2018 ARTICLES
Highlights from CES, Detroit Auto Show and AutomobiliD
January 2018
Mobility Ecosystem: a look back at 2017
February 2018
China Leverages Silicon Valley’s Mobility Ecosystem
March 2018
Vertical Integration Among Carmakers and Mobility Services
April 2018
Autonomous Driving — The Current State of Play
May 2018
Connected Services Are Revolutionizing the Mobility Experience
June 2018
Driver & Passenger Understanding: The Next Frontier
July 2018
Mobility Revolution Triggers Corporate Restructuring in Auto Industry
September 2018
Plug-In Vehicles: The Future in Charging
October 2018
Shared Micro-Mobility Goes Mainstream
November 2018
How Nio, Byton, Lucid, Rivian and others Emulate Tesla
December 2018
Highlights from CES, Detroit Auto Show and AutomobiliD
January 2018
January has become an intense month for auto tech in the US, with CES first, then the Detroit Auto Show (or NAIAS) along with the Motown’s more tech-oriented AutomobiliD. The development of new tech is certainly not slowing down in the mobility space, whether at the initiative of incumbent players, tech giants or startups. Let’s review the key messages and take-aways from these events from a mobility / automotive stand point.
CES 2018
The 2018 edition of the most massive tech show lined up almost 4,000 exhibitors and was attended by about 200,000 people, a third of which originating from outside the US. Among the exhibitors were about 900 startups. The most represented countries were the US, then France (each close to 300) then far behind the Netherlands and China (about 50 each). The trends observed in recent years were visible once again: more startups, more artificial intelligence and more automotive / mobility.
The increased role of mobility made its way into the event’s keynotes. Intel CEO Brian Krzanich showcased the company’s firepower across many industries, then brought a self-driven Ford Fusion to present Mobileye’s forays into mobility. The Israeli company, acquired by Intel in 2017 for $15b, announced new OEM partnerships to deploy their camera-based road scanning solution, REM. The 2 million vehicles to be fitted with REM by end 2018 will provide critical mass to crowd-source maps for autonomous driving purposes. Krzanich’s keynote ended with a very short flight of the eVTOL created by Volocopter, a German startup in which Daimler invested $25m last year. Intel does not want to miss out on any key emerging mobility solutions.
Ford CEO Jim Hackett’s focused his keynote on the company’s effort to better integrate mobility and smart cities in the future. Cities have started to react to the disruption caused by ride-hailing and free float bike sharing services and realize they must prepare for autonomous driving. Ford has understood the need to cooperate with city planners to optimize the impact of new services on cityscapes. Ford’s solution will rely in part on their future connected-V2X and urban mobility platforms to better serve mobility needs.
Artificial Intelligence's (AI) pervasiveness was visible not only at many startups, (some of which mention AI because it is fashionable!) but also at an increasing number of incumbent players, across pretty much all industries. This is certainly true in mobility. AI deployment was integral to a number of emerging value propositions, from predictive maintenance, to passenger monitoring and well being, EV charging optimization or fleet optimization as well as in the deployment of digital assistants in vehicles. AI is of course essential for the development of autonomous vehicles (AV). As seen at many startups and established companies alike, AI is at the core of AV platforms, including in the cumbersome task of teaching AVs to recognize a pedestrian, a road sign, etc.
Several traditional OEMs were present, but I will only mention four here. Daimler showcased the Mercedes EQA concept, a 2-door EV which will likely be priced close to Tesla’s Model 3 when introduced around 2020, and the Smart EQ concept, a level 5 version of its urban car; both have been presented at previous events. Mercedes also introduced MBUX, its new user interface. It uses 2 wide, side-by-side displays, which are highly customizable, controllable from either the steering wheel, a touch pad on central console and the capacitive display itself (right side only). This rather impressive system will appear in 2018 on the E Class.
Toyota introduced e‐Palette, a self-driving concept EV (see picture) which the OEM will start testing in the early 2020s. Toyota is working with Amazon, Didi, Uber and others towards the launch of a mobility service business for either people or goods, along with a suite of connected solutions. At Denso’s booth I spotted a concept remote diagnostic and predictive maintenance solution, which the Tier 1 is probably preparing for the e-Palette in the mid-2020s.
Nissan presented its autonomous, electric IMx concept with retractable steering wheel and pedals (first shown in Tokyo last year). The company also introduced “brain-to-vehicle,” a solution aimed at increasing safety by detecting decisions via brain waves 0.2-0.5 seconds before actions are taken. This innovative approach was showcased with headgear and is expected to be integrated in Level 4-5 AV system in 5-10 yrs.
Surprisingly, BMW positioned the brand this year as “the driving machine,” making a drifting M5 the center piece at their test area. This was somewhat at odds with otherwise tech-biased messages elsewhere.
In the tech giants’ corner, Nvidia and Intel/Mobileye seemed to be on a collision course. Nvidia has established a dominant position in AV computing hardware with its GPU-based Drive PX and is strengthening this position by building the Inception Program ecosystem. It is also moving into software applications for self-driving assistance (early revenue stream) and may later develop a full AV stack. Mobileye has a dominant position in the detection of objects and lanes from camera images with REM, its software on chip which also provides crowdsourcing of map data (see above). Intel/Mobileye is developing Auto Drive, its CPU-based AV stack to be introduced in 2021 as Level 3 for public use and Level 4 for fleets. Reported customers include BMW, FCA, NIO and SAIC. Forty test vehicles are being launched with BMW to train the AI for Intel’s AV solution.
Mobility-related startups offered a wide variety of products or services. These ranged from sensors (essentially lidars), to autonomous driving for cars and trucks, mapping, parking apps, fleet management, emotion and posture analysis, e-ticketing for public transport, driver monitoring, connectivity (on- and off-board), remote diagnostics and predictive maintenance, insurance-related products, various connected services, etc. This gave me a chance to add a number of interesting new entries to my database of over 400 startups in the mobility space.
Emerging OEMs were also at CES, though with less fanfare as last year when Faraday Future presented FF91. This year, FF was off site after adjusting their ambition due to financing issues. It was Byton’s turn (formerly Future Mobility Corp., with Chinese financing as well) to present their first vehicle. The fully electric SUV, developed by teams in China, Silicon Valley and Munich, is expected to launch in China in 2019 for the equivalent of $45k, then in the US in 2020. It is fitted with an impressive instrument panel developed with Faurecia, which includes a pillar-to-pillar, 1.25m long display — see picture. Xiaopeng Motors (or Xpeng), an other Chinese newcomer, presented a fully electric SUV. They just closed a $350m financing round led by e-commerce giant Alibaba and Foxconn, the powerful maker of iPhones and other electronic devices. Interesting combination of investors.
CES was again the stage for real life demos of autonomous vehicles. Lyft and Aptiv (ex Delphi) partnered to offer self-driving ride-share services on several streets in Las Vegas. The tech is far from mature enough to allow AVs to roam freely: the two companies spent a couple of months planning and mapping the geofenced area of operation. In parallel, Navya showcased Autonom Cab, its new fully autonomous, 6-passenger shuttle. Keolis and AAA have been operating a previous version of the French company’s vehicle on the streets of Las Vegas since November.
After Las Vegas’s CES, Detroit’s NAIAS and AutomobiliD
One week apart, the events and the two cities are widely different. The North American International Auto Show (NAIAS) remains totally at odds with CES. No tech at NAIAS. This dealer-sponsored auto show is all about selling what’s on the shelf. Of course there was nothing on AVs and very, very little on electrified vehicles. Instead, more SUVs/crossovers, and bigger and more expensive pickup trucks, i.e. up to $100k!
A bright spot from my standpoint: the electrification of AMG. Daimler’s performance brand introduced a new powertrain, the “53 Series”, which combines a turbocharged 3.0l in-line six (429 hp, 520 N.m) with an electric motor. The latter adds a marginal 21hp but a very significant boost in torque with an extra 250 N.m, or close to +50%, of course available from 0 rpm. AMG is moving from “big displacement for power” to “electrification for torque.” Newton meters (or foot pounds) are what matters most in the end. The 53 Series is initially available on E and CLS classes, but we should expect more such powertrain variants to drive all types of vehicles, including performance ones. By the way, Porsche is also increasingly associating electrification with performance.
At the other end of the spectrum came Guangzhou Auto Co., or GAC with its “Trumpchi” branded vehicles. The Chinese company presented 8 production vehicles, i.e. 4 SUVs, 3 sedans (incl one battery EV) and one minivan, as well as a concept EV. GAC, which produced 500k vehicles in 2016, will introduce the Chinese-produced Trumpchi GS8, an SUV, in the US in 2019. Not sure if the brand name will be used int the US though!
I was also surprised by the presence of Aramco. The Saudi oil and gas giant is obviously seeing the electrification of mobility as a major threat, though it will take a couple of decades before the global automotive fleet is massively powered by electrons. Showcasing an opposed pistons, self igniting test engine from partner Achates, Aramco promoted combustion engine research as a pathway to improve fuel economy, with the intent to licence combustion tech to OEMs.
This was the second year for AutomobiliD, Detroit’s tech show located underneath NAIAS. Whereas ZF, Michelin, Denso and Aisin had booths within the auto show, the tech-oriented floor gathered close to 60 startups and several incumbent Tier 1s, incl. Valeo, Aptiv, Magna or Magneti Marelli. Coming from many countries, the startups covered various spaces within mobility, including autonomous driving (eg Ouster), electrification (eg Cryptowatt), autonomous shuttles (May Mobility), maintenance (eg Carfit), connectivity (eg Lisnr), fleet management (eg Vulog) or smart cities (eg Connecthings). Organizers also planned an interesting series of talks and panels. This is a promising event for the coming years, and certainly a good thing for Michigan.
Overall, CES, and AutomobiliD to a lesser extent, continue to shed light on where mobility is going, i.e. electric, connected and shared in the short term, and progressively automated over the next 10 of so years. And NAIAS is showing us how OEMs and auto suppliers are covering (part of) the development cost for the underlying tech. Exciting future ahead!
Marc Amblard
Managing Director, Orsay Consulting
Feel free to like or comment this article on LinkedIn (https://goo.gl/7RbSGr )
Mobility Ecosystem: a look back at 2017
February 2018
2017 in a nutshell
2017 was another intense year for the mobility ecosystem, in particular for electrification, autonomous driving, and shared and new mobility solutions. Plug-in vehicles sales jumped roughly 50% in China, 40% in Europe and 30% in the USA, reaching respectively 2.4%, 1.7% and 1.2% of total sales — Plug-ins even hit a 39% market share in Norway. Most of the OEMs who had not yet committed to EVs did so in 2017. The industry is now heading full steam towards electrified mobility, with the consensus that pure EVs will reach cost parity with fossil fuel vehicles around 2022-2025.
Massive investments were made towards autonomous vehicles (AV) whether through internal R&D or M&A activity. However the roles have yet to be cast between OEMs, incumbent suppliers, startups and tech companies. Nevertheless, the tech is making its way into drivers’ hands, with Tesla’s AutoPilot or Cadillac’s SuperCruise. In addition, AV-specific regulations were passed and autonomous ride-hailing pilots are now starting.
As for shared and new mobility solutions, the battle heated up between the major new players (Didi, Uber …) and OEMs who accelerated their transformation to fight back (Car2Go/DriveNow, Maven, Moia, Free2Move….) New players received at least $15bn in fresh funding in 2017, which will mainly be used to increase their geographic footprint and invest in AV / AI tech or rental fleets. Automated shuttles become more visible and were joined by automated delivery vehicles. Lastly, eVTOL (electric vertical take-off and landing) initiatives turned last year into an active space with new investments from key players and trials.
Last year incumbents, tech companies and startups made significant progress towards their coexistence. They all increasingly realize the need to partner rather than just compete head-on. Incumbents see the difficulty to become software-centered mobility companies whereas the new comers progressively grasp the complexity of the automotive business, from industry standards and regulations or systems integration or supply chain approaches.
Let’s look in more detail at what actually happened and what it means going forward.
