Automotive Megatrends Magazine

Let us be your guide... …to the automo0ve industry of tomorrow.

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November 29, 2016 November 30, 2016 December 1, 2016

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www.automo0vemegatrends.com Welcome

Welcome...

...to the Q2 2016 issue of Automotive Megatrends Magazine. Automotive Megatrends Magazine

Uncertainty breeds the ISSN: 2053 776X unconventional. As the auto industry attempts to identify what its Publisher: Automotive Megatrends Ltd uncertain future might look like, 1-3 Washington Buildings there's an opportunity for new Stanwell Road, Penarth players with unconventional ideas. In CF64 2AD, UK this issue of Megatrends , we talk exclusively to some of those taking a www.automotivemegatrends.com T: +44 (0) 2920 707 021 leftﬁeld approach to the automotive [email protected] industry.

Registered number: 08000516 Faraday Future's Nick Sampson VAT number: GB 171 5423 23 discusses FF's unconventional approach to vehicle manufacturing, Managing Director: start-up MiMotive’s Antonio Ferreira Gareth Davies talks about the need for drastic change, and futurist Aric Dromi takes Editor: an unconventional look at - well, Martin Kahl everything. Contributors: Indraneel Bardhan Xavier Boucherat Alexander Brenner Santiago Castillo Ian C. Graig Freddie Holmes Sandeep Kar Martin Kahl, Philipp Grosse Kleimann Editor Megan Lampinen Michael Nash

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Exclusive interview with futurist Aric Dromi

20 24

Software and silicon: welcome to the Interview: Nick Sampson, Faraday Future car of the future

27 30

Software companies must think automotive to succeed in automotive Smart cars need smart seats

33 36

It's time to redesign the connected car The evolution of the motor show circuit

8 Automotive Megatrends Magazine Contents

41 44

When is a truck not a truck? When it’s a OEM strategy: Ford in Turkey service

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Drastic change needed: the auto Industry 4.0 and the rise of smart manufacturing industry in 2035

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Aric Dromi

It’s time for a fresh look at the future

Flying cars, drones and downloadable human consciousness – just some of the things we can expect of the automotive world of tomorrow, according to futurologist Aric Dromi. By Megan Lampinen

he vehicle of the future needs to be designed with a view to how future society copes with It’s likely that none of the OEMs reality - and that is a reality dramatically are looking at the future in the diﬀerent from anything today. Every OEM thinks it is capable of designing right way Tthe car of the future - but it’s likely that none of the OEMs are looking at the future in the right way. “ That’s the view of Aric Dromi, a man who describes himself as a speaker, futurologist, digital philosopher and professional troublemaker.

So where do we start?

That’s the question Megatrends put to Dromi at the start of an interview about the future – an interview that covered autonomous driving, drones, ﬂying cars, the human consciousness and the death of brand loyalty as we attempted to identify where the automotive world is likely to end up 30 years from now.

We should start, suggests Dromi, by looking at the future in a diﬀerent way.

"Everyone understands the things they know and some people are aware of the things that they don’t know, but most of the people I encounter are clueless about the things they don’t know that they

16 Automotive Megatrends Magazine Aric Dromi

There aren’t many cities in the West that are capable of producing “an infrastructure that supports autonomous driving cars

don’t know. This is where the major that are capable of producing an careful it will still have manual impact is going to come," Dromi tells infrastructure that supports driving cars 30 years from now; it Megatrends . "What we can do in autonomous driving cars," cautions will become a third world city. It's order to plan for that is to think in a Dromi. simple, because you cannot much more holistic view." disconnect that future from what In the West, Dromi views self-driving artiﬁcial intelligence (AI) and Autonomous driving cars as "nothing but a promise". On robotics will do to society around the other hand, he adds, "that us." and alpha cities promise can be easily realised in the Philippines, in Africa, in China, Ownership gives way 30 years down the line, the industry because they can build an could be unrecognisable. infrastructure that doesn’t have to usership Autonomous drive technology is legacy. For example, outside Manila advancing quickly, but requires they are actually building a new A big problem with many cities supporting infrastructure. connected city - the entire city is today is congestion, and it doesn't based on connectivity." look promising if these places don't Those cities that can put this in get connected. "Most OEMs today place the quickest will be the cities He refers to such regions as 'Alpha are pushing units for the markets, of the future - and they are not cities'. They will most likely emerge but how many more cars can you necessarily the centres of power from those regions with no legacy have in the streets of London, or Los today. infrastructure to hold back Angeles or Beijing? You need to developments. "Where there is no rethink how you move people and "We’re stepping very fast into infrastructure it is easier to things from one place to another," robotic mobility. It’s cool that we’re implement. Just look at Africa, suggests Dromi. focusing on engineering the where there are more mobile technology that can enable a car to phones than sanitary toilet He expects dramatic changes in the drive itself but we don’t have any services," Dromi observes. "Can you concept of car ownership within infrastructure that can support that. introduce digital currency there? such cities. "In 30 years, I expect There aren’t many cities in the West Yes, automatically. If London is not London to say that if you live in the city you are not allowed to own a car. If you want to own a car you can live in a village. Changes in local politics are going to aﬀect ownership in order to create more space," he predicts. OEMs will still be Flying cars Perhaps OEMs need to spread their wings - literally. Dromi points around in 30 years, to the development of the first flying cars - hybrids of cars and aeroplanes that can be driven to but not all of them the nearest airfield, take off, land “ and be driven to their final destination. "Suddenly somebody

www.automotivemegatrends.com 17 Aric Dromi

If London is not careful it will still have manual driving cars “30 years from now; it will become a third world city

will start to realise that having four to an experience, not to the brand competing with them. I see huge wheels spinning on a road is not itself." This has already had an merger potential within certain the only way of moving people impact on the mobile phone industries in order to create turnkey from one place to another. There is industry. 15 years ago there were a solutions." more space in the air than on the handful of mobile phone hardware roads.” He notes the opportunities providers in the market. Today it is Drones to take out for commercial ownership that are largely down to Samsung and Apple, already appearing, and adds: “It’s suggests Dromi. "This fragmented drivers not science fiction anymore. Chitty market found a way to defragment Chitty Bang Bang just became itself and narrow it down to basically Dromi expects trucking to lead the reality." two experiences that are the same - way in autonomous drive Android and iOS. It is an experience- developments but adds that trucks He may not be impressed with the based environment," he points out. may not be the only way of moving aesthetics of certain current goods into and out of cities. Drones offerings, but this approach Data - it's the new could play a much larger role in represents a pivotal new way of transport further down the line, thinking. "It’s an ugly looking car but, currency with considerable potential in the hey, it’s reality," he adds. movement of freight. "30 years In this new paradigm, it is the data from now, I see drones as another Are OEMs really about to rush out brokers who will emerge as the big way of moving goods. If the truck and start developing aeroplane/car money makers, he believes: "It's all OEMs are smart they will take some hybrids? Dromi doesn't think that's about data at the end of the day. It’s of their R&D and start looking into the answer: "Solving the questions about the first company that can drones." A number of companies, of mobility cannot be handled by come to London and promise to including Google, have expressed OEMs; they need to be handled by reduce congestion." The business interest in the potential that the city." rulebooks are being torn up, he says droning could offer. – not just in the automotive industry, but in general. Airbnb, he The implications for employment From brand loyalty to notes, "is the biggest real estate could be worrying. There are not experience-based company in the world, but all of its only millions of truck drivers around loyalty real estate is virtual. They are the world but for every truck there outsourcing the maintenance, which are individuals employed in the OEMs will still be around 30 years is brilliant. Same thing with Uber." loading and unloading process. from now, but not all of them. In "Millions of people are going to lose fact, just about half, in Dromi's view. Uber doesn't own the cars in its vast their jobs. When you are This will be the result of a loyalty global fleet, but it owns the automating the trucks, you will shift away from products to intelligence – about who needs cars, automate the factory, you will experiences, a trend that is already where and when. At some point, automate the uploading and manifesting itself today. Uber may not even need drivers: downloading from the truck. And we "30 years down the road you have a have robots that are capable of “We are loyal to experiences that whole new model. If it is smart, Uber doing that today – so what are we right now are locked to specific will go into drones," says Dromi. "It going to do with so much brands," he explains. "The loyalty is will partner with Amazon instead of unemployment?" he asks.

18 Automotive Megatrends Magazine Aric Dromi

more governance power to corporate giants, it will restructure financial services, and it will Most of the people I encounter fundamentally alter the way we perceive reality. 30 years from now, are clueless about the things they this is how we’re going to be structured," he predicts. don’t know that they don’t know Eventually, Dromi suggests, scientists will be downloading human consciousness into a computer, “Safety – just an all of these patches to the Internet," making the human body redundant. opening up the car to all the "This is going to be available in 30 illusion? vulnerabilities of the Internet. years from now. It took us 350 years from the time we invented the With all the dramatic improvements "We need to rethink it from scratch. telescope until we launched a man in technology that are taking place, We are still working on the old into space. It took us only 15 years some industry players envision a assumption that everything should from the invention of the MRI until future without road deaths. Is Vision be locked, and then looking at what we connected the brain to the Zero something Dromi expects to should be open. We should do it the external world. You have machines see in 30 years? He points to the opposite way: make everything today like ECOG that can reconstruct proverb 'If you want to make God open, and then let’s figure out what your thoughts into pictures," he laugh, tell him about your plans.' "I should be locked and secure," he observes. "It is not science fiction; will never be the guy that’s says. "That’s the only way of this is now all around us today." promised no-one will ever die on eliminating vulnerabilities." the road. Can we narrow down the Design for the future – errors that are happening today? Human consciousness Yes. Almost none of the friction that a different future causes accidents now will exist in 30 – available to years, but there will be new types of download now Part of the problem, Dromi says, is frictions. However, you don’t know the idea that we are just observing that before you eliminate the It's not just the driving that Dromi the world around us. "By observing current ones." expects to become automated. He it, we are manifesting the world sees a convergence of artificial around us. The car industry for ages A big worry about future safety intelligence, robotics, biotech has isolated itself from the rest of stems from cyber security and medicine, neuroscience, energy and the pack, but it cannot do so hacking, with several high profile computation power. "These fields anymore because of the instances demonstrating the are merging into an ecology of technologies that exist right now," potential dangers. In Dromi's view, identities. In this ecology of he says. "If we fail to look at how safety is just "an illusion". As he identities, you will have a mixture of future society is going to cope with explains, the current approach is to digital and human. I refer to digital reality and if we design a car fix problems with one patch on top alphas. This will redefine national isolated from that, that car will not of another. "Then we are connecting sovereignty, it will give so much have a place in that future society."

If the truck OEMs are smart they will take some “of their R&D and start looking into drones www.automotivemegatrends.com 19 Faraday Future

Interview: Nick Sampson, Faraday Future

Michael Nash discusses autonomous driving and electric vehicle technology with Faraday Future’s, Senior VP R&D and Engineering, Nick Sampson

oday’s automotive industry is all about change. New companies are constantly battling their way into the limelight by coming up with striking, innovative technologies. OEMs are doing all tThey can to keep pace, but some are in danger of being left behind.

New vehicle manufacturer Faraday Future (FF) was established in 2014 and has already managed to generate considerable hype, despite having revealed very little about its upcoming product portfolio. At the 2016 Consumer Electronics Show (CES) in Las Vegas, just down the road from the OEM’s new factory, the company decided to showcase a tantalising concept car called the FFZero1 rather than unveiling its ﬁrst production car, which is scheduled to go into production in 2017. The same concept car made another appearance a few months later at the 2016 Beijing Auto Show.

FF is set on taking an unconventional approach to the automotive industry. Despite its confident concept car programme, a goal of bringing its first electric vehicle (EV) to market in 2017, and the recent opening of a US$1bn production facility in Nevada, it has yet to announce reveal any details about its first car, or even name its Chief Executive. However, the company is adamant that it has a

20 Automotive Megatrends Magazine Faraday Future

strong and willing team that is more Autonomous driving is top of the Autonomous driving will also affect than capable of getting the job list. These vehicles will include high ride sharing and will enable a done. levels of technology and we will controlled flow of traffic, making create a seamless environment urban congestion much lighter. In keeping with the changing between the car and the home The occupants of such cars may nature of the automotive industry, when it comes to technologies. not be the owners, but they need FF describes itself as a “tech to feel like the cars are theirs. company rather than an Our lives have become very digital. When you log on to a computer, automotive company,” and has We are increasingly connected all you have a unique configuration said it hopes to churn out products the time, and we will continue to with backgrounds and faster and more efficiently than be increasingly connected over the applications. The same will be true any other OEM has done before. next 20 years. The concept car was for the car. Whether its yours or positioned to demonstrate an not, it will have your identity. For Megatrends recently spoke to Nick exciting and innovative vision for example, if you’re half way through Sampson, FF’s Senior Vice the future. It’s a symbol more than watching a movie on television at President of R&D and Engineering, anything else. home, you can get into a ride- about the company’s vision for the sharing car and keep watching it on automotive world of tomorrow. What are the challenges that the way to work. autonomous driving technologies Is the FFZero1 a reﬂection of the present to a company like FF? What will be the impact of rapid technologies that FF believes will urbanisation? be important to the automotive As the industry moves towards industry over the next, say, 20 autonomous driving there will be Increasingly compact living years? some initial resistance in certain conditions will change ownership areas against the technology models for vehicles. As more people Yes, in some ways. As we said at because there’s an inbuilt fear of the are living in urban environments, CES, it’s a car of concepts to show robotic world. But I think we will fewer will have the capacity to store, some of our visions for the future, soon get over that. The advanced keep and own a vehicle and if though not necessarily quite as far safety that we get from people don’t need to own cars, the out as 20 years. Much of the autonomous driving is such a key space that would be used to store technology found in the vehicle is aspect, and the industry will soon them can be used for other things, available today, or will be available realise that the cars are more awake reducing the number of parking in the very near future. and aware than people. The car spaces. won’t get distracted by other In terms of an image for the distant occupants, or by the phone. It won’t Essentially, we can give back the future, there are several factors get tired, or carried away with space to the people. It deﬁnitely that will come into play. listening to music. changes the types of the vehicles we

The industry will soon realise that the cars are more awake and “aware than people

www.automotivemegatrends.com 21 Faraday Future

might be trying to produce in the future. If they are shared vehicles, people’s expectations change, and the cost equation also changes.

Does it help to be based in Nevada? Is the state pitching itself as a promoter of automotive technology?

The state is certainly very keen on automotive technology. It is looking to create a number of highways that are ready for autonomous and electric vehicles. The electric highway is already being created, with the state making sure the north and south routes have charging stations in all relevant positions. The Governor also has a passion to create an entire electric drive network – ensuring not only that there is one north-south road, but that the whole general road infrastructure is supportive of EVs.

The state is also really pushing to help autonomous driving technology. It wants to diversify its economy. A place like Las Vegas has a very stereotypical image at the moment, and the state evidently wants to expand it, and show how tech-capable it is.

