Automotive Megatrends Magazine Q2 2014

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MEGATRENDS MAGAZINE | Q2 2014

THECO NNECT EDCAR ISSUE +

#eMobility #PowertrainInnovation #FreightEfficiency #Manufacturing&Materials #Retail(R)evolution #Safety

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WELCOME TO MEGATRENDS Q2 2014

Welcome

Welcome to Automotive Megatrends Magazine - the only global publication dedicated to the business models, technologies and trends which are shaping the automotive industry of tomorrow.

Core focus areas

Connected Vehicles

Road Freight Efficiency

eMobility

Manufacturing & Materials

Powertrain Innovation

Retail (R)evolution

Safety

Readership

Every quarter, Automotive Megatrends Magazine is sent to 20,000+ opted-in automotive industry stakeholders:

Suppliers

39%

OEMs

29%

Finance / Consultants

12%

Oil / Lubricants

Logistics

6%

4%

4%

Government

Academia

3%

Other

3%

The publication is downloaded in more than 150 countries worldwide:

27% 11%

9%

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Editor: Martin Kahl

Business Editor: Megan Lampinen

Manufacturing & Materials David Isaiah Electronics & Safety Rachel Boagey

Powertrain & Electrification Rachael Hogg

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IN THIS ISSUE

Contents

> Connected Vehicles

> ABOUT THIS ISSUE E AUTOMOTIV DS

N A|TQ2R20E MAGEAG 14 ZINE

THECO T N N E CR EDCA E ISSU

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8 - BMW’s highly automated car: the ultimate driving machine?

BMW, the champion of driving pleasure, is developing autonomous car technology to relieve the driver of that very task. Martin Kahl asks why

htEfficiency ation #Freig wertrainInnov on #Safety #eMobility #Po aterials #Retail(R)evoluti ing&M tur fac anu #M

Welcome to Automotive Megatrends Magazine – the Connected Car issue.

13 - A Bird’s-eye view of the future Chris Borroni-Bird talks to Megatrends about the future of mobility

Google's self-driving car, built in Detroit, was a wake-up call for the mainstream automotive industry. It's time to prepare for semi-autonomous cars, developed - if not built - by industry outsiders.

What are the implications of increasingly autonomous, increasingly connected cars?

This issue explores a wide range of connected car topics, from highly automated driving to cloud technology, via Ethernet, Big Data and voice recognition – all of which help to shape the connected future envisioned by Chris Borroni-Bird in our exclusive interview.

Automotive Megatrends Magazine is about more than connected cars, however, and our tour of the megatrends shaping the automotive industry of the future takes in eMobility, Powertrain Innovation, Freight Efficiency, Manufacturing & Materials, the Retail (R)evolution and Safety.

Enjoy the magazine and join the debate:

31 Big Data - big opportunity or big problem

46 Connected cars in a connected era

17 - Autonomous cars? We’re nearly there...

Self-driving cars are no longer the stuff of science fiction, writes Karthikeyan Natarajan, Senior VP & Global Head of Integrated Engineering Solutions at Tech Mahindra

20 - Driving in the Cloud

Megatrends talks to CSC’s Paul Scott about the role of the cloud in the development of the connected car

25 - New functionalities, new risks: it’s time to secure the connected car

Infineon’s Shawn Slusser tells Rachel Boagey about the urgent need to address the security of increasingly connected cars

36 - Ethernet: fast track to the connected car

Ethernet cuts cabling cost and weight, increasing bandwidth and data transfer speeds. Rachel Boagey considers the role of Ethernet in the development of connected and autonomous cars Martin Kahl, Editor 4 | Megatrends

39 - Different needs, same speeds: India's just as connected as the West

When it comes to the evolution of connectivity, India has what it takes to keep apace with developed markets, says Sudip Singh, Global head of Engineering Services at Infosys automotivemegatrends.com

IN THIS ISSUE

> eMobility

of the future will be driven by software, 22 Cars says Electric Cloud

56 - EV retail - what’s needed for success?

Elon Musk's direct sales approach for Tesla has raised numerous questions for the mainstream OEMs, especially those selling EVs. By Megan Lampinen

48 - Virtual power plants provide a vital boost to EV sales

EV sales are hampered by a lack of sufficient infrastructure; the roll-out of infrastructure is hampered by high costs. A boost to both could come from virtual power plants, writes Machina Research’s Emil Berthelsen

51 - “Infrastructure, infrastructure, infrastructure” - the main barrier for FCVs

connected future, you’ll need to be agile, 28 InsaystheLixar

With Hyundai's fuel cell car now available commercially in the US as well as Europe, Rachael Hogg asks key industry players whether they expect FCVs to go mainstream any time soon

54 - How wireless charging could increase EV sales

Qualcomm’s Anthony Thomson tells Megatrends why he believes wireless charging will help boost the EV market

> Powertrain Innovation vehicle complexity requires secure 34 Increasing software solutions

58 - Will changes in F1 reach cars on Highway 1?

40

Getting louder – the rise of the voice in automotive HMI

Rudolf Hart asks whether motor sport can ever be truly relevant to passenger vehicles

61 - Indian transmission manufacturers face control system challenges

Mike Savage, Chief Engineer at Drive System Design, works closely with a number of Indian companies and reflects on the challenges they face acquiring new skills to meet market demand for increasingly sophisticated products

63 - Want to improve truck mileage and cut emissions? Just add water!

Fierce Fuel Systems proposes mixing diesel with water to improve truck fuel consumption by 20%, and reduce emissions by the same amount. Martin Kahl investigates

66 - Life beyond Euro VI

Rachael Hogg discusses life after Euro VI with Federal-Mogul’s Gian Maria Olivetti

44

Built-in versus brought-in: the big telematics debate

automotivemegatrends.com

69 - Eaton’s supercharger rollout gathers pace

Eaton’s Jeff Schick talks to Megatrends about how superchargers can help meet performance criteria whilst still enabling OEMs to achieve tightening fuel economy targets Megatrends | 5

IN THIS ISSUE

> Freight Efficiency

80 UPS shares its recipe for natural gas success 76 - North American HD buyers warm to 13-litre drivelines Truck buyers are increasingly considering 13L engines instead of 15L options. By Oliver Dixon

72 - North American fleets wage war on carbon

NACFE’s Mike Roeth outlines the most promising opportunities for increasing fleet efficiency - and doing so profitably

82 - Truck industry calls for global emissions harmonisation

CO2 and greenhouse gas are global problems requiring global solutions. The truck industry wants harmonisation - Daimler’s Wolfgang Bernhard calls it “an historic opportunity that we cannot afford to miss” - but regulators appear more cautious. By Oliver Dixon

84 It’s GST time, say India’s business leaders

> Manufacturing & Materials

86 - Steel to play a key role in meeting 2025 mpg targets David Isaiah talks to Dr. Blake Zuidema, Director of Automotive Product Applications at ArcelorMittal

90 - Is Canada’s automotive manufacturing going down under?

Canada must take urgent measures to prevent its vehicle manufacturing industry suffering a similar fate to Australia’s, warns Manmeet Malhi

93 - All change for OEM manufacturing strategies in Argentina and Brazil?

CARCON Automotive’s Julian Semple considers likely changes in import and export agreements between Argentina and Brazil, and why South America’s two largest new vehicle markets need each other

96 - Landfill gas and the smell of green energy

Future generations will despair at how long it's taken to use rubbish as an energy source

100 - Lightweighting drives materials innovation, inside and out

Materials suppliers play a key role in automotive product innovation, from unseen under-the-hood applications to Class A surfacing.

Megatrends talks to DSM about lighting and lightweighting 6 | Megatrends

takes early advantage of Nigeria’s new 98 Nissan auto policy automotivemegatrends.com

IN THIS ISSUE

> Retail (R)evolution

106 Ford enjoys life in the Quick Lane

102 - Retail challenges demand more integrated approach, and soon

marketing is the new normal for car 108 Digital manufacturers

The car retail industry needs to get ahead of the game, or risk getting left behind, as McKinsey’s Hans-Werner Kaas explains to Megatrends

112 - Forget 2014 – India’s OEMs focus on the long term

India’s auto industry sees 2014 as a year to forget, but the market has serious long-term potential

115 - Car brands must harness the online experience to drive forecourt sales

eBay Advertising’s Phuong Nguyen looks at how car brands can capitalise on the increasingly blurred lines between on- and offline channels to boost sales across the board

117 Truck aftersales: Roadmap to excellence

> Safety

126 - Expect a busy year for NHTSA rulemaking and enforcement 2014 is set to bring strict enforcement of distraction, crash avoidance and recall policy

121 - Autonomous cars, driven by safety

Markus Pfefferer, of Ducker India, looks at how the latest developments in car safety technology are bringing the autonomous car closer to reality

128 - Crunch time for fleet market, warns Global NCAP

‘Five star’ safety will determine winners and losers in global fleet market, writes Global NCAP’s Secretary General, David Ward

129 - European Parliament delays eCall…again

eCall 2015 has become eCall 2017

automotivemegatrends.com

technology challenges 124 Communications safety regulators Megatrends | 7

CONNECTED VEHICLES

BMW’s highly automated car: the ultimate driving machine?

BMW, the champion of driving pleasure, is developing autonomous car technology to relieve the driver of that very task. Martin Kahl asks why

A

s the safety ratings of organisations like Euro NCAP and the US Insurance Institute for Highway Safety (IIHS) become harder to achieve, the role of electronics and advanced driver assistance systems (ADAS) will become increasingly important. One of the outcomes of this will be to take the industry ever closer to semi-autonomous

and fully autonomous cars. Indeed, safety suppliers like TRW see semi-autonomous and ultimately fully autonomous driving as the logical outcome of safety technology developments.

Google unveiled its self-driving car prototypes in May 2014; Volvo said in June it

is preparing to test its autonomous car prototypes in Gothenburg; and at the 2013 Frankfurt Motor Show, Daimler’s Chief Executive, Dieter Zetsche, was driven on stage at his press conference by the Mercedes-Benz S 500 Intelligent Drive, the same self-driving S-Class that famously followed the route taken by Bertha Benz in 1888 when she made the first ever long-distance car journey.

Even BMW, for so long the champion of Freude am Fahren (“the joy of driving”), is developing its own autonomous car technology to relieve the driver of that very task.

