HMI Innovations, Integration of Third Party Cloud Apps and User Analytics will Define Key Focus Areas for OEMs

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1 HMI Innovations, Integration of Third Party Cloud Apps and User Analytics will Define Key Focus Areas for OEMs Frost & Sullivan Presentation By Praveen Chandrasekar Research Manager June 2013

2 Presentation Agenda What s Happening in the Infotainment and HMI Area 3 Changing Telematics Value Proposition 18 Key Conclusions 25 2

3 What s Happening in the Infotainment and HMI Area 3

4 Vehicle Purchase Influencers - EU & US Clearly Infotainment and Connected Technology will never be a top purchase influencer, but how it can influence the overall car technology will be key Quick Glimpse of Connectivity Still lags the usual suspects when it comes to new car purchase Still good to have and not must have All OEMs are behaving very similar in terms of offering Successful OEMs are good at packaging & marketing Focus shifting on long term value derived through connectivity Smartphone has a key role to play e.g. Kia UVO eservices Optional offer no longer a viable strategy 4

5 Driver Distraction Issues Research indicates that even voice usage causes distraction. Clearly HMI as much as a differentiator is a big challenge for OEMs to get right in line of growing distraction possibilities SIRI Vs. Native VR How to Control? Complex Graphics & Menu Structures Display in Line of Sight? Content & Control - On the move vs. static? App Certification & Distraction Guidelines 5

6 Central Display Size Analysis 10 inch plus central display screen sizes will increasingly penetrate the North American market with average sizes exceeding 7 inches Central Display Split by Size (Europe), 2012 Central Display Split by Size (Europe), 2018 less than 6", 50% 6.5"-7", 40% More than 7", 10% 6.5"-7", 45% less than 6", 28% More than 7", 27% Central Display Split by Size (North America), 2012 Central Display Split by Size (North America), "-7", 57% less than 6, 16% more than 7", 27% 6.5"-7", 51% More than 7", 41% less than 6", 8% 6

7 Smartphone Ownership More than half of the Adult American society owns a smartphone and replacement is currently averaging at less than 2 years for a more powerful new phone 67% Smartphone Ownership by Age, US 76% 65% 75% Increasing amount of Mobile Payments & Banking Use in Smartphone Owners Constantly Checking Smartphones for Updates- More than 60% Younger age group ownership of Smartphone is increasing by the year this is no secret! The only age group where ownership is flat over the years is UNDERSTANDBLY! Recent court ruling in California reinforces Dangerous Smartphone use while Driving Average of Texts Sent During the Day from Smartphones 75% of Smartphone owners access social networking through mobile atleast once a day 7

8 Frequency of Smartphone Usage In the Vehicle 40-50% of all customers across segments use their Smartphone inside the car regularly through several means Frequency of Smartphone Usage in Vehicle by Vehicle Segments United States, 2012 Luxury SUV/CUV 40% 30% 16% 14% Luxury car 35% 29% 24% 12% MPV & pickup trucks 19% 25% 33% 23% Always Often A, B & C 17% 25% 31% 27% Sometimes Never D&E 17% 24% 36% 23% Non-luxury SUV/CUV 16% 29% 33% 22% Total sample 23% 27% 29% 21% Base: All respondents (n=1,524). Q7B. When in your vehicle, how often do you use your smartphone? 8

9 Activities that Consumers Frequently Do in the Vehicle Several of the top 10 most frequently done activities by US customers relates to using the Smartphone in one way or another Frequency of Performing Various activities in Vehicle United States, 2012 Daily 2-3 times a week Once a week 2-3 times a month Once a month Less than once a month Listen to the radio 74% 12% 5% 2% Open your garage door or community gate 52% 9% 4% 2% 2% Make calls on cell phone to friends and family 49% 20% 9% 6% Send/receive text messages on your phone 40% 13% 7% 5% 6% Call hands free using a vehicle system 26% 15% 9% 6% 4% Listen to my MP3 player/ ipod 20% 17% 9% 7% 8% Make calls on cell phone to business associates 20% 15% 10% 8% 9% Listen to music, news, etc. on my smartphone 19% 12% 8% 6% 7% Use seat controls 19% 17% 13% 18% Base: Filtered respondents (n=1,435) Q5. How frequently do you do the following activities in your vehicle? Note: Proportions less than five percent are not shown numerically in the chart. 9