2017 was pivotal for the electrification of mobility
Most OEMs announced their electrification roadmaps and objectives: 1m plug-in EVs per year by 2025 for the VW brand, 1m by 2026 for GM, 15-25% of sales for Daimler or BMW. With the most battery EVs (BEV) sold in the industry to-date, Renault-Nissan-Mitsubishi announced 12 new BEVs by 2022, rather a volume target given the uncertainty concerning customer uptake. Benefiting from their early start (Leaf in 2010 and Zoe in 2011), the Alliance said last year they are generating a profit on variable costs. GM indicated their next gen BEV will be profitable, whereas other OEMs’ BEVs won’t be profitable for a while given the massive underlying investment (eg $24 bn by 2030 for the Volkswagen group, $11 bn for Ford).
How about charging these EVs? BMW Group, Daimler, Ford, and the Volkswagen Group announced the creation of Ionity, a JV that will develop and install high-power charging stations (up to 350 kW) along Europe’s main roadways, with the objective to reach 400 stations by 2020. In parallel, California-based EV charging startup ChargePoint, market leader in the US with 45k charging points, established it’s European operations with the help of Daimler which invested $82m. In the US, Electrify America announced its plan, financed by a $2 bn grant from Volkswagen Group as a result of the DieselGate settlement. A majority of these funds will be invested in the US charging network over 10 years (2800 stations by June 2019).
On the battery side, Bloomberg NEF reported an average battery pack cost of $209 / kWh at the end of 2017, down from about $1000 in 2010. They estimate the cost will drop below $100 /kWh by 2025. Tesla started production at its $5bn Nevada-based gigafactory, slated to produce 50 GWh worth of packs by 2020. NorthVolt announced a $4 bn plan to built a 32 GWh battery factory in Sweden. Whereas some incumbent OEMs announced battery-related investment last year (eg 10 GWh capacity for Daimler in the US), Nissan divested their battery operation in 2017.
Several companies emerged with the ambition to become OEMs
Tesla delivered 101 k Model S and X in 2017, or about 0,1% of global vehicle sales. Yet, this represents more Model S than either Mercedes S Class or BMW 7 Series in both Europe and the USA, which is quite an achievement. Model 3, a great product, got a rough start due to “manufacturing hell.” Over 400k clients are waiting for their cars after “loaning” $1 k to Tesla. But the emerging OEM doubled down and announced in Nov ’17 two rather revolutionary products: a new Roadster and a full electric semi. Tesla promised amazing characteristics: 0-60 mph in less than 2 sec for the former and up to 500 miles range for a fully loaded 36t truck for the latter. This is putting intense pressure on incumbents as well as tempting a number of Tesla wannabes.
A year ago, Faraday Future was forging ahead. The LA-based startup lowered their ambitious plan due to financial difficulties, but is now ready to get back into launch mode after finding a new investor in late 2017. More such ventures became more visible in 2017. Also backed by Chinese investors, several new OEMs have built momentum. Nio introduced their first product in China in Jan 2018. The ES8 SUV was developed between China, Silicon Valley and Germany. Lucid is finalizing the development of its Air sedan in Silicon Valley for a late 2019 launch. Byton (SUV presented at CES) and SF Motors and are building up their teams in Silicon Valley. All these companies have their eyes on China, the largest EV market with 600 k plug-in sold in 2017.
A new player emerged in Europe: Dyson came into the public eye with a £2 bn ($2.8 bn) commitment to introduce 3 EVs, starting in 2021. One of the building blocks was the acquisition of Sakti3, a Michigan-based designer of solid-state batteries for $90m in 2015. Dyson had 400 engineers working on the project as of Sept 2017. Interesting expansion from vacuum cleaners and hairdryers to cars!
New OEMs focus exclusively on EVs and prepare to enable autonomous driving. They are much more nimble than incumbent players as they can embrace technology and new business models with ease compared to established OEMs. The latter have to cope with legacy manufacturing assets, distribution networks or organizational structures. New players can build their business from a clean slate, eg domain-based electronics architecture (vs up to 100 ECUs), direct distribution model, manufacturing though partnership vs in-house (eg Nio with JAC), software-centered engineering.
Incumbent players are adapting, but no fast enough … yet
Incumbents continue to suffer from their inherent inertia which makes it very difficult to pivot and become software-centered mobility companies. Realizing the necessity to deeply transform themselves, several incumbents have decided - or are considering - to split into a digital / AV business on one side and a legacy hardware on the other. This was the case in 2017 for Delphi/Aptiv. ZF and Autoliv are looking into such a move. All players are massively recruiting software engineers. Continental has about 15 k of them (7% of the workforce) and is adding 1 k per year.
Incumbents increased their presence in Silicon Valley last year. Ford grew their local team from about 150 to over 200 during 2017. Tier 1 suppliers Continental and Faurecia opened offices in SV during the year. And those that do not have partake in this ecosystem ought to at least understand what is going on here.
The battle heated up significantly in the AV space
Intel acquired Mobileye for an impressive $15bn last March. Ford committed to invest $1bn in ArgoAI. Aptiv (ex Delphi) acquired nuTonomy for $450 m. GM acquires Lidar maker Strobe for a reportedly $32 m. Many OEMs and Tier 1 suppliers invested in either hardware- or software-related AV startups. Delphi even put money on several Lidar companies to hedge their tech bet.
Two tech companies created their own open ecosystem last year with the objective to gain a dominant position and impose their tech. Nvidia created the “Inception Program” dedicated to AI and startups. Baidu established “Apollo,” an open platform which gathers both established companies (OEMs, Tier 1s) and startups. Intel and Nvidia are now on a collision path and Baidu tries to get in the way. Meanwhile, Waymo continued to refine its full stack AV solution, reaching a cumulated 4+ m miles of autonomous driving. They achieved an industry leading disengagement score of 0.18 / 1000 miles during the 352 k miles driven in 2017 in California.
It is also interesting to note that Nvidia partnered with Bosch and ZF for the distribution of the Drive PX AV platform. Similarly, Lidar leader Velodyne partnered with Autoliv to increase their global engineering and manufacturing footprint. Newcomers and incumbents need each other.
A very dynamic share-mobility space, for both people and goods
By the end of 2017, Didi was generating 22 m daily rides with its 4 m drivers, about 6% of which were driving EVs. The Chinese company raised $9.5 bn in two rounds last year and used some of the funds to buy “99,” Brazil’s #2 ride-hailing platform. They also invested in Grab and Careem. Could an investment in Lyft be next? Uber had a difficult year, starting with the lawsuit initiated by Google for allegedly stealing trade secrets (settled in Feb ’18). With 10m daily rides during 2017, the SF-based company introduced “UberFreight,” a platform connecting shippers and carriers or “Express Pool,” a less expensive ride-hailing solution. Uber also accelerated its autonomous driving activity (2 m miles to date) and expanded it to trucks. They finally indicated they will introduce vehicles in their fleet without human backup drivers in 2019.
Second tier ride-hailing players were very active too. At 1 m daily ride and 500 m since launch, Lyft was very active in 2017, taking advantage of Uber’s difficulties. The company created “Level 5,” an autonomous driving division, launched “Shuttle,” a fixed route service, initiated partnerships with GM (early investor), Ford, JLR, Waymo (Google’s investment arm, CapitalG, led a $1 bn round in Lyft in 2017) or Drive.AI. Singapore-based Grab reached 1.2 m drivers across 7 countries, raised $2.5 bn in equity from SoftBank, Didi, Toyota, Hyundai and others, as well as $700 m of debt to finance a rental fleet for its drivers. With its 1 m drivers, India’s Ola continued to develop its connected services, introduced a dock-less bike-sharing network and raised $1.1 bn from SoftBank and Tencent. With 250 k drivers in 10 countries, Dubai-based Careem raised $500m from Daimler, Didi and others. In the USA, Juno was acquired by Gett, in which Volkswagen invested $300m in 2016. Lots of movement in 2017!
Automated shuttles continued to progress in 2017. Though they will likely remain a niche market vs mass automotive, these vehicles already offer full geo-fenced driving autonomy. The leading players, Navya and EasyMile launched new pilots across the world and both established a structured US presence, including manufacturing capacity for Navya. The two French companies received financing from Valeo and Continental respectively. US-based Local Motors and newly established May Mobility will contribute to deploy the solution in city centers, gated communities, campuses and eventually as free floating shuttles. Automated delivery vehicles also got a boost in 2017. Silicon Valley startup Nuro raised $92m at the end of 2017 and is joined in this space by Starship (Daimler invested last year), Udelv and Gatik; all signed or performed pilots in 2017.
Several key steps taken in 2017 make 3D mobility a foreseeable option
Battery cost and density are finally starting to make it possible to consider electric aircrafts for short distance transportation (i.e. up to 30-50 km). Airbus’ single seater eVTOL “Vahana” took its first unmanned flight a few weeks ago; a production-ready aircraft is expected within 3-4 years. Uber announced plans to introduced an eVTOL as a complement to its ground-based service. Daimler invested in German eVTOL startup Volocopter which gave a demo at CES 2018. Joby Aviation received funds from Toyota AI Venture and Intel, amongst others, whereas Chinese carmaker Geely (owner of Volvo cars, of half of Lotus, of 10% of Daimler, of 8% of Volvo Trucks, …) acquired US electric “flying car” startup Terrafugia. Delivery drones also became more visible. One example is Matternet, which operated a pilot in 2017 with Daimler, delivering 2 kg up to 20 km away. Other players such as Amazon, are betting on this mode of delivery.
Overall, 2017 proved again that the mobility ecosystems is undergoing a deep transformation. It impacts products, services, business models, interactions among players, financing, expertise, social balances and more. No stones will be remain unturned!
Marc Amblard
Managing Director, Orsay Consulting
Feel free to like or comment this article on LinkedIn (https://goo.gl/zod9hD)
China Leverages Silicon Valley’s Mobility Ecosystem
March 2018
China became the largest automotive market in 2012 and the largest EV market in 2015. Beijing intends to strengthen its lead by surfing on the global mobility megatrends, i.e. electric, autonomous, connected and shared, and by leveraging talents abroad. The central government has imposed an accelerated electrification of its market and limited access to autonomous driving companies. It is also facilitating the creation of new players backed by Chinese funds, especially from its domestic internet companies. In an asymmetrical move, these players are tapping Silicon Valley’s mobility ecosystem and brain pool to accelerate their emergence. Conversely, Western companies are given limited access to the Chinese mobility market. Let’s analyze what is happening.
Beijing plans to strengthen Chinese leadership
Close to 28 million vehicles were sold in the Middle Kingdom in 2017 vs 17m in both Europe and the US with a total of 95m globally. China’s leadership is even more remarkable in electric mobility: 600k light plug-in vehicles were sold there in 2017 (though a large number were cheap, low range cars) vs 310k in Europe and 200k in the USA. China has established agressive regulations to maintain its leadership in EVs, recognizing this may give its domestic players the upper hand in tomorrow’s clean global mobility. On one side, the New Energy Vehicle policy sets a gradual increase in the minimum proportion of plug-ins each OEM must sell. On the other side, corporate ownership regulations impose Chinese majority shareholding in automotive ventures, along with full access to foreign IP for the Chinese partner. There are no good options for foreign OEMs: either you play and share your tech, or you sit on the sideline and let domestic players build momentum domestically which they will then use to attack you in other markets.
Tencent, Baidu and Alibaba lead the investment charge in new OEMs
In an effort to build momentum, the Chinese government has granted car-production licences to new players backed by Chinese money. Since the existing domestic OEMs did not seem to have what it takes to spearhead Beijing’s strategy, the central government has let Baidu, Alibaba, Tencent and others invest in mobility. They have already poured billions in either new OEMs, autonomous driving startups or new mobility players. They obviously see a big upside as the automotive market will evolve from selling cars to selling subscriptions for / rides in internet-equipped autonomous cars. Most of these new entities have established engineering centers in Silicon Valley to leverage the local ecosystem, including its skilled engineers, testing environment and university research programs.
