A new era: Transformation in the Automotive Industry 8 th December 2010, Istanbul Dr. Martin Hölz Partner & Global Head of Automotive

A new era:Transformation in the Automotive Industry

8th December 2010, Istanbul

Dr. Martin Hölz

Partner & Global Head of Automotive

©2010 Deloitte Turkey. Member of Deloitte Touche Tohmatsu Limited

Introduction

Transformation in Automotive Industry

Success Factors for Manufacturers

Success Factors for Suppliers

Success Factors for Governments

Social System

Barriers on Mass Adoption

Conclusion

Content

2 ©2010 Deloitte Turkey. Member of Deloitte Touche Tohmatsu Limited

© 2009 Deloitte Touche Tohmatsu

“New” Industry

Future

•Significant structural changes

•Newly-consolidated global OEMs and suppliers

•New companies born from restructuring

•New business models

•Emergence of new technologies for e-mobility

Industry Restructuring

2009-2010

•Capital availability improves

•Large-scale asset sales

•Strong balance sheets lead consolidation

•New players and consolidators emerge, especially in emerging markets

Liquidity Crisis

2008-2009

•Major capacity reductions in NAFTA and Western Europe

•Re-sourcing to stronger suppliers

•Government loans

•Bankruptcy and restructurings

•Liquidations

3 A new era. Accelerating toward 2020 – An automotive industry transformed

The global automotive industry will not be the same as it has been in the past 100 years...


The future of the automotive industry will have significantly different characteristics

• Vertically integrated structure

• Sales channels are monopolized by OEM’s

• High entry barriers for new“players”

• High capital requirement

• High dependencies between suppliers & OEMs

4

• Highly flexible, project-oriented structure

• Multi-channel & multi-brand approach

• New “players“ are established to achieve new mobility concepts

• Still high capital requirement for technology-innovation

• Increasing supplier autonomy and power

• New generation of more environment friendly vehicles

Traditional Future perspective


With the transformation to e-mobility there will be a significant change in the value chain of the automotive industry

Key Points

• Shift in profit allocation from assembly to information technology and components

• New “players“ from different industries such as energy, IT and electronics

• Change from one-to-one towards multi-multi structure

• Lower entry barriers

Initiated by automaker integration

Affiliated Supplier

Affiliated Importer /

Dealer

Automaker A

Affiliated Supplier


Dealer

Automaker B

Affiliated Supplier


Dealer

Automaker C

Initiated by various players’ specialization

Sal

esM

anu

fact

uri

ng

Par

tsA

ssem

bly

R&

D

Automaker A

Automaker B

Automaker C

Independent Research Companies(e.g. Engineering Companies

Independent Suppliers(e.g. Battery, Motor, Inverter suppliers)

Independent Multi-brand Dealers

Value Chains

Conventional Vehicle EV

5


Introduction





Social System


Conclusion

Content



Most of the OEMs have already invested in different e-mobility technologies

7

Manufacturer Global Automobile Sales (10.000 units in 2009)

Investment in Technology

FiskerBollore

Th!nk

HV pHV EV FCV

ToyotaGMVWFordHondaPSANissanHyundaiRenault

SuzukiFiat-Chrys.

DaimlerDongfengBMWOpelMazdaMitsubishiDaihatsuTataBYDFAW


Question: From whom would you be most likely to purchase an EV?Question: From whom would you be most likely to purchase an EV?

Companies with current models or models launching this year

Other companies

% o

f p

eop

le%

of

peo

ple

The companies which already invested in e-mobility related topics are leading in the customer preferences

Brand Preference (Example from Deloitte US-study)

Highlights

• Car-buying is brand driven – trust is important

• Toyota, Honda, and Ford have a high green brand equity from hybrid sales

• Toyota, Honda, and Ford have a higher likelihood of success in e-mobility

• Nissan and Chevrolet will face challenges due to the burden of educating consumers

8


• Tesla Motors Case in Silicon Valley‒ Managed by founder of an IT venture-company

‒ Hires talent from the aerospace and IT industry

• New Chinese Entrants (Baoya, Shifeng, etc.)

