Three key trends in automotive industry - PwC key trends in automotive industry ... Smart manufacturing: • Global unified component ... Analysis Corporation Products development

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  • Three key trends in

    automotive industry

    2016/12

    PwC Strategy&

  • Strategy& | PwC 1

    Digitalization

    Electrification

    Changing mobility

    Three key trends in automotive will fundamentally transform automotive industry

    Source: Strategy& analysis

  • Strategy& | PwC

    Digitalization will disrupt the whole value chain from R&D and production to sales

    Marketing

    & serviceDealershipMfg.SourcingR&D

    Value chain of traditional auto industry

    R&D

    Mkt &

    serviceMfg.

    Supply

    chainProduct

    Real

    time

    connecti

    vity

    Value chain of digital auto industry

    Value chain changes

    Linear value chain

    Focus on products/hardware

    Vehicle as a means of transportation

    Multi-level distribution structure

    Mainly finished products

    Multi-dimensional connectivity in

    value chain

    Focus on service/software

    Vehicle as a consumption scenario

    Client relationship without

    intermediary

    Customized products/services in

    small scale

    + Internet + high level design

    Source: l iterature research; Strategy& analysis

  • Strategy& | PwC

    Daimler, as a pioneer, optimized its value chain via digital innovation

    R&D

    Marketing/

    serviceMfg.

    Supply

    chainProduct Intelligent supply chain

    Daimler piloted auto transportation system in Hungary, which transferred

    pre-sorting components boxes to production line

    Smart manufacturing Global unified component

    standard and system framework,

    as well as auto control module The standard module is applied

    into all new robots and production processes. And

    digital simulation can be applied into the whole process from

    stamping to final assembly

    Smart R&D Various Apps, infotainment, automation and

    battery techs have been developed by 150

    digital engineers as well as prototype designers in the R&D center in Silicon Valley

    Smart marketing service:

    Restructured the marketing department, with the steering

    committee at HQ consisting of sales, technicians for in-car info

    and entertainment systems and IT staff

    Define customer habits and lifestyle & mobility drivers with big

    data mining

    Digital auto products The current intelligent connectivity

    includes lifestyle service, infotainment and

    safety service Self-driving concept car is to be launched

    by CES in 2016

    Source: l iterature research; Strategy& analysis

  • Strategy& | PwC

    Digitalization applied in R&D

    Value of digitalization in R&DInfluence of digitalization R&D in industry chain

    Reduced cost Shortened time line Portfolio management

    Virtual verification

    New products New value chain/system

    design The pressure form

    constant technical evolvement

    Fast prototype design

    Platform Joint R&D

    Cross-functional R&D team

    IT security Interface, etc.

    Fast prototype design Digital analog(DIAN) ---

    What contributions R&D can made for digital transformation (in culture, partnership)?

    Curtail publicity process

    Digital capability

    Change/adapt in production combination

    Minimized R&D risk

    Strengthened engineering capability

    Improved efficiency of

    R&D

    Fire-new digital business mode

    The digitalization of products & service

    Digitalization & integration of value chain

    Source: l iterature research; Strategy& analysis

  • Strategy& | PwC

    Open R&D system pushed by digitalization will change the R&D mode essentially, involving every stakeholders in the process

    Marketing

    Service

    Supervision

    manufacturing

    Quality

    Purchasing

    Engineering

    Product

    management

    Proposal

    Customers demands Market demands

    Revolution demands Manual and data sheet

    Service parts catalogue

    Service manual Training manual

    Serve BOM Event reporting

    Design feedback

    Test specification

    Tool design Packaging / labeling specifications

    Consumer goods specifications

    Operational training requirement

    Manufacturing path Work instruction

    Process configuration Manufacturing feedback

    Compliance specifications Compliance reporting

    Qualified supplier

    Selected components

    BOM specifications

    BOM specifications Design specifications

    Model Draft

    Simulation

    Products concept

    Products requirement Products cost

    Distributed manufacturing

    Design partnership

    R&DAnalysis

    Corporation

    Products development

    Model & platform

    Suppliers

    Customers

    Source: l iterature research; Strategy& analysis

  • Strategy& | PwC

    Digitalization changed the interactive mode of information & material flow on both enterprises and the whole value chain

