Spotlight Industry PoV- Automotive pptx.pptx

Industry Pov Automotive

1. Aug 2021 Industry Point of View - Automotive IMM Insights & Analysis

2. Table of Contents Industry Trends and Outlook Challenge from Big-Techs Sustainability and Circular Economy New Transformation Framework for Automotive SAP Unique Value Proposition How Technologies are being used to improve entire value chain of the industry

3. Industry Trends and Outlook

4. The Automotive industry is indispensable to the global economy and resulting prosperity 27 million employees globally (14mn in Europe; 8mn in US; 5mn China) 1.1mn of a total 2.6mn direct automotive manufacturing jobs were affected by plant closures in the EU in March 2020 The Automotive industry’s turnover exceeds 7% of EU GDP and 3 – 3.5% of the overall GDP in the US and 10% in China Linking industry with extensive interconnections to upstream (e.g. steel, chemicals, textiles) and downstream industries (e.g. repair, mobility services) 25% of world’s global CO2

5. Connectivity, digitalization and sustainability are key trends which will define Automotive industry in the current decade Connectivity Automation and au t onomous driving Shared mobilit y Charging i n f ras t r u c tu r e Circular e c o n omy M aa S Batteries pr odu c t i o n Electrification Alternative fuels E n e r g y s u ppl y & d i s t r i b ut i o n S u bs c r i pt i o n models C a r o wn e rsh ip decrease L i ab i l i t y Sa fe ty Homologation (testing and certification) Platooning Cybersecurity Data mo n e t i zat i o n New business models S e r v i t i zat i o n Telecommunications Access to data Urban e c o s y s t ems Decarbonization Sustainability Urbanization G l o ba liz a t i o n v s . regionalization Digitalization Au t o m a t i o n GLOBAL ME GA TREN D S AUTOMOTIVE MEGATRENDS Servitization The industry has been evolving constantly and moving towards mass-scale connected, autonomous, shared, and electric (CASE) systems , where the new business models are supported by artificial intelligence (AI), machine learning (ML), 5G, cloud computing, and big data While focusing on CASE, Sustainability, Customer centricity, and Intelligent Industry is also critical for companies to be ready for next automotive era Source: Business Sweden and I&A Analysis

6. Information-centric technologies will play a central role in the future of the industry Connected Car Platform 5G Micro-mobility Virtual Assistant Automotive Real Time Data Analytics In-Vehicle Services Electric Vehicle Charging Continuous Software Deployment Over-the-Air Software Updates Data Marketplaces and Exchanges Blockchain and IoT Digital Personalization In-Vehicle Advanced UX and UI Mobility-as-a-Service Autonomous Lidar Vehicle-to-Vehicle Communication HD Maps Electric Vehicles Flying Autonomous Vehicles Autonomous Vehicles Autonomous Vehicle Perception System Emerging Technologies for Connected Vehicles and Smart Mobility STAGE 1 Basic hardware c o nn e c t i v i t y 2009-2015 2 2 2 2 5 2 03 STAGE 5 Holistic traffic optimization STAGE 4 Real-time driving safety guards STAGE 3 Live car-driver i nt e r a c t i o n L i n k s d r i v e r s ’ e x t e r n a l digital devices to a c h i e v e i n - c a r interaction INFOTAINMENT / TELEMATICS-ORIENTED In-vehicle interaction STAGE 2 Smartphone-empowered connectivity DRIVING SAFETY & TRAFFIC EFFICIENCY Out-vehicle connection 2035-2050 M a i n l y f o r v e h i c l e monitoring M u l t i s e n s o r y i n t e r a c t i o n s for occupants, such as voice and gestures Proactive and precise danger warnings and collision avoidance in both normal and complex scenarios Intelligent decision making e m p o w e r e d b y A D function seamlessly integrates environmental factors for route selection and modification Now Next New Beyond Horizon Source: Capgemini and I&A Analysis

7. Automotive industry expected to double by 2030 with high increase in software and emission compliance 2660 3500 850 1300 90 200 2000 201 8 2030 Product bu s i n e s s C o nn e ct i v i t y services A f t er ma r k e t Mobility s o l u t i o n s Connectivity Da t a - en a b l ed s e r vic es Shared mobility N on - a u t ono m ous a nd autonomous One time sales Components to full vehicle sales, one time, incl. EV and AV Revenue related to ICEV expected to drop significantly, but e.g. EV will grow substantially Eur 3 , 600 bn 50% Of industry revenues in service- oriented value chains Growth will be primarily driven by service-oriented business Eur 7,000 bn Global automotive revenue pool, EUR bn 90 % Software will account for 90 % of innovations in the vehicle, and lines of code will be a hundred fold what they are today of all revenues could come from mobility services 25 % Total fines auto companies could face from EU for missing emissions targets $ 37bn By 2030 Source: Business Sweden & Web-Search