Proponents of autonomous cars usually underline their usefulness in allowing drivers to relinquish control of the vehicle to technology designed to work in tedious, repetitive situations like slow-moving traffic jams.

BMW is taking a different approach to reach the same ultimate goal by developing the technology to work at motorway or expressway speeds. “In our 8 | Megatrends

automotivemegatrends.com

CONNECTED VEHICLES opinion, highly automated driving involves the driver being able to press a button when the car is travelling at 130kph motorway speed, and for the car to take over the driving task,” explains BMW’s Dr Werner Huber, Project Manager Driver, Assistance and Environmental Perception at BMW Group Research and Technology.“On the one hand, this involves high complexity due to the vehicle’s speed. On the other hand, there’s reduced complexity due to the type of traffic - there are generally good road markings and road signs, there is nothing coming in the opposite direction, and there is nothing crossing in front of the car.”

Drivers who are used to regular slowmoving, bumper-to-bumper city traffic might consider travelling at speeds of 130kph (81mph) to be enjoyable, rather than tedious. For Huber,“The fun of driving is on the weekend on a rural road, in the

mountains. Standing in a traffic jam or driving a few hundred kilometres along a boring highway is not fun. You can use the time for other things. And a long boring trip is not a safe trip.You get tired, you get inattentive.”

Here, BMW’s autonomous car technology can take over what Huber refers to as the relatively simple job of driving - keeping in lane, and not colliding.

Driver taking back control?

Much of the discussion about the role of the “driver” in an autonomous car has centred on whether that driver is able to instantly or even quickly take back control of the vehicle if required. However, even after a few minutes of autonomous drive travel, a driver may be completely unaware of their surroundings. “We cannot rely on the driver

The new era of ConnectedDrive: making mobility smarter

“Traditionally, ConnectedDrive has been related to infotainment, safety and comfort services,” says Simon Euringer, head of ConnectedDrive engineering for BMW, RollRoyce and Mini. “For 15 years, we’ve been equipping cars with SIM cards, connected to our back-end and our call centre. Now we're taking ConnectedDrive to the next level, enabling mobility services.We’ll take you from A to B. One leg of this trip might be in the car, another on public transportation, another on rental bike, for example. Traditionally, navigation has begun in the car and ended in the car. Now navigation starts on your smartphone and it will take you to your car. While you're in the car it will be on-board navigation; it help you find parking, and then switch you to public transportation.

“ConnectedDrive is an enabler for mobility services. Ultimately, ConnectedDrive brings your digital lifestyle into the vehicle. With this holistic, 360 degree approach, it offers a set of services that makes your mobility smarter. It takes your mobility out of an era where it is just car oriented.”

And there’s a considerable overlap between ConnectedDrive and BMW’s highly automated driving programme, with BMW looking to increase the services it can offer a ‘driver’ of a car in highly automated drive mode. Hit the highway, hit the highly automated drive button, and sit back to make full use of ConnectedDrive.The highly automated drive programme and BMW’s ConnectedDrive go hand in hand, says Euringer, “freeing up time that can be used more productively.”

The new era of ConnectedDrive is here; but beyond what BMW is offering now, what is being developed for an automated car? “We’re doing everything that is technically possible.

It's not just about the driving, but also about how drivers use their new-found free time.

We've put a lot of effort into that, to demonstrate our technical abilities and how many situations we can already handle with autonomous driving.

Euringer concedes that there is still considerable work to be done to be able to bring the driver safely back into the loop from a car in highly automated drive mode, but adds that the legal situation presents a greater challenge. “Ultimately, you’re handing over the driving task to an algorithm. If the car is about to hit an obstacle, whether it’s a person or another car, and the driver is not in the loop, then ultimately an algorithm has to take an ethical decision: ‘Who am I going to hit?’ And for this we need a legal background.

What happens then, and who is liable? To date, we have the Vienna Convention, which says the driver is liable in all situations. But what if you hand over the task to an algorithm? What then?”

automotivemegatrends.com

Megatrends | 9

CONNECTED VEHICLES in a critical situation; we must rely on a very good car,” says Huber. For this reason, BMW’s vision of highly automated driving involves taking the driver out of the driving loop. “Give the driver the chance to do other things. Then it's a real benefit. It's not a benefit to sit behind the steering wheel and just observe what the car is doing. And if the car does 99% of the job very well and in 1% it fails, and as a driver you’re expected to intervene, well, that's not fair.”

What drivers do with their time whilst being driven autonomously must also be carefully considered. Someone eating or reading a large newspaper, for example, has little opportunity to quickly take over the control of the vehicle.

Achieving highly automated driving is therefore not only a technical issue, says Huber – it’s also about identifying what people can do with their time.

BMW has shown that its highly automated cars are capable of overtaking buses, slalom driving, and even drifting. However, this was to illustrate technical capability, and to illustrate how the vehicle can respond in critical situations. “In reality, highly automated driving is not about drifting,” grins Huber.

“Normally the car will be driving at highway speed, the driver will be in position, and we have to offer them some form of entertainment, or change the interior displays so that he can work in the car. But you have to also offer the ability to quickly regain control of the driving task. That means the controls and steering wheel must be there.

The displays must function in a way that they can be used during normal driving, but they shouldn't disturb the driver when the car is in self-drive mode. Yet the driver should be able to quickly return to full driving mode.”

Much of the technology is already in place

Just as Daimler highlighted that its self-driving Mercedes-Benz S-Class used essentially existing technology, so too is Huber keen to emphasise that BMW’s highly automated

10 | Megatrends

vehicle technology is a logical extension of existing technology. “We have automatic gear shift; we have automatic throttle, we have electric power steering and we can talk to each brake,” says Huber. “So the basic technology is already available. We're also able to drive into a garage by controlling the car remotely with a key. We already have everything onboard every BMW.”

There is, however, a key difference between BMW’s normal cars and the self-driving prototypes: a high-precision differential GPS (DGPS). “GPS is precise to between 1 and 5 metres, depending on the satellite constellation. In this car, if we want to drive say, through a path of cones, it needs to be millimetre accurate,” explains Huber. “That's why we implemented the DGPS. In a later highly automated car, we will have a very precise map to localise the car. That means that unlike driver assistance systems, we need to install additional and more precise technology to steer the car. But other than the environmental sensors, we don't need too much more for an autonomous car.”

To a layman, then, it appears to be ‘simply’ a case of making the systems talk to each other, but Huber adds a strong sense of reality to such thoughts: “We don't rely on that.We have a back-end connection for carto-X, where the X is called the back-end centre.Through crowd sourcing, cars help to improve the centre’s understanding of what's going on outside. And the centre is necessary to supply the car with a high definition digital map, which we cannot buy in. For the motorways we are driving at present, we have a specific HD map, but we would need it for the whole network.”

And that needs to also be a highly precise topographic map. Huber says BMW has the algorithms to develop such a map in-house, and in the future, it will be combined with data from other vehicles to constantly improve the map. “This is why we need this connection to a back-end, to improve the quality of the environmental model, and amend the situational interpretation of what is going on. If a car further up the traffic queue brakes hard, then we don't have to

wait until the traffic pulse moves down the line of vehicles to our car. We know it electronically – a hard brake and everything can stop at the same time.”

Not before 2020

So the big question is: when will this become a reality? “Not before 2020,” says Huber, echoing timescales suggested by other companies that have committed to launching self-driving cars, including Nissan. Aside from the technological development that is still needed, the legal framework crucially needs to be established.

2020 seems close, but in consumer electronic terms, that's a long way off. “Yes, but in automotive terms, autonomous driving means completely changing the architecture of a car,” says Huber.“We need more redundancy.A data network in a car is designed for the requirements it has to fulfil, and there is no requirement for redundancy. If anything fails, then it fails.We just have to ensure that the car is still safe. In an autonomous mode you have the same requirement, but there is no driver to intervene if the steering or brakes fail. If such things happen in an autonomous car, it must be able to self-diagnose and it must be able to survive ten or 15 seconds until it's safe. So we have to find approaches for redundancy. And we are working on those concepts. The data networks of cars will change in the future, that is certain, but I'm confident that we can handle it. It's a question of cost too. But these are problems we can solve.”

Google has opted for a self-driving car that operates at low speeds in urban environments. Huber suggests that BMW sees inner city applications as being further down the line. For now, BMW’s focus is on highly automated motorway and expressway driving.

“We know the sensors we need for the motorway scenario. Highly automated inner city driving is still far away. At BMW we are talking about the highly automated motorway scenario, perhaps travelling like that for a few hundred kilometres. That's how we see the first step in handing control over to the car.”

Freude am Fahren? It might be time to consider reworking that marketing slogan.

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CONNECTED VEHICLES

A Bird’s-eye view of the future Chris Borroni-Bird talks to Megatrends about the future of mobility. By Rachel Boagey

A

s the connected car develops, consumers will demand vehicles that are even safer, more comfortable and more environmentallyfriendly than today, and fully reflect the level of consumer electronics that people expect in other aspects of their lives.This is the vision of the future of mobility of advanced technology expert, Chris Borroni-Bird, who believes consumer desires for the ‘ideal connected car’ now need to be made reality.

Megatrends spoke to Borroni-Bird, Vice President of Strategic Development at Qualcomm, about his vision of the future of mobility, and the steps that need to be taken by the automotive industry to produce that ‘ideal connected car’.

Cars that can see around corners

Borroni-Bird joined Qualcomm from General Motors in 2012, the latest step in a career spent developing technology that helps vehicles communicate with each other and with their surroundings, with the ultimate aim of eliminating collisions, reducing vehicle weight and improving efficiency.

Qualcomm is a semiconductor company, perhaps best known for its work with smartphones and tablet computers, but it has recently made headway into the automotive industry, increasingly the direction for many traditionally non-automotive suppliers such as Apple and Intel. Qualcomm is now producing cellular chips and technology for cars and automotive-specific technologies, including wireless charging and wireless vehicle-to-vehicle (V2V) communication. automotivemegatrends.com

Megatrends | 13

CONNECTED VEHICLES Future mobility will be developed around electric vehicles (EVs) that talk to each other and use only wireless technology, believes Borroni-Bird.“Qualcomm is working towards addressing consumer and societal trends with wireless connectivity solutions, along with mobile processing technologies and, of course, wireless charging.”

These increasing consumer and societal demands, says Borroni-Bird, will require vehicles to be ever more locally networked – that is, “have the ability to communicate with each other at near distance for collision avoidance purposes.”