Does the size of your Nevada facility reﬂect your conﬁdence for the future?

I think there is clear evidence that the market is in desperate need of the right products from the right companies. We were talking with a potential supplier recently and looking at projections for the future. They laughed and said that the projections would have been optimistic, but they could now be slightly pessimistic.

If Tesla can take 400,000 orders [for the Model 3], and over 100,000 The opportunities are enormous before anyone has seen the product, it really validates our for the right products, at the belief that there is huge, pent-up demand for these types of right price, produced by the products. We strongly believe that the opportunities are enormous right company for the right products, at the right “ price, produced by the right company.

And we are looking at manufacturing with a fresh set of

22 Automotive Megatrends Magazine Faraday Future

FF hopes to churn out products faster and more efficiently than any other OEM has done before eyes. We’re looking at implementi“ng batteries, but we are also looking at diesel. We want to be pure electric – a very flexible manufacturing other alternatives. The current that’s our foundation, and that’s approach in our facility in Nevada, chemistry used in batteries has where we will stay. But there are a but we are also looking further advanced dramatically over the past number of different ways to be pure ahead at different sourcing few years, but in terms of battery electric, which we are actively strategies. development as a whole there are exploring. Lithium-ion batteries several other directions that can be aren’t the only solution. Does the future of the company explored. At FF, we are not only rest on its expertise in looking at what will happen with Do you believe the automotive autonomous driving technology battery technology in the next five industry can be free of emissions and connectivity? years, but at what it could be like in by 2050? Is that goal realistic? 20 or more years’ time. FF is not just about connectivity and I think it’s realistic because we’re autonomous driving. Safety, air A primary aim for the short-term is still a long way from 2050, and there quality and growing urbanisation – driving down the cost of lithium-ion is a lot of technology available. But all of these things are becoming batteries. But we want to keep the it all depends on how the more important. Our lives have architectures of our vehicles open in calculations are made. It is not changed dramatically over the last such a way that other battery enough for every OEM to few years, and will continue to do so technologies and systems are exclusively produce battery electric in the future. The world is equally applicable. vehicles by 2050, because there are recognising the challenges for many other elements that must be reducing emissions and creating a How important will your variable considered. For example, what cleaner environment. There are high platform architecture (VPA) be happens to the materials when the targets being set for 2030 in almost when considering your future car comes to the end of its life? every country, and there are portfolio? Where does the energy come from exceptionally high targets for 2050 to recharge? All these things must as we strive for zero emissions. The Part of our message at CES focused be looked at, not just the vehicles automotive industry and the world on our VPA, which has been themselves. in general definitely has a big designed to embody different challenge ahead of it with these vehicles sizes with different battery, What will that mean for the roles goals. motor and powertrain and responsibilities of companies configurations. It will give us the like FF? Do you have a plan and flexibility to build a large range of timeframe for reducing the cost very different vehicles in the future, We don’t want to become a provider of batteries and other powertrain and to build them rapidly. of renewable energy, for example, technologies? but we are certainly looking to Where does the company stand influence the energy sector to adopt We have a roadmap in our mind as on the ICE? renewable sources. There are plenty to how quickly we want to drive of opportunities here, and they down the cost of batteries. We have We are really against any hybrid need to be leveraged to clean up the previously dealt with lithium-ion technology that uses gasoline or environment.

www.automotivemegatrends.com 23 Intel

Software and silicon: welcome to the car of the future

The chip industry is well known for its pace of change. Now Intel wants to speed up the automotive industry, hears Xavier Boucherat

t’s a prediction that Jack than it has been in the past. Put today. It’s been a fascinating Weast, Principal Engineer and differently, it’s just adjusting for the learning experience. But we also see Chief Architect at Intel, has complexities of the small scale and opportunities to help automotive heard many times before: the highly complex process nodes our companies accelerate their design age of Moore’s Law, which industry now works with.” Progress lifecycles – we’re no stranger to the says that chip processing in the chip industry still moves at an five-year cycle, when looking at 10 power will double every year, is incredible rate. Intel even has a joke nanometre chips for example, but coming to an end. The observation about it – if cars had developed at what we’d like to do is help the Ihas more or less held true since the the same rate, they’d be regularly automotive industry figure out how invention of the integrated circuit in achieving fuel economy of two to accelerate their timeframe, and 1971, when the gap between million miles to the gallon. bring it down to four, perhaps even transistors on a chip was 10,000 three years.” nanometres. On today’s chips, the Tongue in cheek though it is, it’s gap is 14 nanometres, ergo you can certainly true that the automotive New architectures squeeze on many more transistors. industry moves far more slowly – where chip power doubles every The magic word here is But could it really be that the ‘Law’ two years, all-new models from convergence. Simplified chip has run its course? Not really, says OEMs only arrive once every five to architectures, fewer electronic Weast. Whilst it’s true that in 2015 seven years. Does this present any control units (ECUs) for features like the company announced that 10 disconnect for Intel? advanced driver assistance systems nanometre technology products will (ADAS), reduced attack surfaces and not arrive in 2016 as planned, “It’s fun,” laughs Weast. “Our current common microarchitecture from product and process optimisation automotive roadmap was R&D through to production - all continues unabated. “Moore’s Law established around five years ago, these things, says Weast, could have will continue,” says Weast, “but its and we already have parts in a significant impact in reducing time cadence may be just a bit slower millions of cars out on the road to market, and accelerate the emergence of highly-automated and autonomous cars: “We’re very interested in partnering with OEMs on this. The world is changing, and it’s going to be increasingly difficult If cars had developed at the for a five-year design lifecycle to produce competitive products that same rate, they’d be regularly consumers really want.”

In addition, Intel will look to provide achieving fuel economy of two OEMs with the option of not having million miles to the gallon to lock down their ﬁnal design “ architecture for software until much later in the design process. The

24 Automotive Megatrends Magazine Intel

A system needs to be able to recover or continue operating “if an ECU goes down. And that’s going to be an interesting challenge

selection of an operating system, or the applications and capabilities of a product; these are things that no longer have to be set in stone. As Weast puts it, they can be completed, and designed later, and this could mean a far quicker move from R&D to production.

Most OEMs have already hailed the arrival of automated driving, but few have nailed their colours to the wall when it comes to fully autonomous vehicles. By contrast, Intel is unequivocal – the day of the self- driving car is coming, and with it, a wealth of challenges and opportunities for the industry. The emergence of 5G, for example, could radically change the connected car’s capabilities and usages. This will require more computing power in datacentres, says Weast, to support the hundreds of millions of connected cars.

This is good news for Intel. If there’s computation involved, says computing this will require. As Weast, Intel wants to be able to such, it’s not just about offer the best solution on the autonomous driving: “it’s the entire market – and the connected, self- spectrum of how the automobile driving car will have to perform and the automotive market is levels of computation previously going to change, and deliver unheard of in the automotive incredible new experiences that we industry. Once drivers aren’t can’t imagine today.” the time, on driving, what they’ll do inside the any road, under car will change. Entertainment and Fully autonomous driving could any conditions. increased work productivity are arrive earlier than 2030, he This is an extremely two areas where Weast predicts suggests, but with one caveat: high bar.” The reality, considerable demand, and as far “When people make predictions he says, will be more as he’s concerned, the industry about autonomous cars, there’s an constrained. Moving into can’t even imagine just how much assumption we’re talking about all the next decade, Weast

www.automotivemegatrends.com 25 Intel

The day of the self-driving car is coming, and with it, a wealth of “challenges and opportunities for the industry

predicts deployment of fully “You see this in aerospace, where “Almost every other product we autonomous vehicles in certain planes may have multiple have, like our phones or even TVs, situations – for example, a 20-block redundant systems,” explains can receive silent, forced software downtown area designated as off- Weast. “Think about ADAS systems updates. The notion of the car you limits to human drivers. – when it fails, there’s a human take- drive off the lot being the same car over mechanism. If your adaptive you’re driving five years later is Unbreakable cruise control ECU dies, your car going to change, partly because of could ask you take over. But if the emphasis on software-driven Security and safety will present the there’s no steering wheel or brake services and capabilities.” biggest challenges, and Weast pedal, how do you design this predicts a move from reliability- availability? A system needs to be Once again, this raises the question based architectures to what he able to recover or continue of design and architecture. OEMs can terms ‘availability-based operating if an ECU goes down. And no longer afford to design a car that architectures’. In a reliability model, that’s going to be an interesting meets initial specifications, with no a single chip is used, and efforts challenge.” Weast compares it to additional headroom. Not only would centre around reducing the failure building a ‘check engine light’ for the this extra headroom be needed to rate of that part to as low a level as autonomous car – something that introduce new features for possible. Availability-based models indicates a failure, but doesn’t stop customers, but it would be needed to assume that at some point, a the car from driving. counteract emerging security threats. mechanism will fail. As such, the mechanism should be built in a way There’s another design challenge for Convergence remains central, he that, when it does fail, it can OEMs – how can a product be kept concludes. “For us, it’s about continue operating. competitive over its lifetime? reimagining the way we do things in the automotive industry,” he says. “Our theme around convergence says, ‘hey – we see pain points, we see struggles’. The consolidation of ECUs, convergence on a common microarchitecture, or convergence on safety and security architectures, It’s going to be increasingly these things can result in the simplification of an already very complex product. And where things difficult for a five-year design are simpler, they can be done more easily, more cost-effectively, and lifecycle to produce competitive more quickly.” products Moore’s Law may well be starting to “ slow a little, but if Intel and competitors get it right, the chip industry could hold the key to accelerating and transforming automotive design and production.

26 Automotive Megatrends Magazine Wind River

Software companies must think automotive to succeed in automotive

Wind River helped put autonomous vehicles on Mars. Now it’s helping put autonomous cars on public roads. By Megan Lampinen

onnected vehicle technology requires a holistic approach – and that's exactly the approach that software specialist Amongst our ﬁrst autonomous vehicles Wind River is taking. As it now were each one of the Mars Rovers tackles the challenge of aCutonomous cars, the company has that’s still parading around up there a broad range of experiences from which to draw.

Having started with the aerospace, defence and robotics industries, “ Wind River has been involved in autonomous vehicles for some time. "Amongst our ﬁrst autonomous vehicles were each one of the Mars Rovers that's still parading around up there," Marques McCammon, General Manager of connected vehicles at Wind River, told Megatrends . "Our operating system VxWorks has been the operating system basis for each one of those vehicles. We have also applied that to autonomous ﬂying vehicles - drones and other defence- related programmes."

This operating system has also been a part of Audi's autonomous driving architecture, developed by the OEM in conjunction with networking solutions supplier TTTech. "We've been part of that development since

www.automotivemegatrends.com 27 Wind River

the beginning," added McCammon. mobility brands than they have with "To our knowledge, that will be one anything relating to the of the leading production highly conventional automotive brand." automated vehicles." Unbounded potential Silicon Valley inﬂuence Along with uncertainty comes fresh One of the transformational trends opportunities, and the Internet of shaping automotive developments Things (IoT) brings plenty. "We have comes from the consumer the ability to pivot the entire technology industry. McCammon commercial model of the auto observed that what he calls the industry," suggested McCammon. conventional Silicon Valley-based "We move data more freely. People brand experiences have been share data more freely. Information spreading into the automotive is accessible everywhere. The car environment. He elaborated: has such a critical role to play in the "Microsoft was probably the ﬁrst of way that we interact with life." For the conventional Silicon Valley or instance, there could be a big shift tech sector software companies to from selling the car in a one-time make its foray into automotive transaction to a model where the when it did the Sync programme consumer could be renting the car with Ford. Now we are seeing that or renting a portion of the car. Either whole interaction model evolving. way, OEMs will be looking for ways More and more of the experiences to interact with drivers, either of these software companies are through occasional servicing in the

Ford is going beyond talking to the consumers in the context of the vehicle and the driving experience, and “actually trying to become a part of their entire life extending to various aspects of life." first instance or daily interactions He points to Apple TV as an example through mobile devices in the latter. of technology that can interact with the home or a personal mobile McCammon points to FordPass as device as well as the car, "defining one example of an OEM's efforts to the user experience there." engage with the consumer along various points. "Here Ford is going This particular trend is so important beyond talking to the consumers in because it suggests consumer the context of the vehicle and the expectations could dramatically driving experience, and actually change in the future. "We don't trying to become a part of their know what that means and what the entire life," he emphasised. The expectation is for the next possibilities here are almost generation of consumers when they endless. For instance, an OEM could come into an automobile. Do they predict how long it takes for an want a BMW and Audi experience or individual to travel to his local a Google experience? Pre-teens grocery store or place of work and today don't know a world without offer feedback on things that could Google," McCammon commented. be done in that transition. "I could "By the time they get to be of driving recognise that your drycleaners is age, or the age to interact directly on the way between your home and with a car, they've had more time your office and show you that I can interacting with the experiences of reroute you to your drycleaners - some of these technology and and maybe the drycleaners can

28 Automotive Megatrends Magazine Wind River

send you a coupon to help you save money when you show up," McCammon suggested. "The potential of what we could do to add value to the customer is just The potential of what we could unbounded."

While there is a fine line between do to add value to the customer helpful and creepy, McCammon observed that the behavioural is just unbounded patterns of younger individuals suggests that they are not shy of “ sharing personal details. "Look at how they interact with social media, and the fact that they tag their out whether or not it can do data. "I think that is the key to location every time they make a something with it. Then the transforming the energy in the near post. They'll tell you when they wake information is pushed back to the and long-term," observed up, when they get out of bed. It is a driver. Along the way we cannot McCammon. different social phenomenon than isolate any part of the vehicle system. what we're used to. They seem to be We have to think about it end-to-end Also key for Wind River is the ability much more comfortable with that." and we have to predict as much as to manage the lifecycle challenge. we can which elements of software "We have to know that the systems are going to be relevant at every step are going to evolve, and we can't A skeleton for through that vehicle process." make a stagnated software system software because by the time the vehicle is The only way to take advantage of on the road for 18 months or two At Wind River, the idea is to think the full ecosystem is to address such years, half of that software is about software not just as a variances and inputs from the start already obsolete," he said. software company but also as an and come up with a strong automotive company. "At an auto framework. "We need to give the car Wind River recently acquired over- company, they think about each a skeleton for software, designing the-air (OTA) specialist Arynga, which individual component,” explained that skeleton so that it is looking to handles software and firmware OTA McCammon. “An engineer can solve welcome new innovation from updates. "That becomes a critical a problem, especially if you isolate different places," he said. aspect to an overall market strategy. the number of variables. The more Software is a living thing. You also variables you put into the At Wind River, that skeleton is called have to manage the threats. People environment in which 'x' has to Helix Chassis, an architecture for talk about vehicle security like you operate, the more complex it end-to-end connectivity and can put a firewall in place and then becomes. In the automotive autonomous enablement. It provides walk away from it. It doesn't work industry, they have become very the sort of comprehensive Cloud- like that," observed McCammon. good at how to separate the based connectivity, foundation for "Securing a vehicle is a combination problem of driving into its security, and modular flexibility that of product and process, and it must constituent pieces." is needed to integrate systems within have the ability to grow and evolve intelligent vehicles and connect them and to morph to meet new threats At the same time, there is system to external networks of devices and as they arise." integration, which "brings all the pieces together to figure out how to make a harmonious signature. We have to look at software the same way. We have to look at how the constituent pieces ultimately are going to interact with each other, and define them upfront to facilitate proper interaction," he emphasised.

