Global trends in the connected vehicle spacePrepared for the October 3rd, 2016 McCarthy Tetrault lunch and learn

Our Expertise

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Connected Autonomous Secure

infotainment apps | remote servicescar IoT | contextualization | telematics

sensors | advanced driver assistancedriver monitoring | V2X

cyber security | anti-theft | risk assessments | countermeasures

Our services

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trackers | forecast | guidesnews | insights | surveys

performance | usability | engagementfunctionality | security | safety |

tech selection | business modelsdue diligence | market positioning

Intelligence Evaluation Strategy

Why connect the car?The reasons have changed over time

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UBI Services

LBS Advertising

In-vehicle Apps

3rd party data sale

In-vehicle IHU features

Telematics subscriptions

Early OEM objectives for connectivity

New OEM objectives for connectivity

Dealership referrals

Recall management

Usage-based CRM

Design optimization

Warranty analysis

Redundancy optimization

Remote SW updates

$50Cost-saving per

SW update

5.7%Additional customer loyalty

derived from satisfaction with infotainment

Consumer attitude to the connected carSBD survey of 1,000 customers (mix of 50% premium and 50% volume brands)

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Connected car ecosystem

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Cloud Services & Partners (V2C)

V2X

InfotainmentService Scheduling

Parking InfoTraffic Info UBI

Core Telematics Partners

Tier 1

Data Storage

TSPWeb and App

Dev

Embedded Modem

Antenna

HMI

V2XDSRC

Distributor

Factory

Dealer

OEM Operations

V2V

V2I

V2G

V2B/P

Android Auto CarPlay

Analytics

MNO

IOT

Smartwatch Smart house Smart health

Connected car ecosystem – Personal data

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Cloud Services & Partners (V2C)

V2X

InfotainmentService Scheduling

Parking InfoTraffic Info UBI

Core Telematics Partners

Tier 1

Data Storage

TSPWeb and App

Dev

Embedded Modem

Antenna

HMI

V2XDSRC

Distributor

Factory

Dealer

OEM Operations

V2V

V2I

V2G

V2B/P

Android Auto CarPlay

Analytics

MNO

IOT

Smartwatch Smart house Smart health

User ID IP Address

Name VIN

Establishing customer confidenceHow transparent are OEMs with their programmes?

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After reviewing regulations in the largest automotive markets by volume, SBD listed the requirements required to launch a truly global strategy.

The T&Cs of six connected car services were then reviewed to see if sufficient transparency was provided to explicitly comply with these requirements. Android 6.0’s T&Cs were also reviewed to compare the connected car to the smartphone. Though these organizations might have the capability to comply, no reassurance is given to the customer (or data subject) at the point of initial consent.

The transparency of data use matters (e.g. Germany blocking Facebook to use What’s App data).

Source: SBD report: “Big Data 2015 – Preparing for Third Party Use Cases (613)”

OEM 1UK

OEM 1USA

OEM 2US

OEM 2UK

OEM 3 US

OEM 3 EU

Growing challenges of connecting the carThe EU shaping global connected car development?

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EU General Data Protection Regulation (GDPR)The EU’s GDPR is set to come into effect in March 2018 with a strong focus on the protection of personal data. When this occurs it will redefine “personal data” in much broader terms and will require changes to connected vehicle terms and conditions, providing greater transparency and clarity for customers as to what data the vehicle shares with the cloud, as well as which specific business cases they drive.

EU eCall MandateEvery new type-approved vehicle sold in Europe will require an embedded eCall system starting in March 2018. This means that every new model sold in Europe that is type approved after this date will become a connected car. It is highly anticipated that OEMs will leverage the eCall module to supply additional services to the vehicle in an effort to receive a return on their investment in the hardware.

Data PortabilityTrade organizations such as the FIA have been pushing for greater transparency in connected car data and to let the customer decide who handles their connected car data. Their “My Car My Data” campaign has led to an industry group, the ACEA, publishing a manifesto in response, outlining the conditions for OEMs passing connected car data to third parties who want to replace them as the core service provider.