10 Smartphone & App Integration MirrorLink 1.1 with its new areas of focus around driver distraction guidelines, app certification with developers might be the answer 60% of OEMs are looking for to integrate apps MirrorLink 1.1 App certification With dedicated driver distraction Guidelines By OEMS MirrorLink 1.1 OEMs need Not worry About IT costs & Apps for diff Markets By CCC MirrorLink 1.1 High Volume Android Sphone Support MirrorLink By Handset Vendor MirrorLink 1.1 Developers =? = Volume Vs. Niche OEMs? App SDK War Ford MS SDK GM HTML 5 Mirror Link Tweedle Connect 10

11 And what about Apps? There is clear evidence that several of the usual category of apps have very interest and usage both inside and outside the car Higher volume of usage is reported by users for social networking, free nav and internet radio apps where choices are very high Base: All respondents (n=1,524). 11

12 NA Automotive App Stores Recap Ford remains the biggest in this space, but still no clear revenue streams from apps directly. All OEMs acknowledge app effort is to create customer loyalty and chance to sell cool HW OEM App Program No of Apps Point of Sale Paid Vs. Free Apps Revenue Model Ford Applink >40 <5% Paid SYNC W/HMI Options Chevrolet MyLink Paid App BringnGo MyLink W/HMI Options Volvo Sensus 10 All Free Apps Sensus Connected Hardware W/HMI BMW Connected App 10 1 Paid- MoG User Account Audi Audi Connect 6 Embedded Covered under $30 Monthly LTE plan Chrysler UConnect 4 (not available yet) All Free Apps idrive+display MMI Touch+Display Uconnect System W/HMI Options Development Style Direct with Developers Direct with Developers Parrot OEM App Store Direct with Developers Direct with Developers Direct with Developers Cadillac CUE 2 Linux Embedded Mercedes Benz MB App Shop Pandora Free 10 Plus 3 Paid Apps- 10E/App MB Store Toyota Entune 5 $5 access fee per month for apps after 3 years trial CUE System W/HMI Options COMAND ONLINE Entune HW/W/HMI Direct with Developers Direct with Developers Tweedle Connect Hyundai Bluelink 2 Part of Bluelink Bluelink Package Agero - Bluelink 12

13 Ford SYNC Applink Ford offers the largest app collection with majority existing popular free apps. Missing elements are driving & service related apps. Also Applink not available with MyFordTouch Ford Program Availability Revenue Model Apps Point of Sale App Store Highlights Applink Free Apps 95% 2013 Focus, Fiesta, E-series, Expedition, F-150, Super Duty, C-MAX, Fusion and Mustang SYNC Hardware W/Voice/Steering Wheel Controls/Bluetooth Apple/Android/BB Stores 21 different Radio & Music Apps Types of Apps 5 Different Nav Apps including Glympse location sharing Paid Apps Communication Key Partners Development Type 5% - e.g. Amazon Cloud Player user continues his existing account Tethered from User Data Plan Microsoft and App Developers Closed proprietary Developers tweak SDK to SYNC API 2 Sports Apps 8 News Apps New Open SDK Approach Announced Ford also contributing Applink code to GENIVI for other OEMs Health Wellness 3 Social Lifestyle 13