In approaching software through a more holistic sense, McCammon uses the term 'from sensors to server room'. As he elaborated: "Start with the sensors in the bumper of the car. Then, all the way back through the Cloud somewhere, there is a data centre, or a collection of servers, that will aggregate that data and ﬁgure

www.automotivemegatrends.com 29 Smart Seats

Smart cars need smart seats

Suppliers in unlikely markets are ﬁnding themselves developing systems that cooperate with self-driving car technology. Freddie Holmes learns from several Tier 1 suppliers how this is aﬀecting the design of car seats

one are the days As Ray Scott, President of Seating at Director of Industrial Design and where basic cloth Lear, told this writer during a visit to Craftsmanship and Consumer and upholstery and the supplier’s Michigan Market Research at Johnson manual adjustment headquarters, innovation in Controls Automotive Seating (JCI), was the accepted automotive seating is registering agrees that seating will indeed norm for automotive something of a renaissance. “I’ve warrant the definition of ‘smart’. He seating. Along with a rising demand been in seating for 20 years, and it suggests that smart seating could for premium materials, electronic is amazing where it is coming to; it feature ‘smart’ materials that offer Gcontrols and greater degrees of is probably one of the fastest climate and stain resistance, as well adjustment, rising levels of vehicle changing parts of the vehicle, aside as ‘smart’ functions through various autonomy are set to overhaul the from autonomous driving electrical and mechanical way car seats function as part of the technology, but it fits in perfectly adjustments and sensors. interior – but is it fair to suggest that with that.” Karl Henn, Engineering seats are becoming smart? Director at Lear, added: “You can do Sitting comfortably? a lot with the seat, it is changing a This is exactly the case, says Philippe lot, and it is going to change quickly.” You will be… Aumont, Chief Technical Officer of Faurecia Automotive Seating. He Andreas Wolf, Head of Continental’s Contrary to popular belief, most observes that three key megatrends Body & Security business unit, notes drivers do not know best when it will continue to spur the integration that thanks to sophisticated comes to sitting comfortably. of additional functionality: car electronic and pneumatic systems, Suppliers have been working closely attractiveness, occupant monitoring “car seats are definitely becoming with chiropractors and ergonomics and autonomous driving. smarter.” Andreas Maashoff, specialists to develop adjustment settings that place the driver into the best possible position. This will not only improve comfort, but also the long-term health of the driver. Three key megatrends will continue JCI’s Maashoff explains that the to spur the integration of additional most obvious reasons for deploying such sensors in car seats – both for functionality: car attractiveness, the driver and passengers – is to allow the seat to “sense occupant biometrics for an initial ‘best- occupant monitoring and practice’ seat position when sitting “ down.” He agreed that this can autonomous driving “improve comfort through electrical or mechanical adjustments, or

30 Automotive Megatrends Magazine Smart Seats

of valuable information is passed between the occupant and the seat sensors – size, shape, weight, biometrics and even heart rates. “We Informing the driver on his status, are in a unique position to be able to collect that information, analyse it, and suggesting that he is at risk will and then use it to do something useful for the person sitting in that improve safety car,” he explains. “When I sit down, I don’t want to be ﬁddling with switches and knobs and a whole “ keyboard of buttons. We want a product that intuitively knows what to do, and when to do it.”

From automatic to autonomous

More than 80% of automotive seats in the world are manually operated by the driver. For cost reasons, this percentage will remain high, says Faurecia’s Aumont. “In any case, smart seating growth will keep surpassing market growth, to help occupants to better converge towards their best comfort scenario,” he says. “Fully automatic active health functions such as seat reads the driver’s is not what consumers are looking massage, lumbar support, heating anthropometric frame – back and for; they want to remain the final or cooling.” Continental’s Wolf torso and legs – and continually decision maker, except for echoes this view. “Modern car seats adjusts to the driver’s sitting emergency, or in pre-crash make driving comfortable, relaxed position. “After you have been on circumstances,” he adds. and safe,” he says. “This helps to the road for a duration of time, you promote not only the occupants’ move – it’s natural – and the seat will Continental’s Wolf observes that car well-being, but also their health.” move with you,” says Lear’s Scott. seats already offer a wide range of Employees use this prototype comfort and safety functions, but Faurecia is developing solutions to vehicle around six days a week, and although memory functions offer monitor what it calls ‘driver status’. cover thousands of miles each automatic adjustment, the seat In September 2015, the supplier month to gather data. currently does not react revealed its Active Wellness seating autonomously during the entire platform that can detect Henn points out that this seat is driving scenario. “Seat positions can drowsiness, stress, and then offer “about physical connectivity, and the be stored and retrieved by saving alerts and comfort adjustments. seat is the only place where you the seat setting either in the vehicle, “Drowsiness is a major cause of fatal have physical connectivity with the or in the vehicle’s starter key. Using accidents, especially in North vehicle all of the time.” Lear has this approach, the seat will America, where long trips are observed that a significant amount automatically adjust to the driver’s frequent,” explains Aumont. “Stress makes you take wrong decisions. Informing the driver on his status, and suggesting that he is at risk will improve safety.” He advises that combining drowsiness detection with automatic emergency braking (AEB) would also improve safety. The seat is the only place where Lear’s intelligent seat – dubbed InTu you have physical connectivity with – is due to hit the road in 2018 in a premium US sedan. Ahead of its the vehicle all of the time release, we tested a prototype version of the seat in various driving scenarios around Detroit, Michigan. “ A sensor mat embedded within the

www.automotivemegatrends.com 31 Smart Seats

Intelligent seating is not simply a frivolous technology to entice new “buyers, but absolutely vital for the success of the driverless car

preferred position, when he or she unlocks the vehicle,” explains Wolf. In future, however, he expects seats to actively communicate with drivers as part of a ‘holistic human- machine interface (HMI)’ in order to supply important information, such as warnings.

With vehicles becoming increasingly automated, the driver will be able to perform tasks that do not require hands on the wheel, or eyes on the road. This opens up a number of opportunities – and the seat needs to be able to adapt to the driver’s new-found freedom within the car. “We are looking at how you can turn the seat around 180 degrees so the driver could do some reading,” says Lear’s Scott. “But you also need to be able to quickly turn and get back to driving. These are great discussions, because it all centres around the seat.” Continental provides the controls for diverse electric adjustments (green) as well as for seat climatisation (red), and realises massage Following an extended period of (blue), seat-contour (blue), memory, and numerous safety functions automated driving, the car seat could also provide haptic or audio particular situations by a vibrating Faurecia’s Aumont notes several feedback in order to alert the driver seat,” affirms Continental’s Wolf. points that need to be monitored by to an event that requires the driver the seat in the case of autonomous to regain control. The intensity of “Automatic adjustment can prepare driving. “Is the seat in the right driving such feedback would vary for crash situations, and sensors can position, and is the driver too drowsy depending on the degree of danger even restrain adjustments in specific to take over the wheel?” he asks. – an imminent crash situation would driving situations,” adds JCI’s Ultimately, he affirms that intelligent not elicit a gentle vibration, for Maashoff. For example, he says the seating is not simply a frivolous example, but a harsh warning to sensors may not allow drivers to lie technology to entice new buyers, but quickly gain the driver’s attention. flat in a sleeping position or sit at 90 absolutely vital for the success of the “Car seats can make an important degrees to the driving direction until driverless car. “There will be no contribution to automated driving, the scenario is deemed safe for autonomous driving scenario as a driver could be alerted to autonomous mode to resume. without a connected seat!” he warns.

32 Automotive Megatrends Magazine Connected Car

It's time to redesign the connected car

In the interests of cyber security, Kaspersky Lab wants the industry to collaborate on a ‘complete redesign’ of connected car architecture. By Freddie Holmes

he connected car is here, but is it being designed in a way that prevents criminal hackers from taking control and causing havoc? It is a question that has sparked much debate within the automotive iTndustry, and a topic that looks set to rumble on for some time.

However, Megatrends learns that although the automotive industry is making a concerted eﬀort to ﬁnd vulnerabilities in vehicle networks, this is not enough by any stretch. According to Kaspersky Lab, the industry needs to come together to provide a complete solution from cradle to grave – and this requires a redesign of vehicle architecture.

Described as a ‘strange company’ in the sense that its Russian roots led to sales first arising with the Italian marketing and protection Ministry of Foreign Affairs, against automotive specific Kaspersky Lab is becoming a threats, but is also a racing driver in household name in automotive the Kaspersky championship. cyber security. Based in Moscow, Alex Moiseev, Managing Director of Through Kaspersky’s mixed Europe at Kaspersky Lab, explained portfolio of automotive clients, how the company works with cyber which includes Tier 1 suppliers and security “in a wider sense.” As he their OEM customers, the company noted, not only does the company is in conversation with stakeholders work to protect customers at home to redesign the in-car system or in the office, but also to secure architecture to become more secure critical infrastructure, factories, from the outset. “The design itself is he warned, and vehicle components and the car not really secure,” said Moiseev. “We “without changing the itself. As part of a multi-faceted role, can provide patches and add-ons design, it is not really Moiseev is not only in control of which basically solve 70% of issues. possible to provide a fully European operations, handling The problem is the remaining 30%,” secured system.”

www.automotivemegatrends.com 33 Connected Car

The day you declare that the car is connected, you “need to play by the rules of the connected world In order to design such a completely cars. What similarities are shared many cars featuring advanced secure vehicle system – that is, an between Formula 1 and cars on the driver assistance systems (ADAS), in-car network that cannot be road today when it comes to cyber camera and radar sensors have hacked – OEMs need to cover all security? “With the Formula 1 car, become commonplace. These bases. “It must be covered 360 the technologies involved will sensors are linked to the vehicle’s degrees,” said Moiseev. Even if sooner or later move to road cars. electronic control unit (ECU) which bought-in components are designed The big difference is that the time manages the car’s electronic to be secure against hacking, the for taking a decision in Formula 1 systems and communicates with connected car’s Internet connection doesn’t exist,” highlighted Moiseev. components. But as Moiseev is an entry point to the overall “You really must be live and make a explained: “The entry to this system, he explained. In addition, decision about whether something communication is not encrypted entry to the network could be is malware, if you need to stop an and right now, it’s not even possible gained at the factory or at a attack, or if it simply looks like an to detect which devices are dealership during maintenance. attack but is not. You can’t allow communicating with each other in false positives because you risk the car. That’s problematic.” This Kaspersky has had a close-knit blocking something which would be can be solved through software relationship with Ferrari since 2010 a tremendous disaster afterwards.” patches he advised, and is “quite as part of “a wide partnership,” said easy” to re-design it securely. “The Moiseev. “We work with them on a Safeguarding complicated part is that while the technological level which allows us automotive world moves pretty fast, to learn a lot.” Full security of Ferrari autonomous driving it is also quite conservative and factories – from the robots in does not like to change things it is assembly facilities to the aluminium In particular, there is a close link used to. Unfortunately, the day you melting process – forms part of this between the speed of decision declare that the car is connected, partnership. “That’s on the factory making during a Formula 1 race and you need to play by the rules of the side, and we have started to work the requirements of an connected world.” with them also on the car side to autonomous driving vehicle. open the dialogue about car Decisions need to be made Many stakeholders believe that the security,” he advised. What’s more, immediately, and without a false issue lies with the fact that OEMs Kaspersky works with the Ferrari positive or negative. In Formula 1, are not inherent cyber security Formula 1 team to provide a an incorrect decision could lead to experts, and are effectively playing complete cyber security service, lost position in the race, but catch-up. Do they need to reach out even while the cars are on the track. indecision in an autonomous to companies such as Kaspersky to vehicle could very quickly lead to gain a better idea of what needs to From aerodynamics to fuel loss of life. be done to protect consumers? “Of efficiency, it has long been course, yes,” Moiseev affirmed. “If demonstrated how the In this case, a complete redesign of anybody started building a security understandings from motorsport new car infrastructure is company from scratch, it would take can be transferred to passenger “fundamental”, said Moiseev. With them about ten years to be at the required level of expertise. So why would you reinvent the bicycle?” he asked. “For automotive, the goal is to be connected to unload and upload data. For us, the goal is to Without changing the design, its analyse whether this data is bringing any threat or risk.” not really possible to provide a fully secured system Getting sensitive With a high end brand such as “ Ferrari, such luxury vehicles are

34 Automotive Megatrends Magazine Connected Car

While the automotive world moves pretty fast, it is also quite conservative and does not like to “change things it is used to

prime targets for theft, but are they about the private data,” said also prime targets for hacking? Moiseev. “Microphones, cameras, address books, whatever contains Yes, said Moiseev, but adds that it is data in the car can be removed, and not quite that simple: “In terms of that data could be compromised. In the vulnerability of a Ferrari, the car the case of the luxury car, these being stolen is a threat, but it is a people are particularly sensitive less sensitive issue for their owners. about that data.” They say, ‘All right, it’s insured and at the end of the day it’s not that One in, all in painful.’” In essence, for consumers that can aﬀord to purchase a In order for the automotive industry Ferrari, the cost of insurance or to tackle the issue of cyber security in even replacing the vehicle is of less all senses – from the manufacturing concern than for mainstream car plant, to the dealership, to securing

If anybody started building a security company from scratch, it would take them about ten “years to be at the required level of expertise

owners. However, “car features can the in-vehice network – a be disabled, and then they can be collaborative approach is required. ransomed,” warned Moiseev, “We would be crazy to skip at least “especially when we speak about a one of the [cyber security] vendors,” car which costs you six ﬁgures. If stated Moiseev. “Everybody must get somebody asks you for US$100 to in. Commercially, we all compete and re-enable that feature, you would try to provide more attractive probably accept that, which is quite marketing propositions, but dangerous.” technically we are providing the same solution: security for people. The What luxury vehicle owners are more choice people have, the more worried about is the data that is attractive prices will be,” he stored in the car’s network. “It’s concluded.

www.automotivemegatrends.com 35 Auto Shows vs. Tech Shows

The evolution of the motor show circuit

Megatrends examines the changing role of motor show in today’s automotive industry. By Freddie Holmes, Megan Lampinen and Michael Nash

or decades, motor shows have been the source of excitement, the place for vehicle manufacturers to launch new products and spectacular concept cars, The number of major motor shows, for executives to make bold claims and deliver key messages, and for their size, and the cost of attending, Fthe public to get up close to their dream cars in a glamorous setting. leaves OEM budgets and human However, as marketing strategies resources stretched have evolved from pulling back the “ wraps on press day to running tireless online campaigns that reveal almost everything about the car – even the car itself – weeks ahead of a motor show, a shadow of doubt has begun to fall over the beneﬁts of the traditional auto show.