When combined with the increasingly widespread number of sensors for collision avoidance, Qualcomm’s technology will be able to improve this performance, says Borroni-Bird. Cars will be able to perform functions that drivers cannot, such as seeing around corners, or quickly and safely adapting to bad weather conditions.

In late 2013, Qualcomm, alongside Honda, developed a system to prevent vehicle-topedestrian collisions, enabling communication between the two. The system involved a pedestrian carrying a smartphone equipped with Qualcomm’s DSRC modules, and an Acura TL, which was also equipped with the device. In this case, both the driver and the pedestrian were alerted that a collision was imminent, even though they were unable to see each other.

The interest in such technology is clear: were all cars and pedestrians equipped with similar sensors, incidences of cars colliding with pedestrians stepping out from behind parked cars, for example, might no longer involve serious or fatal injuries, or indeed any collision at all.

cloud,” he says. “This would alert nearby vehicles of the ice before they actually hit it.”

Despite the possibilities that vehicle connectivity can provide in terms of sharing information between vehicles, Borroni-Bird highlighted the potential for further connectivity between vehicles and infrastructure to make cities smarter in the future.“Connectivity both locally for collision avoidance as well as to the cloud for traffic and road information is going to be increasingly important in the future.”

Hungry cars

With increased connectivity, however, comes increased data, and vehicles will continue to generate and transmit data to the cloud.

“There is a lot of work needed on the network side to support these hungry cars which have insatiable appetites for data, and there’s going to be a need for more powerful processing on the vehicle,” says Borroni-Bird.

He continues, “This is one of the things to consider as we think about the next

generation of cellular networks. In city centres, where you have tremendous quantities of sensor data to generate, that’s where you may need the greatest capacity in terms of bandwidth.”

City transport – autonomous and efficient

According to Borroni-Bird, autonomous vehicles have the potential to ultimately change the business plan for shared mobility services, if the vehicles can ‘self-balance’ themselves at the end of each day and be brought back to the starting point ready for the beginning of the next day.“I think it would improve the finance on the business side of a shared mobility service,” he explains. “At the moment, car share companies have to send people out to drive the vehicles back at the end of the day to where they may be needed at the beginning of the next day.

They’re experimenting with new business models, such as incentives for people to take strides against the flow, so to speak, for a subsidised rate. If the vehicles could drive autonomously, that would be very attractive.”

An automotive world stored in the clouds

Many OEMs are introducing cellular connectivity into their vehicles to provide consumers with the in-car infotainment they require and desire, and these connections can also prove useful for providing further connectivity for the car, such as driver assistance technologies.

Congestion is a major issue, especially in many cities, having a negative impact on traffic times as well as energy usage. Borroni-Bird sees a role for vehicles linking to the cloud via cellular connection. “We see that it can help in terms of enabling more accurate and more frequent map updates,” he says, “as well as information about problems that are occurring down the road.”

This can range from traffic time predictions to warnings about weather conditions. “It’s not inconceivable that a car in the future encountering patches of ice in a certain location could send that information to the

14 | Megatrends

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CONNECTED VEHICLES Qualcomm® Snapdragon™ Processor Automotive Solutions - “Connected Infotainment”

And on the subject of shared mobility, EVs may also be a solution, “because just as these shared vehicles make sense in city centres, now that’s also where you need clean vehicles to tackle pollution concerns.”

Although people may still own a car for occasional long distance trips, Borroni-Bird believes a shared EV may be attractive for daily use during the week. “And if it can go and park itself because it’s autonomous, then it certainly would play into the need for wireless EV charging, because if the vehicle’s parking itself you don’t want someone to be responsible for plugging it in.” Look at Qualcomm’s offerings, and it’s clear that autonomous vehicles and wirelessly charged EVs form a central role in the company’s vision of the smart city of the future.

Indeed, Borroni-Bird’s long-term vision for shared vehicles includes semi-dynamic charging, something he believes would make sense in places like for taxi ranks and at intersections, where cars spend a significant periods of time.“Wireless charging should be something that people don’t have to think about, he explains. “It’s just part of the longterm vision, beyond benefits in the home and static charging in public parking spaces.”

From high-end to mainstream

Technology currently being introduced in high-end vehicles will be mainstream technology in ten years’ time, due in part to the declining cost of said technology, as well as rising demand. This is not a new phenomenon, but the trickle-down of technology is increasing. “You’ll see more vehicles that have mild hybridisation and more vehicles that have capability of collisionavoidance technologies,” he says,“like forward collision warning, lane detection and so forth.” automotivemegatrends.com

The changing face of automotive design

Through implementing technologies such as Ethernet into their cars, OEMs have been significantly reducing not only connectivity costs but also the very weight of cabling in their vehicles. However, most vehicles currently carry over 3kg of mass in terms of passive safety content, such as energy absorbing foam and airbags, seatbelts and the crash structure itself.

By changing the face of technology, and enabling vehicle autonomy, Borroni-Bird believes there is potential for a complete redesign of the car as we know it. “It’ll need a structure, obviously, for ride and handling purposes, but you wouldn’t need as significant a mass of structure if you don’t have to worry about crashing,” he says. “Today, you have a choice between steel, aluminium and carbon fibre, but if you didn’t have to worry about crashes, then it may open up the space to new materials that might be less expensive, or lighter, or more recyclable, or offer some other benefit. And that in turn opens up opportunities for changing the shape of the vehicle. You might be able to enter through the front of the vehicle instead of the side, as you would no longer be worried about frontal impact.”

Despite there being much that could be done to change the design of the vehicle, BorroniBird concedes that it is a long way from happening. Nonetheless, he maintains that it could occur sooner in a segregated community like a campus. “In terms of the mixed environment that we assume is the dominant model, it will probably be decades before you get to a point where the penetration of autonomous vehicles is such that you can begin to think about that seriously.”

The automotive world in 2025

So, how does Borroni-Bird see the automotive world in 2025? He grins. “That’s only a couple of models away from where we are now, given the cycle times, and if you look back ten years at what cars were like in 2004 versus today, you wouldn’t find a tremendous difference.”

Nonetheless, in the next ten years, BorroniBird sees efficiency being one of the main game-changers. “You may see a greater fraction of vehicles having some kind of a mild hybrid, maybe 42V or 48V systems to promote start-stop capability.You’ll see more plug-in hybrids and more pure battery electric vehicles, but unless there’s a breakthrough in battery technology or a real change in the price of fuel, or some extreme regulatory action that we don’t know about just yet, I think the vehicles will in many senses be not that different from today.

They’ll be capable of a certain level of autonomous driving, such as the limited speed, highway assist operations that are likely to be introduced.”

The road to the future

As the industry moves into an exciting new phase of product development, designing the car of tomorrow to meet new technological innovations is currently one of the main challenges facing OEMs and suppliers.

Despite constant innovation inside the vehicle, the slow automotive development cycle is still a drawback for consumer desires.

Regardless of the changes that will occur inside and outside of the car within the next ten years, it is clear that considerable work still needs to be done before Borroni-Bird’s connected vehicle vision becomes reality.

Megatrends | 15

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CONNECTED VEHICLES

Autonomous cars?

We’re nearly there...

Self-driving cars are no longer the stuff of science fiction, writes Karthikeyan Natarajan, Senior VP & Global Head of Integrated Engineering Solutions at Tech Mahindra

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ust a few years ago, the very concept of a self-driving car was the stuff of science fiction.

However, in the past year alone, technologists have made huge strides in developing autonomous vehicles, with varying levels of operational autonomy now being tested. Yet, much of the underlying technology required to build truly autonomous vehicles, such as cameras, sensors, radars and imaging systems is already available.We already let aircraft and ships make decisions and pilot themselves.

What’s the red light holding up cars?

Clearly, more autonomous cars that build on a few fundamental technologies are a feature of the near future. Google has already logged

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more than 700,000 accident-free miles in its self-driving cars on the streets of Mountain View, California, without the assistance of a human driver. General Motors, Toyota, Mercedes-Benz, Audi, BMW and Volvo are all testing their own full or partially autonomous systems. Volvo has demonstrated its ‘autonomous valet parking cars’ in Europe, and Nissan has said it intends to launch autonomous cars by 2020.

The move towards the development of autonomous vehicles, however slow, is inevitable and is likely to progress with incremental developments such as advanced driver assistance systems, park assist systems, integrated vehicle health monitoring and autonomous systems.

The human and economic case

The human and economic case for greater autonomy is compelling. Moving from point ‘A’ to point ‘B’ involves multi-factor decision making about mode of transport, route, time constraints, safety, comfort, weather, luxury and convenience. In many cases, rules or machine learning-based decisions are likely to be objectively better than those made by a human. One of the central arguments in favour of more autonomous modes of transport is the safety value they offer. As is well documented, some 90% of road accidents stem from human error. At a trivial level, we are already safer and better off if we let a modern vehicle park itself.

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More seriously, making vehicles autonomous globally could save US$300-400bn of societal and economic impact, taking into account loss of human life, social consequences and insurance claims.There is much to be gained by removing the human element. Ultimately, there is no reason that technology cannot make roads driver-free.

As Google’s driverless car tests have proven, there's a serious case that the selfdriving car, with proper intelligent infrastructure, could be safer than the average driver.

Clearly, vehicles equipped with intelligent technologies that enable more efficient decisions and driving styles can provide improved fuel efficiency. There is also the potential to improve journey times and traffic flow, freeing up owners’ time. Technological cars also open the door to solving one of the great conundrums of the industry. A connection to the OEM can continue to provide updates, patches and improvements, and deliver an ongoing relationship with the consumer. The door is open to OEMs to do what has eluded them for a century: to keep

adding value after the car has left the dealer forecourt.

The ecosystem: physical, legal and economic infrastructure

Apart from the primary technology required to build road-safe autonomous vehicles, huge regulatory and infrastructure challenges remain. Autonomous vehicles make sense and will offer a viable alternative to manuallycontrolled cars only if the infrastructure is in place to support them.

Just as electric vehicles require an ecosystem of charging points that can quickly charge a vehicle without bringing down the electricity grid, so too will autonomous vehicles require significant investment in new infrastructure. Intelligent traffic lights and smart lanes with sensors to assist automated parking are just a start.