New comers from different industries have already started to enter the car-manufacturing business

Tesla Roadster

Baoya EV

9

Battery Motor Inverter ASSEMBLY

18650 type

Japanese manufacturer

Taiwanese companies

Main Components are Procured


Alliances with companies from different industries against new comers and threats will be another critical decision for OEMs

Key Points

•How to manage the threat for lack of new technological know-how

•In-house development vs. strategic alliances with suppliers, IT and electronic companies

•Strategies against new comers from different industries like electronics & energy

Investors Battery Comp. OEM supply

Toyota

Panasonic

Honda

GS Yuasa

Mitsubishi Motor

Mitsubishi Corp.

Nissan

NEC

NEC - Tokin

Panasonic EV Energy

Toyota

Sanyo Electric

Blue Energy

Lithium Energy Japan

Automotive Energy Supply

Honda

Mitsubishi Motor

Nissan

Fuji Heavy

(Investment Ratio)

60%

40%

100%

49%

51%

51%

15%

34%

51%

42%

7%

(Plan)

(Plan)

10

Illustra

tive


Introduction





Social System


Conclusion

Content



The quite simple structure of EV’s and new business models enable new players to enter the manufacturing of cars

• Case 1: Taiwan’s Hua-chuang Automobile Information Technical Center Co. Ltd. developed its own EV without any support from traditional suppliers

‒ Procured key components from electronics manufacturers

‒ Adopted driving module control technology from a venture company in the US

• Case 2: China’s BYD Auto (former mobile phone battery manufacturer) built the capacity to manufacture EVs

‒ Acquired an automobile and an inverter manufacturer

‒ Gathered motor technologies from Chongqing University

12

About 95% availability of the resources for battery manufacturing (esp. noble earths as dysprosium, terbium) in China, which could lead to a significant

competitive advantage for Chinese battery suppliers!

BYD E6


With “modularization-” and “plug-and-play-” concepts the role and power of suppliers in the industry will significantly shift

• Definition of global standards enable “Modularization”

• Connectivity without calibration - “Plug-and-Play”

1. Supply to two or more automakers

2. Achieve economies of scale (similar to semiconductor industry)

3. Mega-suppliers would become profitable, while automakers producing relatively small volumes of EVs would be less so

13

BatteryBattery MotorMotor InverterInverterCPUCPU HDDHDD Graphics

Graphics


Introduction





Social System


Conclusion

Content



Many countries have already set challenging goals for the penetration of HV/EVs.

Goals for HV/EV Sales

Goals for the penetration of next generation automobiles (set by Ministry of Environment)• 2020: sell 2.3 M. vehicles (HV 1.45 /EV 0.51 M)

retain 13.5 M vehicles (HV 9.3 /EV 2 M)• 2030 sell 2.9 M vehicles (HV 1.83/ EV 0.73 M)

retain 26.3 M vehicles (HV 17/ EV 6 M)

Japan

• 2012 : retain 500 K HVs, 100 K EVs• 2020 : retain 18 M HVs, 4 M EVs• Long Run: retain 70 M HVs, 50 M EVs

China

• Plans for penetration of 1 M pHVs by 2015

USA

（ Example）• 2020 : Germany plans to penetrate 1 M pHVs• 2020 : Ireland plans to penetrate 230 K Evs (10%)

EU

15


Many countries already heavily invested on e-mobility: More than US $44 B.