Several such new Chinese-funded OEMs have set up shop in California. Backed by Tencent and Baidu (Tencent recently led a $1bn round), Nio has about 450 people in San Jose, CA as well as a team in Munich. They introduced ES8, their first product, in China in January 2018. Founded about 10 years ago as a battery manufacturer, Lucid is finalizing the Air sedan for a 2019 launch. The product development is taking place in Newark, CA where the company has about 300 employees. At its peak in 2017, Faraday Future had over 1,000 employees in Los Angeles to develop the FF91 sedan. The startup was initially funded by China’s LeEco’s owner and recently received fresh funds from a Hong Kong investor. Byton intends to launch the electric SUV they presented at CES, first in China in 2019, and later elsewhere. The product is being developed concurrently in Santa Clara, CA, Munich and China. Byton has raised about $250m from China to date. Lastly, SF Motors, a subsidiary of Chinese auto supplier Sokon, has also established engineering offices in Santa Clara, CA and Ann Arbor, MI.
Chinese investors are also going after existing players. Tencent bought 5% of Tesla for $1.8 bn in March 2017. Geely bought Volvo Cars and has acquired large stakes in Volvo Trucks, Daimler as well as Lotus. Wanxiang Group, a major Chinese auto parts supplier, acquired the assets of defunct US startup Fisker Automotive in 2016, renamed it Karma Automotive and put a US executive team at its helm. For reference, Wanxiang also acquired U.S. lithium-ion battery maker A123 in 2012.
Chinese money also goes to autonomous driving and Silicon Valley
This investment trend is also happening in the autonomous driving space, though not as visibly. The impact of driving autonomy on shared mobility is potentially very significant as it will largely reduce ride cost — roughly by a factor of 3 assuming European or US driver cost. However, China is protecting its market by preventing non-Chinese companies from creating the 3D maps necessary for autonomous vehicles (AVs) to self-localize. This limitation will in essence allow local players like NavInfo or Momenta to close the gap vs Western players (e.g. Here, TomTom or Mobileye) and then to fully control the huge Chinese market. It must be noted that NavInfo and Tencent’s plan to become shareholders of Here was derailed by a U.S. national security oversight board in Sept 2017. China cannot have it both ways, asymmetrical treatment has its limits!
Nevertheless, several Chinese companies have established offices on the US West Coast to leverage local expertise and develop the hardware and software needed to operate AVs. The battle for the necessary AI expertise is red hot. This is certainly the case for most of the emerging OEMs mentioned above. This is also the case for Baidu, which last year established Apollo, an open AV platform for the development of HW and SW, and announced a $1.5bn fund for this effort. Over 80 partners have signed on for the platform, including large incumbents such as Bosch, Daimler, Ford, Continental, Delphi, and ZF. However, I suspect this is more about monitoring the Chinese AV market and being ready to make timely moves with the right partners than about sharing expertise! At CES, Baidu revealed the Apollo Computing Unit, an AV platform featuring Apollo Pilot and map services, going head-on against Nvidia’s Drive PX. Some of Baidu’s AV development work is done in their Silicon Valley office.
This cross Pacific approach is not just used by large players. A number of Chinese-backed AV startups have also established offices in Silicon Valley. For instance, TuSimple is building an autonomous truck solution. The three-year-old, 150 employee company develops and tests its solution in both China and the US West Coast. Pony.ai, which recently closed a $112m round led by a Chinese VC, is co-located in Guangzhou and Silicon Valley with Chinese automaker GAC as a strategic partner. Similarly, PlusAI, whose main financing round was led by a Chinese VC, operates in both China and Silicon Valley and has Chinese OEM SAIC as a strategic partner.
It all comes together as shared mobility
US ride-hailing companies have also been the beneficiaries of Chinese investment. Baidu invested in Uber, and Alibaba in Lyft. Didi, the world’s leading ride-hailing platform, put money in Lyft — as well as in Ola (India), Grab (S. East Asia) and Careem (Middle East). Didi and Uber own stakes in each other as a result of Uber selling its Chinese operations to Didi in 2016. However, the only real significant non-Chinese investment made in Didi comes from Apple, with $1bn in 2016. Again, we have here a largely asymmetrical situation.
Chinese players are definitely planning on playing a major role in tomorrow’s mobility market. And they are using their huge financial resources to buy foreign assets and leverage talents, with a particular interest in Silicon Valley
Marc Amblard
Managing Director, Orsay Consulting
Feel free to like or comment this article on LinkedIn (https://goo.gl/Kve9yu)
Vertical Integration Among Carmakers and Mobility Services
April 2018
The parallel shifts from car ownership to mobility on demand, and from individual to shared mobility are no longer challenged. Automotive incumbents have been testing different business models, e.g. car-sharing and subscription models, in order to morph into mobility providers. They are also building in-house mobility businesses as well as partnering with new operators. Meanwhile, ride-hailing companies are grabbing an increasing share of the mobility budget at the expense of OEMs and public transport operators. These new players are now looking for ways to get a handle on vehicle specification and sourcing through various partnerships or investments. Newer companies are still emerging between the former and the latter, some of which with the intention to address both the vehicle and the mobility service. This article analyses how our mobility ecosystem is getting more vertically integrated between hardware and services.
Carmakers expanding downstream to mobility services
OEMs are developing in-house mobility services as well as partnering with — and in some cases investing in — mobility startups. Daimler was the first OEM to introduce a car-sharing solution in 2009. Now most OEMs have established a “mobility division” to expand their scope to a B2C service business. They follow different development patterns. Yet, pretty much all are heading towards generating revenue from the actual mobility service, i.e. passenger-kilometers, rather than from simply selling cars, financial services and parts.
The largest ride sharing players, namely Didi and Uber, have built massive operations (more on this below). OEMs now need to quickly scale in order to have an impact. Daimler’s 9 year-old Car2Go car sharing platform (3m+ users), is merging with BMW’s DriveNow (1m+ users) into a 50-50 JV in order to counter the ride-hailing giants’ growing footprint. But Daimler is also playing with these companies. In Jan 2017, the OEM announced a partnership with Uber to introduce their own self-driving cars in the ride-hailing fleet. Daimler has also invested in ride-hailing startups Careem (Dubai) and Via (USA). BMW invested in 2016 in fleet management startup RideCell and earlier this year in autonomous shuttle startup May Mobility.
The VW Group has not yet established any mobility service operations. However, the company invested $300 million in US ride sharing startup Gett in 2016 though it did not follow on in the 2017 funding rounding, apparently favoring Moia, VW’s in-house mobility division. VW also signed a cooperation framework with Uber in Nov 2016. However, talks stopped as VW would not settle for a mere supplier role, preferring a comprehensive mobility service play. They will start a ride-sharing service with their own vans in Hamburg later this year, with the objective to become one of the world’s Top 3 mobility providers within the next few years.
Carmakers and Mobility Operators Expanding their Value Chains
GM is developing its own mobility service with Maven. However, the OEM is also partnering with established mobility players. The company invested $500m in Lyft in Jan 2016, with the aim to jointly develop a network of on-demand autonomous vehicles and to provide short-term vehicle rentals for Lyft drivers. GM also partnered with Uber with both a lease agreement for its drivers, and a plan to introduce autonomous vehicles in Uber’s San Francisco fleet through GM’s Cruise division.
Ford recognized the need to morph from a carmaker to a mobility operator in the late 2000s. Yet not much has happened until a couple of years ago. The OEM created Smart Mobility, a separate entity focused on developing software, tech services, and business models related to transportation. Ford piloted a free float car sharing service in London in 2015-2016, which did not result in any deployment. In 2016, the company bought Charriot, a van-based ride sharing startup operating with fixed stops. Like other OEMs, Ford also is also collaborating with Lyft to deploy autonomous vehicles in “large numbers” on the platform by 2021.
PSA (Peugeot, Citroën, Opel, Vauxhall) was probably the first OEM to offer a subscription model. Back in the 2000s, the “Mu” program allowed monthly subscribers to choose from a selection of cars and 2 wheelers for a fixed fee. PSA offers free float car sharing services in several European cities under the brands Multicity and Emov. PSA also introduced Free2Move, a mobility aggregator with over 400k subscribers in Europe — the platform arrived in the USA in late 2017. Among the 30 or so services providers offered are ZipCar, Car2Go, TravelCar as well as 2 wheel providers. PSA also invested in several car sharing operators, e.g. KooliCar, Communauto, TravelCar and CarJump.
None of the Renault/Nissan/Mitsubishi Alliance members offer any sort of mobility service today. A division called Alliance Connected vehicle and Mobility Services (ACMS) was created in 2016, but the focus seems to be on the software rather on actual mobility services. Nevertheless, Nissan will test an autonomous ride-hailing service on public roads in Japan in 2018, aiming to start robotaxi rides in the early 2020s. Renault is expected to start a similar service in France later this year in partnership with multimodal mobility operator Transdev.
Toyota is somewhat behind in the mobility service game. In 2016, the OEM signed an investment and car leasing deal with Uber. The partnership scope was later extended to include data sharing and the development of self-driving vehicles for ride hailing and parcel delivery. Last year, the OEM invested in South East Asian ride sharing startup Grab, with an agreement to record and analyze driving patterns in 100 cars in Singapore. Earlier this year, Toyota also announced a more ambitious project with ePalette, a multipurpose autonomous vehicle the company plans to operate starting in the mid-2020s, and invested in autonomous shuttle startup May Mobility.
A few Tier 1 suppliers are also taking part in emerging mobility services. Valeo and Continental invested respectively in Navya and Easymile, the two most mature startups providing autonomous shuttle systems, both based in France (more below).
Navya's Autonom automated shuttle
Mobility operators partnering upstreams with OEMs and tech companies
The largest ride hailing companies, mainly Didi, Uber and Lyft are investing heavily in autonomous driving tech as an opportunity to drastically reduce operating costs. As ride sharing gains momentum, it will be increasingly important for these players to specify vehicles for particular use cases and to partner with companies capable to build them.
Uber, with about 10m daily rides, has been partnering with Volvo for several years, though the OEM’s vehicles have been merely used as development mules. In late 2017, Uber signed a frame contract to buy 24k XC90s which are expected to join its fleet starting in 2019. Since then, Uber sold the 30k vehicles it owned and leased to its drivers, as the fleet had turned into a major money losing venture. The buyer, car sharing startup Fair, then became Uber’s exclusive leasing partner. Uber is also investing a lot in the development of its own autonomous driving tech which we can expect will find its way in partner OEMs.
Didi, the largest ride sharing operator with about 25+m daily rides, has established Didi Auto Alliance, a.k.a. D-Alliance, which aims at becoming a provider of transportation solutions (incl leasing, sales, services, car sharing ...). To this end, the company is getting involved in the design and manufacturing of purpose built vehicles. The D-Alliance has already partnered with Chinese OEMs BAIC, BYD, FAW or GAC and more recently Renault-Nissan-Mitsubishi. In addition, Didi invested in Chinese OEM GAC and just set up a majority owned electric vehicle joint venture with CHJ Automotive, a Chinese startup founded in 2015 and which recently raised $500m. The JV plans to produce urban EVs starting in 2020. The mobility giant also expects to have 1m EVs in its network by 2020 — they had 260k EVs as of Nov 2017 among about 4m drivers. Just like Uber, Didi is also investing increasingly in autonomous driving tech.
Lyft, with 1m+ daily rides, expanded heavily its web of hardware and tech partners over the past few months: GM/Cruise, Ford, Delphi/nuTonomy, Waymo and JLR will test their vehicles on the Lyft platform. Just last month, automotive supplier (and car assembler, more that below) Magna invested $200m in Lyft with a hardware partnership in mind — more below. Similarly to Uber and Didi, Lyft is investing heavily in autonomous driving tech through Level 5, its in-house AV development center.
Waymo has been partnering for several years with FCA, which provides minivans for the development of its autonomous driving solution. The Google unit is now building momentum towards operating autonomous ride-hailing service, for which they will need various types of vehicles. Last month, a deal with JLR to source up to 20k Jaguar I-Pace EVs by 2022 was announced. After a couple years of talks, Waymo even more recently announced a partnership with Honda to develop a car from ground up for the purpose of carrying goods.
