NAVIGATING TO SUCCESS Predictive analytics and the future of automotive TROUBLED TIMES, UNCERTAIN FUTURE An industry in search of a roadmap

The figures are stark.

Over $180 billion was wiped off the value of firms last year. Tesla, General Motors and Jaguar Land Rover have cut a huge number of jobs, with GM alone culling 14,700 roles. President Trump’s trade war with China shows no signs of abating. A Chinese economic slow-down calls into question the engine of growth many carmakers are relying on. In Europe, Britain’s carmakers struggle to get to grips with Brexit.

It’s as big a crisis as the global automotive industry has ever faced — and there are even more challenges on the horizon. From electrification and autonomous vehicle development, to the threat posed by ride- hailing services and personal vehicle sales, there are abundant threats that not all companies will be able to meet. There’s going to be more It’s an industry in a state of flux, but also “ one thirsty for certainty. And it’s clear it’s never been more important to have a change in the next 15 to competitive edge. To be able to see the bigger picture. To know what’s coming up 20 years than in the last ahead and be able to react in time.

But now, for the first time, there’s hope in 100 years. sight. And that’s the story that this white ” paper will tell. Prof. David Bailey, Aston University.1

1 The Guardian, 2019, Stricken carmakers stall at the crossroads of a radical future, https://www.theguardian.com/business/2019/jan/12/carmakers-stall-crossroads-radical-future-self-driving-electric-power 2 3 GETTING AHEAD OR FALLING BEHIND? Putting your business on the right course

Although there are many factors that can’t be directly controlled, there are two clear issues in particular that can put Original Equipment Manufacturers (OEMs) and suppliers at risk of missing out on a successful future.

Not looking far enough into the future Not having the right data at your fingertips While working with numerous OEMs and suppliers over the years, Traditionally, manufacturers use their own service data and 01 we have found that most have a very clear idea how their products 02 may have tear-down data on parts. Typically, though, they and components perform historically — what’s in their rear-view won’t have empirical or comparable competitive information mirror. However, few have robust methods on how to see where on hand. Suppliers in particular have blind spots to certain their products are going and how they are predicted to perform OEMs who do not consistently share warranty repair in the hands of consumers. information until there is a significant issue in the field. By the time they are aware of it, more parts have been made To further compound the problem, OEMs and suppliers tend to and more vehicles on the road potentially have an issue. focus on the first 90 days to one year that a consumer has their products, when the average US consumer now keeps their vehicle When OEMs and suppliers incorporate their warranty data for 11 years or more. into our predictive models, however, they inevitably ask: “Is my product competitive? Is that performance good or bad? The tide is turning, though. Business models are beginning to Where is my competition going?” evolve, where OEMs, dealer groups and new entrants are running and maintaining fleets more often, companies are launching new It’s clear that there’s a need and a value that the industry places technologies and partnerships, and safety is paramount for the on having a competitive view of the components consumers life of the product. need to repair on their vehicles. But despite the innovations made in this $2 trillion industry, there’s an astounding lack To navigate these waters, automakers and suppliers need the data, of transparency into how components have performed in the tools and skills to predict how their vehicles and components will past and how they are going to perform over time. perform and, by taking a more long-term view, give themselves the opportunity to move faster and with more confidence — and Having better competitive data would give you greater reduce consumer repairs. confidence in both your components and your ability to make better business decisions.

4 5 With our predictive insights revealing how each component and vehicle will perform, our clients THE TROUBLE become smarter businesses on many fronts:

WITH ANALYTICS Quality assurance Analyze and predict how components will perform Better data, better business in the next 30 days, six months, one year, three years and beyond.

Dealer and aftersales Discover which dealers under-charge or over-charge At heart, many of the issues affecting the industry and confidently plan extended warranty options. boil down to the fact that it’s notoriously difficult to benchmark component performance in the field. Telematics Match telematics with warranty to quickly identify emerging issues, refine products, and resolve problems based on driver behaviors. Everyone wants to better understand how their performance compares to what Accruals and revenue others are experiencing, but no one wants Match accruals and cash-flow to the expected to share the information. There’s no risk, freeing up funds for new technology and industry transparency. product improvements. Which is where We Predict comes in. Balance sheet insurance We don’t guess. We know. Stabilize the balance sheet with our insurance. For 10 years, we’ve been working with manufacturers, captive finance companies, Customer satisfaction suppliers, heavy equipment, fleet companies, Prioritize service claims that impact customers most. and others. By combining our exclusive forecasting methodology with warranty and customer-pay service records, we can predict component performance, saving our clients millions of dollars on warranty, cutting costly repairs and galvanizing their consumer reputation.

