Zero Dollar Car: Why technology companies are focussing on the auto industry

All rights reserved. @2015. Ellis & Associates.
I’m not a car guy; I’m a software
guy and I work with cars.
November 11, 2015

All rights reserved. @2015. Ellis & Associates. Slide 2 of 16
Open
Who am I?
I’m a developer.

Why suppliers are engaged in the
automotive segment
~100 Million new vehicles sold every year
~1 Billion vehicles on the road today
~1 Trillion $ in yearly revenues are
projected to be generated in the
automotive segment in 2020

• A 2013 study by IHS Automotive predicted that
"connected car systems will yield approximately $14.5
billion in revenue from automotive data … by 2020."
What’s the big deal?
• Data found in the connected car come from: diagnostics, location,
user experience/feature tracking, adaptive driver assistance
systems/autonomy and more.
• When people are out driving, they're likely on their way to
purchase something, or at least to stop off at, say, a Starbucks for
a coffee.
User data based on location, intentions, and preferences is gold to
marketers and money to anyone that can harvest, analyze, and process it.

Many are interested in automotive data…
Representative sample only. Not intended to imply a complete list of
companies.

How they are getting it today…
There are significant challenges with OBD dongles.

Drivers & Occupants are Captive Audience
• Cars are inherently mobile with Americans spending an
average of 1.2 hours a day traveling between locations
and an average of 38 hours a year stuck in traffic.
• OEMs are beginning to respond with solutions that
leverage cellular technologies as part of their long-
term strategy for infotainment systems.
• Current dashboard infotainment systems are mostly terrible
and are very limited in capability compared to counterparts
such as the smartphones and phablets.
Data Source: GSMA, 2014
OEM actions to date are piece meal and continue to focus on initial
owner, not long-term value of vehicle & customer.

What are you worth (just your
internet traffic)?
Data Source: PrivacyFix, E&A 2013
Note – single desktop, does not include work
issued laptop, home laptop, mobile phones,
iPad_1, iPad_2 etc.
~$5,500

It is therefore no wonder Apple &
Google are doing what they are doing.
But what are they doing?

Chevy MyLink
Cadillac CUE
Kia UVO
MercedesmBrace2
Toyota Entune
Audi Connect
OnStar
25+
Connected
Solutions

One solution, all vehicles

Chevy MyLink
Cadillac CUE
Kia UVO
MercedesmBrace2
Toyota Entune
Audi Connect
OnStar
Toyota
Chevy
Kia
CadillacAudi
Mercedes
GM

What will be the impact on devices?
Hardware High. Expect higher-end components and faster refresh rate.
Display High. Expect higher-end components and richer characteristics.
OS Minimal other than pricing pressure.
Phone Minimal other than pricing pressure.
Connectivity High. Expect higher-end technologies (e.g., USB 3.0, NFC, WiFi Direct).
Media Medium. Continued OEM solution but pricing pressure will be high.
Navigation High. Continued OEM solution but pricing pressure will be high.
Loyalty High. Continued deterioration of the OEM brand as customers increasingly interact
with their digital mobile life ecosystem.

What will be the impact on ecosystems?
media consumption Going hard after the establishment
gaming Going hard after the establishment
social networking Required for completeness; but desire stickiness
blogging Minimal impact
email Minimal impact
file sharing Required, minimal impact
reference Required, minimal impact
search Going hard after the establishment
browsing Going hard after the establishment
mapping Going hard after the establishment
shopping Going hard after the establishment
instant messaging Going hard after the establishment
telephony Required, minimal impact

Who’s next is any one with a digital
life mobile ecosystem, including …

But what really is the impact?

Zero $ / £ / € Car

Headlight
Rain
Wiper
Barometer
Traction Control
Microphone
Representative. Locations and specific sensors are meant to be descriptive.
Clock

Headlight
Rain
Wiper
Barometer
Traction Control
Clock
Microphone
Representative. Locations and specific sensors are meant to be descriptive.

Sample data extracted from IVR system
of cars on road today

There’s so much more “value” here than
just a pretty word cloud…

Scenario One – Sensors @ Dealers
Base Price $ 40,000
Package 1 $ 6,000
Sub-total $ 34,000
Package 2 $ 4,000
Sub-total $ 30,000
Total $ -

Scenario Two – Ecosystem Subsidy
Base Price $ 25,000
Subsidy - Year 1 $ 5,000
Total $ -

Summary
• First vehicles are expected in market in mid-2015.
• Expect high scrutiny on sales impact along with continued scrutiny on support
and SW update / security issues.
• Over 20 OEMs have publicly stated support for integrating Apple & Google
including Ford, GM and VW.
• Value of driver will increase over time so expect to see other mobile ecosystems
(especially China) follow Google & Apple.
• Significant disruption to the broader automotive ecosystem as we know it today.
• Aftermarket is under-exploited but recognition is growing quickly for how to
bring in technology modifications (e.g., Pioneer, Voxx).
• All industries tangentially related to automotive will be significantly and
materially impacted (e.g., music, finance, insurance)

Thank You.

Zero Dollar Car: Why technology companies are focussing on the auto industry

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