The presence of OEMs and suppliers at events like the Consumer Electronics Show (CES) in Las Vegas and Mobile World Congress (MWC) in Barcelona has grown considerably during recent years. At the same time, vehicle manufacturers and other leading industry players have begun questioning whether attendance at traditional motor shows meets their requirements as they seek new and better focused ways of promoting their products and oﬀerings.

A variety of reasons can be attributed to this shift in focus, one of which is the changing nature of the automotive industry itself; as

36 Automotive Megatrends Magazine Auto Shows vs. Tech Shows

the major OEMs shift their focus from building and selling cars to becoming mobility providers, and business models evolve from ownership to usership as the inﬂuence of consumer electronics products and services works its way into mainstream cars, so vehicle manufacturers know they too need to evolve to remain relevant.

Motor shows still present OEMs with a perfect platform to launch their vehicles; increasingly, however, those same OEMs are looking to specialist shows to promote the technology inside their vehicles. In addition, the number of major Chevrolet used CES 2016 to unveil the prroduction version of the Bolt motor shows, their size, and the EV, a week ahead of the 2016 Detroit Auto Show cost of attending, leaves OEM budgets and human resources stretched. Smaller booths at suggesting Ford would have a from its green roots? “Maybe after specialist shows enable OEMs to considerable presence at the 2016 so many years of focusing on green deliver their messages without Frankfurt Motor Show (IAA). tech, the industry is looking for an being drowned out by the opportunity to showcase other competition, and often to a broader, Discussing the 2016 Geneva Motor things to bring a bit more buzz and perhaps more mainstream Show, the OEM’s spokesman excitement,” said FISITA’s Paul audience. referred to the number of high Mascarenas. “I’m not saying green is out, but some of these new vehicles are really exciting.”

Mascarenas, currently President as well as Chairman of the Executive Some big names are deciding not to Board of the umbrella organisation for national automotive engineering have a presence at some of the societies around the world, told Megatrends he believes that many of largest shows in the world, which is the vehicles on show at today’s motor shows will have a hybridised reflective of a declining tradition powertrain, for example, but “this is not the focus of the car. The Acura “ NSX has a hybrid powertrain but it’s never really talked about. Instead, performance vehicles on show, as the focus is on the styling, the well as luxury vehicles and SUVs. driving experience and A shift of focus “Geneva was once dubbed as a performance of the vehicle.” “The motor show circuit is definitely show for green cars,” he recalled. changing,” a Ford spokesperson told “But that has changed – our Mascarenas added: “Several OEMs Megatrends during the 2016 Geneva exhibition, for example, revolved are now talking about things they’re Motor Show. “Some big names are around the Vignale brand, which doing outside the traditional deciding not to have a presence at has been steadily growing in vehicle space, which is important some of the largest shows in the strength across the continent.” because it is indicative of an world, which is reflective of a industry collectively recognising the declining tradition.” And it wasn’t just Ford that decided macro trends like population to go with luxury and performance growth, urbanisation and The OEM has confirmed rumours over green and clean at the 2016 congestion, and the need for the that it will not be exhibiting at the Geneva Motor Show. Volvo, Aston industry to evolve over time to 2016 Paris Motor Show: “It wouldn’t Martin, Bugatti, Lamborghini and something that is less dependent work for us in terms of timing for Maserati were out in force with on individually-owned vehicles and product launches,” a Ford luxury SUVs or high performance more of a mobility or spokesman told Megatrends . “We’re vehicles. transportation-as-a-service type of going to take a different approach model. Fortunately, it doesn’t look this year compared to what we’ve Are there some underlying factors like an industry that is getting left done in the past.” He continued by that have caused Geneva to stray behind.”

www.automotivemegatrends.com 37 Auto Shows vs. Tech Shows

This was echoed by Christopher Preuss, Senior Vice President, Marketing and Communications at Delphi. In an interview at CES 2016, he said: “We hear a lot of talk suggesting that this is the beginning CES has never been more highly of the end of the traditional auto industry,” he explained to attended by automotive OEMs and Megatrends . “But I don’t think that it’s realistic. The original role of auto their adjacent suppliers shows was to sell vehicles to customers, and I don't think that relevance has gone away one bit. It's “ still a very important part of the suppliers, which develop the to show its all-new E-Class, ahead of industry's ability to reach products in the first place. its otherwise official global debut in customers.” the Motor City. Speaking from the Lars Reger, Chief Technical Officer of Detroit show, Mike Richardson, However, he believes that events chip manufacturer NXP, told Executive Board Director, Senior like CES and MWC will be critical to Megatrends during CES that times Vice President and Strategy Officer OEMs as the nature of the were changing. “This convergence at Nexteer, noted that “CES has automotive industry evolves. “I think [of industries] has imploded… This never been more highly attended by this lends credence to the idea that is the Car Electronics Show and not automotive OEMs and their the automotive industry is no longer the Consumer Electronics Show any adjacent suppliers.” Also at CES, just about transportation,” he said. more.” All the European Tier 1s and Johannes Roters, Chief Executive of OEMs could be seen on the show Yanfeng Automotive Interiors, Electronics puts the floor, he suggested, and many of remarked that the company was “in them make use of the stage to the middle of the other suppliers” spotlight on suppliers announce new technologies. “For with peers such as Johnson us, where in 2008 we had been Controls, Continental and Faurecia Once only seen at the back of the there mainly for car radio purposes, “in the neighbourhood.” party, suppliers have certainly risen it is now very strongly advanced in social status at motor shows. No driver assistance systems (ADAS) Looking at the big picture, Roters longer overshadowed by their OEM driven,” explained Reger. believes that the auto show remains customers, large – and growing – Tier the platform for OEMs to 1s are now firmly on the guest list. Taking place just days before the demonstrate “new products, new 2016 North American International trends and new directions,” but One reason behind this has been Auto Show (NAIAS) in Detroit, Reger pointed out, “The auto industry also the exponential rise in demand for observed that CES – which is not an has a strong supply industry. You vehicle electronics and luxury in- automotive event – had in fact have to be here too as a strong vehicle traits, such as connectivity, drawn much of the attraction away supplier if you would like to support autonomous driving and premium from one of the key events on the them [the OEMs] globally.” interiors. While the OEMs ultimately global automotive calendar. CES get the bragging rights, much of saw GM launch the Chevrolet Bolt; Describing auto shows as “a their success is down to the Mercedes-Benz, too, used the event meeting point” and “a beautiful opportunity to exchange and talk about specific trends,” Roters observed that the industry is changing. In order to keep up with this change, suppliers can no longer afford to take a back seat at auto shows. “Google and Facebook would like to enter this business, and that means things are happening. A lot of changes are in front of us, and so it's a good opportunity to stop and to look at all the products and new innovations here. As a supplier, you should be part of this,” he affirmed.

Weeks after automotive industry announcements from Las Vegas, Ford was one of the many OEMs that opted for performance and luxury Barcelona became a source of over green technology at the 2016 Geneva show automotive news; partnerships

38 Automotive Megatrends Magazine Auto Shows vs. Tech Shows

Design fairs, especially in Europe, are gaining increasing interest from automotive players were announced at MWC between oversaw Toyota's Setsuna concept audience who might not discover us SEAT, SAP and Samsung, and vehicle at this year's event. As he at motor shows or in the betwe“en Visa and Honda on explained to Megatrends : "As a automotive press," he elaborated. payment; Accenture and SEAT company, we gain in three ways And ﬁnally, with many opinions and announced a partnership on car-to- from attending an event like this. It evaluations from various home connectivity, car status alerts, gives us a chance to get feedback perspectives, it pushes us as and a driver behaviour monitoring from an audience that is educated designers to think in new ways and capability; and Qt partnered with in terms of design and style." enables us to stimulate future Harman, with Qt providing Harman Notably, this audience is often vehicle development or concept with leading application and UI completely diﬀerent from the one making." framework for the creation of targeted at the Frankfurt or Tokyo connected, personalised, adaptive shows, for example. "It exposes Toyota's Lexus brand had an active and secure vehicle infotainment these unprecedented ideas to an presence at both this year's Geneva systems. Lifestyle events

Lifestyle events represent an alternative approach to the traditional motor show for some brands. Like motor shows, they oﬀer pivotal brand exposure, but they also reach a brand new group of people. Ford of Europe Design Director Chris Bird commented that design fairs, especially in Europe, are gaining increasing interest from automotive players. "The Milan fair really captures a lot of attention from all areas of design."

Milan’s Salone del Mobile began as a furniture design show but today attracts the likes of Toyota, Lexus, At the 2016 Mobile World Congress (MWC) in Barcelona, SEAT, Samsung Mini, Jaguar Land Rover, and many Electronics and SAP created a technological alliance to develop future others. What's the draw? Kenji Tsuji connected car projects

www.automotivemegatrends.com 39 Auto Shows vs. Tech Shows

The new Mercedes-Benz E-Class appeared at CES 2016 in Las Vegas, four days ahead of its oﬃcial world premier in Detroit

Motor Show and the Milan Salone event have their role in our car technologies, e-mobility, Del Mobile. Alain Uyttenhoven, communication despite their mobility services and urban Head of Lexus Europe, touched on differences," Uyttenhoven mobility. the different benefits from both explained. "Obviously an event like approaches. As he told Megatrends : a motor show is kind of an ‘old But fail to offer the vehicle "Both events play an important role playground’ for all automotive manufacturers what they want, and in exposing the brand, however they brands. Lifestyle events such as they will stay away. No auto show have a different nature and as such Milan Salone are not so obvious for features every OEM, but as the Mid- attract a different public. The an automotive brand yet. But more America Trucking Show discovered Geneva Motor Show is primarily and more we are trying to occupy in 2016, things look very different attended by automotive media and this territory for Lexus." when all the OEMs decide to pull customers interested in purchasing out. Furthermore, such was the vehicles. The Milan Salone, on the To remain relevant and reflect the truck industry’s desire for a US show other hand, is attended purely by changing nature of the auto show, that better reflected the needs of people interested and specialised in event organisers have begun to the OEMs that an entirely new show design and lifestyle. Hence, the incorporate aspects of specialist was created, starting in 2017. The inaugural North American Commercial Vehicle (NACV) Show will take place in September 2017 in Atlanta, organised by Deutsche Messe subsidiary Hannover Fairs The industry’s love affair with – and USA (HFUSA), and Newcom Business Media. dependence upon – the traditional Clearly, the industry’s love affair with – and dependence upon – the auto show is changing traditional auto show is changing. But falling out of love with the concept? That’s less clear cut. It’s “messages conveyed at both events shows into their own events. At the difficult to imagine an auto industry have to be adjusted to the different 2015 Frankfurt motor show (IAA), coping without the framework of nature of the public and the events Halle 3.1 was dedicated to the New the traditional auto show. And the themselves." Mobility World; the 2017 Detroit many thousands of visitors who Auto Show will feature a similar pass through the gates of the big At Geneva, Lexus directs brand exposition, Automobili-D. The idea shows suggest there’s a demand for focus through its products, design at both is to offer a dedicated such events. The OEMs have to work and technologies. At Milan Salone, it exposition for OEMs, suppliers and to make those shows. The question presents the brand by means of art tech start-ups operating in the areas is, can the OEMs make the shows and artistic objects. "Both types of of autonomous driving, connected work for them?

40 Automotive Megatrends Magazine Truck Industry

When is a truck not a truck? When it’s a service

With major transitions taking place across the commercial vehicle sector, it is time to view the truck buyer as a client and not as a customer, writes Sandeep Kar, Global Vice President at Frost & Sullivan

ccording to an old digitisation in trucking, a trend that level are encouraged to take a adage in the is omnipresent now in both wider look. Tier 1 and 2 suppliers, automotive industry, developed and emerging markets. fleets, owner-operators, truck passenger cars are drivers, technicians, and even bought with the heart, With rising competition, shrinking shippers – all are experiencing this commercial vehicles degrees of separation between seismic shift. are bought with the mind. trucks (products) offered by the major truck OEMs, and the rapid The global freight movement ASince the first truck was built and proliferation of electronics and industry is undergoing a digital sold, the OEM focus has always connectivity related to advanced transformation that is creating been on the product. Over the past technologies, the global trucking revenue opportunities of decade in particular, truck industry is undergoing a tectonic approximately US$207bn by 2025, manufacturers have competed on change, a change that has and this is limited to only the section factors such as fuel economy, impacted many other adjacent and of the industry between reliability, durability and safety, and more recently total cost of ownership. All along, the truck was the product at the centre of all truck manufacturer improvements and innovations, benefiting a range of The global trucking industry is customers that included fleet owners, owner operators, drivers undergoing a tectonic change, a and technicians. change that has impacted many However, as competition increased and the areas offering one truck other adjacent and unrelated manufacturer an advantage over another shrank, it became evident “ industries in the past that this age-long focus on products was about to change.

Moreover, the business of trucking became focused on downtime unrelated industries in the past. manufacturer or shipper and reduction, higher degree of mobile This change is happening at the warehouse. Telematics represents resource eﬀectiveness and very core of this industry, one that roughly US$35bn in revenue eﬃciency – with both the truck and is changing focus from products to opportunities. So far, the the driver being mobile resources – services. Product-based business proliferation and market adoption as well as better asset utilisation models are transforming into of telematics has been a story of and ultimately greater value to service-based business models. service providers and OEM push, shippers and consumers. This was Those who thought this change and this has delivered handsome further accelerated by the advent of was happening only at the OEM growth.

www.automotivemegatrends.com 41 Truck Industry

Moreover, telematics subscription connectivity-enabled technologies, renewal rates have also been high, will offer OEMs, suppliers and indicating that subscribers who use service providers with monthly or this technology for mobile resource annual revenue streams. This will management derive value from it. In position OEMs in a new territory, 2015, approximately 17.1 million where their value proposition will commercial vehicles globally were transform from being product connected to telematics services, manufacturers and sellers to service according to Frost & Sullivan providers. Look around this industry analysis. Of this, 46.4% of vehicles and follow some of the recent were medium-heavy duty trucks, partnerships, acquisitions, ensuring a steady growth of the stakeholding patterns, and global commercial vehicle personnel changes emerging from telematics subscriber base thus far. Gothenburg to Tokyo, from Munich By 2022, the subscriber base is to Mumbai, from Stuttgart to expected to more than double, Shanghai, and Chicago to Sao Paolo, reaching 40 million. At Frost & and the beginnings of a shift in the Sullivan, we expect market pull to industry can be seen; product outweigh the push from OEMs and innovations will continue, but suppliers, and that will greatly service and solution development expedite the proliferation of and positioning will emerge as a telematics in global commercial higher priority. vehicles. This will largely be driven by a confluence of factors; however, This implies a new focus on entire the most important factors will be business models, affecting OEMs, the need for greater supply chain suppliers, fleet managers, owner-

The global freight movement industry is undergoing a digital transformation that is “creating revenue opportunities of approximately US$207bn by 2025

visibility, mobile resource operators and shippers. effectiveness and efficiency Fortunately, technology will come to enhancement, and emergence of the rescue that affects powertrain, new and customisable pricing plans. chassis, safety and telematics. All the talk of connectivity and While telematics technology is telematics may easily draw focus steadily and surely ushering in towards connectivity technologies, digitisation in commercial vehicles, but one needs to understand that this trend is gaining momentum looking forward, we should not look against the backdrop a notable shift at service-based business models in in the business of commercial the context of connectivity vehicle sales. technologies but just the opposite, for example connectivity We are now entering a phase in technologies in the context of commercial vehicle sales where an service. That is why it will be crucial OEM’s relationship with its customer to look at technologies and services does not end when the truck is sold, that harness connectivity as well as but in fact begins at that point. offer innovative and attractive value Thereafter, ‘soft’ technologies, for propositions to all stakeholders in example advanced electronics and freight mobility.

