Automotive manufacturers need an efficient and comprehensive solution to remotely manage the accelerating amount of software inside of today’s connected cars. This presentation, given by Roger Lanctot of Strategy Analytics, describes the current OEM embedded telematics market conditions and the future of the connected car.

1. Red Bend Seminar:
Managing the Accelerating Amount
of Software in Cars
Roger C. Lanctot,
Associate Director
Global Automotive Practice
Strategy Analytics
September 2013

3. Where We Stand Today
Universal Connectivity
Vs.
Consumer Indifference

4. Hardware in Market
OEM Embedded Telematics
150,000
140,430
125,000
Units 000's
100,000
75,000
73,895
Hardware in Market
50,000
39,548
25,000
24,716
0
2011
2013
2015
2017
Source: Automotive Multimedia & Communications - AMCS

5. Active Subs
OEM Embedded Telematics
150,000
140,430
125,000
Units 000's
100,000
98,785
75,000
Hardware in Market
73,895
Active Subs
50,000
49,739
39,548
25,000
24,716
25,734
12,075
0
2011
2013
2015
2017
Source: Automotive Multimedia & Communications - AMCS

6. Inactive Subs
OEM Embedded Telematics
150,000
140,430
125,000
Units 000's
100,000
98,785
Hardware in Market
75,000
73,895
Active Subs
Inactive Subs
50,000
49,739
41,645
39,548
24,716
25,734
12,641
12,075
25,000
13,814
24,156
0
2011
2013
2015
2017
Source: Automotive Multimedia & Communications - AMCS

7. Inactive Subs = Dead $$$
OEM Embedded Telematics – Units/Revenues
40,000
Over $4 Billion wasted in 2017 alone
Over $12 Billion wasted 2011  2017
4,500,000
$4,026,727
4,000,000
Units (000's)
35,000
3,500,000
30,000
3,000,000
$2,530,689
25,000
20,000
2,500,000
$1,691,760
2,000,000
$1,618,224
15,000
1,500,000
10,000
1,000,000
5,000
Revenues (USD Mil)
45,000
500,000
0
0
2011
2013
2015
Revenues
2017
Units
Source: Automotive Multimedia & Communications - AMCS

8. Customers Won’t Pay

9. Customers Don’t Use

10. Customers Don’t Care

11. Connected Car Going Nowhere

12. Big Picture
• Embedded telematics is not taking off
• Smartphone connections are failing, fragmenting
• Navigation/traffic has become a battleground – awareness
growing, solutions/service quality improving
• Loss of focus on core value propositions
• But there is light at the end of the tunnel:
– VRM-CRM
– Safety

13. Connectivity Status Report
1. Customers don’t want to pay for embedded
2. Not enough customers connecting their smartphones
3. Too many “platforms,” apps, and content chasing too few
connections
4. Need to drive daily relevant applications to drive adoption:
Traffic, weather, streaming content
5. OBJECTIVE: Standard embedded connectivity
6. TIMEFRAME: 4-5 years+
7. SHORT-TERM: Smart-phone connectivity focus

14. Where We Stand Today
How is this picture
changing.

15. Big Three
•
•
•
•
GM/OnStar – 100%!
Chrysler – will be ~ 10% for MY14 – FOTA via smartphone
Ford – EVs only for now – thumb drive updates - future?
Lincoln – Announced intention to embed

16. Japan
• Toyota – Not yet – FOTA via smartphone / Lexus ~ 100%
• Honda – Not yet / Acura -> 100%
• Nissan – Not yet / Infiniti -> 100%
• Others – still in planning

17. Germany
• BMW – 100%! – FOTA for CY2014?
• Audi - ~ 50% - “aftermarket” SIM
• Mercedes -> 100% - FOTA capable - “not replacing ECU software
yet”
• VW -> 100%

18. France, Italy, UK, Sweden
•
•
•
•
•
Fiat – not yet – thumb drive updates
Renault < 20%
PSA < 20%
Volvo -> 100% outside the U.S. – limited updates
Jaguar – not yet