8. Challenges Coming From Big Techs and Automakers Response

9. Automotive players need to adopt new technologies and business models to take on challenge coming from tech-players Tech players moving deeper into Automotive space Challenges For Traditional Players Source: Roadzen and I&A Analysis Examples of Automakers Response At $631B, Tesla is now worth more than the next top six car companies combined Microsoft has been focused on connectivity, through partnerships with major automakers such as Nissan, Volvo, and Toyota to deploy its Azure-based connected car platform Apple aims to launch electric car production for the mass market by 2024 Google, already a player in the automotive space with its self-driving subsidiary Waymo, has been investing in-Vehicles connectivity Amazon has been focused on EVs as part of company’s commitment to reaching carbon neutrality by 2040 Adapting quickly to newer technologies such as AI, Blockchain, Cloud and 5G Big Data Analytics Software driven vehicles Product-to-service business model Customers digital services Create a positive brand perception through value-added services GM, Renault, Nissan, Mitsubishi have preferred to build strategic partnerships with tech companies to compensate for missing technological competencies Volkswagen Group has invested heavily in developing their own operating systems. Volkswagen created its own automotive cloud and new electric vehicle architecture. The GENIVI Alliance is a non-profit automotive industry alliance, which several automakers and suppliers have joined to develop an open-source solution based on Linux. Cybersecurity

10. Use Of Emerging Technologies In All Aspects Of Automotive Business

11. Industry leaders are redefining the Automotive value chain, creating new business segments and transforming traditional activities Source: Accenture, I&A IN - C A R SO FT W A RE 100M lines of code per car, validation, testing, cybersecurity S U PP L Y C H A IN From globalization to r e g i o n - s pe c i f i c ; c i r c u l ar economy impact M A NUF A C T URING F r o m I CE wi th p r e d i c t a b l e volumes to electrification — wi th unc e r ta i nty ENG I N EERIN G From waterfall mechanical components to agile software defined features P UR C H A S I NG F r o m T i e r - 1 o r i g i nal e qu i p m e nt supp li e r s to high tech companies A FT ER S A LES From mechanical repairs to over-the-air upgrade MARKETING From dealer-mediated brand awareness to direct 1:1 c ust o m e r e x per i e nc e SALES From traditional dealers to a direct or omni-channel world M O B ILI T Y S E RV IC ES Passenger economy; selling multi-model service to consumers C O N NEC T ED V EHIC L E S E RV IC ES In-car services for consumers; data monetization FI N A NCING & I N S U R A NCE From lump sum financing to lease, rental, subscriptions, etc; usage-based-insurance FINANCE Funding ”the new” HR Talent Challenge C ORE IT Transformation Cloud Platforms, Vehicle-to-Cloud, IOT, Cybersecurity NEW ! N E W ! Degree of Change by Value Chain Segment Very high High Medium Low Very low MANUFACTURING P U R C HA SIN G IN-CAR S O F T W A R E ENGINEERING SU PP LY CHAIN S A LE S C O NN E C TE D VEHICLE SERVICES FINANCING & IN SU R A N C E M A R KE TIN G M O BI L ITY S ER V I C E S A F TER S A LE S NEW !

12. Industry 4.0 is being used in automotive manufacturing to improve processes Internet of things (IoT) Artificial intelligence (AI) D r ones Robots 3D printing Blockchain Virtual r eality (VR) Augmented reality (AR) Industry 4.0 Technologies Key Value Drivers Flexible routing, scheduling, and load balancing 30- 40% lower capex achieved by Porsche by deploying flexible Automated Guided Vehicle (AGV)-based assembly line to optimize its electric vehicle production AI and automation in routing, scheduling, and load balancing can reduce idle/wait times and lead to increases in labor productivity and throughput in final assembly Closed control loops through sensor-based in-line quality inspection 90% improvement in defect detection by Ford by automating quality control through camera-based in-line quality inspection Sensor-based in-line quality inspection facilitates rapid feedback loops for process parameter correction Extension of automation to final and pre-assembly <20 month amortization Bosch increased end-of-line parts inspection efficiency through flexible and collaborative robotization by Rexroth This flexible automation solution was amortized in less than 20 months Extending automation to final and pre-assembly ultimately reduces labor costs by enabling lights-out areas in this phase of production Source: PWC, I&A Analysis and Web-Search