Moreover, specific safety regulations and traffic rules within individual countries must be taken into account. Any autonomous vehicle system must be adaptable to any given regulatory regime.What happens when the cars cross national borders? Can we expect a self-driving car to drive on the left of the road onto a ferry at the UK port of Dover, and have it drive off on the right side of the road when it reaches Calais in France?

Clearly, cars must be programmed to tailor their intelligent drive systems to different geographies and cultures.

Then there are less tangible factors to consider. It has, for example, been argued 18 | Megatrends

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that autonomous vehicles, built with advanced sensing and tracking capabilities and constantly monitored, pose a threat to privacy. While this feature will improve vehicle performance, it creates new security concerns and risks commercial misuse. Whilst most of us are comfortable to receive targeted advertising from, say, a free satnav programme, will we feel differently if we’re targeted on the basis of data from our car?

Finally, there is the cultural challenge. Are consumers ready to change a fundamental part of everyday life? Can someone give up the pleasure of driving? This final hurdle could well be the most significant; but there will be new rewards, such as, for example, sitting in the driver’s seat without being discombobulated by rush hour traffic!

How will the industry change?

implement the artificial intelligence and machine learning that must underpin the next generation of cars.

The automotive industry has anticipated this change for a few decades, growing a partner ecosystem. It started with the inclusion and integration of electronics and artificial intelligence into cars. Next-generation cars include electronics in everything from braking systems, engine and powertrain, to body controls and infotainment, enabled with advanced driver assist systems (ADAS) integrating with multiple types of sensor inputs, radar and image fusion and analytics, not forgetting the electronics and software.

System architecture, integration and system testing would be more challenging than ever before. With autonomous vehicles, such requirements will only increase.

With the primary technologies already falling into place, the greatest hurdle is not technological but cultural and commercial.

Bluntly, we need a more agile commercial ecosystem to create and adopt technology faster than ever before. We need to define boundaries for our personal data. The value chain - encompassing developers, content and app providers, telcos, insurers and OEMs - still has to catch up with the implications of more autonomous vehicles.

Culturally and ergonomically, driverless cars need not resemble the cars of today. For instance, in a completely driverless car or digital cockpit, is there even a need for a steering wheel? And if human intervention is required, is there a better way to operate the controls than a steering wheel? We can also safely assume that the role of ‘intelligence’ within such cars must be significantly greater than it is today.

These changes are reflected in an already changing business ecosystem. OEMs are great at building desirable, functional machines, but increasingly recognise that partners are needed to develop, test and

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Driving in the Cloud Megatrends talks to CSC’s Paul Scott about the role of the cloud in the development of the connected car. By Martin Kahl

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SC has conducted a considerable level of research into the use of the cloud in the automotive industry. The consulting and outsourcing solutions provider recently came up with a research project entitled “Driving in the Cloud”. Megatrends asked Paul Scott, Industry Strategist, Global Vertical Manufacturing at CSC, to explain the thinking behind this project.

“Driving in the Cloud is our vision of how the automotive industry will work in the future,” says Scott, “and it focuses on the lifecycle of the car, essentially from the cradle to the grave. There are basically two parts to this picture: the traditional part, namely engineering and manufacturing; and the ‘new world’ around aftermarket and service which is being driven by key technology trends: cloud technology, Big Data and social media.”

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Fundamentally, there are two key factors that will lead to a successful business strategy shaped around the connected car, says Scott: how to use the data generated by connected cars, and how to store that data.

“There’s already a huge amount of data. The question is, what data to extract, what data to analyse? And then what should be done with the data afterwards, and how should it be used within an organisation? An OEM organisation includes sales, marketing, customer service and dealers, so it has to channel this information to the right people to use the information in the right way.”

Interestingly, Scott believes that concerns about data security and privacy have changed.

“I think we've gone past that thought process. I think organisations have realised that the huge volumes of data need to be

stored in some form of cloud-based architecture to allow easy access to it.

Some of it is going to be made available to insurance companies or other third parties who want to sell services. So I see the cloud playing a big role going forwards.”

The OEMs are losing the race

The connected car is increasingly seen as offering opportunities to non-traditional automotive suppliers, and in terms of what happens to that data, Scott believes the car companies are being outplayed by insurance companies, for example. “They already have their dongles and black boxes in some cars, and are using that information. So why doesn't an OEM capture and sell the information to the insurance companies? This goes back to

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CONNECTED VEHICLES one of my earlier points - how can an organisation take the data created by the combination of consumer and vehicle and use it to generate revenue?”

One oft-cited area is predictive maintenance, which can be used to get people to come into an authorised repair shop to get their car repaired. Scott agrees. “Under warranty, over 80% of people go into authorised repair shops; once a car is out of warranty, this drops down to below 25%.You can argue about the percentages but there's a huge drop and therefore a huge potential for OEMS to capture additional service revenue and spare parts revenue.”

This would suggest that there's a potential for the OEMs to capture that service, but there's also an opportunity for smaller players, if they were able to buy that data, to join the race.

“Yes. Who owns the user interface? Who owns the data? The challenge for an OEM is how to get that data and how to utilise that data, how to turn it into information, and monetise it. This will take place within the OEM and across the overall ecosystem.”

Built-in or brought-in?

Delivering the desired connected vehicle experience is another area of debate, specifically around the question of broughtin or built-devices. “The OEMs are pursuing different routes and it will be interesting to see how the strategies unfold. If the OEMs are not careful, the car display will be reminiscent of a dumb terminal to gain access to infotainment and navigation information streamed from the cloud.” A dumb terminal in the car pairing with an occupant’s smartphone for infotainment and navigation would create a serious challenge for the OEM wanting to ensure some ownership of that experience. This suggestion leads Scott to repeat his comment that some OEMs “are losing that race”.

With third parties generating data and content, the OEMs are losing out. “An OEM stands to win if it's using data that it's generating itself,” explains Scott. “What data does the OEM have? It has data from its cars - how its cars are performing, how far a car is being driven, and when the next service is due. By understanding when the next service is due, and connecting that with where the consumer normally gets that car serviced, the OEM can prearrange a service appointment. What happens when the red light error message appearing in the dashboard can be diagnosed, and appropriate action suggested and organised by the OEM? Wouldn't it be nice if the customer service desk automatically made contact with the

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consumer with information about that red light error message just after it appears, or even better, based on predictive patterns, before the red light is even triggered?”

Turn customers into brand advocates

Some suppliers, including Arynga and Red Bend, and OEMs like Tesla, are already operating free, over-the-air software updates that can prevent such red light warnings occurring. “In other industries, particularly the aerospace industry, we're doing some work on Big Data analytics, involving figuring out what has caused an error,” says Scott.

“When an error takes place, you then analyse the events that took place prior to the error.

The more errors you get, the better you can understand the importance of the events.

“The next sophisticated step of predictive maintenance is to figure out what combination of events or factors are relevant,” he continues. “Once those start to occur in sequence, you can transmit a message to the driver with a suggested relevant preventative or emergency action.

This is important in terms of safety and in terms of the customer experience. Get the customer experience right and somebody will go from a customer to a loyal customer and from a loyal customer to being an advocate of the brand. And I think that's one way the data can be used in a much more sophisticated predictive way, saving money for the consumer and giving the consumer a safer driving experience.”

And this could prevent large OEMs from issuing multi-million unit recalls. “Of course.

If you know when errors are occurring, you can send an early warning back to the relevant engineering or risk department so they can assess what needs doing, and take appropriate action.”

Winners and losers

So, who does Scott think will be the winners, financially, from the connected car – OEMs, telecoms, suppliers, or some other party?

“Telecoms companies will definitely claim a victory, because of the volumes of communication that will take place. Once we get into car-to-car and car-to-infrastructure communications, the levels of communication will increase further still, and the potential for revenue generation is very high. The infrastructure providers will also claim a victory. But I think those who can orchestrate everything will be the real winners.”

And that might not necessarily be a traditional automotive industry player at all.

“It could well be another party entirely,” concludes Scott. “The infotainment race is not an OEM race any more. It’s a Silicon Valley race. Own the user interface and you are in pole position for the revenue streams!”

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Cars of the future will be driven by software, says Electric Cloud Rachael Hogg talks to Electric Cloud about managing the increasing complexity of automotive technology

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he number of lines of code in a single automotive electronic control unit (ECU) already often reaches into the tens of millions. However, as emissions and safety regulations tighten, the role played by electronics is set to see the use of software in automotive applications increase many times over. Add to this the rising demand for infotainment and consumer electronics capabilities in cars, and the scene is set for vehicles driven by software. This software needs to be written quickly, verified and constantly maintained; errors can have huge implications.

Developers are expected to work at increasing speeds, and subsequently have less time to spend on manual maintenance tasks, and it is here that companies providing software production management solutions can gain a competitive edge. Electric Cloud helps to get software to market at a faster rate, by assisting companies to automate, accelerate and analyse software build-test deployment processes. The US-based company works across a variety of industries, including automotive. Andreas Dharmawan,

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Senior Director of Solutions and Services at Electric Cloud spoke to Megatrends about the increasing complexity of cars, and the software delivery challenges presented by the automotive industry.

Electric Cloud focuses on many markets, but what is the automotive aspect of your company?

Marc Andreessen, Groupon and LinkedIn investor, said a few years ago that ‘software is eating the world’. The automotive industry is using software at a rapidly increasing rate and customers demand the same services in their cars as on their smartphones. If you look at the technology to reduce traffic congestion and increase fuel efficiency, cars now have software for this. Much of the automotive supply chain is hiring software engineers who are in a very competitive market.

OEMs can conduct considerable software development on the test side, but can’t work fast when the module they build goes into multiple models. For a supplier, the test metrics become even more complicated.

Many software modules need to be married into the hardware module, because software is an embedded system, so it’s not just running on Pentium or ARM chips. It goes into a different engine control unit.This could be for powertrain, transmission, ignition firing, or lighting. Even though the process of embedding software into hardware is semiautomated, it is not fully orchestrated. There are many manual tasks.We have also noticed that sometimes the team building the software is located in a different time zone to the team doing the testing, which leads to lost time.

What does Electric Cloud do for OEMs and suppliers?

Many of the manual processes need to be orchestrated. Electric Cloud can orchestrate and model an existing process. OEMs or suppliers don’t need to change the way they work. We help the automotive industry in two ways: one is orchestrating the build, test, and release process to eliminate time consuming and error prone manual tasks, and eliminating the delays of cross-timezone automotivemegatrends.com

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work.The second is pure acceleration - much embedded software is written in C/C++, and Electric Cloud accelerates the build time for C/C++.The top five embedded companies in the world are Electric Cloud customers because they do a large volume of C/C++ build, and we can reduce a build that previously took six hours, into 20 minutes, through massive parallelisation.

