© Accenture 2002

April, 2002

European Telematics SurveyAutomotive OEMs at a Crossroad ?

2© 2002 European Telematics Survey

Agenda

Telematics status quo

Results of European Telematics Survey

Analysis of major challenges in telematics

3© 2002 European Telematics Survey

Technology drives Telematics

Wireless Local Area

Networks (e.g. Bluetooth, 802.11b, RFID)

Wireless Internet

Technology (e.g. UMTS,

GPRS)

Powerful User interfaces

(e.g. voice, XML, multi device,

miniaturization)

Elements of our environment are becoming increasingly…

Connected

Interactive

Intelligent

Mobile Computing Platforms

(e.g. Win CE for Auto,

LINUX, QNX)

4© 2002 European Telematics Survey

Telematics as Business Opportunity

OEMs consider telematics as a chance for new streams of revenues

New Entrants in Value Chain Aggressive Push to Innovation

Competitors

Decreasing Customer Loyalty Increasing Market Transparency

Customers

Market Saturation Decreasing Product Margins Difficult Brand Differentiation

Market

Liberalization of Distribution Channels

Changing Legal Context

5© 2002 European Telematics Survey

Subscription Fees mCommerce Insurance per mile …

Quality Improvement Customer Loyalty

Vehicle Parts Services

…

Hardware Sales Cost Reduction Process Alignment Working Capital

Reduction …

Telematics Benefits

CoreBusiness

New Business

Indirect Effects

Direct Effects

Telematics Benefits for OEMs

6© 2002 European Telematics Survey

To get up to speed quickly, OEMs have been rushing to invest heavily in telematics1

However, customers have demonstrated only moderate demand and willingness to pay for devices and services2

As a consequence, today’s $1-5B market volume is 2-10 fold lower than numbers predicted in 20003 and forecasts are continuously scaled down further4

Dealing with enormous sunk costs and lacking profitability, OEMs are concerned that due to competitive pressure telematics offerings may become another „cost-of-doing-business“ (such as airbags)

Facing an increasingly uncertain market, OEMs are currently reassessing their telematics strategies

Pay Back ?

1GM OnStar: $1.2B, Ford WingCast $200-250M3compared to UBS Warburg estimates in 2000

2Ducker Inc., Telematics Survey 2002 4McKinsey Quarterly, “A road map for telematics”, 04/2002

7© 2002 European Telematics Survey

Key Messages Telematics Study (1/2)

Telematics is of increasing importance

Telematics is a competitive necessity

Telematics will primarily be used to enhance the core business (CRM, Hw sales, brand differentiation, cost reduction)

New streams of revenue are becoming more important(service revenue, mCommerce, usage based business)

Vehicle-related services are the main focus, but non-vehicle related services are becoming more important

8© 2002 European Telematics Survey

Key Messages Telematics Study (2/2)

OEMs dominate the telematics market by… Control of business architecture and alliance partners Control technology through the usage of proprietary infrastructure

Premium customer will remain the most important customer segment

Aftermarket providers don’t pose a significant threat

The risk of liability charges will be significant

Traffic safety / data protection legislation will impact telematics revenues

9© 2002 European Telematics Survey

OEM Systems Integration (CRM, RD, M&S, Production

etc.)

Remote Diagnostics

Emergency & Road Side Services

Location-Based Services

Integration with Home and Office

Usage-Based Services (e.g.

insurance by the mile)

Automatic Mobile Payments

Infotainmen

tContent

Mobile ClientsIntegration

OEMs´ Vision

Fleet Systems

Integration

Customer facing

capabilities

Non-customer

facing capabilities

Remote FunctionControl

DynamicNavigation

Vehicle Monitoring

Fleet Management

Dealer Systems

Integration

DriverMonitoring

10© 2002 European Telematics Survey

Customer Knowledge main Challenge

5,33 5,17 5,17 5,174,83 4,83

4,17 4 3,83

3,17

1

2

3

4

5

6Very High Importance

Very LowImportance

- Main Challenges Perceived by OEMs -

Strategic Challenges

Define Strategy

Create Customer Demand

Identify Customer N

eeds

Attractive Business Case

Internal Program Management

External Program Management

Front-End Technology

Competition by other O

EMs

Building Technology Infrastructure

Competition by non-OEM Providers

11© 2002 European Telematics Survey

Mismatch of OEMs’ Focus

Potential benefits as seen by OEMs

Today's OEM focus

Strategy, not technology should drive telematics Balance customer facing to non-customer facing capabilities according

to projected ROIs Focus efforts according to most attractive capabilities

(I.e. “pull” capabilities)

12© 2002 European Telematics Survey

Potential benefits as seen by OEMs

Today's OEM focus

Open Platforms

Focus on vehicle related services (safety/security, vehicle monitoring) Provide open architecture with interfaces to personal, non-proprietary

mobile devices Avoid customer lock-in: leverage other services providers by allowing

customer’s choice