42 Automotive Megatrends Magazine Truck Industry

The innovations in the freight duty cycles of trucks are forcing a businesses for which the trucks are brokering market, prognostics, fresh look at a truck’s purpose. built to cater. driver monitoring, automated and automatic transmissions, Frost & Sullivan expects global Compared to low-cost trucks, value infotainment, truck safety, comfort medium-heavy duty truck sales to trucks feature a higher degree of and convenience technologies, and reach 2.68 million units in 2016, but reliability and durability, improved many other commercial what is more important is the rise of levels of comfort, more connectivity technologies that surround us today a new type of truck: the so-called and safety, and more applicability to show that something exciting is ‘value truck’. For the last decade, urban and regional freight mobility. happening in the global commercial global commercial vehicle sales In 2014, value trucks accounted for vehicle industry. In the past, it was were supported largely by low-cost 17% of total truck sales; this share is the product (read: truck) that trucks sold in developing markets, expected to touch 19% in 2016. created services, but now we are especially the BRIC markets. It is in Value trucks are being demanded by seeing services creating products. these very markets that we are truck fleets and owner-operators Urban delivery is driving powertrain seeing the rise of value trucks. seeking better products for development and truck design; These are trucks that are priced delivering the better service that supply chain visibility is driving higher than low-cost trucks and shippers are demanding from telematics adoption; driver health, lower than premium trucks. This carriers in developing markets. wellness and wellbeing is driving in- represents the rise of a ‘middle cabin and also powertrain and class’ in the global truck market. As the industry now finds itself on chassis technology innovations; and What is more remarkable is the fact the cusp of transition from a more fundamentally, shared that these trucks feature a high product-based to a service-based economy principles (for example, degree of advanced truck business model, it is important to smartphone-based freight mobility) technology proliferation and are understand that this is just a is driving asset utilisation, while the being created in response to the transition and not the end-game. Look around in adjacent markets and other non-related markets, and enough evidence can be found to suggest that another transition will soon follow, one that transforms the service-based business model into a We are now entering a phase solutions-based business model. That transition will happen much in commercial vehicle sales more quickly than the one from products to services. With such transitions under way, it is time to where an OEM’s relationship quickly become accustomed to viewing the truck buyer as a client “with its customer does not end and not as a customer. when the truck is sold Disclosure: Sandeep Kar serves on the advisory board of Transfix and Vaahika, and on the board of South End Travels

www.automotivemegatrends.com 43 OEM Strategy

OEM strategy: Ford in Turkey

Ford Otosan exempliﬁes the Turkey's quest to position itself as a high-tech R&D location, as well as an ideal manufacturing base. By Xavier Boucherat

ith its highly Despite civil unrest, instability in the Organisation of Motor Vehicle skilled, low-cost Kurdish region, and ongoing conﬂict Manufacturers (OICA) show that in labour force, in neighbouring Syria, Turkey’s 2015, the country achieved a total Turkey has long success story continues. The output of 1.36 million units, a been hailed as country’s economy grew 5.7% in Q4 16.1% increase on 2014’s figure of an ideal 2015, the third highest rate for a 1.17 million units. Approximately manufacturing location for OEMs G20 country after China and India. 73 out of every 100 vehicles and Tier 1s. But now the country manufactured in 2015 were Wwants to forge itself a new The automotive industry has grown exported, mainly to European reputation as a haven for cutting accordingly, and is in a good markets. Major global brands edge research and development. It’s position to lead Turkey’s manufactured in the country a plan with ambition that reﬂects its transformation into a high-tech include Fiat, Ford, Daimler, Toyota, rapid growth in recent years. hub. Figures from the International Hyundai and Renault.

44 Automotive Megatrends Magazine OEM Strategy

Not quite European, The result, he suggests, is a dream Of course, labour costs have risen, set-up for manufacturers – and China remains a cheaper not quite Arabic proximity to Europe and a secular alternative, but Turkey retains government has beneﬁtted Turkish competitiveness, partly on account Formally established in 1977, Ford education over the years, resulting of its labour laws. In Turkey, a full Otosan is an equally owned joint in one of the most highly skilled working week is 45 hours long, venture (JV) between Ford and workforces in the region. compared with a European Union Turkish industrial conglomerate Meanwhile, its emerging market (EU) average of 37.2. “The labour Koç. Total production for the OEM in status means that labour costs are costs will gradually increase,” 2015 was 334,622 units. In total, relatively low, and energy costs are concedes Yenigun, “but the Ford Otosan produces 73% of Ford’s very competitive, particularly specialised skillsets we’re

Turkey’s emerging market status “means that labour costs are relatively low, and energy costs are very competitive

European CV sales, and 81% of its compared with Eastern European accumulating, along with continued Transit model sales. The CV locations. Geographically, it also investment from the government, specialisation is important – Turkey beneﬁts from easy access to the raw mean that continued growth is is one of only two countries globally materials needed. certain.” Technical specialisation is to manufacture the Ford Cargo particularly important, especially if heavy truck, at the Inonu plant, Yenigun is conﬁdent that the Turkish industries are to realise their which has annual capacity of 10,000 industry will go from strength to high-tech goals. trucks, 66,000 engines and 45,000 strength, and that the incentive is gearboxes. Ford Otosan was also there for more investment in the Stepping up involved in the development of the Turkish automotive industry. “It’s one Ford Connect and, most recently, of the strongest industries in Turkey,” “We have a big ambition to get ahead the Ford Transit Courier vans. he says, “and not just because of us. of the curve in technology,” says Hyundai, Toyota, Fiat, Renault - we’re Yenigun. Ford Otosan’s R&D facility in “It’s quite an interesting place,” all located in almost the same region, Istanbul currently employs around comes Haydar Yenigun’s which has led to the development of 1,500 people. Current studies are understated assessment of his a supply base infrastructure. In performing research on home country. An engineer by addition, more than 50% of our autonomous driving for heavy training, Yenigun is currently a products leave Turkey for other commercial vehicles (HCVs), as well General Manager at Ford Otosan – European markets, which means as connected software for CVs. These an executive role comparable to most European suppliers are using can monitor engine condition, and Chief Operating Officer. “On the our supply base for engine conduct preventative maintenance one side you have unrest, components, body components, throughout the vehicle. sometimes war, and on the other plastic parts, and more.” Further side you have Eastern Europe. opportunities will arrive with the Engine development is another What we have is a culture that’s not recovery of the oil price, he particular strength. In April 2016, quite European, and not quite concludes, when Russia will once the Ecotorq truck engine went into Arabic.” again become attractive to OEMs. production at the Inonu plant. Ford

www.automotivemegatrends.com 45 OEM Strategy

Otosan is the only company within modern, servo-mechanical Human-robot co-operation has been Ford’s network that develops heavy instruments powered by electricity, adopted at some of the world’s most truck engines, explains Yenigun. which are less energy intensive. technologically sophisticated plants: These engines will be exported Quality improvements are achieved Audi, an early adopter of the worldwide, and production will also through the use of electronic concept, uses robots at its Ingolstadt start in China. The Turkish sensors and lasers to perform facility to correctly identify and hand government approves; speaking at measurements on parts. components directly to workers at an opening ceremony at the plant, the right time. At Bosch’s ‘smart the Minister for Science, Industry Other advanced technology at the factory’ facility in Feuerbach, which and Technology, Fikri Isik, said facility includes a remote laser produces common rail pumps for Turkey had become an “exporter of system that can perform welding diesel engines, the supplier’s R&D services.” operations at a distance of up to automated production assistant one metre. This, explains Yenigun, (APAS) operates in extremely close Ford Otosan isn’t alone – Tofas, means the robot no longer has to quarters with workers to relieve FCA’s JV with Koç, also has R&D perform complicated positioning them of dangerous, repetitive tasks. capabilities at its plant in Bursa. The manoeuvres to get close to the facility is FCA group’s largest in sheet metal, saving both time and Looking forward, Yenigun sees Europe, manufacturing vehicles for energy costs. Cycle times can thus future potential in what many refer seven different brands. Most recent be shortened on some parts by up to as Industry 4.0, but what he to go into production was the to 60%. prefers to call connected Tipo/Egea platform in April 2016 – technologies and digitalisation. This designed and engineered in Turkey. Of particular importance for Ford could usher in improvements not Otosan’s future manufacturing just in production efficiency, but in Ford Otosan has also invested strategy, says Yenigun, is increasing the way the organisation could heavily in the manufacturing side of levels of human-robot co-operation. innovate and work with ideas. “We the equation. Modern technologies Collaborative robots are built with number over 10,500 people in total,” are on prominent display at the sensors and padding that allow he says, “both white and blue collar. Ford Yenikoy plant, opened in May them to work without safety fences An effective digital platform could 2014 with an investment of and security areas. When a worker allow us to quickly collect ideas from US$511m. The plant produces the enters a pre-determined work area, each one of these 10,500 people.” Ford Transit Courier and Tourneo the mechanism slows down. Just This way, he concludes, Ford Otosan Courier, with an annual capacity of before it comes into direct contact and the Turkish automotive around 110,000 units. with a worker, it stops altogether. industry’s effort to become a centre for high-tech design and Compressed-air powered robots In the case of Yenikoy, the robots manufacturing could be a have been scrapped in favour of assist workers with tyre assembly. collaborative one.

46 Automotive Megatrends Magazine Emerging Markets

Back to business: Iran, a new emerging market

Iran has reopened its markets to the automotive industry. The environment is attractive, but interested parties must keep an eye on customer preferences and new legislative initiatives. By Philipp Grosse Kleimann , Santiago Castillo and Alexander Brenner of Roland Berger Strategy Consultants

n a world beset with structural €427m (US$483m) in debt waivers economic problems, automotive and discounts for the Iranian investment locations with high- manufacturer. Peugeot and Iran growth potential resting on Khodro plan to produce Peugeot's sound economic fundamentals 2008 SUV and the Peugeot 208, with seem few and far between. On the ﬁrst vehicles rolling oﬀ 16 January 2016, it was announced production lines in 2017. Daimler, that Iran is in compliance with the UN which gave up its 30% stake in Inuclear agreement, resulting in Khodro Diesel in 2010, has already almost all international economic announced plans to restart sales sanctions against it being lifted. and local production.

The critical question is how the Daimler predicts intense demand overall market has changed since for commercial vehicles, trucks in those sanctions were imposed. particular. Players such as Audi, Automotive players looking for Volkswagen, BMW, and Hyundai lucrative opportunities will need a who, until now, have not had a thorough understanding of recent manufacturing presence in the developments and the particulars of country, started exploring the the Iranian market: the competitive market and holding discussions with environment, the specific regulatory Iranian OEMs in mid-2015. There is and taxation conditions, and current still a perceptible caution for now: customer preferences. BMW has said it will hold back and see how political and economic A hurried return to the developments unfold. Fiat Chrysler has described the Iranian market as market very promising but too early to judge. Skeptics note that if Iran does Although most sanctions preventing not stick to the agreement, European firms trading with Iran sanctions may be reintroduced at were already lifted at the beginning any point. At the end of February of 2014, the automotive industry 2016, however, Iranians has been hit significantly. After overwhelmingly reelected Rouhani reaching a peak of 1.5 million units and his moderate allies, a positive sold in 2011, it crashed in 2013 with sign that Iran will abide by the terms sales of only 670,000 units. By 2014, of the nuclear agreement. sales had recovered significantly, to 930,000. Now the storm has passed Solid fundamentals and former trading partners are scrambling to get back into Iran. The ongoing sensitivity of the Peugeot is back with a new Iran political situation notwithstanding, Khodro joint venture that includes the fundamentals of the Iranian

www.automotivemegatrends.com 47 Emerging Markets

market are highly promising. Iran De mand for foreign products has a population of 80 million – 3 roughly the same size as Germany – Irania n custom ers prefer im ported goods beca use of their half of which is under the age of perceived better quality – Survey shows highest interest in thirty and highly educated, in imported cars particular in science, engineering, Cust omer att itudes t oward forei gn compa nie s, g ood s an d s erv ices and technology. The IMF has Which nat ion ali ty Which coun tr ies How g ood d o you What is the main What kind of predicted economic growth of 4.4% of co mpanyw ould are you interested in con sider the qual it y reas on you are imported produ cts you consider working visiting? of produ cts fro m in terested in would you be in Iran from 2016 onwards if for? these countr ies? imported goods fro m in terested in? sanctions remain lifted. Although the abroad? 87 83 85 country continues to be dependent 80 on oil revenues, it has managed to 66 gradually reduce the share of 49 40 40 37 38 government revenues based on oil 33 29 31 exports. As of December 2015, the share of oil in Iran's budget was 9 9

26.1% – a decrease of 13.8% over USA GermanyFrance USA GermanyFrance Germany USA Japan Better Late st More Car/ Perso nal Com - qua lity de sign cho ice mot or electro. put ing same period last year.