Apple and GoogleDisruption, contribution or noise?

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• Though popular with many customers, most OEMs are reluctant to offer Google and Apple a greater presence within the car for fear of lack of control in the data flow and the HMI customer experience being too different from the OEM’s brand experience.

• As consumer awareness of screen duplication services grows, and ‘Digital Natives’ reach car buying age, penetration of these services is set to reach much higher levels.

• Apple will improve their contextual services to compete with Google’s dominance in this area.

• Only the largest car makers are likely to have the resources to truly compete with the growing level of sophistication that the CE giants are applying to AI use cases.

• Google have made clear their intent to embed the Android OS in the car, starting with Android N. Google is likely offer of an ‘autonomous platform’ to car makers, possibly on a licensing model

• Apple’s Project Titan has been thought to have incurred notable lay-offs, but the recent rumours (denied by both parties) of their discussions to acquire McLaren Technologies has created additional speculation

TeslaRisk takers

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• Autopilot is a beta-level software; the disclaimer and consent point appears only once meaning that subsequent drivers may be unaware of the maturity level of the solution

• Their customers are more comfortable sharing their data than other brands• Tesla has been open and even aggressive in using car data to counter claims by the media• Their up-sell model (autonomous, extended range, ludicrous mode), allows functional improvements to an existing car,

something others could follow• Much will depend on their ability to produce the volume of cars pledged by 2018

Source: Tesla blog

Mobility servicesGenerally false starts and limited successes

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Mobility services have seen mixed success. In some cases, such as Car2Go, there is success in Toronto and Vancouver, but it struggles in other areas (e.g. ceased operations in the UK, Copenhagen, Miami) making it challenging to deploy a regional, let alone global, service. Even Uber recently pulled out of China, showing that even giants are susceptible to regional demands.

Source: SBD report: “Automotive Mobility - Preparing the Connected Car for Mobility Solutions (615)”

Personal data and shared vehicles• For personal cars, OEMs have no guaranteed way to

know when a vehicle changes hands, keeping services active without the new data subject’s consent

• This is an even more prevalent concern with shared vehicles

• How big of a concern is it that shared vehicles display previous users’ navigation destinations and other synced data?

• The challenge of providing a personalized and contextualized in-vehicle experience without jeopardizing personal data

• Screen duplication solutions is one possible answer

Autonomous carsNo OEM has launched an SAE level 3 solution to date, connectivity is critical

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2017: SAE Level 3 - Supervised Autonomous Driving

• Low speed Traffic Jam Assist• Autonomous Parking

2020: SAE Level 3 - Supervised Autonomous Driving

• Motorway Assist• Remote Parking

Mid 2020: SAE Level 4 - Unsupervised Autonomous Driving

• Motorway Cruising

2030-40: SAE Level 4 - Unsupervised Autonomous Driving

• Urban Cruising

When can we expect higher level automation in the market?To realise such vehicles, the industry is being driven to intensify collaborations and

acquisitions. Since early 2015 this development has been driving many cross-industry partnerships between automakers, suppliers, software giants, technology start-ups, ride-sharing companies and many others. Some of these partnerships are looking to develop new solutions, to support delivering autonomous vehicles. The main developments are mentioned below:

• Tri-vision solution• Multi-megapixel cameras• New long-range laser - expected to be launched in the near future (e.g. 2017 Audi A8);

many companies are currently working towards an automotive-grade long range laser• Centralised ADAS ECU and sensor fusion scheme• Real-time high definition maps• Potential introduction of 79GHz radar• Developments in image processing techniques (Artificial Intelligence including Deep

Learning) • Long term plan to potentially introduce DSRC-based V2X • More advanced driver monitoring solutions (direct measurement of driver’s status)

Connected car forecastMore connected cars mean more data, more relationships and more scrutiny

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2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Embedded 20% 23% 26% 30% 34% 38% 43% 47% 51% 55% 59%Tethered 12% 15% 15% 14% 12% 12% 10% 8% 7% 5% 0%Smartphone 18% 20% 25% 30% 34% 43% 48% 53% 59% 64% 69%

0%20%40%60%80%

100%

Pene

tratio

n Penetration

There are strong indications that OEMs will continue to embed connectivity in vehicles, though when considering evolving business models, data concerns and consumer confidence in the technology it will continue to be an uphill battle.