16

Infrastructure and system

• Experimental national city power grid infrastructure charging

• HV / EV development of national standards

• Next generation car / fuel initiative 　

• Maintenance is promoted by the cooperation of the state government and the private company (California:1 billion dollars investment)

R&D and Manufacturing Support

863 ProjectMinistry of Science and Technology• FY06-08: 8.3 billion yen Development

support to build a finished car• FY08-10: 6.2 billion yen Core

technology development support

Next-gen battery research and development •2009 ~ 2015 / total 21 billion yen

• Car technology program / Hybrid electric system department (every year/ 165 million dollars)

• The next generation battery, EV development, manufacturing, and proof experiment (FY09-/2.4 billion dollars)

• Low-interest loan for gas-snipper production (FY09-/25 billion dollars)

Purchase incentive

• Environmental car purchase assistance plan

• The car green taxation system

• PHV/EV purchase assistance plan (FY11-/7500 dollar or less per unit)

• UK: spend 20 million pounds for infrastructure

• France: Experiment execution of the charge infrastructure maintenance

• Germany: Pilot Charging Stations

• EU Green Car Initiative project • France: R&D assistance for driving

system and battery (FY09-/250 million Euro )

• Germany: R&D assistance of pHV/EV (FY09/115 million Euro)

• UK: FY11-/Max of 5,000 pounds• France: Transfer to HV cars that

passes 10 years or more/FY08-/Max of 5,000 Euro

• Germany: Transfer to low-emission vehicle FY08-09 Max of 2500 Euro Total of 5 billion Euro

Intergovernmental cooperation

China – US

•Establishment of clean energy laboratory

EU – JapanEnergy technology development workshop

Britain – China• A joint research

concerning electrification of the car

Note: The data and information was collected and compiled using various external media resources based on information available from around November 2008 to end of February

Illustra

tive


Introduction





Social System


Conclusion

Content



With the changing preferences and new dynamics, e-mobility will also play a critical role in the future urban transportation

18

E-vehicle sharing Case: LISELEC - La Rochelle, France

• 50 EV’s (Peugeot 106 and Citroën Saxo)

• 7 stations across the city

• Membership structure (Membership in Car clubs reached 100.000 in 2009)

Other applications: Petit Renta in Japan, Car Clubs in the UK, Autolib in France and EV-tests in Germany.

Station

• User freedom

• Cheap

• Free parking

• Convenience

• Availability

• Reduce global warming

• Less traffic

Benefits


Vehicle conversion to social networks

• Transportation Information

o Traffic stream control

o Pricing and payment systems

• Lifelog Business

o Understanding consumer behavior

o Creation of new businesses

• IT and electronics into the car

o Web in the car

o Car to car communication

Technological advancements will increase the appetite of companies like Google, Microsoft, HP, etc. to invest in the automotive industry

19


Introduction





Social System


Conclusion

Content



One of the important challenge of the industry is overcoming the barriers against mass adoption of new generation vehicles...

Source: Deloitte Survey, Interviews and Analysis

Vehicle price

Reliability

Cost to charge

Convenience to charge

Fuel costs

Gov. incentives

Style and appearance

Environmental impact

Foreign oil dependence

Option to lease battery

Larger vehicle availability

Popularity

Question: What would be your main considerations when purchasing an EV?

Question: What would be your main considerations when purchasing an EV?

LowLow HighHigh

Question: What is the top factor that would prevent you from purchasing an EV (% of respondents)?

Question: What is the top factor that would prevent you from purchasing an EV (% of respondents)?

Factors Driving Purchase Factors Preventing Purchase

Six Adoption BarriersSix Adoption Barriers

Familiarity Brand Range Charging InfrastructurePrice and

Ownership Cost

1 2 3 4 5 6

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Introduction





Social System


Conclusion

Content



The strategies and policies on e-mobility need to be built based on the needs and alignment of all parties in the automotive value chain

GovernmentCustomer

Automotive Association

Manufacturer & Supplier

Energy Policy

Regulations

Incentives

Manufacturing Strategy

23

Infrastructure


Documents

A new era: Transformation in the Automotive Industry 8 th December 2010, Istanbul Dr. Martin Hölz Partner & Global Head of Automotive