White label manufacturing and operating platforms
Ride sharing, car sharing, as well autonomous delivery services, will need purpose-designed vehicles for various use cases. White label vehicle assemblers potentially have a major role to play as incumbent OEMs will favor their own mobility services.
Magna has the ideal expertise to become the Foxconn of the automotive space. The company already produce about 200k vehicles per year for OEMs such as Mercedes, Jaguar (e.g. the recent I-Pace) or BMW, in addition to being a large Tier 1 supplier. Magna invested $200 million in Lyft to co-develop a self-driving system for light vehicles; Lyft will develop the software while Magna will manufacture and integrate the platform into vehicles. The end game is without doubt to secure the provision of vehicles for Lyft’s fleet. Magna will be careful not to be at odds with its all important customers, the OEMs.
Open Motors, a young startup based Silicon Valley, has been developing a highly modular and upgradable platform which can used for various ride / car sharing fleets in the future. Similarly, recently established Evelozcity plans to build connected EVs with an urban focus, apparently as a white brand. In addition, OEMs with low brand value (e.g. within the FCA group) could eventually manufacture under contract in a world where mass private ownership fades away.
Navya and EasyMile, mentioned above, have designed autonomous electric shuttles and the underlying platform to operate them, the complete system being deployed by mobility operators. Established more recently, NEXT Future Transportation and May Mobility have been following the same model, the former with a very innovative pod concept.
A new vertically integrated player with a big ambition
A new kind of player has emerged from this trend towards vertical integration between vehicle manufacturing and mobility services: Zoox. The two year-old startup covers (both electric and autonomous) vehicle design, fleet management and ride-hailing operation, thus competing with both OEMs and ride-hailing companies. Based in Silicon Valley, the very ambitious Zoox has already raised $290m at a valuation of $1.6 bn. Zoox plans to introduce a ride sharing service with its own vehicles in a major US city in 2020.
Summary
The need for incumbent OEMs to engage in mobility services on one side, and for new mobility players to get involved in specifying / sourcing their vehicles on the other, results in deep corporate transformation and multiple strategic partnerships. The search for recurring revenue from mobility services as well as for lower operating costs will continue to drive both sides to some sort of loose, vertical integration. OEMs need to quickly scale their contribution to mobility services if they are to avoid becoming contract manufacturers, though it may be a good strategy for some.
Marc Amblard
Managing Director, Orsay Consulting
Feel free to like or comment this article on LinkedIn (https://goo.gl/kJMfmp)
Autonomous Driving — The Current State of Play
May 2018
The autonomous vehicle (AV) landscape has evolved significantly since I wrote my previous article on the AV State of Play in March 2017. AVs have passed the peak of the hype cycle: some disillusion and bad press, i.e. the recent Uber and Tesla accidents. There have also been gaps in the communication between technical and business leaders as to when Level 4 (L4) and 5 will actually be widely accessible. Will it be 10 or 15 years before vehicles and infrastructure can provide a level of safety that surpasses the 1 death per 100M km human drivers achieve today on any road? No one can say. Nevertheless, soon the deployment of AVs will begin for specific car and truck use cases and will continue progressively. Huge efforts are being undertaken to enable this revolution, including the emergence of a whole AV development ecosystem. Not surprisingly, legislation seems to progress more slowly than technology. Let’s look at the latest state of play on these key dimensions.
Race to develop or acquire AV tech
Two megatrends absorb a very significant portion of automotive incumbents’ R&D budgets, whether OEMs or Tier 1: electrification and autonomous driving. New players, i.e. tech giants and startups, concentrate clearly on the latter. Since the deployment of AV will be tightly linked to shared mobility (see below), the race and the collaboration are intense between the “old guard” and new players.
OEMs continued building in-house AV expertise which will likely be used mainly for integration purposes. They have also established multiple partnerships to assemble full solutions (software and software) and test them. Ford and GM have made significant acquisitions, respectively with ArgoAI ($1bn over 5 years) and Cruise ($600m), to jump start their in-house development. Toyota, which said it would not give into autonomous driving, changed their mind and are playing catch-up. Other OEMs are progressing on their chosen paths. As for Tier 1s, Delphi and Autoliv have carved out their new tech business (mainly AV-related) and Continental is considering the same move. Aptiv (ex Delphi) bought nuTonomy for $450m a few months ago. Stakes are high!
Among ride sharing companies, Uber is the most advanced though they hit a few road blocks during the past year: a legal battle vs Waymo, a deadly accident and the resulting removal of a test license. Conversely, Lyft created its own AV development team, Level 5, which partners with multiple OEMs and Aptiv. Building on its AV expertise, Waymo is moving into autonomous mobility on demand (AMoD). The Alphabet company is also working with Honda to develop vehicles fit for purpose and with JLR to integrate its AV tech and operate the vehicles. Waymo likely has the most mature solution, leading the pack in terms of system disengagements with 0.1 per 1,000 km in 2017, i.e. the backup driver must take over on average once every 10,000 km.
In China, Didi has accelerated its AV efforts in the last months. The world’s largest ride hailing company has been testing AVs on public roads in China. Didi also recently created the “Auto Alliance” platform to bring OEMs in its ecosystems and co-design vehicles fit for AMoD (See my Apr 2018 article for more on this subject). Earlier this year, Didi opened a lab in Silicon Valley to work on AV tech and was granted a permit last month to test AVs in California.
It is clear that the AV race is on between China and the rest of the world. The Middle Empire now prohibits foreign companies from mapping out the country, which ultimately creates a barrier to entry. Chinese tech giants are also developing AV tech. Baidu created the Apollo “open source” AV development platform and intends to supply not only the software but also the hardware as seen at CES. Tencent and Alibaba are also investing in this space.
On the sensor front, Lidars continue to attract much attention as they are required for L3 and above, except if you listen to Tesla. Whereas spinning models (e.g. Velodyne, Valeo, Ouster) see their projected price drop, a number of companies are working on theoretically cheaper solid state versions, targeting a 3-digit — $ or € — price at scale. We have yet to see any volume though. Valeo’s “Scala” is the first one to go into production for Audi A8’s “Traffic Jam Pilot”. Recently, a production contract was announced between BMW, Innoviz (solid state) and Magna, which I suspect has been brought in to hold the startup’s hand — the Tier 1 invested in Innoviz in 2017.
An ecosystem has emerged around AV tech development
AV tech testing and validation is a very painstaking task, given the quasi infinite number of corner cases and the safety objective stated earlier. Road testing is time consuming, expensive and does not necessarily present all the required test conditions. Simulators allow to quickly test fleets on a large number of adjustable scenarii, making it the de facto complement to road testing.
Last year, Waymo was reportedly “driving” 12M km a day on their proprietary simulator, Carcraft, i.e. even more than the 10M km they have driven on the road since 2009. In parallel, simulator startups have emerged, e.g. Metamoto or AIMotive. Others, such as DeepenAI or MightyAI, provide the labeled, real life data (i.e. people and objects are identified on all images) that feed simulators. Further up the value chain comes the collection of real life data, most economically done through crowdsourcing. While focusing on safety, Nauto’s cameras installed on fleet vehicles are well positioned to provide such data. Likewise, Tesla has been collecting similar input for many years, which provides them with a huge amount of data with which to test their AV stack.
The legislative framework progresses heterogeneously
Governments now realize that AVs are definitely coming. They also increasingly understand that adapting the legislative framework can bolster innovation and economic development. Whereas the U.S. has hosted a large part of the AV development to-date, the country as a whole does not present a unified framework. Last fall, the SELF DRIVE and AV START Acts were introduced in the U.S. Congress to create a structure. In parallel, individual states have enacted their own legislation. Four states, i.e. Michigan, Arizona, California and Ohio (plus Pittsburgh), now allow AV testing on public roads. 53 companies have obtained a license to test AVs (with backup drivers) in California, vs 27 as of March 2017. Since April 2018, companies can also request permits to operate AVs without backup drivers. So far, two companies have applied, including Waymo.
In Europe, France already allows permit-based testing with a backup driver and plans to enable full driverless vehicle testing on public roads in 2019. The UK adapted its legislation last fall: developers can apply to test their vehicles on public roads without a human operator. Germany passed a law last March to allow AV testing with a backup driver, while clearly assigning liabilities.
In China, several cities have passed local laws to enable permit-based AV testing. Realizing the strategic importance of AV development in the global race, the central government just issued national guidelines for testing self-driving cars as part of the “Made in China 2025” plan. Korea has been quietly enabling its own AV development, allowing testing on a defined set of public roads, with the objective to have AVs for sale by 2020. In Singapore, where the first ever self-driving taxis picked up select passengers in 2016, AV tests on public roads started in 2015.
The deployment will be progressive
Last year, OEMs were announcing the introduction of L4 AVs by 2020-2021 — and in 2019 for Tesla. As of mid-2018, the vehicle with the highest level of automation is the Audi A8. Its L3 feature, “Traffic Jam Pilot,”, provides conditional autonomy up to 60 km/h. However, it will only be sold in Europe due to the heterogeneity of the global legislative framework.
As far L4/L5 deployment, the earliest commercial applications will be AMoD operating in geofenced areas where HD 3D maps have been developed and the AV system has been trained. Waymo will reportedly begin operating a self-driving ride-hailing service in Phoenix later this year — the company has been transporting non-paying passengers for a few months there. Uber, Didi and Lyft are poised to test similar services though they are running behind Waymo.
Concurrently, Navya and EasyMile had an early start with automated shuttles and continue to test their complete solution, transporting “real passengers” in geofenced areas around the globe. May Mobility emerged last year to do the same thing, along with Local Motors. Zoox, with $290m raised in two rounds, came out of stealth mode about a year ago with the ambitious plan to design, manufacture, maintain and operate fully autonomous vehicles, competing with both OEMs and ride-sharing companies. Operations should start in a large US city (SF?) in 2020.
As far as OEMs are concerned, last January GM made the biggest promise so far, presenting a version of its Chevrolet Bolt EV sans steering wheel and pedals! They intend to use it in a commercial ride-share service at scale starting in 2019. To this end, GM petitioned the U.S. Dept. of Transportation for permission to begin operating such a vehicle by then.
Trucks also go autonomous
Autonomous driving is also making its way into the trucking world. Truck makers have been working on this for some time, e.g. market leader Daimler. More recently, Uber (with the acquisition of Otto in 2016) and Waymo have been investing in applying the AV tech to specific use cases. Several startups are also making significant progress, namely TuSimple, Embark, Starsky Robotics or to a lesser extend Peloton Technology (focus so far on truck platooning). The low hanging fruits are port terminal tractors (close environment, controlled traffic) and long stretches of freeway from entrance to exit (single direction, no intersections). This will allow drivers to focus on short hauls, thus avoiding long absences from home.
It’s still a long journey ahead. In the meantime, hands on the wheel and eyes on the road!
Marc Amblard
Managing Director, Orsay Consulting
Feel free to like or comment this article on LinkedIn (https://goo.gl/HyWwp7)
Connected Services Are Revolutionizing the Mobility Experience
June 2018
The mobility revolution we are currently experiencing, the most disruptive since the automobile was introduced about 130 years ago, is the result of four mega-trends: electrification, autonomy, shared mobility and connectivity. Vehicles are becoming increasingly connected to their users, owners and pedestrians, to each other, to the infrastructure and more. A myriad of value propositions have already emerged and many more should be expected. They benefit safety, user experience or productivity. Let’s see how this is unfolding for various categories of value propositions.
Enabling the Safe Deployment of Highly Automated Vehicles
Whereas connectivity can be a “nice to have” for certain use cases, it will be necessary in various semblances to maximize the safety of highly automated vehicles. Vehicle to vehicle (V2V) communication can address blind spots when cameras, lidar and radars cannot see around the corner, and provide overall redundancy. Savari, Veniam or Autotalks have developed different parts of the solution to this problem. They not only provide the location of other vehicles, but also potentially information as to their behavior, e.g., acceleration or braking.