Why did Electric Cloud enter the automotive industry in the first place?

A customer called us who was trying to master agile development, but their time to market and quality was an issue.Two types of company approach us. One has an issue with the coordination of effort. They master the agile but the time to market and product quality is still low. We help with their build, test, and release. The other is a customer whose build time takes six hours and is unable to carry out agile development.

How important is the automotive industry within your company, and what role will it play in Electric Cloud's business strategy long term?

Automotive is a growth business - we would like to grow our company rapidly and see automotive as a sector where we can grow. We are promoting and evangelising continuous delivery. Many of automotivemegatrends.com

our existing customers are on that transformation. We want to always be the leader in the continuous delivery space and to move it to automotive.

One area of concern is reliability and the avoidance of software-related malfunctions. How can your system help car manufacturers overcome bugs?

Our product allows the development team to move faster between build and test.

Because we have the technology of massive parallelisation, a lot of the first permutations have complex build and test metrics. If you can iterate every day, you discover bugs almost every day. When you discover these bugs, the development team can fix it sooner.

In the past, the product would be released without adequate bug fixing and these bugs would be discovered by customers. Our customers can move the bug peak to earlier in the test cycle, so a developer can collaborate and reduce or eliminate all priority one and zero bugs, and confidently release the software.

The ability to display the progress of each team, and the status of each artefact as it goes through the pipeline of continuous delivery is also important. We can maintain a module through our artefact repository, and show the health of a particular module

as it goes through the product lifecycle. At the end, you can have a bill of materials in terms of software. This allows faster root cause analysis.

Finally, could you please comment on what you see as the key megatrends shaping the automotive industry of the future, and how you are accommodating these in your product development?

Mobility is changing because the population growth is accelerating. There is a trend of people moving into urban settings. The number of available roads in the world is not growing as fast as the number of cars. I do not see everyone adopting public transportation in a few years. It has values and strengths, but personal transportation is still highly desired. The migration is more towards smaller cars.

The technology that drives the car will change as well. Instead of focusing on combustion technology, the market will focus on electric or hybrid technologies. A lot of alternative technology goes into smaller cars, so I see more personal transportation devices. All of these things require software. This is not only going into the car, but into the infrastructure, because the vehicle needs to communicate with both the driver and the road.

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AURIX™ – Safety Joins Performance Automotive Multicore 32-bit Microcontroller Now you can get your automotive applications under control with just one microcontroller platform – using the AURIX™ 32-bit multicore microcontroller, you will be able to control powertrain and safety applications with one single platform.

Using AURIX™ will require less effort to achieve the ASIL-D standard than with a classical Lockstep architecture. Customers can now cut down their microcontroller safety development by 30%. On the same token, up to 100% performance surplus allows more functionality and sufficient resource buffer for future requirements, keeping the power consumption on single core microcontroller level. While protecting IP, IP, theft theft and fraud AURIX™ provides an already built-in Hardware Security Module.

With its special feature set AURIX™ is the perfect match for powertrain applications (including hybrid and electrical vehicles) as well as safety applications (such as steering, braking, airbag and advanced driver assistant systems). www.infineon.com/aurix

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New functionalities, new risks: it’s time to secure the connected car

Infineon’s Shawn Slusser tells Rachel Boagey about the urgent need to address the security of increasingly connected cars

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s far as the consumer is concerned, connected vehicles will significantly alter the driving experience. The blending of vehicle-to-vehicle (V2V) communications, cloud connectivity and consumer electronics technology will make driving safer, but behind the scenes, increased connectivity must be matched with increased data security. This is a significant challenge for the industry’s engineering and business practices.

Megatrends spoke to Shawn Slusser, Vice President, Automotive Business at Infineon Technologies Americas, about the challenge of ensuring safety and security, and how the rapidly developing connected car requires the industry to incorporate design for security into vehicle development.

The connected car will enable many features, such as apps, content from the cloud, and the ability to update the software in the car.

Autonomous driving features will utilise the ability to communicate with other vehicles and even roadside objects for safety. All of this connectivity introduces security risks, said Slusser. He also highlighted that Infineon, which supplies semiconductors for automotive electronics systems, has parallel expertise in the global market for smart card technology, the chips that provide security for payment cards, passports and other electronic ID, and other applications requiring protection of critical data. This perspective underlies advice on how the industry can protect against security threats as levels of connectivity increase.

functionalities often harbour new risks, so what we can learn from the past, and from other industries, can undoubtedly apply to the car industry,” said Slusser.

He noted the importance of distinguishing between two types of risk in the connected car. Safety risk refers to the danger of unintentional errors occurring in electronic systems.The industry is tackling this challenge through the well-developed concept of functional safety embodied in ISO 26262.

Security, meanwhile, involves protecting against intentional attacks on systems and software.

“These include tampering, theft, or data privacy, and are risky to the connected car.”

Slusser describes intentional attacks as “Dark Side” scenarios, referring to the Star Wars films. “We have a job to fight against the Dark Side,” he said. “These risks should be a wakeup call to the industry that we need to address automotive security immediately.”

While this may sound like Hollywood, university research teams (www.autosecure.org) have already documented successful attacks on car systems. In another incident reported earlier this year, two Spanish researchers described a device made for under US$20 that, after being wired in to the CAN bus of a car, would give an attacker the ability to remotely manipulate vital vehicle systems.

Slusser noted that all automotive stakeholders need to be involved in developing the security systems that protect against intentional attacks. He said, “To solve these problems takes more than just OEMs and Tier 1s; it’s really a whole ecosystem problem. This will involve everyone from suppliers like us to our customers, to the OEMs, to insurers and regulatory bodies. All of the different stakeholders will have a role to play.”

Battling the “Dark Side”

Widespread connectivity to the Internet changed the computer industry in many ways, not least of which was individual and organisational exposure to security risks.

Now the car is increasingly incorporating Internet capability, making it more vulnerable to outside threats. “New automotivemegatrends.com

To meet requirements for security in automotive electronic control units, Infineon integrated a programmable hardware security module (HSM) into the AURIX microcontroller family, using Infineon-developed hardware-based encryption technology

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“

We need ‘Jedi Master’ security architects and engineers with security expertise. To create a ‘trusted environment’, changes in manufacturing need to happen to secure connected devices

- Shawn Slusser, Vice President, Automotive Business, Infineon What’s next?

So what does this mean for the car industry?

“It means there are some new requirements,” said Slusser. “In order for the benefits of connectivity to be enabled in the car, the industry has to incorporate security into the design process at the start of vehicle development.”

Slusser described five major elements in electronic system security: secure memory to store password and certification information; cryptography capability; authentication to verify identity; an assured “root of trust;” and revocation capability that allows access to be denied. “These security

ISO 26262

ISO 26262 is intended to be applied to safetyrelated systems that include one or more electrical and/or electronic (E/E) systems and that are installed in series production passenger cars with a maximum gross vehicle mass up to 3 500 kg.

The ten parts of ISO 26262:

• Vocabulary • Management of functional safety • Concept phase • Product development at the system level • Product development at the hardware level • Product development at the software level • Production and operation • Supporting processes • Automotive Safety Integrity Level (ASIL)oriented and safety-oriented analysis • Guideline on ISO 26262

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elements will need to be included in future vehicle electrical architectures,” explained Slusser. “Specialised security hardware and software will be necessary.”

Infineon’s expertise with the security technologies to protect digital information in the car comes from the company’s long participation in the smart card industry.

“Smart card chips, which are really specialised microcontrollers dedicated to security functions, have been around since the 1980s and have been become very sophisticated and well-hardened against attacks,” explained Slusser. The next stage, he said, is to enable this type of security technology in automotive systems. “We have the essential elements of security technology figured out.

As an industry, we now need to adapt this technology to the car.”

This means that companies working on security, such as Infineon, need to figure out the level of security technology required for different automotive systems, and thus which ECUs in the car require targeted security features.“First you figure out what applications need security and to what level,” said Slusser.

“Then the specialised hardware and software to address those needs can be implemented.”

An important part of meeting security requirements is that developments must occur beyond the car. “You have to enable these security devices in the car and also in the ecosystem of automotive design,” he said.

“Security practices have to become a part of the development cycle and ultimately

embedded into the IT infrastructure of the industry in order to protect the secret keys associated with the hardware Root of Trust.”

OEMs therefore have to adopt a new development process to enable the components in their cars to be secure.

Slusser said, “The typical automotive development programme today doesn’t consider electronics security, but it is has to be heavily considered in the near future.”

Lagging behind

To achieve security in the connected car, Slusser sees a need for new roles and new expertise. Returning to the Star Wars theme, he suggested the industry could use, “someone like Yoda to fight the Dark Side.”

He continued, “We need ‘Jedi Master’ security architects and engineers with security expertise. To create a ‘trusted environment’, changes in manufacturing need to happen to secure connected devices.”

While the promise of the connected car marks a major change in personal transportation, its success relies in large part on how well the industry protects against the risks of the ‘Dark Side’ concluded Slusser.

Today the automotive industry has considerable work to do to develop the necessary expertise for implementing security technology. To catch up, it must develop a robust security ecosystem that can adapt and build on smart card technology to make security an integral part of future vehicle architectures. automotivemegatrends.com

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In the connected future, you’ll need to be agile, says Lixar Megan Lampinen talks to Lixar's Bill Syrros and Justin Moon about the company’s transition into the automotive space and the trends driving its business strategy

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anadian software company Lixar has been gradually making its way into the automotive segment over the past three to four years, working with such big names as Delphi, Verizon and QNX. It specialises in aftermarket connected car products, with experience in building car-to-cloud enterprise strength systems and mobile iOS and Android applications for automotive use. Within the automotive space it has worked on vehicle diagnostics, geo-fencing, geo-location, mileage tracking, Bluetooth Key Fob connectivity, fleet management and automotive data analytics, with an ever widening array of projects.

Megatrends asked Lixar’s Chief Executive, Bill Syrros and its Director of Innovation, Justin Moon, about the growth of the company’s automotive business and the key megatrends shaping its business strategy.

From a mobile angle

Lixar entered the automotive segment "through a mobile angle,” explained Syrros.