After all, when you know what to expect, you can choose your next move with confidence.

6 7 ACCELERATE TOWARDS CERTAINTY Introducing Deepview

Imagine if next time you were driving somewhere, you could get a warning that there was traffic congestion coming up in five miles. The chances are, you’d seize the opportunity to take a swift detour.

What if that kind of information could save you $5 million? Or How does it work? get you ahead of your competitors — fast? With the automotive We Predict’s computer and data scientists analyze comprehensive business changing at a faster pace than it has in the past 100 OEM dealer and independent service facility repair order information, years, a company’s ability to thrive in this industry will depend provided by our strategic partners (and kept confidential). on how quickly it can recognize and react to trends. Those that That includes hundreds of millions of records for warranty and succeed will harness the capability to see what’s ahead on the customer-pay, across multiple model years and most brands. horizon, course-correct for bumps on the road and accelerate to their destination. Our predictive methodology then consistently compares incident rates on automotive repairs, part replacement, adjustments, Welcome to the future reprogramming, diagnostics and other services across a multitude Deepview is a syndicated analysis of predictive automotive of categories and timeframes, so you can see how components warranty and customer-pay repair frequency. rank today — and in the future.

Combining We Predict’s proven predictive methodology with repair records from across the US, it allows you to see where your claims rank today and where they’re headed, compared to Leveling the playing field your competitors’ products and components. It’s smart. It’s easy Deepview answers questions like: to use. And it’s the very first of its kind. ••Who has the lowest warranty? ••Is one supplier having problems with a particular part compared to others? ••What will repairs look like in three years’ time? ••When do my products become uncompetitive? ••Is there business I should be targeting with this third-party validation of the quality and reliability of my components and systems?

8 9 As electrical-related services present the biggest potential issue for this particular example, let’s drill down into the A DEEP DIVE INTO DETAIL next layer of detail for the category to see how it can best be managed.

Put the answers at your fingertips Industry level projected frequency of repair incidents 500 in the Electrical category 400

300

200

Projected service/1000 Projected 100 A Deepview focus on: Light Duty Passenger and Trucks 0 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 Deepview doesn’t just show you a single set of data. It allows you to Model year drill deep into multiple data sets, pulled from millions of sources, to After improvements in the 2016 and 2017 model vehicles, extract industry-shaping insights that can put you in pole position. Electrical rates are projected to grow slightly for 2018 model vehicles. Midsize Premium and Large Premium Cars models had the highest projected rates, while Compact To demonstrate its potential and multiple layers of insights, Sporty Cars had the lowest projected frequency after let’s take the industry level for 2018 model year Light Duty three years. Passenger Cars and Trucks as an example.

Electrical rates growth 01 03 06 09 12 16 17 18 Industry level of Light Electrical projection for 2018 and 2019 Duty Passenger Cars and Model year: 2018 model vehicles 13 04 10 Trucks, 2018 Chassis Projection months: 36 07 19 22 23 Service/1000: 49.173 02 14 Exterior 20 05 08 11 Projected service/1000: 268.411 15 Powertrain 21 24 Total Projected service/1000 Interior Projected 01 Midsize Premium Car 09 Midsize SUV 17 Compact SUV 268.411 service/1000 02 Large Premium Car 10 Compact Premium Car Sporty 18 Large Body/Structure 202.399 642.097 03 Midsize Premium SUV 11 Midsize Sporty Car 19 Large SUV 136.387 04 Large Premium SUV 12 Midsize Premium Sporty Car 20 Midsize Pickup HVAC 05 Compact Premium SUV 13 Midsize Van 21 70.375 06 Large Car 14 Midsize Car 22 Commercial 4.363 Drivetrain/Axle 07 Compact MPV 15 Large Heavy-Duty Pickup 23 Small Car 131.108 08 Compact Premium Car 16 Large Pickup 24 Compact Sporty Car The highest projected frequency of repair incidents is in the Electrical category, followed by Chassis, Exterior By using Deepview, engineers can identify high-risk and then Powertrain repairs. To date, consumers have designs and potential parts needed at repair facilities for experienced 49 Electrical repairs per 1000 (49/1000) vehicles in these segments. This means they will have the vehicles sold, with a projected rate of over 268/1000 right parts available for consumers and can also make once all 2018 models reach three years after sale. the design changes needed to ease warranty costs and customer backlash on future models. Every one of these repairs means inconvenience for consumers, worry, and possibly time without their cars. Having this long-term viewpoint now, as opposed to waiting two to three years for trends to materialize, can save millions.