13. Sustainability in the driver’s seat

14. Sustainability is now a strategic priority for the Automotive industry Wearable technology, EksoVest to reduce risk of injury during the conduct of overhead work Drones with cameras for overhead inspections, cutting accident risk Employee Health & Safety Michelin rethreads old truck tires and create new tires. 85% of a tire is reused, saves 30 kg of rubber and 20 kg of steel per tire, as well as 60 kg of CO2 emissions Circular Economy Toyota set up a joint venture with Maruti to establish vehicle dismantling units across India Green Supply Chain Improve traceability in its global, supply chains Through increased integration using AI & blockchain Only uses renewable energy sources – worldwide. Aims to reduce supply chain CO2 emissions per vehicle by 20% , production emissions by 80% CO2 per vehicle by 2030 and use phase emissions by 40% CO2 per vehicle by 2030 from 2019 levels by 2030. Uses average 36% recycled materials and 10–20% recycled plastics Renewable Energy Tata Motors’ value from hazardous waste initiative successful in reducing hazardous waste to landfill or incineration by 19.3 % in 2020 vs. 2019. Source: Company websites press releases/Blogs

15. Automotive industry implementing sustainability practices across business operations R&D and engineering Sustainable R&D and product development Product sustainability Supply chain Sustainable supply chain Environmentally responsible sourcing of metals, Due diligence of all material and product procurement Manufacturing & operations Sustainable manufacturing Recycling of waste and easy returns for end-of-life disposal Sustainable power procurement Mobility services and vehicle usage Mobility and digital services Lower emissions and improved vehicle safety 9. Sales, marketing, and after-sales sustainability Marketing & sales Supporting and promoting a circular economy Fair labor policy for automotive value chain Sustainability in IT R&D and E ngineering Groupe PSA consolidated its R&D efforts to two platforms, designed to limit CO 2 emissions by reducing weight and improving aerodynamics. Volkswagen uses renewable raw materials such as the natural fibers, flax, cotton, wood, cellulose and hemp to produce components, wherever possible. Supply Chain Scania co-founded a consortium to encourage the roll-out of bio-gas (from waste and residues and 90% less polluting) fueled trucks. It will build a network of gas filling stations across major commercial routes in Europe Manufacturing & O perations Yamaha Motors achieved zero waste, both direct and indirect, to landfill by using thermal recycling processes to create materials to be used as combustion improvers and using post-combustion residue in making cement and roads. General Motors runs its SUV assembly plant in Texas, US, on 100% clean wind energy . Marketing & Sales Tata Motors took back an equivalent of 26,993 vehicles for refurbishing and reuse in the year 2017-18 Mobility Services And Vehicle Usage Daimler-owned moovel Mobility-as-a-service platform makes it possible to purchase and pay for public transport tickets in German cities and it also offers users access to other mobility options such as carsharing, ride-hailing and bike rentals. Source: Capgemini, I&A Analysis

16. Automotive Industry need to adopt best practices of sustainability leaders to drive sustainability programs forward Demonstrate progress Pursue sustainability as an organization- wide mission Bring accountability and robust governance Use technology for sustainability Envision and spread sustainability across the automotive value chain Strengthen alliances/ partnerships Around 80% of automotive companies publish a sustainability report every year. However, often the data reported are not comparable across different companies or consistent from year-to-year. In addition, it is estimated that almost 42% of sustainability-related metrics go unreported by large organizations Ralf Pfitzner, head of sustainability, Volkswagen Group, outlines how they see sustainability as critical to their long- term value : “If we approach it the right way, sustainability is not a cost factor, but rather an investment in a viable company,” Sustainability leaders are putting in place the governance mechanisms needed to drive their sustainability goals. For 64% of leaders, sustainability is a C-level or board- level agenda General Motors appointed its first chief sustainability officer to lead the company as a global advocate for climate-sensitive manufacturing and mobility operations and direct the design and implementation infrastructure for EVs Companies are collaborating with their suppliers to develop greater supply chain transparency . Volvo is a case in point. The company partnered with two of its EV battery suppliers to create a digital ledger that tracks the source of rare-earth materials such as Cobalt Automotive organizations have traditionally focused on using technologies to improve vehicle efficiencies (such as reducing waste) and developing innovations in EVs and AVs. Substantial value can also be unlocked by using forecasting and analytic techniques to calculate, track, audit and publish environmental impact . Leading organizations are introducing technologies to promote sustainability and employee welfare. Critical initiatives – such as the circular economy and developments in EVs – will not come to fruition without active participation of all players. Collaboration will be key . For example, BMW, Scania, Volvo, and Volkswagen were lead partners to promote a harmonized approach in driving sustainability in automotive Source: Capgemini and I&A Analysis