“As a company we've focussed our efforts on mobile connected transportation technology." An initial partnership with QNX Systems led to other automotive projects, covering visual displays, mobile applications, cloud-based systems and data analytics.

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"Our interests are highly innovative and highly specialised development and technologies," commented Syrros. "And being able to say those words and connect them to automotive is sometimes hard to believe, given the cycles in the world of automotive."

Entry to the automotive segment poses certain challenges for any new company, but particularly for software companies like Lixar. "Traditionally the automotive sector has been slow to move in terms of integrating new technology. The long cycles in which those technologies get integrated in the cars means that it is difficult to be successful for software companies like ours," said Syrros.

However, the industry is evolving at a dramatic rate, and Syrros noted "We slowly see that those traditional ways of thinking are starting to change."

Safety

As Lixar has discovered, the move into the automotive segment automatically brings safety to the forefront. "At the end of the day, whatever we do in automotive, the safety aspect is the number one issue that people should be concerned with," stated Syrros.

When it comes to connected cars, Lixar sees safety as the driving force. "When you hear the term 'connected car', many people see the advantages from an infotainment perspective, but Lixar is interested in developing technology that leads to a safer environment. As more technology is packed into vehicles, things like distraction really come into focus," said Syrros.

Moon believes design is key to balancing the demand for new technology without compromising on safety. "It comes down to design and fundamentally understanding how to leverage that information," he said.

"You'll see governing bodies push standards with regard to distraction which could potentially hinder innovation and technology moving forward. The idea of leveraging technology in a proper way, disseminating information in the proper way, will allow us further progression from a technological standpoint. At the same time, understanding how to interact with the data, we can further reduce distraction."

The human factor

Moon believes the key in moving forward will involve looking at how this data is leveraged, and specifically how it is leveraged in terms of the driver. "One of the largest trends we're

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CONNECTED VEHICLES going to start seeing moving forward is bringing the driver back into the conversation and the human factor," he said. This involves understanding how to leverage the data and do something relevant with it. "Understanding when I need to deliver specific pieces of data, how I deliver it, which screen it goes to, how I interact with it... Understanding how to leverage that data not just from a Big Data environment, but how I as a human will interact with it," Moon explained.

The movement towards this focus, Moon believes, is an inevitable one: "You're going to see more and more that this will become an 'in your face' and upfront trend moving forward. It has to. Just look at the vast amount of data that exists today in the current connected vehicles."

Just the beginning

Syrros believes the automotive industry is on the cusp of several dominant trends, which will all contribute to a dramatically changed interpretation of the car in the future: "Most of the presentations I've gone to lately address what the car of the future will look like in 2025. We're in 2014 and we're just starting to push out and do effective and measurable things today, but it's just the beginning."

In just six to eight years, Syrros expects to see a significant difference in the design and appearance of mass market cars, with most

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of that difference stemming from the energy efficiency boom and connected vehicle booms. Safety, which he described as "that slow moving juggernaut", is also at work behind the scenes. "By 2020, the level of electronics in vehicles is going to be ten times greater than what you see today, if not a hundred times. It's going to be so much more significant in the future."

The key for Lixar now is to place itself in the best position for moving forward.

"We're pushing the envelope from aftermarket connectivity to OEM connectivity," explained Moon. "We're very much interested in how to create value that overarches that. Right now we are one of the largest aftermarket connectivity platforms. How do you transition the value from an aftermarket connectivity base? How do you maintain that consumer moving from an aftermarket device to a built-in device? We're starting to look at what that strategy looks like."

New talents are required," Moon added.

"Agile companies are going to pave the way in that respect." With its muscles warmed up now through projects with QNX, Delphi and Verizon, Lixar is positioning itself for trailblazing work ahead.

Bill Syrros, Chief Executive

Overall, Moon believes that most OEMs will try to migrate to some form of built-in solution. For those in the aftermarket solution space, the question becomes how to enhance value and increase the consumer base while transitioning technology. "There are all kinds of players trying to figure out that," said Moon.

"We have to recognise that we're talking about a new paradigm in technology here.

Justin Moon, Director of Innovation

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wh when en cars c ars talk ta lk Cars are rolling gold mines of information, gathering data about the driver, the driving environment and of course —the car itself—as well as any devices connected to it. Automotive companies can use this data to provide a safer driving experience, improve customer service and enhance vehicle quality.

And the benefits associated with real-time analysis of data collected from vehicles extend beyond just the automotive industry. Insurance companies can more accurately assess risky driver behavior, enhance the claims process and identify fraudulent claims. Fleet operators can use vehicle data to improve the efficiency and safety of their operators, and retailers can improve the timeliness and accuracy of product promotions.

With IBM Watson Foundations Big Data & Analytics technology, automakers can now analyze huge volumes of vehicle data at speeds that allow cars to “talk” to each other through the cloud. This vehicle-to-vehicle communication makes it possible for drivers to receive real-time alerts about nearby hazardous road conditions or looming equipment failures.

Watson Foundations can also provide a more enriched driving experience through application or entertainment offerings customized just for them, and delivered through their vehicle’s infotainment system or a connected device.

To learn more, visit ibm.com/software/data/bigdata/industry-auto.html ibm.com / software /data / bigdata / industry-auto.html

CONNECTED VEHICLES

Big Data – big opportunity or big problem?

Megatrends asks key players in the development of connected vehicle technology to share their views on the role of Big Data. By Rachel Boagey automotivemegatrends.com

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T

he future connected car will be a powerful device in transmitting and providing data, and will be able to collect data from on-board diagnostics for analysis purposes. With this in mind, Big Data presents a huge opportunity for automotive companies to meet the demands of their more demanding, tech-savvy customers.

According to Frost & Sullivan, Big Data will be worth US$122bn in the automotive industry by 2025; with 70-80% of cars expected to be connected, Big Data will have a key role to play.

For large manufacturers, dealerships and fleet management businesses, however, all of a sudden a Big Data challenge has arisen, with many left wondering how this data should be stored, accessed and used.

Why do we need Big Data?

Every second, a telematics device will produce a data record including information such as date, time, speed, longitude, latitude, acceleration or deceleration, cumulative mileage and fuel consumption. These data sets can represent approximately 5MB to 15MB annually per customer. With a customer base of 100,000 vehicles, this represents more than 1 terabyte of data per year.

Andreas Mai, Director Smart Connected Vehicles, Cisco, recently described Big Data as food for thought, inspiring OEMs to think outside the box of the usual use for data, and instead using data collected from the car in a more productive way, namely to generate cash. “Everyone wants to see the money,” he said. “The internet of cars will unlock US$1400 in benefits per year, per vehicle.”

Aside from making money, however, Big Data offers many benefits to multiple parties, including drivers themselves. Mai explained, “Big Data has big benefits for vehicle users, allowing lower insurance premiums, lower operating costs, and ultimately creating savings.”

Jamyn Edis, Founder and Chief Executive at connected car start-up company, Dash Labs, explained to Megatrends that through Big Data, live and dynamic information is able to re-price particular features if an OEM is charging too little or too much. He said, “Big Data, along with the connected car, has the ability to book your parking space before you leave home, and predict traffic jams.”

Edis also explained that in the future, car buyers will be able to profile a car’s pricing from day one to find out if it has had any accidents or been involved in any illegal activity.“Most cars in the UK and the US have a digital footprint, it’s just a case of mining that data and figuring how to use it,” he explained. “If you compare cars with real

32 | Megatrends

estate, where there is an ability to create a history of every house since it went on the market, that’s what we might start to see with cars - more and more data transfer and lots of Big Data that will enable buyers to check out the car in detail.”

Collaborate and benefit

While some may be puzzling over data, and what to do with it, others are reaping the rewards of one of the main benefits of telematics data: improved customer experience. Through monitoring Big Data in cars, it becomes possible to reduce warranty costs, increase safety, and create a data sharing network between the dealer, customer, OEM and others. OEMs currently develop different approaches to reach their targets; yet Frost & Sullivan predicts that the

“killer” OEMs will be those that can use predictive data analytics to effect a 1-3% reduction in warranty costs along with other important software and firmware over-theair updates.

Cosmin Laslau, Research Analyst in Energy Storage at Lux Research, spoke to Megatrends about the importance of the partnerships needed to develop the connected car.“These collaborations are very important. Continental will collaborate with IBM to enable vehicle-to-infrastructure (V2I) functionality: Continental anticipates sending detailed data from individual vehicles, like position, speed, and deceleration, which IBM will process efficiently its computing infrastructure expertise. The resulting aggregated and processed data will enable Continental and IBM to develop automotive automotivemegatrends.com automotivemegatrends.com

CONNECTED VEHICLES

grade products with a high degree of autonomous and anticipatory capability.”

Storing the data

Finding a place to store this data is currently a challenge for the industry, and transporting data from the car to the cloud is appearing as a viable option. But it would be naive to think that this method of collecting and sending data would not also bring with it a host of problems.

Cisco’s Mai said, “The more connected cars are, the more data can be made use of and stored, but then congestion of airways becomes an issue. Offloading data and switching the ways a vehicle can connect to the cloud is mission critical.”

Joe Speed is the Internet of Things Leader at the Linux Foundation. Speaking to Megatrends in his previous capacity as IoT Leader at IBM, Speed described the car as just one of the ‘things’ in the Internet of Things. He also described the connected car as a Big Data problem. “In an average car, there is between 1 and 5 gigabytes an hour of data produced,” he explained, “and when you consider that there are around 60 million cars manufactured each year, that is a lot of data.”

Speed suggested that rather than discarding the data, OEMs can do interesting things with it, but the trick lies in finding a way to manage and store the data. “Http has no quality of service, is not reliable and not designed for wireless,” he said, noting that there must be a better way to manage car data.

MQTT, the Message Queuing Telemetry Transport, is a messaging protocol of choice for the emergence of Big Data. It was

automotivemegatrends.com

developed by IBM, which took the decision to make the technology open source. “Half a dozen manufacturers are already building MQTT into their cars and trucks because it is military grade secure,” explained Speed.

“The platform can currently connect 21 million vehicles per rack.”

Vehicle management

Sarwant Singh, Senior Partner, Frost & Sullivan, recently spoke to Megatrends in a webinar entitled “The Internet of cars part 1 – Big Data”.Another benefit of Big Data, highlighted

by Singh, is the role it can play in warranty and vehicle management. “Some recent recalls could have been prevented or managed better,” said Singh,“as the manufacturers could have used Big Data to predict that a failure was happening or just used it for a much better management of recalls.”