Key areas that have not been central to vehicle development, such as data privacy laws, will play a major role in how services are developed, deployed and maintained.

Source: SBD 2016 Connected Car Forecast10 years eCall & diagnostics as standard

3 to 4 years

3 years

Nothing (EU)

eCall & diagnostics as standard

2010

2016

5 years Remote & diagnostics as standard

6 months20102016

20102016

15

The largest team of in-car technology specialists recruited from over 10 OEMs & suppliers

To be the world-leading knowledge partner for the automotive industry

Model-level databases

Technology forecasts

Supplier intelligence

Market regulations

News analysis

Expert UX testing

Consumer UX testing

Iterative prototype evaluation

KPI setting

Cyber security testing

New market entry support

RFP/RFQ management

M&A due diligence

Strategic workshops

Supplier positioning support

90% of OEMs

65% of Tier-1s

60% of Service Providers

SBD NA(Michigan, USA)

SBD EU(Milton Keynes, UK)

SBD Japan(Nagoya, Japan)

SBD India(Bangalore, India)

Jeffrey Hannah

Director, North Americajeffreyhannah@sbd-na.com

734-883-3417

We are committed to adapting to our client’s needs and always strive for the highest quality of service

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About SBD

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McCarthy Tétrault LLP / mccarthy.ca

The Connected Car:Managing Legal Liability

George S. TakachMcCarthy TétraultOct. 3, 2016

DOCS #15963400

McCarthy Tétrault LLP / mccarthy.ca

A Complex Connected VehicleEco-System− OEMS− Safety Regulators− Dealers− Owners− E-System Suppliers− E-Service Suppliers− Law Enforcement− Privacy Regulators− Insurers

DOCS #15963400

18

McCarthy Tétrault LLP / mccarthy.ca

The OEM’s Connected Car Legal Agenda1. Collaboration Agreements

− IP ownership/licensing− data ownership/licensing

2. Tax planning− e-commerce tax vis-à-vis the owner− cross border

3. Privacy policy updates− including, internal data breach policy (need to make S-4 compliant)− consent at point of sale of the vehicle− consent at point of subscription to the new service

4. Cybersecurity compliance5. Contract formation with the Owner

− privacy consent− liability communication

6. Consumer Protection Regulation compliance7. Insurance

DOCS #15963400

19

McCarthy Tétrault LLP / mccarthy.ca

VANCOUVERSuite 2400, 745 Thurlow StreetVancouver BC V6E 0C5Tel: 604-643-7100 Fax: 604-643-7900 Toll-Free: 1-877-244-7711

CALGARYSuite 4000, 421 7th Avenue SWCalgary AB T2P 4K9Tel: 403-260-3500 Fax: 403-260-3501 Toll-Free: 1-877-244-7711

TORONTOSuite 5300, TD Bank TowerBox 48, 66 Wellington Street WestToronto ON M5K 1E6Tel: 416-362-1812 Fax: 416-868-0673 Toll-Free: 1-877-244-7711

MONTRÉALSuite 25001000 De La Gauchetière Street WestMontréal QC H3B 0A2Tel: 514-397-4100 Fax: 514-875-6246 Toll-Free: 1-877-244-7711

QUÉBEC CITY500, Grande Allée Est, 9e étageQuébec QC G1R 2J7Tel: 418-521-3000 Fax: 418-521-3099 Toll-Free: 1-877-244-7711

LONDON, UK125 Old Broad Street, 26th FloorLondon EC2N 1ARUNITED KINGDOMTel: +44 (0)20 7786 5700 Fax: +44 (0)20 7786 5702

DOCS #15963400