17. Transformation framework for the next automotive era

18. Transformation framework for the next automotive era Customer centricity Mobili t y Ecosystem Sustainabilit y Su cc es s F ac t ors People & Organization Technological & Software Competency Operational Excellence Intelligent Industry Source: Capgemini, Microsoft, I&A Analysis Key Focus Areas To implement Transformation Framework Resilient Operations Differentiated Customer Experience Emerging Mobility Services Accelerate Vehicle Innovation Increased Organization Productivity Sustainability underlying technologies need to become more innovative shift from hardware to software excellence Collaborative platforms need to transform to achieve the total customer centricity of a technology company also equipping themselves to cope with the constantly accelerating transformation of their industry doing more with fewer resources, i.e. better resource utilization, but it should be more than that: a holistic philosophy that makes it possible to improve and maintain an efficient and resilient automotive organization

19. SAP unique value proposition can help automotive industry to implement transformation framework and be ready for next era Source: I&A Resilient Operations Differentiated Customer Experience Emerging Mobility Services Accelerate Vehicle Innovation Increased Organization Productivity Sustainability Connected Factory Connected Supply Chain Intelligent Decision Making Intelligent Reality C us t o mer 3 60 Digital Marketing Customer Experience Management Connected Field Service Dealer Management Systems Predictive Maintenance Fare & Toll Management Traffic & Transit Management Fleet & Asset Management Parking Management Data Management Vehicle Service Connectiv ity Location-Based Services Speech Services In-Car Productivity Over-The-Air Modern Workplace High Performance Computing Low- Code Development Quantum Computing Circular Economy Sustainability Reporting Material Circularity Utilization Improvement Key Elements SAP Value Proposition- Venture Services Focus Areas Sustainability Service Package Sustainability Reporting, Resource Recovery & Reuse, Responsible Design & Production Business Process Intelligence Provide process insights to customers based on the findings, process improvements are suggested and can be implemented BoSH AI platform to support automation in the business operations self healing space from self-help, self-service to self-healing Cross-Company Collaboration Cross-company collaboration with the use of blockchain helps to provide trust and authenticity within the supply chain.. Blockchain can also enable better recyclability XR Provide situational awareness, enhanced perception and hands free system access

20. Source: I&A Analysis SAP Venture Services offerings to help Automotive industry to be efficient, resilient, customer centric and environmental friendly Business Process Intelligence Business Process Intelligence End-to-end capabilities for strategic process transformation. It can help visualize process reality by running in depth process analysis for enterprise transformation, help reimagine processes by enabling organization to quickly respond to unpredictable business and regulatory changes and gain complete visibility and governance over your workflows Optimize the re-organization process Improve resource allocations Improve Go- to market processes Digital touch point improvements Reduce business disruption Reduce resolution time Improve service quality BoSH Business Process Automation Comprehensive out-of-the-box AI platform to support automation in the business operations self healing space from self-help, self-service to self-healing Sustainability Service package Sustainability Service package is used to introduce and position SAP innovations for Sustainability pillars such as Circular Economy, Sustainability Reporting and Steering and Climate 21 Accounting Drive more sustainable business growth Improved compliance with new sustainability norms SDG Initiatives Prioritization​ Satisfy investors who are integrating more ESG data into their investment decisions Manage risks Improve productivity of collaborating entities Improve decision making by gaining insights across the Programs Cross Company Collaboration Emerging Technologies This solution combines Business Technology Platform workflow with blockchain services to enable cross-company collaboration and create an audit trail of key activities linked to program contracts and key dates logged by the program participants. Key Theme Ventures Venture Overview Venture Value Proposition XR Provide unmatched situational awareness, enhanced perception and hands free SAP system access in Design to Operate scenarios (e.g. for field technicians) Experience SAP business processes and implementation options in a virtual business process showroom Decrease in maintenance/service execution cost Less onsite travel for field technicians Reduced cost for development of XR apps

21. Thank you. Kuljit Singh IMM – Insights & Analytics [email protected] M: [phone] Deeksha Nigam IMM – Insights & Analytics [email protected]   M: [phone]