Singh also noted that Big Data is already being used today in other services, and suggested that the automotive industry could learn from industries such as aviation, where remote diagnostics are used to remotely manage and predict maintenance on aeroplanes. “This is something that can be adopted by the automotive industry to allow recalls to be better managed,” said Singh.

A question of privacy

Another challenge that Big Data brings is data security, which Mai described as a hot topic across the industry. He said, “There are tremendous amounts of security risks and threats in the connected vehicle space.”

Dash Labs is launching a low-cost, easy-toinstall device that analyses car and driver performance, allowing the driver the

opportunity to drive more economically and safely.

The app produced by Dash allows the supplier to collect consumer data, collecting diagnostic information from the vehicle’s computer via the on-board diagnostic reader. “We can pair this information with the sensors on your smartphone, and that can act as your GPS, compass, and barometer,” explained Edis.

“Because we integrate with the social networks, we now know the demographics of the driver. We could find out from Facebook that the driver is a woman within this age bracket, and likes to do this online, with these friends.Whatever you can infer as a developer using Facebook or Twitter or Google+, that’s all stuff that’s helpful to us.”

However, the question remains, are people going to be willing to take Big Data to as far as it is able to go? Speed mentioned that a generation divide undoubtedly exists when it comes to privacy concerns, and that young people seem alarmingly unconcerned about privacy. “I’m noticing people my age are very much privacy conscious but as long as young people are getting something of value, it doesn’t seem to be a big concern for them. Some of the concern we try to put into protecting personally-identifiable information is putting energy into the wrong parts of the problem.”

The future connected car will undoubtedly be a data machine, collecting data from on-board diagnostics for analysis, in an aim to save the consumer money in their overall driving experience. The argument posed by Dash’s Edis suggests that a conventional family could benefit from Big Data monitoring their driving habits; the question is, are we really ready for our data to be mined in this way?

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Increasing vehicle complexity requires secure software solutions Green Hills Software’s Dan Mender talks to Megatrends about consolidating ECUs to ensure secure software solutions. By Rachael Hogg

I

t’s an oft-cited anecdote, but it’s worth repeating: there are now more lines of code in a single vehicle than there were in the first rocket on the moon. As vehicle complexity increases, however, so do the challenges for both OEMs, and suppliers.

The many millions of lines of code in a car – there could be tens of millions of lines of code in a single electronic control unit (ECU) – need to be carefully managed, and such complexity requires powerful multicore microprocessors. The myriad recalls just in the first half of 2014 highlight the need for the automotive industry to prove and guarantee system reliability – and that means secure software solutions.

Green Hills Software is a large independent embedded software provider and has been involved with automotive industry Tier 1s, Tier 2s, and OEMs for over 20 years. The company focuses on a number of vertical markets, including automotive. As Dan Mender, the company’s Vice President of

34 | Megatrends

Business Development, explained to Megatrends, there is a movement towards ECU consolidation, which is evolving to include some autonomous driving functionality, and some legacy ECU software.

“There’s a hypersensitivity to make sure systems can be validated and tested and support the level of reliability, availability and functionality that’s needed in the car, without failure.”

OEMs and suppliers now need to be able to run a complex processor, adhere to stringent safety and security standards, and consolidate functions in a provable way. “We help OEMs with the idea of ECU consolidation, how the next generation of infotainment systems will be multifunctional, and how they can take advantage of that in a powerful ECU design, but in a safe and reliable way,” said Mender.

“This allows them to consolidate functions in one box, increase reliability of the electronics, and reduce the cost. Having fewer individual ECUs in the system increases quality and reliability.”

The evolution of in-vehicle infotainment (IVI) platforms

There has been a movement towards open source software platforms like GENIVI, Android, Linux, or a combination of these.

There may be the need to run two platforms in combination with more critical applications, and that presents yet more complexity. Green Hills does not develop infotainment stacks, like Linux or QNX, but provides the platform that runs them safely and securely, within the OEM and Tier 1’s platform. To support the evolution of IVI platforms, Green Hills delivers a scalable, flexible safety-certified platform allowing the OEM or Tier 1 to run whatever IVI infotainment stack they choose, explained Mender. “OEMs and Tier 1s are focused on a broad set of markets and customer requirements that can be driven by not only geographical aspects, but by different groups of individuals looking to purchase vehicles.

Whether that is the digital natives or Gen Ys, they all have different things they’re looking for. One size does not fit all.” automotivemegatrends.com

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Vehicle Bus

OpenGL Apps

Instrument Cluster

Infotainment Applications

Safety Applications

ADAS

Graphics

Rear-view Camera

General Purpose Operating Systems

INTEGRITY Secure VM

INTEGRITY Multivisor Secure Virtualization CPU

3D GPU

However, while one size may not fit all, there does need to be a degree of flexibility. Green Hills provides an ASIL-qualified platform on which its customers can run any combination of guest operating systems they choose for infotainment. Mender said, “They may have a legacy infotainment platform, but want to add Android to bring in an app store environment, in a safe and reliable way.” The ability is needed to flexibly run the infotainment experience of choice based on geography, cost, and a targeted consumer group, such as Millenials. Different vehicle platforms, he said, will also offer different experiences, from entry level vehicles in the BRIC countries, to high-end vehicles sold in China, the US, and Europe.

Autonomous driving and security

The race to launch the first commercially available autonomous car has been on for years; most recently, Google released design details of a prototype of its first self-driving car. Although a fully autonomous vehicle is still years away, the level of driverless features such as self-parking and automatic braking are increasing. Around 90% of collisions on the road are due to driver error, and Mender believes that addressing that with autonomous technology will be valuable for generations.

Ethernet

USB

ASIL-A to ASIL-D. Our software products have been qualified to the highest levels of ASIL.We can help our customers with design architectures and philosophies that are safe and secure.”

To solve some upcoming performance challenges in the autonomous vehicle realm, it will be necessary to take advantage of the multicore processors available on the market, but that poses a safety challenge.

Similarly, there are predictions that by 2020, there will be over 150 million vehicles connected to the Internet. Security surrounding that communication and connectivity may not have been ignored, but many agree that not enough focus has been placed on it.

New vulnerabilities are being presented every day, said Mender. “One area we focus on is guaranteeing that information gets to

CAN

Wi-Fi

where it needs to be, and is not compromised, hacked, or used in a malicious way. Our drive is to make sure the automotive industry isn’t putting its collective head in the sand and thinking no-one will hack cars. If we don’t do the right thing, it will be easy to capture transactions or steal data of the owner of the vehicle.” OEMs and suppliers need to consider data security at the beginning of their development, he added, rather than as an afterthought.

As the automotive industry moves increasingly towards connected vehicles, the need is growing for understanding policies and architectural aspects to deliver systems that are both reliable and secure. With vehicles beginning to transmit and manage Big Data, discussions will be focused on the safety and security of systems to support the continuous and increasing growth in the number of lines of code.

As vehicles become increasingly autonomous, and increasingly connected, there is a growing concern over safety and security. “We’re helping our customers with the highest levels of safety and security,” said Mender. “In some cases, that’s the ISO26262 standard, where it has the ASIL ratings, from automotivemegatrends.com

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Ethernet:

the fast track to the connected car Ethernet cuts cabling cost and weight, increasing bandwidth and data transfer speeds. Rachel Boagey looks at the role of Ethernet in the development of connected and autonomous cars

W

ith significant increases in the volume and complexity of in-car electronics, networking solutions that offer low-cost, high speed transmission and bandwidth are becoming ever more necessary.

Ethernet bypasses traditional cabling for connectivity, allowing all vehicle components to connect with lighter and more effective wires, and enabling manufacturers to reduce connectivity costs by up to 80% and cabling weight by up to 30%. This also provides a cost-effective, scalable solution to the increasingly connected car.

According to ABI Research, Ethernet penetration in new vehicles will grow from 1% in 2014 to 40% in 2020, quickly becoming the technology of choice for some of the biggest OEMs.

Assisting connectivity where others can’t

‘Connected car’ is an umbrella term used to encompass many elements of in-car connectivity, but in reality, the phrase refers to everything made possible by an in-car LTE connection, from infotainment to assisted vehicle technology and full autonomy.

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There are currently as many as nine proprietary automotive networking specifications including LIN, CAN/CAN-FD, MOST and FlexRay. These standards offer relatively low bandwidth and performance compared to Ethernet, which enables an open, highperformance network for powering in-vehicle infotainment and ADAS, improving the ability to share data from a common

source to the entire network. One of the main advantages of Ethernet is that is can run alongside standard vehicle cables used for other in-car networking technologies, and requires no extensive fitting procedure, saving cost.

“The emergence of drive-by-wire, the explosion of in-vehicle sensors for ADAS and automated driving, and the adoption of connected infotainment, poses new

automotivemegatrends.com

CONNECTED VEHICLES Evolution of Network Bandwidth

Deployment of low-cost automotive Ethernet also means that high-end features such as infotainment and ADAS features such as surround-view parking and lane departure warning can be deployed in a much broader range of vehicles, beyond just very high end models.

BMW recently commercialised Ethernet for a 360-degree camera parking assist system based on Broadcom’s BroadR-Reach technology, the first OEM to use the technology in a vehicle. The car uses singlepair twisted wire, 100Mbps Ethernet to connect its driver-assistance cameras.

challenges for in-vehicle networking technologies in terms of cost, bandwidth, cable harness weight, and complexity,” said ABI Research Vice President and Practice Director, Dominique Bonte. “Ethernet is now being considered as a replacement for legacy bus protocols such as MOST and FlexRay by car OEMs including BMW and Hyundai.”

Megatrends spoke to Timothy Lau, Associate Product Line Director, Connected Car at Broadcom, who explained the benefits of incar Ethernet to aid connectivity speeds. Lau said, “The technologies available today offer very low performance in terms of overall throughput or bandwidth for network applications. For instance, CAN and LIN bus only support up to 2Kbps bandwidth, and FlexRay can go up to 10Kbps. Ethernet supports up to 100Mbps.”

