact

file sharing Required, minimal impact

reference Required, minimal impact

search Going hard after the establishment

browsing Going hard after the establishment

mapping Going hard after the establishment

shopping Going hard after the establishment

instant messaging Going hard after the establishment

telephony Required, minimal impact


Who’s next is any one with a digital life mobile ecosystem, including …


But what really is the impact?


Zero $ / £ / € Car


Headlight

Rain

Wiper

Barometer

Traction Control

Microphone

Representative. Locations and specific sensors are meant to be descriptive.

Clock


Headlight

Rain

Wiper

Barometer

Traction Control

Clock

Microphone

Representative. Locations and specific sensors are meant to be descriptive.


Sample data extracted from IVR system of cars on road today


There’s so much more “value” here than just a pretty word cloud…


Scenario One – Sensors @ Dealers Base Price $ 40,000

Package 1 $ 6,000

Sub-total $ 34,000

Package 2 $ 4,000

Sub-total $ 30,000

Total $ -

http://www.google.com/url?url=http://www.techyville.com/2012/12/news/did-you-know-mcdonalds-logo-is-recognized-more-than-the-holy-cross/&rct=j&frm=1&q=&esrc=s&sa=U&ei=knrGVIPGOtDioATczYHQDA&ved=0CB4Q9QEwBA&usg=AFQjCNE95byHy5NWuQadD-5A2DEFcJ2DDQ

http://www.google.com/url?url=http://en.wikipedia.org/wiki/File:Starbucks_Coffee_Logo.svg&rct=j&frm=1&q=&esrc=s&sa=U&ei=3XrGVIHrPImyoQSR2IDgBA&ved=0CBgQ9QEwAQ&usg=AFQjCNHsG7l5DHsaQHaTfhfroLe82l6oHA


Scenario Two – Ecosystem Subsidy

Base Price $ 25,000

Subsidy - Year 1 $ 5,000





Total $ -


Summary

• First vehicles are expected in market in mid-2015.

• Expect high scrutiny on sales impact along with continued scrutiny on support and SW update / security issues.

• Over 20 OEMs have publicly stated support for integrating Apple & Google including Ford, GM and VW.

• Value of driver will increase over time so expect to see other mobile ecosystems (especially China) follow Google & Apple.

• Significant disruption to the broader automotive ecosystem as we know it today.

• Aftermarket is under-exploited but recognition is growing quickly for how to bring in technology modifications (e.g., Pioneer, Voxx).

• All industries tangentially related to automotive will be significantly and materially impacted (e.g., music, finance, insurance)


Thank You.