10 11 Diving deeper still into the subcategories of Electrical Projected services within Battery Model year: 2018 repairs, we can see the highest projected frequency is in the Energy/Charging Projection months: 36 sub-category, 2018 Alternator Energy/Charging and Engine Management, with predicted Service/1000: 6.517 rates of 98/1000 and 75/1000, respectively. Projected service/1000: 95.915 Voltage Regulator Total Projected service/1000 Energy/Charging Projected service/1000 Industry level for Light Duty Electrical Energy/ Power Outlet Engine Management 268.411 Passenger Cars and Trucks Keys 268.411 Charging Electrical sub-category, 2018 Control Module 201.339 General 201.317 Inverter Ignition System 134.266 134.222 Wiring 67.194 Audio System 67.128 Diagnostic Module Hybrid Battery 0.121 GPS/Navigation 0.034 Instrument Panel/Displays Total Anti-theft Circuit Electrical Body Electrical Projected Battery incidents can vary greatly within Warning Systems Switches segments, hinting at design differences that impact fewer Sockets Sensor frequencies. One example below shows the spread of Fuses Horn incident rates in the popular Midsize SUV segment, ranging Cruise Control Telephone from 309/1000 on the Atlas, down to 26/1000 Telematics/Data Services on the 4-Runner.

We can now begin to understand wider trends: with added Projected Battery Midsize Car Projected service/1000 Midsize Van Volkswagen – Atlas features and new technology on many vehicles, Energy incidents, 2018 Midsize Premium Car Mazda CX-9 735.099 Large Premium Car – Pathf inder and Charging rates have been increasing since 2016. Compact Premium SUV Hyundai – Santa Fe 552.871 Midsize Premium SUV Ford – Flex 370.643 Compact Car Honda – Pilot Compact Premium Car 188.415 GMC – Acadia Compact SUV Light Duty Passenger Cars Ford – Edge 6.187 100 Large Car and Trucks Energy/Charging Small Car Subaru – Outback Midsize Premium Sporty Car Nissan – Murano sub-category, 2018 Midsize SUV 80 Ford – Explorer Battery Large SUV Dodge – Journey Large Premium SUV Buick – Enclave Midsize Pickup Hyundai – Santa Fe Premium Sporty Car 60 Dodge – Durango Compact Sporty Car Kai – Sorento Compact MPV Large Van Jeep – Grand Cherokee 40 Midsize Sporty Car Chevrolet – Traverse Large Heavy-Duty Pickup Toyota – Highlander Large Pickup Toyota – 4-Runner Projected service/1000 Projected 20 Commercial

0 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 By understanding the range of performance, as well as Model year the segment-level performance over the next three years, engineers can compare how their parts stack up. Using And on even closer examination, we can see that Battery Deepview, they can determine if the actual and projected remains the largest contributor within the Energy/ repair rates are much higher on their components than for Charging sub-category for projected services. other manufacturers and, if so, target tear-down activity on the components with the lowest level of repairs.

Analysts can then determine if a problem is coming from one supplier across all the manufacturers using that part, or if it is isolated to specific models.

To find the right answers, you need to ask the right questions. With Deepview, the right questions become clear.

12 13 GO FURTHER THAN We can also see that vehicles are experiencing fewer repairs, with rates improving from 2013 to 2017 models, and EVER BEFORE then increasing in 2018. Vehicle Seat repairs, 15.0 Where do your parts sit within the market? 2013-2017 models 12.0

9. 0

6.0 A Deepview focus on: Projected service/1000 Projected 3.0 Let’s take another interesting area: Seats. As companies work 0 to develop concepts that incorporate autonomous driving ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 Model year options and free up passengers to enjoy more options in their vehicles, Seats will take on even more importance. So, it’s vital Today, you’ll find the highest repair frequencies on Large to understand where we are and where we’re going. Premium Cars and SUVs, and Midsize Premium Cars. However, performance does vary within each segment. For example, in the Large Premium Car Segment, models range from a low of 1.2/1000 Seat incidents up to as high as 79/1000, offering engineers a never-before-seen viewpoint into customer experience with Seats.

As more vehicles are used in autonomous fleets, we might see repair patterns changing in segments that are Firstly, in looking at 2017 models and the industry level, Seat currently seeing lower projected service rates, matching service repairs are projected at 6/1000 vehicles at 36 MIS, those in more utilitarian roles (like Pickups) or in Premium making up 10% of overall interior repairs. Vehicles as expectations grow.