19. Korea
• Kia – not yet
• Hyundai -> 100%

20. Common Thread
• Japanese mass brands – value-oriented customer, highly reliable
cars, low cost of ownership – difficult to justify embedded
modem
• German luxury brands – BMW has made 100% fitment table
stakes
• VW, Hyundai, Kia – similar value prop and challenge as Japanese
• Domestics – GM’s planned shift to LTE will change the game –
true FOTA coming (ie. ECU updatability) – Chysler and Ford
following slowly

21. Smartphone Connectivity
+
=
Customer Acquisition

22. Embedded Modem
+
=
Customer Retention

23. Why connect all cars?
Revenue
Metrics – Can’t monetize or manage what you
can’t measure
Retention – What happened to our customers?
Competitive threats – insurance
companies, independent dealers
Preserve the value of the fleet – lease
customers, etc.

24. Why connect all cars?
Crowdsourcing – traffic, weather, safety, maps
Community building – ownership experience
Firmware updates – which version? Universal
deployment
Service – Dealer metrics for scheduled, ad hoc
Real-time customer connection
Customer identification management
Customer portal
Vehicle life-cycle management

25. Why FOTA?
• Hundreds of millions of lines of code
• Why identify problems (diagnostics/prognostics) if you
can’t/won’t fix them?
• Need to update mission-critical safety systems, powertrain etc.
• Aftersales added value – enhance/transform ownership
experience
• Reward consumer for being/staying connected
• Software recalls – cost avoidance
• Customer expectation/OEM obligation
• We didn’t do it because we couldn’t – onset of LTE means “no
excuses”

26. Sirius XM Concept
Sirius XM is proposing a
combination LTE/Satellite
module as part of its plan to
transition into telematics.
Expected plan is to shift
content distribution to XM
while Sirius satellites are used
for video and/or software updating. This concept
has been greeted with skepticism by OEMs.

27. Biggest FOTA Challenges
• Role of the dealer – lost sales/service revenue, out of the loop
• Consumer awareness/understanding/acceptance – customer
MUST be notified – customer MUST accept
• Frequency – ad hoc, monthly, quarterly
• Threshold for update – safety, security, size, timing, functionality
Big Customer Relationship Win + Potential Dealer Alienation
Goal: Make it Win-Win for all

28. Current Dealer Landscape
• Hostile to FOTA
• Misinformation/confusion regarding updates due to changes
from hardwire to wireless updating at the dealer
• Lack of dealer-integrated management system for tracking
versions etc.
• Software updates = customer visit = opportunity!
• Software updates as a customer value proposition – a means to
exclude aftermarket – updates disable “mods”
• Updating ECUs is an important new phase!

29. Telematics ECU:
OEM Global Shipments - Units and Revenues
4,000
40,000
3,500
Units (000's)
35,000
3,000
30,000
2,500
25,000
2,000
20,000
1,500
15,000
1,000
10,000
500
5,000
0
0
2010
2011
2012
2013
2014
Units
2015
2016
2017
2018
2019
2020
Revenues
• Telematics ECU Opportunity: 2012 vs. 2020
–
–
–
–
Revenues (US $ Mil)
45,000

ECU Shipments: +500% : 7.0 Million units in 2012  42 Million units in 2020
ECU Revenues: +320% : $910 Million in 2012  $3.8 Billion in 2020
Average Selling Price 2012: $130/unit  2020: $92/unit
The high volume Mass-Market Product in 2020 will have limited features
• E.g. eCall and support for Location Based Services/B2B communications:
• Typical mass market product will have 3G Cell Modem + GPS/location capability
Source: Automotive Multimedia & Communications - AMCS

30. OEM Telematics ECU
Cellular Modem Choice - Global
45,000
40,000
Units (000's)
35,000
4G
30,000
3G
25,000
2 .5 G
20,000
2G
1
5,000
1
0,000
5,000
0
2 0 10 2 0 11 2 0 12 2 0 13 2 0 14 2 0 15 2 0 16 2 0 17 2 0 18 2 0 19 2 0 2 0
• Telematics ECU Modem forecast 2012 vs. 2020 (7.0 Mil. units  $42 Mil. units)
–
–
–
–
2G Wireless Network: 21K units in ‘12 to Zero units in ‘20 Units
2.5G Wireless Network: 6.3 Mil units to 0K units
3G Wireless Network: 670K units to 26.6 Mil units
4G Wireless Network: 55K units to 15.6 Mil units