14 Volvo Sensus Connected Touch Program Volvo has direct partnership with Parrot and uses its Android app store called Asteroid and also has a direct partnership with Ericson to use its connected cloud, complete outsourcing Volvo Program Availability Revenue Model Point of Sale Free Apps Paid Apps Communication Key Partners Development Type App Store Highlights Sensus Connected Touch Option Accessory - V40, V40 Cross Country, S60, V60, XC60, V70, XC70 and S80 Retrofit for Certain 2011 Models HW+HMI Options+3G/4G Dongle Google Play Android Market Spotify, TuneIn, Deezer, igo, etc. Coyote App (EU Specific) Choice of dedicated 3G/4G Dongle or Users Smartphone Ericson/Parrot/ Neonode App framework completely outsourced to Parrot Utilizes Parrot s BT enabled Smartphone link to replicate/mirror apps to the display HTML 5 browser+java script for full internet access when vehicle is not in motion Partnership with Neonode to utilize a new infrared beam touch screen multisensing environment More OEMs are moving towards a model of outsourcing app stores to third parties, e.g. Renault ATOS, Volvo Parrot 14

15 Renault TomTom Carminat followed by R-Link R-Link is an example of OEM+Third party (ATOS) development however the closed development based on Android will strain the customers pocket HMI Options 5.8 colour screen 590E Option on Select Models 7 Inch Touch Screen Display Voice Recognition- 9 Languages Joystick Remote control Speech to text BT Streaming + Portable Device Connectivity Carminat TomTom Live costs 490. All models come with a three month free subscription of live services. Post free trial Live services are charged at 145 for 3 years. Additional European mapping for long distance travel is available for 120. Carminat TomTom was essentially a rebuilt TomTom One where the key was the ecosystem partners ability to keep costs down Navigation+Telephony Vehicle Related Services 3 months free access to TomTom and Coyote Services 6 Months Free access to , R-Link Tweeet, Weather and Roadside Assistance (Covered by TTS) Dedicated App Store 20 Apps available Discovery pack access to select apps for 6 months Apps pricing expected to be between 5 to 50 Euros (e.g. Coyote) 15

16 Preferred HMI Type by Application for D&E Segment Multimodality is preferred with a combination of touch, voice and steering wheel controls Telematics and Infotainment Market Outlook: Preferences for HMI Controls by Application Type, Europe, 2012 Operating features and apps built into vehicle Operating features and apps from smartphone Climate control operation Hands-free telephony/texting Portable device operation (ipod, etc.) Navigation system operation Entertainment system operation 13% 19% 14% 18% 13% 14% 8% 15% 9% 29% 15% 16% 14% 21% 26% 11% 13% 14% 14% Voice recognition 21% 13% 14% 16% 17% 14% Touch screen 11% Single dial knob 16% 17% 16% 13% 26% Steering wheel controls 14% 7% 28% 10% 13% 12% 9% 15% 11% 9% 12% Touchpad and handwriten recognition 14% 9% Specific physical buttons 7% 9% 12% 7% 12% Joystick Base: All respondents (2012, n=1,592). Q19. If the following was available in your vehicle, please indicate how you would prefer to control each function. Note: Proportions less than five percent are not shown numerically in the chart. Source: Frost & Sullivan analysis. NC

17 What Future HMI Tech are Customers Interested In? Interest is very high in natural voice recognition and capacitive touch screens which is a direct result of their CE device interaction Telematics and Infotainment Market Outlook: Willingness to Pay for Future HMI Technologies, US, 2012 A, B & C D&E Luxury car Non-luxury SUV/CUV Luxury SUV/CUV $175 $178 $210 $205 $195 $211 $156 $148 $148 $151 $104 $130 $64 $70 $59 $82 $53 $56 $64 $87 $68 $77 $53 $108 Touch screen with haptic feedback Proximity sensing Multi-touch gesture recognition Natural speech recognition Capacitive touch screen Base: All respondents (n=1,524). Q21. Please indicate your interest in the following future control options if available in your next vehicle by indicating the price that you would be willing to pay. Source: Frost & Sullivan analysis. 17

18 Changing Telematics Value Proposition 18

19 Key Areas of Focus Opportunity here is to capture the customer spending post the 3 years bumper to bumper warranty at OEM dealerships. This needs a longer term valuable relationship and rich data Source: NADA 2011 A slight decrease in warranty costs and increase in long term parts and sales adds billions to the OEM balance sheet in terms of margins 19