Vehicle to infrastructure (V2I) communication enables a dialog with traffic management systems and road markers. This will eventually allow for traffic to flow more smoothly thus more efficiently, for emergency vehicles to be given priority over regular traffic, and potentially to help autonomous vehicles (AVs) precisely locate themselves. A few corridors, such as El Camino Real in Silicon Valley, have been fitted with DSRC-based equipment to test the technology. BMW is also deploying a solution developed by Connected Signals which provides current and predictive information on signal status (green/yellow/red). This allows drivers to adapt their speed and drive more smoothly.
At least for the foreseeable future, AVs will require 3D HD maps to precisely locate and guide themselves. Such maps are likely to be crowdsourced and updated in realtime in order to reflect changes, such as road construction. Gaps observed vs the onboard reference map will be pushed to the cloud, confirmed with similar data from other vehicles and pushed back to all vehicles in the concerned area. For instance, Mobileye is collaborating with BMW, VW and Nissan on such a solution. By end 2018, they expect to have 2 million vehicles capable of crowdsourcing map data.
Drivers and pedestrians are accustomed to informal communication. In an AV world, pedestrians must be made aware of vehicles’ intentions. Conversely, vehicles must identify all pedestrians who may get in their paths, whether they are visible or not. Autonomic, which was acquired by Ford earlier this year, is incorporating pedestrians into their cellular V2X platform.
Driver and Vehicle Monitoring Enhance Safety and Cost
Vehicles already generate a large amount data due to a multitude of sensors. Intel predicted that an AV will generate 4 TB of data each day. Currently, this data is by and large processed onboard for the purpose of optimizing vehicular operations. However, a number of companies are already taping the data available on the vehicle’s CAN bus (via aftermarket dongles installed on the OBD port) or adding extra sensors, e.g., cameras. The data is exported via 4G and processed remotely or sold to third parties. This opens the door to a myriad of services.
Some of these services relate to safety, such as Zendrive or i4drive, which analyze driving behavior and provide feedback to both drivers and fleet managers. On top of this, Nauto alerts drivers when their behavior puts them at risk in dangerous situations, e.g., vehicle breaking ahead. Safe driving habits can mean lower premiums via Usage Based Insurance, which is the main focus of Octo Telematics.
Vehicle diagnostics and predictive maintenance is critical, not just to reduce operating costs, but also to remotely diagnose vehicles when the user is not the owner. In addition, it can provide leads to service networks. Companies like Mojio or Voyomotive address such opportunities. Carfit (which I am advising) uses vibration AI to diagnose systems that are not fitted with sensors with the same objective. The monitoring of a vehicle’s parameters creates a richer history than that built on dealer visit records (e.g. Carfax), which will enable fact-based fleet valuation. VINchain plans to build a blockchain-based history of individual vehicles to do just that.
Tesla has been collecting vehicle output since the introduction of Model S. The resulting data lake provides a huge resource that leads to engineering improvement as well as business performance. The rest of the industry is following suit, as natively connected vehicles will represent about 80% of global sales vs 40% today. Yet this does not suffice. Corporate culture and expertise at incumbent players must evolve to leverage the full potential of this massive data.
A Plethora of Extra Convenience and Services
If safety remains the most critical objective, customer benefits allow for differentiation, thus extra value. By introducing over-the-air (OTA) updates in 2012, Tesla was not only able to fine-tune its software overtime — without the need for customers to come to the dealer — but also to add new features on the fly. Examples include Autopilot updates, the recent reduction in braking distance on Model 3, the temporarily range increase in an emergency situation or the addition of voice command. Movimento now offers such OTA services to all OEMs.
Connected vehicles also offer extra convenience. While we still own cars, remote access enables services such as dropping your Amazon parcel in your trunk, servicing, refueling or cleaning your car while you work, etc. SmartCar is working with BMW, Hyundai and PSA on such a solution. The understanding of human behavior inside the cabin will provide insights first on the driver (awareness, ability to take over the driving role) and then on passengers. Identifying their sex, gender, emotion, position or activities inside the cabin will enable a series of features including targeted promotion. Eyeris (which I am advising) has a production-ready solution for both drivers and passengers.
With these services comes the need for secure payment. Vehicle-specific platforms are coming to life to allow for the payment of tolls, parking, EV charging, foods or other in-car services without human intervention. Several players are developing solutions, including Tier 1 supplier ZF and IBM who are jointly developing ”Car eWallet.” GM is rolling out Marketplace, which enables access to third party service providers directly on the vehicle’s head unit, as well as payment. Xevo, which powers Marketplace, just announced a similar deal with Hyundai to develop their Digital Wallet.
Drivers and passengers alike expect continuity between their smartphones, vehicle displays and home/office. To this end, Apple and Google are already widely present in the cabin respectively with CarPlay and Android Auto. Whereas Apple has so far allowed very few proprietary apps, the giant will open up and include Google Maps and Waze with iOS12 later this year. CarPlay and Android Auto come with their digital assistants, i.e., Siri and Google Assistant. However, Amazon’s Alexa seems to have taken the lead when it comes to in-car assistant. A few startups also work on Natural Language Processing (NLP) for cars, such a Xbrain, German Autolabs or Mobvoi.
Privacy and Monetization
Who owns the data? The user, the OEM, the solution supplier or any 3rd party? How is data transfer controlled? Europeans are more protective of their personal data than Americans, who mainly put free services ahead of privacy. GDPR, introduced last May in the EU, puts citizens at the center. They own and have full control over the use of their personal data — a user’s consent is required before such data can be shared. Since the USA lacks the equivalent of GDPR, early signals seem to indicate that the GDPR may become the de-facto global rule for any company that does business in Europe.
Once data ownership is sorted out, business can be made from monetizing data. A majority of the companies mentioned above make money off of their data in some ways. However, marketplaces have been created for the sole purpose of trading automotive data, connecting sellers and buyers. Companies behind them includes Caruso in Europe or Otonomo in the USA. Such companies often process or augment the data through analytics in order to increase their value.
How about the Tech behind these Services?
Whereas WiFi and DSRC are likely technologies for V2V and V2I, the latter has only been deployed so far by Toyota and Cadillac. This is a major hinderance as it takes two to communicate. The large amount of data sent and received by vehicles will use 4G, then 5G when deployed — Audi has already announced they will roll out 5G-connected vehicles starting in 2020. In specific use cases where a narrow bandwidth is sufficient and energy is scarce (e.g. vehicle tracking), the ultra narrow band modulation tech deployed by Sigfox or LoRa will make sense. As for, vehicle to pedestrian communication, cellular is main contender though LiFi, an LED-based tech deployed by Zero.1, may be an alternative. Whichever the communication, a robust cybersecurity layer is absolutely essential, but that’s a whole other topi, which is not addressed here.
Lastly, large amounts of data will means large bandwidth and high cost. For this reason, I expect that processing data at the edge will become more prevalent, unless its monetization potential far exceeds the cost of beaming it. However, a side benefit from processing more data locally will be that more personal data will remain inside the vehicle, e.g. the dialog you have with your digital assistant will not be shared!
Marc Amblard
Managing Director, Orsay Consulting
Feel free to like or comment this article on LinkedIn (https://bit.ly/2tfSlCd)
Driver & Passenger Understanding: The Next Frontier
July 2018
So far, few solutions have been created to assess real time traffic risks around vehicles, and even fewer to understand the behavior of humans inside them. Safety, comfort and onboard e-commerce solutions can be enhanced by leveraging sensors, AI, onboard compute platforms and connectivity. Improvement can be brought about by the analysis of driving habits, driving behavior vs. traffic risks and the generation of in-cabin intelligence. Whereas basic data is generated by native sensors and accessed via the OBD port, additional input can be extracted from extra cameras or biometric sensors. Let’s look at the different value propositions and some of the enabling solutions.
Evaluate drivers by assessing their driving habits
This most basic level in this array of features identifies hard accelerations, braking and steering, or frequent lane changes. Depending on the solution, feedback is provided to drivers to help them drive more safely or improve fuel economy. Fleets are the prime targets for these solutions as they provide fleet managers with insight into the driving habits of their employees. Incentives can then be put in place with the objective to curtail accidents and reduce insurance cost. The latter benefit is also targeted by private owners who accept to share their driving profile with insurance providers. These in turn offer usage-based insurance premium (UBI), i.e., incentive to drive more safely.
Solutions are mostly based on connected dongles plugged into the OBD port. In this case, the underlying data is generated by the vehicle’s native sensors. Some applications may use sensors inside smartphones, e.g., accelerometer. Providers of such solutions include Zendrive, Octo (insurance focus), KeepTruckin (truck specific), Caruma or Voyomotive.
Analyzing traffic risks vs. driver behavior can curtail accidents
The next level in terms of value proposition builds on the previous one and aims at increasing real time safety. These solutions monitor the driving scene ahead of the vehicle, e.g., leading vehicle braking hard, lane departure, etc. The more sophisticated systems also monitor the driver and assess their ability to react by analyzing whether they are on the phone, texting, looking away from the road or focused on driving. A safety score can be derived from this analysis. These aftermarket systems will then warn drivers but stop short of acting as a native Emergency Braking System. In addition, events can be recorded to identify responsibilities in case of accidents, serve for driver training purpose or be used as raw material for the development of autonomous vehicles.
Solutions that simply observe traffic risk rely on a forward facing camera, which in some cases is the one fitted on the drivers’ smartphone. The full set of features, including driver behavior analysis, also require a rear facing camera. Some companies that provide such solutions are Nauto, CarVi, i4drive or SmartDrive (focus on commercial vehicles).
Highly automated vehicles require specific solutions for safety
In Level 2 (SAE), partial or “hands off” automation, the system steers, brakes and accelerates in certains conditions, but the drivers must remain focused on the road. In Level 3, conditional or “eyes off” automation, the driver no longer needs to continuously watch the road but must be able to take over the driving function if requested. This calls for the need to monitor the driver and assess his/her state. Different solutions will monitor eye gaze, eyelid movement, whether hands are on the wheel, etc., and will infer a state of awareness, inattention or drowsiness. Currently, drivers may be requested to signal their awareness every so often — as it has been the case for train engineers for many years. For instance, Tesla warns drivers if their hands have been off the wheels for too long. Settings were strengthened last month after a deadly accident in March, which indicates this is a critical feature. Audi and Cadillac use cameras positioned behind the wheel respectively on the A8 (with Traffic Jam Pilot, available in Europe only for now) and the CT6 (with Super Cruise). On these two cars, the native cameras monitor the drivers’ head pose and eye gaze direction to assess whether they are looking at the road.
The solutions currently in production are provided by SeeingMachine (Cadillac) and Smart Eye (Audi). Other providers of vision-AI solutions include Eyeris (more below), or Innov +.
Biometrics measurement can help improve comfort
Today, comfort inside the cabin is optimized by personalizing settings for the seating/driving position, temperature and airflow, lighting and the infotainment system. What if your vehicle could make these adjustments based on your actual body temperature, heart rate, respiration rate, sweating, fatigue or brain load? By fusing various data sets, one can make a determination as to how best to make passengers feel most comfortable. Life Detection Technologies and BrainCo could provide such input to enable automatic cabin setting optimization.
In-cabin intelligence for safety, comfort and e-commerce
This constitutes the last untapped space. Who is inside the vehicle? What are the drivers’ and passengers’ mood and behavior? What are they doing? These questions become more relevant as mobility evolves towards autonomy and sharing. When drivers are conditionally relieved from driving duty, monitoring eye movement may not be enough to assess their ability to take over. Body pose (head and upper body positions) gives valuable insight to this end and can even be fused with a traffic risk assessment to maximize safety as defined above.
In parallel, shared mobility makes it necessary to monitor what is going on inside the cabin. The identification of passengers, their age group, gender, race, mood (sad, joyful, fearful…) and activity (on the phone, texting, reading, sleeping…) gives valuable information to mobility service providers. Moreover, ensuring all passengers are properly seated inside autonomous shuttles (or robo-taxis) or identifying objects left behind will also be critical. It is important to know passengers are not moving around the cabin as the vehicle moves. Lastly, Human Behavior Understanding (HBU) will enable targeted promotion.