Note : Survey c onducted by On Device Rese arch in August 2015 via mobile internet fo r a sa mple of 1, 000 Iranians

Iran's car industry is its second- Source: Roland Berger study " How to do business in– Iransuc c es sfull y" 2015 largest after its oil industry and prior to the sanctions, Iran was the 20th largest car manufacturer in the world. The automotive industry employs 700,000 people directly Pos itive develop men t of ca r sales in all seg men ts and 2.4 million people indirectly in Premiu m car sal es will o utperform the overall market with related industries, equivalent to expected growth of ~66% p.a. b etwee n 2015 and 2 020 10% of the employable population Passenger car sales in Iran by price segment 2010-2020 ['00]0 units] of the country. 2015 Volv oOther > Impor t tari !s on new ca rs Le xus 90 BMW (CBUs ) have been lowered to 66 %p.a. Iran exports vehicles only to some Audi Group 40 % in 2013 , suppo rting new Mercede-s Benz Premi um ca r sales go ing f orward car sa les > The mar ket collapseind countries in the Middle East region 50 5 4 4 6 7 7 20 11/2012 ude to the poli tical (mainly Iraq and Egypt), as well as to si tua tion Toyota 2015 > The six -mon th period of Belorussia, Algeria, Senegal and eased sanct ions s tar ting on Venezuela. Its central geographic Peugeot Janua ry 18 , 2014 and la ter Others extended to Nove mber 2014 Renault 16 %p.a. 1,700 has g iven a boo st to Iran's location means it has signiﬁcant 1,40 0 1,500 HyundaiKIA au to sales growth potential as an export hub. 90 0 1,0 00 > Pre mium mar ket is expe cted 70 0 80 0 Volu me Peugeot has announced plans to 1,300 car sa les to ou tpace the ove ral l mar ket, high lighting the shi ft in export 30% of the vehicles it de mand toward pre mium produ cts produces in Iran, taking advantage of 201 0 2011 201 2 201 3 201 4 201 5 2016 e2017 e2018 e2019e 2020 e a government scheme to give Bas e sce nario Addition al volu mes in opti mistic scen ar io generous tax breaks and other Source: IHS Global Insight; Roland Berger incentives to foreign investors who construct factories in Iran and export more than 30% of their production. Iran as an expo rt hub The market potential for new cars is Iran is centrally locat ed with go od access to Mid dle Eastern and huge (as illustrated in the Asian markets – Tax breaks to foster export of local goods accompanying chart). Premium car sales are expected to outperform Ir an as a gate way to oth er bud get mar kets the overall market with an annual > Due t o its centra l geographic loca tion growth rate of 66% until 2020, while and f ur ther posi tive loca tion fac tor s, Iran could se rve as an expo rt hub t o other the rest of the market will grow by budge t mar kets in the Middle East , CIS, Russ ia Africa and La tin America

16% within the same period. Iran's Bela rus > Lo cal manufacturer s such as I ran Khod ro

Ukraine are already expo rting their ca rs to young population will reach its peak countr ies like Rus sia , Syria , Tur key, Iraq , Bulg aria Georgia Aze rbai jan , Uk raine , Egypt , Algeria , purchasing power by 2040. Armen ia Azerba ijan Turkey Turkmen istan Bulgar ia and Venezuela Tunisia Syria Currently, there are 147 cars for Morocc o Lebano n Iraq Iran Afghan istan > Foreign manu facturer PS A has a lso Alg eria Pakistan announced plans t o expo rt 30 % of their every 1,000 (the UK, by comparison, Lib ya Egypt local ly produced vehicles a fte-r re laun ching manufacturing ope rat ions has 519 cars per 1,000 people, and > Iranian au thori ties announced a 50 % tax the USA 809). Suda n brea k besides other incen tives for foreign investors who bui ld f actor ies in Iran and expo rt more than 30 % of their produ cts The Iranian government has Pot enti al ex port markets introduced various initiatives to Source: Iran Khodro, PSA; Press research; Roland Berger modernise the country's ﬂeet, which

48 Automotive Megatrends Magazine Emerging Markets

on average is about 11 years old, Know your cus tomer requ iremen ts such as new emissions standards Custom ers have clearly de!ne d exp ectations of a dealer, and a vehicle scrappage scheme, on the basis of which they make a purchase decision which was introduced in 2005 with the aim of taking old and inefficient Ke y su cce ss f act ors for Ir ani an cus tomers cars off the roads. In 2015, over 1 Ne twork co verage 320,000 vehicles were scrapped as Key succ ess part of the scheme and the 2 Knowledgeab le, profes sional and f riend ly sta" factors for th e Irania n government predicts that 200,000 3 Availab ilit y ofth e ful l rangofe technical suppo rt in wor kshops car market vehicles will be traded in every year 4 Qua lity & speed o aff t er-sales se rvice for the next ten to 15 years. 5 Availab ilit y of op tionpsarts, and ac ces sories for ca rs 6 Reasonable co st of aft-esalesr service Foreign brands continue to enjoy a 7 Favorable warranty op tions positive reputation among the 8 Dealership appearance public, despite attracting the ire of Iranian officials as a result of their 9 Dealership brand image retreat back then. According to an 10 Pro vision of other o"e–r sC ustomer club , memberships, etc. August 2015 study, Iranians Source: Customer survey conducted by Roland Berger in Iran in April 2015; Roland Berger perceive imported goods as being of superior quality, with 49% of those Even very high tariffs and a ban on Khodro and Saipa. It is to be interviewed saying they would be engines with capacities higher than expected that the government's interested in purchasing an 2.5 litres have not dented wealthy priority is to build up the domestic imported car. But importing Iranians' enthusiasm for luxury industry's expertise while complete cars to Iran has never models in recent years. From March continuing to shield it from largely been a big business due to high 2011 to 2012, during the height of foreign competition. That's why CBU import tariffs; CBU imports dropped the sanctions, 563 Porsche models strategies will remain efficient only to between 35 and 40,000 units were imported into Iran at a total as a mid-term strategy, and only for during the sanctions. They cost of US$50m dollars. On top of low volume models. Iran Khodro recovered rapidly in 2014, however, that, customers had to pay the 90% announced in 2014 that it can to 106,000 units, and this upward import tariff. manufacture the TU3 engines for trend is expected to continue as type 2 Peugeot 206 cars "completely historically high tariffs are slowly New beginning, new on its own" and "without assistance being reduced. A 100% import tariff from Peugeot". Greenfield for new cars was reduced to 90% in rules? approaches in Iran are untested 2006 and lowered again to 70% in terrain for foreign investors, but 2010. Iran has traditionally maintained given the country's current policy government monopolies in the oil priorities, joint ventures remain the Hybrid vehicles, however, are an sector and major manufacturing best entry to the country’s vehicle exception – an import tax of 4% was industries. In recent years, the market. set in order to promote their government has gradually reduced purchase, resulting in a 112% its ownership in Iran Khodro and Foreign investors who are prepared increase in hybrid vehicles sales in Saipa, the two largest Iranian OEMs, to navigate Iran's intersection of 2014. Although Iran is the world's down from around 50% in 2008 to regulatory requirements, market seventh-largest oil producer, it has 20% in 2010. Smaller Iranian conditions and its unique political limited refining capacity and is players, however, continue to and cultural landscape will be well- seeking to promote hybrid vehicles complain of an effective duopoly positioned in what is promising to and cars that run on natural gas. and preferential treatment for Iran be a highly lucrative market. The Iranian government disagrees over whether to continue to reduce import tariffs or not. In 2015, a How the Iranian government supports a more modern car parc group of Iranian parliamentarians, as well as the head of Iran's customs Emission standards: Since March 2012, compliance with Euro IV standard is mandatory administration, called for an for all locally-produced gasoline and diesel vehicles; compliance with Euro V is increase in car tariffs in order to mandatory for imported vehicles, and it is expected that from 2016, imported vehicles boost government revenue and will have to comply with Euro VI. Moreover, authorities have introduced restricted low- emission traffic zones. reduce imports to protect local manufacturing. It is likely, however, Alternative powertrains: Iran has the second largest fleet of compressed natural gas that the Iranian government will (CNG) powered vehicles globally. The aim is that 60% of vehicles sold in the country must continue to relax import tariffs run on natural gas or on dual-fuel – so far this regulation is not being enforced. considering its long-term goal of Scrappage programme: Authorities want to take some 200,000 vehicles per year out off joining the WTO, among whose the road, replacing them with newer, more efficient cars. The programme started in members car import tariffs are 3.5% 2005, and reduced the average age of vehicles in use from 17 years to 10.6 within eight on average. years. It is expected that within 10-15 years, about 2.2 million vehicles will be replaced.

www.automotivemegatrends.com 49 Retail Revolution

The automotive retail revolution arrives in India

A new initiative for India takes word of mouth online and to the masses. Could this be a blueprint for a new emerging market online car sales tool? By Megan Lampinen

he car purchasing experience is moving online, and as it does, the automotive retail revolution is moving into emerging markets. 84% of new-car owners

In India, Internet usage has reached Tsuch a point in the market that J.D. in India stated that they Power, a marketing information services firm, and Wheelmonk.com, an Indian website for car owner rely on word-of-mouth feedback, have decided the time is “ ripe to introduce a new information service. The result: an automotive recommendation when website offering feedback from verified vehicle owners. shopping for their car The power of opinion

Studies from J.D. Power indicate that Top 5 information sources* % feedback from friends and relatives plays a key role in new car purchase Friends / relatives 84% decisions among Indian consumers. In fact, 84% of new-car owners in India stated that they rely on word- Newspapers / magazines (ads / articles) 39% of-mouth recommendation when shopping for their car. TV 32% "Even with the proliferation of the Internet in India, word-of-mouth recommendations remain solidly Internet 28% the top information source in the car buying process," Mohit Arora, Dealer owner / Salesperson recommendation 25% Executive Director at J.D. Power Asia Paciﬁc, told Megatrends . "And it has remained in pole position for the *Multiple response question, totals may exceed 100% past 15 years, since J.D. Power Source: J.D. Power 2015 India Sales Satisfaction Index (SSI) Study started its tracking studies in India."

50 Automotive Megatrends Magazine Retail Revolution

After friends and relatives, the next DIY kits and accessories will most popular information source in increasingly be performed online. the car buying process is newspapers and magazines Expanding the circle (adverts and articles), a distant second at 39%. Wheelmonk and J.D. Power are Moving online tapping into these two big trends of online research and word of mouth "However, having said that, it recommendations. While owner doesn’t mean that automakers feedback plays a critical role in car should discount the online purchase decisions, most inﬂuence," Arora added. The individuals only have exposure to a percentage of car owners that use handful of friends and family the Internet in the car buying members. "If you look around, an

Most of the websites that are currently out there do not have any signiﬁcant “ownership-related information to help consumers make a better choice

process has risen from 22% in 2010 individual buyer manages to get to 28% as of 2015 and is further only limited feedback within his or accentuated in cities. "The her own social circle," Sameer Dua, importance of online research in the Co-Founder of Wheelmonk.com, car shopping process will only told Megatrends . "Most of the increase in future," he predicted. websites that are currently out there do not have any significant Of those car buyers in India who ownership-related information to are using the Internet, J.D. Power help consumers make a better figures show that 45% are visiting choice. They end up being just a car manufacturer websites, 44% listing or expert review websites." visited dedicated car websites/forums, 41% visited the This is exactly the gap that automotive section of a Wheelmonk and J.D. Power want to consumer/news website while just fill. Their focus is twofold: to create 17% visited dealer websites. As for easy access to comprehensive how they are using the Internet, verified consumer feedback data for the accompanying table shows the potential car buyers, and to kind of information sought out by recommend what best suits the customers online. individual buyer.

"In the coming years, with improving "We believe that expert reviews, infrastructure, increasing awareness while being honest and informative, and growing confidence of don't work the same way for consumers to interact online, we are everyone," added Dua. "Different likely to see a greater role for the buyers have different sets of Internet in the overall lifecycle preferences and it is difficult for a ownership of the car," commented prospective buyer to make a choice Arora. He suggests that activities like among the plethora of options scheduling a service visit or ordering available based on these reviews

www.automotivemegatrends.com 51 Retail Revolution

alone. So wheelmonk.com has developed a proprietary algorithm Key information gathered via Internet* % based on these thousands of pieces of customer feedback and in-house Technical specifications 78% expert ratings, that helps these buyers identify the cars that best Vehicle features or accessories 73% suit their needs." Vehicle price 61% Just the start As Dua explained it, the current Vehicle brochures / pictures 55% version is "just a discovery platform", but he added that the Warranty information 29% team has started working on expansion plans. Specifically, they Spare parts information 23% are looking to create a platform which connects buyers to dealers. "The platform will not only drive Service maintenance information 21% seamless integration within the ecosystem, but would also provide *Multiple response question, totals may exceed 100% multiple tools to dealers to improve Source: J.D. Power 2015 India Sales Satisfaction Index (SSI) Study their connectivity with consumers. It would also improve its internal online purchasing in the automotive consumer bases and covering the supply chain efficiency and industry in the short to medium entire spectrum of car ownership." operations effectiveness," he term." explained. The new modules are In India, the need for help such as currently in the development stage A model for export? the new website will offer is all the but should soon become available more pronounced in light of the on the site, he promised. The proposition offered by number of new buyers. As Arora Wheelmonk.com may be new to added: "We want to provide Asked about the possibility of buying India but it has already been guidance to prospective buyers who a vehicle online, and whether exists available in other markets for some are making one of the largest the potential to take the website time. In the US, the J.D. Power purchases in their lifetime and this down this road in the future, Arora Consumer Centre provides is even more critical keeping in mind said, "At this point of time, many of information from the agency's that nearly half of them are first- the people are using the Internet for studies to consumers. In China, J.D. time car buyers." initial information searches. Power collaborates with multiple However, most of these customers automotive portals to provide the Transparency and advice will help would still walk into the dealerships same sort of information. put them at ease. "Transparency is to view the product or schedule a largely driven through proactive test drive before committing to the "It is now launched in India as we communication, fulfilment of purchase. Nearly all of them would find an increasing proportion of commitments and proper

It may still be too premature to see signiﬁcant online purchasing in the automotive industry in the short to medium term

“ customers utilising the Internet talk to a friend or relative, or to an during the vehicle shopping documentation. Over the years, owner of the same model to get process," Arora explained. dealerships have made progress in their perspective on the vehicle’s "Moreover, this is a critical time for several of these areas. However, performance and its suitability for us to launch this initiative as there is with increasing Internet usage, their needs." While Arora believes a great need in that market for customer expectations and that Internet use will expand in the prospective buyers to access knowledge are advancing much years ahead, he added: "It may still independent, third party faster than the dealerships," he said. be too premature to see signiﬁcant information supported by large Wheelmonk.com is here to help.