20 VRM is Essential to Capture that Long Term Opportunity A multi-pronged strategy which OEMs are addressing in small steps today. Key step though is bringing high bandwidth communication and longer so called free access periods Over the Air Updates Predictive Maintenance & Diagnostics Dynamic Service Scheduling/Reminder System Increased Customer Satisfaction Remote software management Advanced understanding of faults & issues In-vehicle service scheduling Advanced recall notification Already in motion from several OEMs Warranty costs reduction and key PD data Several OEMs moving fast in this space Support customers over lifecycle Key is doing this over the vehicle lifecycle meaning longer exposure time needed with the customer 20

21 What's the Ecosystem Like? Key technology enablers with capabilities to do remote software management over the cloud and innovations like in-vehicle service scheduling will be the key in this space Technology Enablers Over the Air Updates Management Service Scheduling Companies Big Data Analytics Capabilities Vehicle Manufacturers Dealers Customers 21

22 Which OEMs are Leading the Way Hyundai and Kia are defining the ideal use case strategies with Kia taking the extra step in having a smartphone based eservices app that can be upgraded easily Criteria Free Trial Period Safety 6-12 Months SOS. Roadside 1 Year 3 Years 3 Years 10 Years Lifetime 3-6 Months SOS. Roadside SOS SOS. Roadside SOS. Roadside SOS SOS. Roadside Security Yes Yes No Yes Yes No Yes Vehicle Health Reports Preset or Detected Maintenance Alerts Auto Diagnostic Fault Detection Auto Recall Notifier In-Vehicle Service Scheduling Yes No Yes Yes No Yes No Yes No No Yes No Yes No Yes No No Yes No Yes No No No No Yes No No No No No No Yes No No No Emb/Tethered Emb Emb Tethered Emb Emb Tethered Emb 22

23 Hyundai Taking a Giant Leap A large portion of the Hyundai strategy rests on the features enabled by the Bluelink connected platform that captures the most essential diagnostics and performance data Best in Class Powertrain Warranty 10 year/100 k Miles Bluelink Connected Car Services 3 years free for equipped vehicles Roadside Assistance 5 years unlimited Free Service Period 3 year multipoint free inspection 23

24 Kia UVO eservices eservices is a breakthrough approach by Kia which has functionalities on par with the Hyundai solution but is more long term sustainable because of the Smartphone approach Kia Program Availability Highlights UVO first gen+ eservices Suite Most MY2014 models Revenue Model Complete UVO solution/hardware Long term warranty costs savings/incremental service and dealer involvement Point of Sale App Price eservices Free App download from APP STORES Free Key Benefits - No additional costs for the app or communication, lowest cost implementation in the market - Most easy solution to upgrade/update over vehicle lifecycle because of the app nature Key Partners Similar Market Approaches Microsoft, Hardware Partners GM MyLink BYOD (only Navigation), SYNC (Only entertainment apps) Kia is only OEM with Diagnostics+VRM approach through Smartphone App Aftermarket has witnessed some implementations like this Delphi Verizon onboard unit + Smartphone App, Audiovox App 24

25 Key Conclusions 25

26 Key Conclusions and Opportunities Creating value out of connectivity needs to be looked at over a long term perspective this is an area where OEMs need support to develop state of the art services Biggest area OEM need Assistance is selling and packaging services Embedded Modem Vs. Tethering Another key area which needs to be evaluated by application area Bring the Smartphone as a key enabler of apps/vrm and other services UX is another key area which is creating fast user reaction, Critical for USP for OEMs Key Opportunities Support OEMs with solutions that shares performance and vehicle data with dealers User data- another area where OEMs need support to define what needs to be done Proactive diagnostics will be a key feature- enable OTA update features 26

27 Contact Information Praveen Chandrasekar Research Manager, Telematics & Infotainment (+1)

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