    Supply network of digitalization

    Systematic supplier inventory management/autonomous replenishment

    Remote order process

    Comprehensive R&D

    Joint order management

    Repertory visualization

    3D printing (spare parts )

    Purchasing platform Intelligent warehouse

    Classification and selection, automatic packaging

    Logistic system connecting to warehouse

    Cross warehouse visualization and optimization

    Effective order management

    Real-time order confirmation by self-owned supply chain network

    Remote order process

    Fully real order exposure

    Logistics visualization of E2E

    Logistic I&E records and tracking capability of the Internet of things

    Supply chain visualization and event processing platform, Single source of truth

    Detection and identification of initial risks and event processing tool

    Customer networkSupplier network

    Supply chain eco-system

    ProductionLogistics & Warehouse

    Supplier Customers

    Vertical & comprehensiv e planning platform

    Planning

    Internal demand Consumer orderPurchase order

    Supply and demand plan of E2E

    Leverage cloud-based planning platform to realize system-based plan and vertical corporation of E2E

    Real-time planning, execution, optimization, Scenario Planning

    Management & communication of supply chain

    Centralized supply chain and performance management

    Analysis, predictions and business principles driven by data have been optimized

    Socialized supply chain, communication and customer interaction

    21

    3

    4

    5

    6

    Source: l iterature research; Strategy& analysis

  • Strategy& | PwC

    Convert functional silo into E2E supply chain network though horizontal integration

    Traditional value chain Integrated value chain

    Transparency Limited visualization of supply chain Complete supply chain panorama

    Synchronism Delayed effect of information in supply chain

    members

    Simultaneous information for all members in

    the supply chain

    Extendibility

    /cooperativity

    Limited visualization impedes meaningful

    cooperation

    Deepened cooperation contributes to more

    internal value of supply chain

    FlexibilityCustomer in the end should be contorted when

    the information is needed in logistics

    Quick supervision on the requirement

    changes of customer in the end

    ResponseDelays by different planning cycle and response

    by different layers

    Real-time response in the process of planning

    and implementing(response of requirement changes from different levels)

    Productionsupplier logistics Customer

    Plan

    Order & Confirmatio

    n

    Plan

    Order & Confirmatio

    n

    Smart supply chain

    Order & Confirmatio

    n

    Plan

    Customer Distributor

    Supplier OEM

    Supply chain

    Control center

  • Strategy& | PwC

    Integrate consumer electronics in vehicles, promoting their digital experience

    The mix of digitalization and automation

    Customers w ant the

    personalized digital experience

    can be applied in vehicles via

    the easiest w ay (like the

    CarPlay by Android)

    OEMs w ant to be closer to

    end customers, especially

    via digital channel

    Communication

    Family

    Mobile device

    Tourism & activity

    Shopping

    Food & healthy

    Internal/external

    sensor/arresterEntertainment/

    infotainment

    Device & display

    Comfortable feature

    Integration of smart grid

    Lifestyle & fashion

    Individuals demand Ownership/financing

    lease/renting/sharing

    Reduced/optimized

    travel time

    Driving

    experience Mobility cost

    Customers digital

    experience

    Intelligent and

    connected vehicle

    +

    Source: l iterature research; Strategy& analysis

  • Strategy& | PwC

    Software, hardware and services will experience revolution with the development of vehicle digitalization