At this point, Eyeris (of which I am a Board Advisor) is the only company capable to offer a comprehensive HBU solution to OEMs and mobility operators, with a full suite of interior vision analytics. This includes emotion recognition from occupants’ facial micro-expression, real-time 2D upper body tracking, action recognition and activity prediction. The solution is targeting automotive OEMs and Tier1 suppliers. It is based on a multi-modal AI engine that uses deep learning at the edge, probabilistic modeling techniques and efficient inference. It works with any standard 2D camera placed inside the cabin.
Conclusion
The understanding of both humans inside the cabin and traffic risk, made possible mostly by AI, will improve safety and comfort. Most of the data processing is done on board the vehicle, which will ensure privacy where needed. However, raw or processed data can be shared for monitoring and value-adding purposes. Whereas most of the solutions presented here are for the aftermarket, the underlying tech will progressively be designed into new vehicles to make our mobility experience safer and more pleasant.
Marc Amblard
Managing Director, Orsay Consulting
Feel free to like this article on LinkedIn. Thanks!
Mobility Revolution Triggers Corporate Restructuring in Auto Industry
September 2018
The automotive industry is undergoing a profound transformation with rapid electrification, the emergence of autonomous driving and the development of mobility as a service. These three megatrends lead very different business profiles compared to an industry based internal combustion engines (ICE) and privately owned, driven vehicles. R&D expenditures grow, the timing of future revenue is uncertain, business and technical risks are significant, but margin are potentially higher than the status quo. As a result, several incumbent players have — or are planning to — engage in massive reorganizations or split current vs. future tech, such as Autoliv, Delphi, Continental, GM or Daimler. Let’s analyze what is happening.
R&D expenditures are surging
Vehicle electrification is kicking into high gear, which requires the development of electric motors, e-axles, power electronics as well as battery and charging tech. The range of solutions is broadening from mild hybrid, to 48V, plug in hybrid, to 400V and soon 800-1000V full electric. Autonomous driving (AV) presents a much more difficult set of technical challenges. It requires the development of sensors (Lidar, camera, radar, localization tech), HD/3D maps, compute hardware, software stack, development tools, V2X connectivity and a massive amount of testing and validation. Whereas electrification solutions are by and large developed by individual companies, autonomous driving tech is increasingly the object of resource pooling in the form of partnerships or open development platforms such as the ones led by Baidu/Apollo or Lyft, given the magnitude of the task at stake. On the other hand, new mobility solutions such as ride-hailing, car-sharing, subscription model or others “only” require the development of software platforms as far as R&D is concerned.
The commitment of Tier 1s to electrification and/or driving autonomy has resulted in signifiant increases in R&D budgets. Their share of sales grew over 2 percentage points over the past 2-4 years, with a direct impact on profitability. At Continental (supplier #4 in global sales), the R&D budget increased from 7.9% of sales in 2013 to 10.1% in 2017. For ZF (#5), the ratio went from 4.8% in 2015 (first year with TRW) to 6.1% last year. For Valeo (#9), it went from 4.7% in 2014 to 6.1% last year. It is interesting to note that the R&D budget of Valeo’s Comfort & Driving Assistance business group — the entity responsible for their AV activities — represented a high 11.6% of sales last year.
Delphi (ex #12) finalized its split into Aptiv (AV, mobility on demand, new architectures, connectivity, data) and Delphi Technologies (powertrain incl. electrification) in Nov 2017. The R&D profile of the off-shoots shows interesting trends. Aptiv’s R&D budget increased from 8.2% in 2015 to 8.4% last year whereas Delphi Tech’s dropped from a high 10% to 8.7% in the same period (retreated perimeters). Similarly, Autoliv (ex #22) completed the spinoff of Veoneer (AV focus) in June 2018. The latter’s R&D budget represented 19.3% of sales in S1 2018, up from 16.3% in S1 last year. This compares with 7.1% for pre-spinoff Autoliv as a whole in 2017.
Timing of future revenue streams of new tech is uncertain
Electrified and autonomous vehicles as well as shared mobility are definitely coming, but how fast? Whereas most OEMs have announced the introduction of electrified versions across their ranges over of next 5 or so years, the industry remains uncertain about their penetration growth. The sales of plug-in vehicles, i.e. plug-in hybrids and full EVs, are growing at about a 50% annual rate, yet they represented only 1.4% of global sales last year. Future growth will depend largely on CO2 regulations, incentives and customers’ sheer interest. Several projections put plug-ins at 25-30% of global sales by 2030, but all players must be ready to adapt their mix over time. This mix is critical for a supplier like Delphi Technologies whose CEO recently said they generate content worth about $300 per vehicle for an ICE or a 48V hybrid, $1500 for a full EV and $1800 for a 400V hybrid.
Autonomous vehicles are at their infancy stage. A handful of trials with actual customers are currently taking place. Waymo has announced the launch of a ride-hailing service using AVs later in 2018 and has placed frame contracts with FCA and JLR for 80.000 vehicles to deploy their service. GM, VW and others has made similar yet less ambitious announcements. Deployment will first take place in geofenced areas and spread as the tech matures and 3D/HD maps become available; we are still a long way to offering AV to the individual buyers. In addition, the general population is mostly reluctant to board such vehicles. Growth rate will depend on technical maturity, customer acceptance and the regulatory frameworks which tend to lag behind the tech.
Lastly, shared mobility has already gained significant ground, as demonstrated by the 25+ million and 15+ million rides operated daily respectively by ride-hailing giants Didi and Uber. The trend towards more shared mobility and less vehicle ownership will intensify. Millennials are less interested in getting their driver’s license as evidenced by the drop of 28% over the last 10 years for Germany’s 18-25 age olds and 21% for the UK’s 17-20 year olds.
Corporate reorganization and spin-off
Businesses focused on current technologies and business models aim for incremental productivity and product performance gains. Their R&D budgets are covered by current revenue and their future revenue is reasonably predictable. Lastly, their organizations are typically built around rather silo’d product groups with limited shared resources.
By contrast, businesses focused on new technologies and business models aims for innovative solutions and step changes in productivity and business performance. Their R&D is fueled by capital injection with the expectation that they will enable future revenue, with the timing uncertainty seen earlier. Finally, product development is much more based on software (and increasingly AI), for which resources are pooled. This dichotomy between current and future tech results in two very different risk profiles, business structures and management styles. Consequently, large companies that embrace current and future businesses are (considering) re-organizing or breaking up their organizations to maximize efficiency on all fronts.
As mentioned above, Delphi was split into Aptiv (“longer” term tech and mobility solutions; $12bn in sales) and Delphi Technologies (powertrain, including vehicle electrification; $4bn) last year. In June 2018, passive safety leader Autoliv spun off Veoneer (AV focus; 1bn€). This past July, Continental announced a major restructuring, breaking up the company into Automotive (20bn€), Rubber (18bn€) and Powertrain (8bn€), with a plan to IPO Powertrain in 2019 and possibly Rubber in the future. The same month, ZF announced the spinoff of Car eWallet, a business focused on in-vehicle transaction services. In July 2018 still, Daimler announced a new 3-pronged corporate restructuring, breaking up into Mercedes-Benz, Daimler Trucks and Daimler Mobility— the latter will be built on the current Daimler Financial Services. Finally, Faurecia sold off its Automotive Exterior business (2b€) to Plastic Omnium in 2016 “to accelerate investment in value-added tech for sustainable mobility and enhanced life on board.”
Risk and investment profiles lead to contrasted valuation trends
Investments in AV tech have skyrocketed. In 2016, GM spend $600m to acquire AV startup Cruise Automation, now valued at $11.5bn after SoftBank bought a 20% stake for $2.25bn. GM is now considering having Cruise go public. Intel bought Mobileye in 2017 for $15bn. That same year, Ford committed to investing $1bn over 5 years in AV startup Argo AI. The Dearborn-based OEM recently announced the creation of Ford Autonomous Vehicle LLC to host Argo and other AV and new mobility-related activities, which opens the door to financial independence.
In addition, the financial markets have reacted to the differentiated business profiles described above. Stocks have performed quite distinctively. As of August 31st, Delphi Tech. and Aptiv had lost respectively 38% and 1% since they were listed separately last December. In parallel, Autoliv had lost 11% when Veoneer had gained 13% since their independent listing in July 2018.
And so what …
Whereas EVs, AVs and shared mobility are exciting and certainly coming, we cannot throw away the current tech and operating models quite yet. ICEs will most likely be around in large volumes for over 30 years and will have to abide by increasingly stringent CO2 regulations. Likewise, people will be turning the steering wheel of their own cars for many more years. And the replacement parts business based on current tech will still enjoy many profitable years thanks to market inertia — fleets’ average age is 10-12 years in Europe or the US. Nevertheless, incumbent players must give themselves the necessary leeway to develop tomorrow’s radically new tech, and accept the associated risks, or their years are numbered!
In addition, increasingly connected vehicles have started to bring about a plethora of new services to OEMs, drivers, fleet managers, insurance companies, etc., with short term business opportunities. Incumbent players are not best positioned to develop these services. However, they can retain control of the vehicle’s gateway — and hopefully develop valuable services — provided they transform their culture and significantly build their software and data management expertise. Here again, incumbents may have to establish independent organizations to force the transformation. Exciting times ahead!
Marc Amblard
Managing Director, Orsay Consulting
Feel free to like this article on LinkedIn at https://bit.ly/2N28IPz.. Thanks!
Plug-In Vehicles: The Future in Charging
October 2018
Sales of plug-in electric vehicles (PEVs) are growing at a very rapid pace. PEVs, i.e., battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs), represented 0.9% of global light vehicle sales in 2016, 1.5% in 2017, and is expected to reach about 2.2% in 2018. This growth momentum is getting stronger. In effect, incumbent OEMs are just starting a multi-year salvo of new products covering most segments of the market, with increased range at lower cost. The global PEV fleet is expected to reach 5.4 million vehicles (incl. commercial) by the end of 2018, up 64% vs. end of 2017. This will represent only 1 in 250 vehicles. Yet, the significant growth requires a paradigm change in the charging infrastructure. What is being done to address this?
Significant PEV sales growth across the globe
Global PEV sales grew 50% to reach 1.1 million light vehicles in 2017. They are up 66% in H1 2018 vs. H1 2017 (source: ev-volumes.com). China strengthens its lead with a light PEV market expected to reach 1.1 million in 2018 (4.2% of light vehicle sales) vs. 606K in 2017. Europe follows with 430K PEVs expected in 2018 (2.3% of the market), up from 307K. The USA plug-in market lags with 200K units in 2017, but will catch up with 350K (2% of the market) in 2018, in part thanks to the delivery of Tesla Model 3’s backlog. Bloomberg NEF expects 11 million PEVs to be sold in 2025 and 30 million in 2030.
The sales growth will come in part from a fast growing product offering. The number of plug-in models is expected to increase from about 80 today, to about 200 in 2020 and 300-500 in 2025. At the same time, PEVs’ electric range is increasing thanks to fast dropping battery pack cost. The latest PHEVs offer 100 km up from 50 km. BEVs already reach over 500 km (Tesla Model S 100D) and lower priced models see increased battery capacity. For instance, Nissan Leaf (24 to 40 to 60 kWh in 2019) is catching up with Chevrolet’s Bolt EV (60 kWh for close to 400 km). This will also contribute to higher charging station utilization unless they are more numerous and/or more powerful.
Another long term driver to PEV sales will come from lower operating costs. In Palo Alto in Silicon Valley where I reside, my Chevy Bolt EV (see display below with 287 miles of range) is charged mostly at home, i.e., at $0.10-0.18/kWh. As a result, my energy cost per km amounts to about 1/4 of its equivalent in fuel. Charging at a fast, 43 kW station still brings a 50% energy cost saving — and maintenance is a lot cheaper. In Paris, the city charges 1€/h (one hour max) at its 22 kW public stations, which brings energy cost per km to 1/5 to its fuel equivalent — and charging is free from 8pm to 8am!