52 Automotive Megatrends Magazine Tech vs. Policy

Tech and policy face oﬀ in the auto industry of the future

Ian C. Graig , Chief Executive of Global Policy Group, looks at the changing relationship between OEMs and regulators as new technologies impact the automotive industry and even the very nature of driving

he dramatic change Regulators, policy makers, and companies like Google or Apple which the automotive legislators are working to keep pace become important players in the industry is undergoing, with rapid changes in automotive motor vehicle industry. driven by the emergence technology. The development of of new technologies, is new vehicle-to-vehicle (V2V and Several recent developments most apparent in the vehicle-to-infrastructure (V2X) highlight the challenges in impact of connected car technologies, with their potential for regulating a changing automotive technologies. These technologies eventually bringing fully industry. In September of last year, Tcould transform both the industry autonomous vehicles to US for example, the US Department of and the very nature of driving itself. highways, poses public policy Transportation’s National Highway But while it may be less apparent, challenges in such areas as vehicle Traffic Safety Administration rapid technological change is also safety, liability, cyber security, (NHTSA), the Insurance Institute for transforming the relationship privacy protection, spectrum Highway Safety (IIHS), and ten between the automotive industry management, and transportation vehicle manufacturers announced and government regulators. and infrastructure planning. an agreement to make automatic Addressing these challenges will emergency braking (AEB) systems a Government agencies are struggling take years, if not decades. standard feature on cars sold in the to ensure that motor vehicle US. AEB systems, which use V2X regulations achieve their public The rapid pace of technological technologies to detect an imminent goals, such as protecting highway change is also forcing regulators, crash and automatically engage the safety, while not slowing the legislators, and interested brakes if the driver fails to do so, are emergence of new technologies that stakeholders (such as vehicle and installed as standard equipment on have potentially huge social, component manufacturers, ICT only 1% of cars sold in the US. In economic, environmental, and other companies, insurers, and safety and March, NHTSA and the IIHS benefits. These challenges are consumer groups) to consider new announced the agreement had certain to continue for years, since approaches to addressing public been expanded to include 20 OEMs the pace of technological change policy issues. This has already that had agreed to make AEB a shows few signs of slowing. become apparent in the US, where standard feature on new cars sold in regulators are looking to voluntary the US no later than 2022. The tension between these and market-based agreements as potentially conflicting goals has well as traditional regulatory NHTSA had been under pressure for been particularly clear in the United mandates. The entry of non- some time to propose a new States, which is home not only to traditional players into the regulation (or “rule”) mandating the many traditional automotive firms automotive market is also blurring use of collision-avoidance but also to information and lines between regulatory entities technologies to reduce rear-end communications technology (ICT) with differing legal mandates or collisions. NHTSA decided not to companies that are moving into the technical expertise. This trend is proceed with a formal rulemaking, vehicle sector for the first time. certain to continue, particularly if however, but to rely on a voluntary

www.automotivemegatrends.com 53 Tech vs. Policy

commitment by OEMs. NHTSA just NCAP recommendations, for innovative approaches that ensure concluded that such an approach example, and NHTSA is currently they are meeting public needs like was the fastest way to get AEB crafting a rule to mandate that new highway safety without slowing systems installed on more new passenger vehicles be equipped beneficial technological change. vehicles. with dedicated short-range radio communication devices to ensure These regulatory challenges will be The rationale for this decision is they have V2X communications particularly intense in terms of self- clear: proposing and finalising a capability. driving vehicles (SDVs), as was federal motor vehicle safety evident in a letter earlier this year standard through a formal Voluntary agreements are from NHTSA to Google. That letter ‘rulemaking’ is an often contentious nonetheless likely to be used again stated that, in certain instances, a process that can take years – not to in the future as rapid technology self-driving car itself could mention the near-certainty that a development poses new challenges potentially be considered a “driver” new regulation will be subject to legal to regulators and OEMs alike. In for the purpose of complying with challenge even after it is finalised. A another recent example, the US federal vehicle safety standards. In voluntary agreement could have an Department of Transportation (DOT) so doing, the letter highlighted a impact much sooner. In fact, while and 17 OEMs in January announced particular challenge for regulators the OEMs have agreed to install AEB an agreement on voluntary and SDV producers alike: how do systems as standard equipment no measures aimed at improving you certify that an SDV is complying later than 2022, many are expected vehicle safety and the cyber security with federal safety standards to do so well before then. NHTSA is of connected vehicles. As part of written for vehicles with human taking other steps to expand the that agreement, OEMs committed drivers? Rule interpretations or availability of AEB systems, such as to expanding membership in the guidance could address some including AEB as a recommended industry’s cyber security issues, but NHTSA made it clear that safety technology in its ‘five-star’ New information sharing and analysis there may need for a formal

Government agencies are struggling to ensure that motor vehicle regulations achieve their public goals, such as protecting highway safety, while not slowing the emergence “of new technologies that have potentially huge benefits Car Assessment Program (NCAP) – a centre to include automotive rulemaking to change its definition market-based approach aimed at suppliers and other companies in of ‘driver’ in light of the using consumer choice rather than the ‘connected vehicle ecosystem’. development of SDVs. Such a regulatory mandates to speed the rulemaking would have huge introduction of AEB systems that OEMs, component firms, ICT implications for the entire meet performance standards companies, and others in that connected vehicle ‘ecosystem’. defined by NHTSA. ‘ecosystem’ are quickly developing new V2X technologies that do not fit NHTSA stated in the letter that the Critics have raised concerns about easily into traditional regulatory development of SDVs raises policy this approach, arguing that only a categories. Regulating those issues that are “beyond the scope formal regulation has the legal technologies will require technical and limitations of interpretations authority to ensure that OEMs skills that are far different from and thus will need to be addressed install AEB systems that meet those needed for traditional passive using other regulatory tools or minimal standards. These critics safety regulations. It will involve approaches.” Regulators, working point to the automotive industry’s regulatory agencies, like the Federal with OEMs, ICT firms, and others, recent record of safety recalls and Communications Commission, that need to determine over the coming cheating on emissions tests to have traditionally not regulated years how motor vehicle rules apply question dependence on voluntary automotive technologies, while to SDVs. That process is likely to commitments. Regulators clearly posing new challenges in federal- include the involvement of Congress are not going to abandon formal state relations. It will stretch the – since current law may need to be rulemaking in the years ahead: fabric of traditional automotive changed to address the dramatic NHTSA in the past has promulgated regulations by raising questions that changes in vehicle technology – and formal rules mandating that new were never even considered when the administration of the new US vehicles be equipped with those rules were written. Finally, it president, who will take office in technologies that were previously will lead regulators to consider January 2017.

54 Automotive Megatrends Magazine Automotive Materials

Pick'n'mix: the evolution of automotive materials

Those OEMs that master the art of the eﬃcient manufacturing material mix will enjoy a huge competitive advantage in the automotive industry of the future, writes Indraneel Bardhan of EOS Intelligence

he increasing demand Average materia l composition of a passeng er vehic le for fuel efficient, lighter, (%, 1990 – 2020F) and safer vehicles is re- shaping the global 18 18 automotive industry 17 20 5 6 6 landscape. Significant 7 13 14 16 Others pressure from regulators and 18 customers is driving vehicle Rubber Plastics manufacturers to focus on design T Meta ls efficiencies using advanced 65 63 61 technologies and materials. These 55 factors have made vehicle material composition a vital part of every OEM’s overall manufacturing 199 0 200 0 2010 2020 F strategy. Sou rce: A. T. Kea rney , 201 2 Note: Due to rounding, percentages may not total 100%

www.automotivemegatrends.com 55 Automotive Materials

Signiﬁcant pressure from regulators and customers is driving OEMs to focus on design eﬃciencies using advanced technologies and materials. These factors have “made vehicle material composition a vital part of every OEM’s overall manufacturing strategy

- Aseef Kadir, Principal Designer, a leading Indian OEM (April 2016)

Evolution of material material composition of passenger vehicles to evolve constantly over composition over the the past three decades. last three decades In recent years, the increased regulatory and user pressure on The ongoing evaluation of material vehicle manufacturers and performance in the automotive materials suppliers to discover industry, as well as continuous better and lighter materials has enhancements in the material resulted in an increased use of composition of vehicles have always plastics, with a corresponding been on the agenda for OEMs as reduced role for metals in vehicle vehicle weight has direct manufacturing (though metals are implications on driving dynamics expected to still account for more and fuel consumption. than half (55%) of the material composition of a vehicle in 2020). Due to changing industry dynamics, OEMs face growing pressure to develop lightweight vehicles that Regulatory Reforms ensure lower environmental impact and provide safety and desired Stringent CO2 reforms such as performance. This has led the corporate average fuel economy

Key drivers of material composition evolution

Regu latory reforms s t n e m N e e c w n a

m v d a a r

Evoluti on of k y e g

mater ial t

o l e

o compo sition n n t r h a c n e t s T

Consume r d ema nds & ex pectations

56 Automotive Megatrends Magazine Automotive Materials

Overview of current BIW material composition strategies

Weight Reduc - Increased BIW Material Mix OEMS/Models Target Segment tion (%/kg) Cost Hyundai Genesis Economy AHSS-intensive 22% / 72.8 $147 Nissan Murano Sedans

BMW 7 Series Luxury AHSS, aluminium, composites 24.5% / 80.3 $176 Lexus LC500

Jaguar XF Luxury

Aluminum-intensive 35% / 114.8 $720 Range Rover Premium

Audi A8

BMW i3 Super Premium Carbon ﬁbre 50% / 164 $2,512 Lamborghini Aventador Sports Cars

Source: ENDAG, 2012 Note: Weight reduction and cost ﬁgures are as per the 2012 research study by ENDAG that determined maximum feasible weight reduction in passenger vehicles using 2011 Honda Accord as its baseline vehicle.

(CAFE) in the USA as well as EU CO2 printing start-up Divergent emission targets for 2021 are Microfactories, is transforming forcing OEMs to make their vehicles traditional vehicle manufacturing more energy efficient. processes and technologies. By leveraging new materials and These reforms have fuelled R&D technologies, these companies have efforts as well as investments in developed new vehicle models that vehicle lightweighting. According to offer better design and Ducker Worldwide, a US-based performance. This is encouraging research and consulting firm, by traditional players in the industry to 2025, an average vehicle in the USA learn and adapt their designs and will have to reduce approximately material composition choices in 181kg of its total weight to achieve upcoming vehicle models to help an average fuel economy that them to achieve better design and enables passenger vehicles to drive fuel efficiencies. at least 54.5 miles per gallon of fuel. Clearly, as lightweight materials are Consumer demands a significant factor in meeting these rigorous regulations, OEMs are re- and expectations thinking their vehicle material composition. In the coming years, Over the years, consumers’ one can expect the material demands with regard to their cars composition to evolve further as have changed considerably, with these compliance deadlines expectations of improved fuel approach nearer and OEMs begin to economy, safety and driving feel the pressure of monetary experience through technology and penalties for non-compliance. For functionality enhancements. These example, in Europe, OEMs will have factors have driven the R&D, design, to pay at least €95 for every gram of and material teams in the industry CO2 above the set limit (95g) to innovate to satisfy evolving multiplied by total cars sold in 2020. consumer demands. The tech-savvy This could translate to consumers of ‘Generation Z’ (born approximately €1bn for Volkswagen post-1995) and the generations and €300m for Hyundai in penalties after ‘Z’ are sure to be more as per estimates by PA Consulting. demanding, and one can expect the passenger vehicles to continue on New market entrants the innovation path; this is likely to also see more advanced grades of The entry of new players, such as plastics and composites used in the Tesla and the Silicon Valley 3D construction of these vehicles.

www.automotivemegatrends.com 57 Automotive Materials

Technology integration of these materials Steel and aluminium are expected to creates significant challenges in be the two key materials that OEMs advancements design, simulation, and parts will usefor their BIW components processing. Besides these over the next four to five years. Improvements in materials as well challenges, the industry still lacks a According to some industry players as production technologies in the good understanding of these such as Jaguar Land Rover and Kaiser automotive sector have come on in materials at the engineering level Aluminum, between 2016 and 2020, leaps and bounds in the last 20 for vehicle manufacturing there will be a surge in the use of years. According to ArcelorMittal, a applications. Current barriers range aluminium. According to Doug multinational steel manufacturing across issues in forming, joining, Richman, Vice President of corporation, only five grades of steel and corrosion, paired by high cost Engineering and Technology, Kaiser were available to the automotive and limited supply of such Aluminum, aluminium will account industry in 1960, while today, the materials. Therefore, the use of for 14% of the average vehicle in USA industry has more than 175 grades composites, especially in and Europe (kerb weight) by 2025, up of steel at its disposal for design mainstream structural components, from around 10% at present. This is optimisation. The current grades of will remain very limited in the near primarily due to the fact that steel, such as advanced high- future. advancements in steel processing strength steel (AHSS) and ultra have nearly reached the tipping high-strength steel (UHSS) are much OEMs are also exploring point that limits further significant stronger, lighter, and processing- nanomaterials and nanotechnology weight savings. Additionally, friendly for various vehicle that can provide OEMs with better aluminium is the easiest switch for manufacturing applications. weight-to-strength ratios and help the vehicle production line, them with vehicle lightweighting. In compared to plastics, magnesium, The emergence of 3D printing, new addition, companies are looking into and carbon fibre. design, testing, and processing tools other advanced metals such as is transforming automobile titanium and nickel-based alloys The pressure to change and engineering. By leveraging that offer high strength, low density, improve the material composition technology and advanced and superior resistance to corrosion to achieve regulatory compliance manufacturing techniques, along and oxidation, thus making them will work as a double-edged sword with the strategic use of various ideal for use in vehicle for OEMs. On the one hand, it will materials, automotive engineers manufacturing applications. create opportunities for industry today are designing body-in-white However, these research projects players to innovate by creating new (BIW) structures that are far lighter are still in nascent stages, with most designs using advanced materials than those of the 1990s. of them in laboratory and manufacturing techniques. This testing phases. can help them to outperform their Current trends in peers by enhancing their product The future of material and brand value proposition. On the material composition other hand, integrating these mix materials will create more There is no single approach to manufacturing challenges for OEMs material composition that applies For OEMs, any material switch and require them to pour in more across each passenger vehicle requires significant investments in investments. This will not only lead segment. In fact, material R&D, production processes and to higher capex and opex, but it will composition choices vary by region, equipment, repair infrastructure, directly impact their profit margins. OEM, vehicle type, manufacturing securing material supply, staff volumes, and target customer training, etc. Many OEMs have As vehicle design optimisation segment. For example, a pick-up already made significant remains the largest leverage truck in the USA uses considerably investments in their existing available to vehicle manufacturers to more aluminium than a similar truck production infrastructure that satisfy regulatory compliance, there in Europe (138kg versus 59kg), while supports steel. Amid the current is no doubt that material OEMs in Europe use more aluminium global economic environment and composition will be an important in their premium car segment than cost pressures that the majority of part of every OEM’s future fuel their US counterparts. At present, OEMs face, they are likely to refrain efficiency optimisation strategy. BIW material composition of an from making new capital Going forward, OEMs are likely to average passenger vehicle consists of investments. Therefore, steel is focus on component-specific a mix of various grades of steel, expected to continue its dominance materials. They will combine aluminum, iron, and plastics, while at in the near future due to its cost materials to take the best advantage the upper end of the market, the use effectiveness and design flexibilities. of what each has to offer. Although of carbon fibre and composites is Furthermore, due to consumers’ there are widespread complexities at more prevalent. limited willingness to pay for weight present, those OEMs that master the reduction, the uptake of advanced art of the efficient manufacturing While there has been much talk lightweight materials will remain material mix will enjoy a huge about rapid uptake of advanced limited within the mass market competitive advantage in the composites in vehicle production, segments of passenger vehicles. automotive industry of the future.