    Head-up display

    Electric parking brake

    Radar Lidar

    Camera

    Sensor

    Electric steering systems

    Dash boardMultimedia

    windshield unit

    HumanMachine Interaction software haptic feedback, sound, Gesture control

    Engine for Internet of vehicles

    Central chassis control unit

    Image processing

    Communication module

    Image processing software

    Interconnectivity

    In-car hardware In-car software

    Analytic engine

    Vehicle diagnostic services Limousine and vehicle communication service

    Customer service management

    Storage and support service of customer and

    vehicle data

    OEMs global service(GPS, transportation, traffic

    police, toll station)

    Data communication module

    Global serviceExternal and internal

    supplier

    External provider of infotainment and service

    Software and service outside the car Service department of the 3rd

    party

    In-car

    Wir

    ele

    ss

    de

    vic

    e s

    erv

    ice

    Outside the car

    Data aggregation service (application server)

    Electric throttle control

    Exte

    rnal

    (Se

    nso

    r te

    ch

    .)

    En

    gin

    e b

    ay

    (co

    ntr

    ol

    tech

    .)

    Dash

    bo

    ard

    (In

    pu

    t/fe

    ed

    back)

    Wireless device

    Engine control module

    +

  • Strategy& | PwC 1

    Digitalization

    Electrification

    Changing mobility

    Three key trends in automotive will fundamentally transform automotive industry

    Source: Strategy& analysis

  • Strategy& | PwC

    With the prevailing of EV, great changes are taking place along the whole value chain of Chinas NEV industry

    Charging infrastructure

    operation & battery

    recycling

    Production & Sale of

    finished automobile

    Battery &

    components

    manufacturing1 2 3

    Situati-

    on

    Trend

    Local brands have had large presence in

    NEV already w ith diversif ied business

    models, e.g. e-commerce, leasing, etc.

    Now international brands have limited

    market share in NEV

    Non-traditional OEMs and social capital

    are entering NEV market

    Current existing public charging facilities is

    not reasonable w ith low use rate and simple

    sources of investment.

    The government policies encourage

    segmentation of charging facilities

    investment to solve practical issues.

    Along w ith the w idespread use of NEV,

    demands of dealing and recycling w aste

    battery are urgent.

    Chinas battery and motor industry

    is developed enough w ith the

    supply chain and capacity needed

    for mass production

    Despite the technological gap w ith

    global peers, Chinese companies

    are developing fast w ith scale effect

    around the corner for leading

    players

    More private capital and OEM joined the

    investment of facilities, construction, and

    operation. The infrastructure netw orks of

    connectivity and w in-win cooperation

    established w ith existing gas stations and

    other facilities introduced more business

    models and technology innovations.

    With more strict rules and policies, attentions

    tow ards battery recycling are increased. OEM,

    battery companies and professional

    enterprises of battery recycling w ill have rapid

    grow th.

    According to current new energy

    regulations, the BEV w ith

    comparable technical functions w ill

    still be priced 20%+ higher than

    traditional cars, supposing

    electricity cost is 30%-40% low er in

    2020. It w ill take 5+yrs to break

    even for a NEV ow ner, w hich

    seems lackluster if w ithout

    subsidies

    Foreign players increasing investment

    in in Chinas NEV market w ill accelerate

    the localization of EV product, resulting

    in f iercer competition

    Under the overheated competition and

    investment, the new entrants might

    have to exit w ith their underestimation

    of the complexity and investment in

    auto manufacturing

    Status quo and future of Chinas NEV industry

    Source: l iterature research; Strategy& analysis

  • Strategy& | PwC

    Inevitable price fall-The price of Cell and Pack will decrease ~50% by 2020, which will pose great threat for battery industry

    Co. CustomerPrice of Pack

    (Yuan/Wh)