Higher range and new charging solutions increase buyer confidence
Range anxiety, an issue that has held BEV sales back, is diminishing. Most of the latest BEVs have at least 60 kWh of battery, except for most vehicles in China where a change in incentive schemes will now favor longer range BEVs. Such battery capacity provides a range of over 300 or even 400 km depending of the vehicle. New charging options and network density also contribute to eliminating range anxiety. Among these new options are induction charging and robotized conductive charging solutions at one end of the spectrum, and higher power charging stations at the other.
Charging takes place in three instances: at home, at destination (work, shopping, hotel,…) or on the road. The mix varies by region. Home charging is dominant in the US due to the pervasiveness of individual homes: it represents 81% of the mix, vs. 10% at a public stations and 7% at work according to a recent study. By contrast, EV owners in Chinese cities mostly live in apartment buildings; this led Nio to opt for swappable batteries for the ES8 introduced there a few months ago.
The charging infrastructure varies by region
How many charging points are there today and how does this compare with fleet size by region? According to its Dept of Transportation, the United States currently has about 56K public charging outlets located at 20K stations. For reference, the US fleet will amount to about 1 million PEVs at the end of 2018. For the EU, the European Alternative Fuels Observatory reports 150K public charging points vs. 70K three years ago. This network will serve a fleet of about 1.1 million PEVs by year-end. Last, China counted about 230K public charging plugs in early 2018 for a fleet estimated at 2.3 million by Dec 2018.
For reference, the European Commission recommends one public charging point per 10 PEVs, in addition to private chargers. The US ratio is significantly below this guidance, but one should consider the uneven sales distribution. Half of US PEV sales originate in California, 40% of which are in the San Francisco Bay Area. Living in Silicon Valley, 5 km from Tesla’s HQ, I can attest to the high density of BEVs and PHEVs (penetration similar to that in China) as well as to reasonable density of charging stations. Even so, they are often in-use, thus unavailable.
Infrastructure density is increasing fast
Recently, research firm Wood Mackenzie estimated that 12 million residential charging points and 1.2 million public ones will be installed in the N. America by 2030. For Europe, the firm foresees respectively 9 million and 1.6 million points at that time and a global total of nearly 40 million charging points.
Last month, Chargepoint, the US leader, committed to installing 2.5 million charging points by 2025 up from 54K today. For reference, the Silicon Valley-based company counts BMW, Daimler and Toyota among its investors. Similarly, EVBox, one of Europe’s leading charging networks which operates in 45 countries, committed to having 1 million plugs by 2025, up from 60K.
Many other initiatives will contribute to building the required charging infrastructure. For instance, Ionity, a JV between BMW Group, Daimler AG, Ford, and Volkswagen Group intends to install one thousand high-powered charging stations — capable of up to 350 kW — across Europe, aiming for an average of six plugs every 120 km. Electrify America, with funding provided by the VW Group following the Dieselgate settlement, will invest its two billion dollars in the charging infrastructure as well as in communication campaigns over 10 years. I should also mention Nissan, which has co-financed charging stations, both in Europe (2,000 stations between 2013 and 2016) and in the US (800 km fast charging corridor in the Northeast with EVgo).
These multiple charging networks have generally required that you subscribe to each of them, but this is changing. Hubject introduced a roaming service across Europe and is currently deploying it in the US. Similarly, Chargepoint just announced seamless roaming agreements with EVBox for Europe and N. America, and with Canadian leader FLO across the USA and Canada. The infrastructure is progressively gaining in maturity.
New charging solutions
Current charging stations deliver up to 120 kW if you have a Tesla, but only up to 43 kW for everybody else. This is about to change with the emergence of vehicles and stations capable of charging at 350 kW. Porsche Taycan, which will arrive in 2019, will be the first such car, followed by Audi’s e-tron GT, due at the earliest in 2020 (same platform). Porsche promises almost 400 km of range for a 15 minute charge and is currently deploying 350 kW stations at its dealers. With current voltage of 400 V, such high power would require cooling them, thus rendering them too heavy. To address this need for higher power, the voltage is increased to 800 V, resulting in a 75% reduction in power loss.
Wireless charging solutions are emerging from established players (e.g., Qualcomm) as well as startups (e.g., Witricity, Evatran below). The first such solution to be offered as an OEM option will be on BMW’s 530e PHEV, with a max power of 3.2 kW or about 15 km of range per hour of charge. Some solution providers offer 11 kW, while 20 kW seems to be for the near future. Robotized conductive charging solutions offer a higher efficiency. They either plug under the vehicle with an automatic guiding feature (e.g. Gulplug) or in the original side connector (e.g., Diatom). These solutions are mostly relevant for homes and fleets as they require matching units between vehicles and the infrastructure.
Are oil majors pivoting to distribute electricity?
Most European oil majors are indeed investing in the development of the charging infrastructure to prepare for life beyond oil. Last year, Shell acquired NewMotion, a European charging network. The Dutch oil company is also partnering with the Ionity consortium (see above) to expand its EV charging business in Europe. In 2018, Total acquired G2mobility, a charging solution provider. Earlier this year, BP acquired Chargemaster, a UK charging network, and invested in 2017 in FreeWire Technologies, which provides a mobile charging solution. Surprisingly, US oil majors remain absent in the EV charging transformation.
The takeaways
Both the market and the industry have clearly initiated a significant ramp-up in battery EVs and plug-in hybrids sales. The global fleet of PEVs will have quadrupled to 5.4 million vehicles from end 2015 to end 2018 and this is just the beginning. China alone targets 5 million such units to be sold in 2020. Whereas PEVs will represent ~2.2% of global light vehicle sales this year, their market share is expected to reach 11% in 2025, and climbed to 28% in 2030 (Bloomberg NEF). Consequently, the charging infrastructure is adapting on multiple fronts: network density, charging speed, new charging options and roaming solutions. Yet, the charging industry is far from stabilized and its oil-based counterpart has hardly started to prepare for this tidal shift. The future is exciting!
Marc Amblard
Managing Director, Orsay Consulting
Feel free to comment or like this article on LinkedIn. Thanks!
Shared Micro-Mobility Goes Mainstream
November 2018
The proportion of the world population living in urban areas is expected to rise from 55% today to 68% in 2050. Congestion in cities keeps increasing in the absence of specific regulations such as the London access charge. A recent study shows that ride-hailing contributes to making matters worse, representing about half of the congestion increase in several US cities. Autonomous ride-hailing, may accelerate this trend as ride prices will drop. Incentivizing higher vehicle occupancy and the use of public transit should be part of the solution as they reduce footprint per passenger. Micro-mobility is certainly another solution and it is available today.
Bikes, scooters and to a leaser extent moped, i.e., micro-mobility, have developed significantly in cities in most regions over the past decade and built momentum recently. These modes have emerged as strong alternatives to cars for short distances. For reference, about 50% of all trips in U.S. are shorter than 8 km. However, the modal distribution varies greatly by region: in London, only 35% of all trips are done by car whereas the ratio is 50% in Vancouver and 95% in Los Angeles. The quality of the public transit system has a lot to do with this contrast.
In addition to reducing congestion, these electric or human-power modes are clean and accessible to people with lower incomes. They complement each other depending on distance and eagerness to travel on two wheels, and help urbanites connect with public transportation. As a result, OEMs and ride-hailing companies are also investing in micro-mobility to offer a broader choice of modes. How is this playing out?
Bike-Sharing Accelerated When It Went Dockless
Bike sharing started to build real momentum about 10 years ago in Europe. In Denmark and the Netherlands, biking has been a key mode of transportation historically— 58% and 53% of the population ride their bike to work respectively in Copenhagen and Amsterdam. In London, bicycles have become the dominant vehicle during rush hour. In 2007, Paris introduced Velib’ which became the largest fleet with 20,000 docked bikes, which are used for an average distance of 5 km. The fleet now includes e-bikes.
Then came a massive wave of dockless bikes in China, with Ofo, Mobike and Hellobike, starting in 2014. Fleets grew fast — Ofo had 85,000 bikes in China after 18 months of operation, before going international. At the end of 2017, 1.5 million bikes had been “dumped” in Shanghai alone. This excess led to the bankruptcy of overly aggressive players.
In the US, bike-sharing started more slowly, which is not surprising as cars dominate mobility and urban centers are typically less dense than in Europe or Asia. Established in 2009 as Alta Bicycle Share, Motivate provided about 80% of all bike-share rides in 2017. Jump was founded a year later, as Social Bicycles. Together with Lime and Spin, these companies now operate both pedal and e-bikes in many US cities. Deployed more recently, the latter not only allows users to ride farther, but also attracts otherwise reluctant commuters. For reference, a bike generates about $10 of revenue per day in San Francisco, and costs approximately $1000.
Free Floating E-Scooters Become All the Rage in 12 Months
Shared electric scooters are a recent phenomenon, since their introduction in the US in mid 2017. The GPS-located 2-wheelers address the “last mile” in urban transportation. According to Bird, 68% of scooter rides are to connect with public transit. Lime considers that scooters cover to the 0-2.5 km range and e-bike go up to 5 km.
Lime and Bird, have triggered a race to occupy sidewalk real estate. This resulted in waves of small two-wheelers being dropped in cities, without permits initially. In their first 12 months, these startups provided about 10 million rides each. After less than 14 months of operation, Lime, which started with bike-sharing, had deployed its e-scooters in 125 markets in 8 countries (see below), and reached over 20 millions rides. This stellar growth requires significant funding — $400 to 500 million each to-date — at valuations over a billion dollars … that’s fast! In addition, this sudden and massive deployment has reportedly led to a shortage of scooters.
These Chinese-made vehicles cost $300-500 and generate $15-20 per day, with typically a $1 flat fee plus $0.15 per minute — an interesting economic analysis can be found here. It is clear that scooter-sharing is more profitable than bike-sharing. However, e-scooters have to be replaced every month or two as they turn out not to be designed for such intense use. The two startups are now developing their own products to address design deficiencies, especially robustness.
Another issue is the weather. In anticipation of its first winter in northern US cities, Lime is launching a car-sharing program, starting with Seattle. The pilot will include a free-floating fleet Fiat 500Es. In parallel, Lime is developing a 2-seat, 4-wheel battery EV to be produced in China. These EVs will offer an alternative to scooters and bikes in case of poor weather conditions and will enable use cases up to 50 km. Pricing is aggressive at $1 plus $0.40 / min for a Fiat 500E vs. $1 plus $0.15 / min for an e-bike.
Other operators include Grin and Yellow in Latin America, Taxify (initially a car-based, ride-hailing), Tier or VOI in Europe, or Skip, Spin and Razor in the US or Wind in Europe and the US.
Electric Mopeds Complement Bikes and Scooters
Founded respectively in 2012, 2014 and 2016, Scoot, CityScoot and Coup all offer dockless electric mopeds. Whereas the American Scoot operates in San Francisco, Barcelona and Santiago, the French CityScoot has deployed its e-mopeds in Paris and Nice and will soon be in Milan. The German Coup, a subsidiary of Bosch, is present in Berlin, Paris and Madrid. It is interesting to note that back in 2016, Scoot had in their fleet a dozen or so Renault-made Twizy vehicles (full EV, 4 wheels, 2 seats in a row). Instead, the San Francisco-based company decided to expand its fleet with e-scooters in its hometown and e-bikes in Barcelona.
Fleets are still of limited size. CityScoot has the largest, with an expected 6,000 vehicles at the end of 2018, followed by Coup with 3,500 (see below). In all cases, these smart-phone activated mopeds have a top speed of 45 km/h and can be operated without a license, using a helmet provided with the vehicle. Based in Silicon Valley, I often spend the day in San Francisco and find it very convenient to use Scoot’s e-mopeds to go from one meeting to another while my EV charges at a city parking structure.