Industry level Seat Interior Trim Using Deepview’s predictive methodology and learning service repairs, 2017 Airbag Model year: 2017 models, trends can be revealed at the touch of a button. Seat Projection months: 36 Floor Interior Lighting Service/1000: 3.224 Seat Belt Projected service/1000: 5.916 Changing repair patterns 01 03 05 08 11 12 13 14 Console Sunvisor in segments experiencing Carpet lower projected service rates Total Rear Compartment 06 09 HVAC Interior 15 18 21 22 Interior Glove Box Projected service/1000 04 02 16 19 Headliner 07 10 Cupholder 50.769 23 17 20 Rear View Mirror 38.103 24 Ashtray 25.437 Shifter Projected 01 Large Premium Car 09 Large SUV 17 Compact Sporty Car Lighter 12.772 service/1000 02 Large Premium SUV 10 Compact Premium Sporty Car 18 Compact Car Controls 0.106 32.726 03 Midsize Premium Car 11 Large Car 19 Midsize Car 04 Compact Premium Car 12 Large Pickup 20 Large Van 05 Midsize Premium Sporty Car 13 Midsize Pickup 21 Compact SUV 06 Midsize Premium SUV 14 Midsize SUV 22 Small Car 07 Compact Premium SUV 15 Midsize Van 23 Compact MPV 2.521 08 Midsize Sporty Car 16 Large Heavy-Duty Pickup 24 Commercial

14 15 Diving down another level, you can see that it is actually Seat Cushions and Covers that make up 38% of the repairs in the Seat category. WHY NOW?

Actual/projected Actual/projected Seat repairs/1000 vehicles Taking control of your future Seat incidents per 1000 2017 MY at 36 months in service vehicles, 2017 Seat Cover/Cushion Latch/Lock Seat Seat Switch Seat Sensor Seat Motor Seat Air Filter Seat Control Module Simply put, there’s no time to lose. The industry is moving Heated Seat Headrest at an unprecedented pace, launching new technology and Heater Lumbar mobility options seemingly every month — and that means Seat Back Recliner Seat Adjuster Seat Assembly automakers and suppliers don’t have the luxury of patiently Seat Track Springs waiting for trends to emerge.

Giving yourself clarity when it comes to where you — and your Among premium brands, Lexus had the most models competition — are headed means you can act with confidence (five) ranking in the top three of their segments (models and change direction well in advance. with the fewest Seat repairs over three years), followed by Nissan/Infiniti (four), and Acura (two). It’s equipping yourself with a combination of deep industry data and proven predictive methodology that will help you navigate the kinds of decisions that can help you lower Top three 2017 Premium Compact Compact Compact Large Premium Car Premium Sporty Car Premium SUV Premium Car warranty and repair costs, source components with more models with the fewest Acura ILX Acura RDX Genesis G90 (best) projected frequency Lexus IS Porsche Boxter Lexus NX Lexus LS clarity, always have the right parts available, and grow faster. of Seat incidents over Lexus CT BMW M2 Infiniti QX50 Porsche Panamera three years of use 1.2 73 3.0 118 1.4 37 1.2 79 It’s being prepared for anything that’s coming. It’s being Range of incidents/1000 in the segment empowered to meet tomorrow on your terms.

Large Midsize Midsize Midsize Premium SUV Premium Car Premium Sporty Car Premium SUV Infiniti QX80 Lexus GS Maserati Quattroporte Lexus RX Land Rover Range rover Audi RS7 BMW M6 Maserati Levante Mercedes Benz GLE Acura RLX Porsche 911 Infiniti QZ70

7.8 35 2.3 35 4.7 57 3.9 92 Range of incidents/1000 in the segment

As the data shows, Seat incident rates clearly vary greatly across segments and suppliers. With these insights, designers, engineers, and commodity buyers can compare actual long-term Seat benchmarks, incorporating the different customer usage conditions at a scale surveys are just not capable of.

Using Deepview, OEMs and suppliers can target those displaying superior performance to identify success criteria and fast-track improvement in the market.

16 17 Take the next step Ready to put yourself in the driver’s seat in negotiations? Ready to reduce your costs and cover your balance sheet risks? Ready to grow your business with proof of your quality and reliability?

Get in touch today. [email protected] US: +1 (248) 716 0865 UK: +44 (0) 845 130 5521

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