    PrideCATL BAIC C102.2-2.4

    2.6-2.7

    GuoXuan High-

    TechBAIC M307 1.6

    Tenpower BAIC M307 1.1

    Zhuoneng BAIC M307 1.1-1.2

    Wina Foton PX/2T 2.0

    EVE Huatai 1.8

    Coslight Yogomo 2

    Wanxiang Haima 2.1

    Guoneng/Tianjin Tongjia 1.8

    Current Price Situation

    YearCell

    Yuan/Wh

    Pack

    Yuan/Wh

    2016 1250 1850

    2017 1200 1800

    2018 1100 1600

    2019 950 1300

    2020 850 1100

    2021 750 950

    Target Price

    1

    Source: l iterature research; Strategy& analysis

  • Strategy& | PwC

    More frequent integration of industry chain-battery company also cooperates with OEMs in Pack field to target customers

    Types Company Integration of industry chain

    Aggregation BYDFrom raw materials such as lithium, battery, motor, electronic

    control, pow er assembly to the vehicle

    Vehicle-

    batteryLifan

    10 lithium battery production line have been built with a investment of

    1.548b RMB. Power battery production volume id 6GWh annually

    Battery-pack

    CATL Self-ow ned BMS and PACK team

    JV w ith BAIC called Pride in PACK field

    Wanxiang

    A123 New PACK in Shanghai w ith SAIC

    Sunw oda Qida(JV) PACK in Wuhu w ith Chery

    Lishen/Opti

    mumnano Self-ow ned PACK site

    Battery-up &

    dow nstream

    Guoxuan

    High-Tech

    300m RMB share of BAIC accounting for 3.76%

    Joint effort on R&D center in Silicon Valley

    Joint establishment of a 10b AH pow er battery plant in Laixi,

    Qingdao

    Partnership leasing and charging business w ith 3rd party

    Self-built positive electrode and separator plant w ith an

    investment of 5b RMB

    Battery-

    vehicle

    Wanxiang

    A123

    M&A Fisker (An American EV company) and plan to reproduce

    Karma

    De-Fluoride Invested 150m RMB in Hongxing Auto, acquiring a share of 72.5%

    Raw material

    -Battery

    ShanshanIn addition to negative electrode material business, raise funds into

    pow er battery, electronic control and other f ields

    Zhonghe

    Deep footprints in Lithium resources, lithium salt, precursor

    materials, cathode materials and other f ields

    Provide NCA / NCM materials through their ow ned Shenzhen

    Tianjiao

    Citic Guoan Launch battery plants

    Data source: EVTANK/ companies public data

    60%20%

    20%

    PACK Supplier

    PACK

    Battery Company

    OEM

    Specific third party

    PACK Company

    50%40%

    10%

    Specific third party PACK Company

    -

    PACK

    PACK

    Partnership of B. &

    OEM

    The third party PACK

    PACK Co. from small

    battery to power

    1

    Source: l iterature research; Strategy& analysis

  • Strategy& | PwC

    OEMs continue to deepen control of the PACK and batteries

    OEM NEV strategy Battery supplier With PACK business or not

    BYD / Self-production Self-production

    DFPlanned annual production and sales of 300,000 cars in 2020

    Wuxi Fullsave/Tianjin Jeve/Shanghai Aerospace Power/CATL

    Confirmed cooperation between CATL and Lishen

    BAICPlanned annual production and sales of 500,000 cars in 2020

    Samsung SDI/SK CATL/Coslight/Boston

    Establish Pride with CATL Establish BESK with SK

    JACPlanned annual production and sales of 200,000 cars in 2020

    Samsung SDI Lishen/Guoxuan High-tech

    Deep cooperation with Huating

    SAICPlanned annual production and sales: 200k by own, 400k by JV

    LGC Wanxiang A123/Shanghai Jiexin/ CATL

    Establish Shanghai Jiexin with Wanxiang A123

    ZotyePlanned annual production and sales of 500,000 cars in 2018

    BAK Tianneng /Wanxiang A123/Weineng

    /First/Sounddon/Lishen/Boston/ Do-Fluoride N/A

    CheryPlanned annual production and sales of 200,000 cars in 2020

    Wanxiang A123/Tianjin Jieneng Establish Wuhu Qida with

    Sunwoda

    JianglingPlanned annual production and s...

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