Few OEMs Are Embracing Micro-Mobility to Broaden Their Service Offering
The mobility ecosystem is undergoing a profound transformation, including a shift from vehicle ownership to mobility on demand, and the introduction of cheaper micro-mobility modes. While many OEMs are experimenting with shared mobility on four wheels, fewer are embracing micro-mobility. In my view, this is smart: it is better to cannibalize your own business than to see it go to the competition.
In 2017, Ford deployed a fleet of 7,000 GoBikes operated by Motivate (now owned by Lyft), in San Francisco. Last month, the OEM acquired Spin, which operates both bikes and scooters. On its Free2move mobility aggregation platform, PSA offers not only car-sharing and ride-sharing services, but also shared bikes and scooters (see below). Just last month, Daimler announced that its ride-hailing subsidiary MyTaxi would soon launch an e-scooter sharing program with 500 vehicles in southern Europe. Last month, GM announced they will launch two foldable e-bikes in 2019. And a few days later, it was Tesla’s turn: Musk indicated that his company may introduce an e-bike.
Ride-Hailing Companies Are Also Expanding From 4 Wheels to 2 Wheels
For the same reasons OEMs start to adopt micro-mobility, ride-hailing players are broadening their modal offering. In mid 2018, Uber acquired Jump (bikes, scooters) and invested in Lime (bikes, scooters) - the ride-hailing giant started to deploy Jump scooters last month. Furthermore, its CEO has declared that car rides will eventually represent not more than half of Uber’s business, recognizing the potential of micro-mobility (and airborne solutions). In a similar move, Lyft acquired Motivate (bikes) for $250 million in June, and China’s Didi has become Ofo’s largest shareholder (bikes). In addition, Estonia-based ride-hailing operator Taxify, in which Daimler and Didi have invested, also launched e-scooters on the streets of Paris this past September. This broadens their customer base as 60% of their scooter riders are new to Taxify.
The Take-Aways
It is clear from this analysis that the mobility ecosystem is in the midst of a profound transformation. Consumers are decreasingly inclined to place a significant portion of their assets in a vehicle that’s parked 95% of the time. Instead, they expect access to mobility when and where they want, without commitment. The fast development of the sharing economy is forcing traditional players, OEMs in particular, to truly embrace their proclaimed ambition to pivot from selling cars to providing mobility. Likewise, companies offering shared mobility based on a single mode are racing to deploy across other modes in order to gain a first mover advantage. As there won’t be room for everyone, the race is on!
Marc Amblard
Managing Director, Orsay Consulting
Feel free comment or like this article on LinkedIn. Thanks!
How Nio, Byton, Lucid, Rivian and others Emulate Tesla
December 2018
Established Automotive Original Equipment Manufacturers (OEMs) were founded 60 to 130 years ago. They operate in a low margin business, with complex products and supply chains, combined with high volumes. There has been significant consolidation among OEMs to bring economies of scale. Outsourcing shot up in the 80’s and 90’s to reach about 70% of sales. Their expertise is centered today on overall vehicle design, systems integration, powertrain as well as high volume supply chain and manufacturing. This has resulted in an industry that delivers incremental improvements focused on user experience and overall efficiency. The OEMs’ legacy and culture prevent them from inventing the “next big thing.”
Then comes Tesla with the introduction of its Model S in 2012. Incumbent OEMs downplayed the potential of the Silicon Valley-based startup. Only Nissan, Renault and Mitsubishi were selling battery electric vehicles (EVs) at that time, in low volume. It took about 3 years (2015), when Model X was launched and Volkswagen’s Diesel scandal came to light, for incumbent OEMs to initiate accelerated EV development programs. JLR was the first to market with i-Pace in 2018 (image below). The year 2019 will see the beginning of slew of new EVs by all major OEMs. Yet that’s not all, Tesla and the other emerging OEMs were developed from the get-go as software powerhouses with agile organizations. This will prove difficult for cumbersome OEMs to compete against.
Can other EV startups successfully follow in Tesla footsteps? It is one thing to raise funds on the basis of a disruptive business plan, assemble teams with hundreds of well-paid technical experts, and create a concept vehicle for a few million dollars. It is yet another thing to establish a well-oiled supply chain and a manufacturing unit capable of high yield and high quality. Nevertheless, these emerging OEMs are free from any legacy related to engineering, product platform, manufacturing, culture or organization, which gives them a lot a leeway to do things differently.
Who are these emerging EV OEMs, what is their approach, and can they succeed?
Tesla
Much has been written on the company, so I will only highlight a few aspects that are relevant here. Founded in 2003, Tesla has managed not only to make EVs appealing and create a strong brand, but has forced incumbents to adapt. The company will sell about 250k vehicles in 2018 between Model S and X (~50k units each) and Model 3 (~150k). This has not been without great pain, mainly with production ramp-up over the past 15-18 months. According to Elon Musk, this hardship brought Tesla just weeks away from bankruptcy.
From the very beginning, Tesla created a different kind of OEM focused on technology and software, leveraging its localization in the heart of Silicon Valley. The company favors vertical integration for differentiating technologies. This applies to power units and electronics, battery packs (Gigafactory produces 3.5M battery cells/day), the vehicle’s operating system and infotainment (including over the air update), a high speed charging network or autonomous driving tech. None of these were initially available in the market at Tesla’s required performance level.
The bottom line: incumbents are playing catch-up on things like powertrain efficiency, OTA updates and charging speed. They have also fallen behind on volume. Tesla is ahead of the German premium sedans in the US (similar pricing), and sells more Model S vehicles in Germany than S Class or 7 Series. Lastly, Tesla’s market cap stands at about $60B (250k veh), 20% more than Daimler’s (2M+ veh), 30% over Renault+Nissan’s (10M+ veh) or 3/4 of Volkswagen AG’s (10M+ veh). However, Tesla still has to prove it can reach sustain profitability. I am confident the company is out of the woods. However, incumbents are closing in.
NIO
Since its foundation as NextEV in 2014, the Tencent- and Baidu-backed Chinese company has been a fast follower. NIO has developed and already sold 8k units of their first vehicle, ES8, a 7-seat , China-only SUV (image below) retailing for about $70k (image). The company went public on the NYSE last September, raising $1B at a valuation of $6.4B. NIO just presented their second vehicle, ES6, a 5-seat SUV emphasizing performance with 540 hp and 510 km of NEDC range ($58k and up). It is destined for the Chinese market where deliveries will start in Q2 2019. That is quite an achievement in just 4 years!
Teams are spread over 3 continents: Shanghai (mostly hardware), Silicon Valley (mostly software with over 500 people), Munich (design) and London (performance program). China’s JAC Motors manufactures the vehicles, thus minimizing expertise and cash drain, as well as maximizing the chance of a smooth ramp up. The company had 6,500 employees as of June 2018. NIO also has a unique division in-house: XPT Global aims at providing engineered power units (induction and permanent magnet), battery packs and power electronics to other OEMs.
NIO focuses on the complete user experience, positioning the car as a means rather than an end. The company is building a network of battery swap stations in China, an equivalent of Tesla’s supercharger network. This approach is unique for this market given the relative lack of home charging capacity. NIO is also opening private lounges or “user centers,” at the heart of China’s main cities. NIO seems to have found a winning recipe, at least for the Chinese market. Other manufacturing partners will likely be needed to access other markets depending on tariffs.
Byton
Founded in 2016 as Future Mobility Corp. by two Germans - former BMW and Infiniti executives, the company was initially backed by China’s Tencent and Taiwan’s Foxconn. Like Tesla and NIO, it will focus on EVs. It will launch its first vehicle, M-Byte, a 5-seat SUV (image below), in China in 2019, then in 2020 in Europe and the US (tariff permitting). A second vehicle, K-Byte, a sedan, has been presented as a concept and will be launched in 2021.
Like Tesla, Byton is building its own manufacturing plant, in Nanjing. It is likely to get assistance from Chinese OEM FAW and battery producer CATL, which both took part in a $500M investment round earlier this year. The staff, 700 as of last August, is distributed between Silicon Valley (R&D, 300 p.), China (HQ, engineering, manufacturing) and Munich (design). It’s interesting to note that Byton contracted Bosch to develop its powertrain, arguing it is not an element of differentiation.
Even more so than NIO, Byton positions its cars as mobility enablers with a focus on the digital experience, leveraging the vehicle’s pillar-to-pillar display (image). Conceptually, the car becomes a sort of “smartphone on wheels.”
Lucid
The company started in 2007 as Atieva, a supplier of battery packs. Headquartered in the San Francisco Bay Area, Lucid was initially backed by Chinese OEM BAIC, which sold its shares to China’s electronics company LeEco. Last Sept, Saudi Arabia’s sovereign fund, which owns 5% of Tesla, invested $1B in Lucid and gained majority ownership.
The company’s first product is Lucid Air (image). The sedan will focus on luxury and performance with up to 1,000 hp and a 130 kWh battery good for a range of 650 km. It is expected to launch in 2020. However, there are no signs that construction has begun on the company’s own manufacturing site. In 2016, Lucid announced it would build a greenfield site with a capacity of 130k in Casa Grande, Arizona. The $1B cash injection received 4 months ago is expected to allow for the construction of the plant as well the completion of product engineering. Lucid continues to develop the Air at its SF Bay Area HQ. I look forward to an update on the product launch and its ramp-up.
Rivian
Founded in 2009, the company operated in stealth mode for many years, while raising $450M from Sumitomo among others. The first two products were presented at the LA Auto Show in November 2018. Built on the same platform, R1T, a pick-up truck (image), and R1S, a 3-row SUV, are expected to launch in 2020 and 2021 respectively. In line with the “adventure vehicle” positioning, these EVs will offer up to 180 kWh of battery capacity for over 650 km in range (EPA).
SF Motors
The company, which will operate under the name Seres, has teams across in 3 continents and its HQ in Silicon Valley. R&D is done at its HQ as well as in China, Michigan and Japan. Vehicles will be assembled in both China (Chongqing) and the US, at a brownfield operation located in Indiana, acquired in 2017 from AM General for $110M. Production will reportedly start in 2019 for SF5 and 2020 for SF7. SF Motors tapped the expertise of Martin Eberhard, co-founder & former CEO of Tesla, through the acquisition of his small battery startup, InEVit, in 2018. Eberhard is now the OEM’s Chief Innovation Officer.
Faraday Future
The Los Angeles-based startup was initially backed by LeEco (yes, same as Lucid). At CES in January of 2018, Faraday Future presented it first product, FF91, a “tall sedan” priced then at $150k and up (image). A second vehicle, FF81, was expected to compete with Tesla Model X. At that time, a $1B greenfield plant was announced in Nevada. Then, the CEO of LeEco got into legal trouble and was unable to provide the necessary cash, forcing the company to find new investors and downsize its ambition to a brownfield site — a former Pirelli plant in California.
In early 2018, a Hong Kong-based company committed to providing $2B for a 45% stake in FF. The project seemed to be back on track. Then a first body in white was presented in fanfare before financing collapsed again. Most of the senior leadership has jumped ship in the last couple of months and it is doubtful Faraday Future will get another life.
Take Aways
Common denominators to these companies include a focus on tech and software, skate-board-type platforms, high performance typical to EVs, high digital content and the progressive integration of highly automated driving capabilities with often pre-installed hardware. However, the latter seems to be a core element mainly for the mature Tesla.
Many of these companies are headquartered in China and/or have received significant Chinese funding. This is easily explained by the fact that China is by far the largest EV market, with about 60% of global plug-in EV sales (800k+ battery EVs expected in 2018).
I have focused here some of the most mature companies, but there are many other contenders such as Bollinger Motors (USA), Dyson (UK), Elextra (Switzerland), Evelozcity (USA), Chanje (USA), Fisker (USA), Karma (China), Sono Motors (Germany), Xpeng Motors (China), WM Motors (China) or Workhorse (USA) to name just a few. Only a handful of all these emerging OEMs will turn into mature businesses. Incumbent OEMs, especially laggards, may shop among those which fail, either for technology or for established teams, as a way to catch-up.
All the best to the new EV players! We need competition to foster electric mobility.
Marc Amblard
Managing Director, Orsay Consulting
Feel free to comment or like this article on LinkedIn. Thanks!