Source: Automotive Multimedia & Communications - AMCS

31. Connectivity ECU - OEM:
Units and Revenues
40,000
2,500
2,000
Units (000's)
30,000
25,000
1,500
20,000
1,000
15,000
10,000
500
Revenues (US $ Mil)
35,000
5,000
0
0
2010
2011
2012
2013
2014
Units
•
2015
2016
2017
2018
2019
2020
Revenues
Connectivity ECU Opportunity: 2012 vs. 2020

– ECU Shipments: +360% (7.2 Mil units in 2012  33.7 Mil units in 2020)
– ECU Revenues: +220% ($725 Million in 2012  $2.3 Billion in 2020)
– Average Selling Price 2012: $100/unit  2020: $69
– Examples include: SYNC, Entune, Blue&Me, Kia UVO, Mini Connected etc.
Source: Automotive Multimedia & Communications - AMCS

32. World ECU $ Per Vehicle

33. Polk: Average Age of Vehicles Hits Record High

34. Dealer share of collision business in decline

35. Tesla: Industry Disruption

36. Tesla – Industry Disruption
•
•
•
•
•
•
•
•
•
•
•
Field upgradable telecom module
Field upgradable graphics
Company-owned stores
Streaming content via embedded modem
Limited HMI overhead + touch-centric vs. voice-centric
Firmware over the air updates
Top safety rating
Top score in Consumer Reports
Top Strategy Analytics customer clinic evaluation
Non-traditional sourcing and development
Googlemap! (VIDEO #1)

37. Tesla Update Process
•
•
•
•
•
Notification message in car “Tesla has an update”
“Press here to download”
Timing of download and time required for download provided
Approve or change timing
Post update: Message detailing contents of update
• Biggest update thus far: addition of “creep” – addition of voice to
make phone calls

38. Tesla Software Update Report

39. Google Disruption

40. Google – Industry Disruption
• Self-contained – no connection necessary
• Uses its own map
• Multiple consumer, commercial applications
• Quanergy: targeting replacing $70K Lidar unit with $500 unit with
rotating element -> $200 solid state device

41. Elements Enabled by LTE
•
•
•
•
•
•
Personalized, contextualized content engine (audio & video)
Live map – hybrid on/off-board – map updating
Ad hoc/mesh networked connectivity – Wi-Fi, cellular, other
Secure gateway (Cisco)
Alert-driven/workload managed interface – traffic, weather, etc.
Communication efficiency optimized – on/off-board data
management/processing “delta-focused”
• Voice (Nuance), Metadata (Gracenote)
• Preferences/policy-managed – data, app use, privacy

42. Four Core Value Propositions for Connectivity
1.
2.
3.
4.
Navigation/traffic/location – contextual awareness
VRM/CRM
Streaming content
Connected safety – anticipating/avoiding crashes
OBJECTIVE: Telematics 2.0 = collision avoidance + delivering
critical, real-time information safely to the driver before/as it is
needed

43. Telematics 1.0 -> Telematics 2.0

44. Telematics 1.0
Automatic Crash Notification +
Stolen Vehicle Recovery + Remote
Diagnostics
=
Good Enough Telematics
44

45. Telematics 1.0 - Shortcomings
Reactive
Limited dealer engagement
Limited use of vehicle data
Limited consumer access to data
Limited dealer access to data
45

46. Telematics 2.0
Firmware over the air updates
Prognostics
VRM
IP-based traffic data, hybrid speech
recognition
Streaming content
46

47. FOTA as a core connected car value proposition
•
•
•
•
Necessary for mission-critical, safety updates
Strengthening bonds to the customer AND the car
Adding value after the sale
Avoiding costly recalls and, in some cases, inconvenient dealer
visits
• Enhancing the customer experience
• Maintaining vehicle software integrity

48. Thank you!
Roger C. Lanctot
Associate Director
Global Automotive Practice
Strategy Analytics
rlanctot@strategyanalytics.com
+1 (617) 614-0714
Twitter: @rogermud