58 Automotive Megatrends Magazine Industry 4.0

Industry 4.0 and the rise of smart manufacturing

Industry 4.0 has evolved from a disparate set of high-ﬂown ideas around connectivity into a real practice that is saving the automotive industry money and creating new business opportunities. By Xavier Boucherat

t goes by many names – Industry 4.0, smart manufacturing, the Industrial Internet of Things (IIoT) – but whatever you call it, the idea of connected manufacturing is becoming increasingly pervasive. Indeed, it’s risen to such pIrominence that 2016’s Hannover Messe, where Industry 4.0 was the central theme, was opened by two of the world’s most powerful leaders – Barack Obama and Angela Merkel.

The pair visited a number of stands demonstrating the latest Industry 4.0 applications for industrial analytics, energy management, predictive maintenance and smart logistics. But what’s interesting to note is that whilst the potential impact of Industry 4.0 is often compared to previous technological leaps forward (mechanisation, electrification, digitalisation), many of the projects use technology that’s already widely available. The difference lies in the problems they’re used to solve, e.g. data- Bosch has achieved a 25% output mining, and the problems they create, e.g. cyber security threats. improvement for its automatic braking Should we view this as a revolution, system (ABS) and electronic stability or an evolution? programme (EPS) production with the Bosch, one of the companies credited with coining the term “introduction of smart, connected lines Industry 4.0 at the Hannover Messe in 2011, is clear on this. “It’s definitely an evolution,” says Werner

www.automotivemegatrends.com 59 Industry 4.0

Struth, Member of the Board of lowering stamping dies when it might be in the future that no two Management and Industry 4.0 measurements fall outside a certain cars are quite the same.” By specialist. “That’s an extremely window. This also contributes to connecting customers directly to important point.” Industry 4.0, he sustainable production by lowering manufacturing facilities, the time says, is now a reality that’s built up the number of reject parts. between making these requests over the course of recent years, and and receiving a finished vehicle no longer a disparate set of abstract Trends and behaviours could be reduced. concepts. There are now several examples of Tier 1s like Bosch co- As Industry 4.0 develops, it will be New models operating with automotive able to better respond to the customers by means of Industry 4.0. pressures faced by OEMs. Trends Industry 4.0 could also open up new such as lightweighting and business opportunities, particularly Sensitive matters electrification remain huge topics for super suppliers. Equipment prior to the arrival of Euro VII and reliability within plants is of greater In terms of manufacturing, says more stringent CAFE regulations. importance than ever, with some Struth, sensors are the key enabler One of Bosch’s current customers is facilities running nearly round the that will help realise the biggest an EV manufacturer, for which it clock. benefits. A production system fitted makes iBooster brake systems. “We with sensors, he explains, can have full control not just over the “Machines have failures, and some provide continuous status updates data from our production system, will be due to breakdowns brought which can then be compared with a but our customer’s production about through wear and tear,” says ‘digital twin’ – a simulation of the system, and the components as Struth. “If you set up a condition

Like many, Struth identiﬁes data security as the biggest threat accompanying Industry 4.0

system that runs at 100% efficiency. they are used in the field.” The data monitoring system, again paired “Through this, deviations can be returned shows the effect of the with a digital twin, you can make quickly flagged, and trends can be brakes on the vehicle, and how predictive maintenance strategies.” more easily identified. Struth points effectively they work. This opens up opportunities for to a concrete example: Bosch has suppliers in the fields of data achieved a 25% output Stefan Assmann, Head of Bosch’s collection, storage, and alert improvement for its automatic Connected Industry Innovation services. “This is a new service braking system (ABS) and electronic Cluster, explained this gives Bosch model that can be delivered to stability programme (EPS) valuable insight, “now just into how customers to improve their production with the introduction of we thought our product was used, productivity, and reduce their costs.” smart, connected lines. but how it is really used, and through this we can learn how to Bosch’s Feuerbach plant in One OEM that has led the way on simplify design, because we get a Stuttgart, which produces CP4 sensor-equipped manufacturing sense of where it has been over- common rail pumps for diesel that can take advantage of data is engineered, or under-engineered.” injection systems, is using a number Audi. The manufacturer’s tool- Similar applications in future could of applications such as the making division has designed wield further efficiency gains. production data system. This is self-learning technology for connected to a worldwide network stamping operations on press lines. As well as responding to demands that monitors output at a CP4 plant These can automatically adjust to from OEMs, Industry 4.0 could also in the Czech Republic, and will later optimise how much material is fed offer ways to address changing include plants in Bangalore and into a press. Pulling too little customer behaviour. Assmann says China. When production drops or material over the tool can result in increased demand from customers rises at any workstation in these component tearing, whilst excessive for customisation and quick plants, they can immediately get in material can impact on stability. delivery is one of the key drivers touch with one another to figure out Sensors measure the force exerted behind Industry 4.0. “People love the cause. Along with using these on steel or aluminium blanks, and things like Amazon because they technologies, Bosch’s hope is to adjust pressure by raising or offer it the next day,” he says, “and provide them and the necessary

60 Automotive Megatrends Magazine Industry 4.0

the Cloud, we have to make sure that we have state-of-the-art architecture.”

Peter Brooke, director at Deloitte’s Many manufacturers use China as a Supply Chain Practice, points out base, and there are several issues in that this could become particularly tricky for OEMs looking to move the Far East, including the threat of data across borders. “There is still work to be done, particularly when intellectual property theft we talk about the dispatch of data to foreign countries,” he says. “Many “ manufacturers use China as a base, and there are several issues in the infrastructure to other suppliers and field of connected industry. “This Far East, including the threat of manufacturers. two-pronged strategy is paying off,” intellectual property theft.” The risk he added. “By 2020, we expect of data sets being stolen increases The same data services will be connected industry to have saved us as they are shared across suppliers, required for preventive an aggregate €1bn (US$1.14bn) in he continues, which in turn means maintenance on connected vehicles costs, and to have generated competitors and other bodies, such in the field, which could potentially aggregate extra sales of the same as nation-states, may be able to see let a factory know when it will need amount.” products. a part replacement. OEMs like Volvo Trucks have been leading the way Letting your guard Rolf Nicodemus, Project Vice on this. The OEM has previously President of Bosch Connected suggested the preventive down Parking, agrees with Struth that maintenance could cut unplanned security will be an ever more- truck standstills by as much as 80%. Like many, Struth identifies data challenging, on-going project: “It will The amount of data required will be security as the biggest threat always be a competition between us huge, and could even be collected accompanying Industry 4.0. Within and those who would look to do on a region-by-region basis as the Internet of Things (IoT), there is harm.” Bosch and numerous other different conditions could affect no such thing as 100% security, he OEMs and Tier 1s now regularly different parts of a vehicle. concedes. “The risk isn’t necessarily employ the services of white-hat as big within a closed loop, such as hackers, dedicated to picking apart Speaking at Bosch’s 2016 annual in a factory. Here we can easily digital defences. Ultimately, it will be press conference, Volkmar Denner, achieve a high level of security,” he down to players in the industry to Chairman of the Board of says. “But as soon as I want to decide what technologies bring Management, said Bosch saw itself connect with my business partners benefits that outweigh their as a leading user and provider in the to shared data, and deliver data to accompanying risks.

Collaborative robots: At the Bosch plant in Stuttgart-Feuerbach, humans work together with automatic production assistants (APAS), which are equipped with sensors that stop the APAS working if the human and the APAS get too close to each other

www.automotivemegatrends.com 61 Antonio Ferreira

Drastic change needed: the auto industry in 2035

Usership not ownership, new vehicle propulsion and all-new brands: automotive industry futurist Antonio Ferreira shares his vision of the future with Megan Lampinen

f the automotive industry is poised to see more change in the next five years than it has in the past 50, what sort of future are we looking at 20 The car will definitely be different from years down the line? There's no crystal ball, but the trends at what we have now, mainly driven by work today suggest a clear direction what younger consumers want. Itowards a shared economy and smart technology. Consumers are demanding more based Antonio Ferreira, Founder and Chief on their lifestyles, and that will change Executive of Lisbon, Portugal- “ headquartered automotive digital the way the vehicle is going to look content start-up MiMotive, recently shared with Megatrends his view of a future transport industry. Cars will look different 20 years hence, as will are demanding more based on their absorb that entertainment, than the the business models supporting lifestyles, and that will change the driving pleasure, or just the freedom them. The roster of successful way the vehicle is going to look." of moving from A to B. That will companies and brands could be very Notably, vehicles will have to drive the development of the vehicle different - and for existing players to incorporate considerably more itself." give future consumers what they technological content, connectivity want, Ferreira believes there’s a need and advanced driver assistance What will propel the vehicle will also for drastic change. systems (ADAS) than they currently change, with a move not just away do. from gasoline and diesel but also The infotainment- electricity. Ferreira expects to see a At the heart of the development is a broader lifecycle outlook with better powered car of the change in value proposition, away informed consumers and greater future from the car as an object and transparency. "Everything will be towards transport as a service. Just very transparent. Consumers will What the vehicle itself looks like in a decade ago, obtaining a driving base their decisions on information, 20 years’ time depends entirely on licence and that first car meant not just on marketing. When consumer preferences, and they are freedom. Now, pointed out Ferreira, consumers start taking into account demanding very specific things. "younger consumers are happy to the complete lifecycle, opinions are "The car will definitely be different swap the driving experience and the going to change very dramatically," from what we have now, mainly driving freedom for infotainment he predicted. For example, he driven by what younger consumers addiction. They would rather have believes that this lifecycle outlook want," he predicted. "Consumers infotainment within the vehicle and will turn opinion on electric vehicles

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(EVs), currently presented as an eco- friendly solution. "The consumer has to be informed where the energy comes from. On that data, I’m not sure if EVs have the same bright future that they have now. In the future, we will see vehicle Much depends on battery manufacturers move away from technology and that will develop, but long term there has to be a manufacturing, focus more on the better solution." Power cells or hydrogen could fit the bill, he brand and introduce themselves as a suggested, though he admitted that these also have their drawbacks. "It “service all depends on the energy and product lifecycle and what energy has the best benefits," he commented. Overall, though, he why we're seeing so many start-up emphasised. sees automation as a slow but companies showing up in our area. inevitable process: "It’s going to be We're talking hundreds and Who’s at the wheel? much more autonomous. It will hundreds of start-ups, some of happen step by step, not overnight." which are attracting investment from Technological developments are the bigger players because simply steadily leading towards a future Safe and secure? no-one knows how to deal with it. where the car handles much of the There's no real solution to this issue." driving functions - but how much? With technology improving every "From a hardware perspective, we day, some industry players are Even 20 years down the line, are not that far away from full aiming for a target of zero road Ferreira doesn't see a complete autonomy," said Ferreira. "From a deaths. But is Vision Zero possible in solution to the risk of hacking. "Look software perspective, there will be 20 years? "I think it can be achieved, at banking, at telecommunications - many developments, especially from but it's not going to be easy." hacking is happening every day," he a fusion perspective, but we are not Autonomous vehicles ask almost as said. "Cars are not going to be any really far away." However, legislation many new questions as they answer, different. There will be more niches and regulations could prove trickier. and nobody knows how the moral within the automotive industry and "They are going to delay it, especially dilemmas will be resolved. If a cyber security is going to be a major in Europe," he said."From that computer is making all the decisions niche." perspective, we’re going to suffer in a car, how does it decide what to significant delays that are not going do in a situation where it either From cars to transport to match with the technology we protects the driver or protects the have at the moment." pedestrian? "It's not an easy answer, With legislation likely to delay the and who is going to programme that arrival of self-driving vehicles, the As for consumer acceptance, this is software to make that decision? At greatest change in the next 20 years likely to vary by generation. "For the the end of the day, it's more a right could come in the form of the older generation, it’s going to be and wrong perspective, and how are ownership model. "The future of the much harder to give away that we going to reach that?" vehicle is all about transportation control to something that is rather than car ownership, as we autonomous. For the younger At the same time, hacking poses have it these days. There is no generation, it will be easier because many new safety concerns. "Cyber future for personal vehicles, it allows them to be more efficient security is one of the major especially in cities," predicted and they see mobility as a service automotive weaknesses we have at Ferreira. "Modern cities simply rather than a pleasure," he the moment," said Ferreira. "That's cannot afford that."

The industry of the future will be all about transportation as a cycle, starting with a pick-up point and ending with a drop-off location. Today, he estimates that about 90% It’s reached the point where there has of the journey works well, using trains, buses, etc. "The difficult part to be drastic change, because it’s is the first mile and the last mile, the first 5% of the trip and the last 5% of what consumers are demanding the trip," he warned. "In the long term, there is not going to be one perfect solution for the complete “ transportation cycle. That’s why we

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have niche services like Uber that rather than the hardware itself," he have been successful because they emphasised. focus on that last mile." The vehicle brands that will survive While rural areas may prove an these changes are the ones that will exception, the overall trend is develop a diﬀerent perspective of moving decidedly away from brand loyalty. "There are going to be personal ownership. "There might more and more owners of code and

20 years ago branding depended on the hardware, the type of engine, how the car sounded and felt. These days, branding is more of a design thing, a feeling that can be “easily adjusted by software be very small niches where cars can owners of software rather than be applied, like ride sharing, but the owners of hardware. We’ve seen premise of car ownership - of me that already, and manufacturers are personally driving or owning my car giving more and more responsibility - is going to disappear very quickly to system suppliers. They’re moving in city driving." into branding rather than building cars themselves," Ferreira said. "In What does that mean for the the future, we will see vehicle automotive industry? "It means manufacturers move away from reduced sales and reduced manufacturing, focus more on the production. 20 years down the line, brand and introduce themselves as there's no way there can be as much a service." production because one vehicle can be shared among three or four It’s time for drastic consumers," cautioned Ferreira. change

Brand loyalty – what’s And the big money makers in this that? scenario? "Not the hardware, not the manufacturing. It is coming With the ownership model turned from the service providers - either on its head, OEMs will need to the owners of the brand or whoever scramble to retain some sense of provides that service of brand loyalty. But then again, brand transportation." loyalty is already in the midst of an evolution. "Brand is very much a Along the way, some brands will different thing to what it was a few disappear. "There’s simply no room years ago for cars," suggested for so many brands, especially when Ferreira. "20 years ago branding external players outside of the depended on the hardware, the automotive market come into play; type of engine, how the car they are going to gain some market sounded and felt. These days, share as well," he warned. branding is more of a design thing, a feeling that can be easily adjusted At the moment, the rate of change is by software." He points to the trend faster than it has ever been. "The of platform sharing across brands automotive industry has never by larger OEM Groups, such as VW worked in revolutions; over the last Group, where small adjustments 110 years, it’s always been a case of are made within the interior or evolution," Ferreira observed. "Now software. "It’s going to be a lot it’s reached the point where there more related to the software, to has to be drastic change, because it’s what the consumer uses every day what consumers are demanding.”

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