To create a solution for existing in-car lowperformance networks, Broadcom developed BroadR-Reach, an automotive-qualified Ethernet standard. This enables multiple invehicle systems to simultaneously access information over a single unshielded twisted pair cable. Lau explained, “BroadR-Reach is designed specifically to address the stringent requirements of the automotive industry, delivering a bandwidth of 100Mbps over an unshielded single twisted pair cable. By eliminating the need for expensive, cumbersome shielded cabling, manufacturers can significantly reduce connectivity costs.”

Complex data requirements

As the connected car develops, the vast amount of data generated undoubtedly requires improved processing techniques and technologies. According to Mario Mueller, BMW’s Vice President of IT Infrastructure, in 2012, BMW had around one million connected cars on the road, generating over one million data requests daily. The company now has three million connected cars on the road, and beyond 2018, it expects to have 10 million connected cars generating over 100 million daily data requests, equivalent to 1TB of data every day. Sarwant Singh, Senior Partner, Frost & Sullivan recently discussed increasing data and the need for an improved automotivemegatrends.com

coping method in an Automotive Megatrends webinar entitled ‘The Internet of Cars Part 1 – Big Data’. He said, “The fourth-generation BMW 7 Series uploads 81Mb of data in ten hours, but thanks to Ethernet, the fifth generation 7 Series takes 20 minutes to upload 1 gigabyte of data, showing just how effective this technology can be to manage the vast levels of data management required.”

BMW sees the importance in taking the technology one step at a time to ensure reliability and use of Ethernet. A BMW ConnectedDrive spokesperson told Megatrends, “To introduce a new in-car networking technology is a major change for car manufacturers as it represents a crucial infrastructure for a vehicle’s smooth functioning. To ensure the best quality for customers, it is therefore advisable to start small, that is, to connect only the cameras to the optional surround view system electronic control unit (ECU) as in the X5, and extend to more models and electronic control units from there.”

Autonomy – a strong case for automotive Ethernet

Many OEMs are now focusing their research towards the autonomous vehicle, which requires organisation of millions of lines of data – a strong case for Ethernet inside the car. Lau said, “You need to be able to take data and send it very quickly to the ECU that is making decisions on what the car needs to do to react to that data.”

A BMW spokesperson told Megatrends, “Ethernet-based in-car networking harmonises the communication concepts inside the car with communication concepts used outside the car. This makes it easier to integrate a car as a node into the worldwide communication network.

Environmental information gathered from outside a car including other cars can thus be gathered more readily. Also, data rate limitations are fewer inside the car and realtime information exchange will be supported. However, already today autonomous driving is technically possible.

The main challenges in the way of autonomous driving are more in juridical and customer acceptance domains.”

While the industry has only witnessed the first applications of in-car Ethernet, it is the next logical step to consider Ethernet for other in-car applications.

"Ethernet could be the catalyst for bringing the automotive industry a step closer to connected vehicles," says Frost & Sullivan Senior Research Analyst, Divya Krishnamurthy. "With its capability to simplify the networking architecture, higher uptake rates are expected in the near future."

The importance of standards

Standardisation is essential to enable new, innovative in-vehicle applications, reducing time-to-market and ensuring availability, lifecycle, upgradability and interoperability.

This will play a key role in establishing the

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networked car of the future, believes Lau – “helping automotive OEMs minimise design risk with proven platforms to meet stringent environmental demands and rigorous industry requirements.”

As demonstrated by the BMW X5, large OEMs and technology providers are collaborating to encourage wide-scale adoption of Ethernet-based networks as the standard in networking applications.

Broadcom has helped set up the OPEN Alliance special interest group (SIG) to promote BroadR-Reach as a de facto automotive Ethernet standard. The OPEN (One-Pair Ether-Net) Alliance now has over 200 members after being founded in 2010 by BMW, Broadcom, Freescale, Harman and Hyundai.

The alliance is beneficial to Broadcom and other companies pushing automotive Ethernet as it expands the use of the technology in cars. Lau said, “The automotive industry always wants standardisation when it comes to implementation of advanced technologies. They want to ensure their multiple suppliers, sources, and healthy competition to ensure that additional feature sets and innovation continues to happen in the industry.”

Lau explained the OPEN Alliance helps fulfil a desire from OEMs to have stability of supply to ensure pricing stays competitive, along with driving innovation. He said, “Different manufacturers continue to innovate on this technology, driving things like lower power, smaller size, and overall innovation.”

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"It is also indicative that OEMs such as BMW, Hyundai, Jaguar Land Rover, General Motors, Honda, and PSA Peugeot Citroën are also part of the OPEN Alliance," said Frost & Sullivan’s Krishnamurthy.

Security advantages

As the connected car evolves, so too do concerns about network security. By leveraging automotive Ethernet as the network backbone, however, network security features such as message authentication and encryption protect the car from malicious attacks, eavesdropping and the installation of non-service-approved devices.

“Consumers are looking for increased safety requirements in their vehicles and anything that can contribute to increased vehicle safety will be of interest.” Lau especially attributed these consumer demands to the increasingly popular vehicle-to-infrastructure benefits, and how they will continue to drive the additional need for higher bandwidth in the car.

A bright future for Ethernet?

Andreas Mai, Director Smart Connected Vehicles, Cisco, confirmed to Megatrends that, “In the future, Ethernet will play a very important role, not just for infotainment but for ADAS and autonomous vehicles specifically.”

Despite the first automotive applications of Ethernet now in the market, Ethernet has not yet achieved widespread industry backing. Lau explained his perception of certain geographical trends that have emerged so far: “My sense is that the entire automotive industry is interested in Ethernet for vehicle networking in their next generation vehicles, but I notice that vehicles today that have implemented or embraced a lot of the digital networking technology, seem to be in geographic areas that embrace BroadR-Reach Ethernet first.”

Lau agrees safety is always a major concern when operating with low bandwidths, and argued it is also becoming a requirement from a consumer perspective. He said,

There is no limit to the data rates needed in the connected cars in the future, and already today there are specific applications in cars for which the transmitted data rate exceeds 100 Mbps. As more challenges arise for the connected car, and growing amounts of data needs to be managed, automotive Ethernet becomes even more of a viable option to solve those problems.

Mai emphasised the importance of having efficient and secure communications in the connected car that cannot be established with the traditional CAN network. He continued, “If you look at security specifically, the CAN network doesn’t have enough capacity to carry the encryption overhead necessary to carry and protect messages effectively. From both angles, performance and security, we see a role for Ethernet in the eco networks.”

As for future market expansion, Lau continued, “Europe is in the lead in adopting the technology right now, but very quickly, Japan, Korea and other areas will be implementing these types of very advanced systems at a low cost.”

automotivemegatrends.com

Different needs, same speeds:

CONNECTED VEHICLES

India's just as connected as the West When it comes to the evolution of connectivity, India has what it takes to keep apace with developed markets, says Sudip Singh, Global Head of Engineering Services at Infosys

By Megan Lampinen

C

onnected car developments may be kicking off in the world's mature markets, but they won't be limited to these regions. Megatrends spoke to Sudip Singh, Global head of Engineering Services at Infosys, about the evolution of connectivity in different regions around the globe, and the forces at work behind the scenes.

While Infosys is an Indian company, Singh operates out of its Texas office and has been with the company for nearly 20 years. Infosys classifies itself as an ecosystem integrator and the automotive segment is just one of several in which it is active. As head of its engineering services, Singh's work involves the vehicle domain. "This is an extremely exciting time for the connected car," he notes. "Things are already moving extremely quickly. We are seeing a tremendous amount of action in the telematics space, the connected car space and the Internet of Things."

Western origins

Singh observes that the emergence of the connected car segment was driven primarily

by safety requirements. "In the US, Europe and Japan, the focus is sitting on the edge of safety, security and personalisation. In a connected car, they are looking at somebody who can be a companion, who can make you more productive, can allow you to be more social, can allow for you to improve. It is this entire suite of services which a connected car is providing in the western world."

However, the sector's development in emerging markets, notably India, has come from another direction and has only been made possible through the rising use of smartphones. "It is the extremely broad prevalence of the mobile device which exists and has become ubiquitous in the Indian market,” says Singh. “It is driving behaviour from a richness of application experience, as opposed to safety or security."

Most notably, safety and security require a certain level of infrastructure that is not present in India. As Singh explains, "Safety and security presume a certain base infrastructure around 911 [emergency services number in the US]. In India, that

infrastructure is not as well developed.What is well developed and in some ways has become an expectation of the consumer, who is the end client, is a very rich interface on the application side. The application per se is driving behaviour in India, compared to the safety or security part of it."

Leaning on infrastructure

Singh believes connected cars can become a widespread reality without necessarily being a function of the vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) networks being established across the US, Europe and Japan.

For the likes of India, the proliferation of mobile devices will be sufficient to ensure a future for connected car technology. Singh points to Google's autonomous vehicle and its trial operations in the US: "We have scenario where Google's car is driving here in the US without a fully established infrastructure."

Singh believes that the initial V2V and V2I conceptualisation did not factor in the proliferation of mobile devices, and in India, "smartphones have become a part of life."

This, Singh says, "has taken a lot of folks by surprise. It was not anticipated that you can potentially develop on the back of the technology that now exists on the mobile device.You are now able to go ahead and not need to lean on a V2V, V2I sort of infrastructure to first be established."

This opens up possibilities for connected car technology around the world. "That will ensure connected cars could operate anywhere. I don't feel that India will need to wait behind the western world. It will not be a poor cousin to the western world."

Not only will India keep apace with other regions, but it could even emerge as a leader.

"In the connected car space and the Internet of Things, I expect the Indian market to be at parity or in some ways even drive behaviour,” Singh concludes. automotivemegatrends.com

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Getting louder – the rise of Major advances in natural language and voice recognition mean that talking to your car will soon be the norm, writes Rachel Boagey

K

eeping a driver’s eyes focused on the road ahead has always been of great importance, but with the increase of invehicle connectivity demands, OEMs are under even more pressure to reduce driver distraction. Many OEMs such as Tesla are already scrapping the use of the buttons in their vehicles, favouring touch screens and speech-interfaces, which now need to be more efficient and user-friendly.

The use of voice applications can help to bypass numerous menu stages, and control many in-car functions thought to be distracting to the driver. Despite this, many argue that voice is not suitable for controlling all in-car applications, often taking longer to perform complex tasks than manual administration.With that in mind, is voice the logical next step towards safe in-vehicle interaction?

Driver relevant content

Arnd Weil, Vice President and General Manager of Automotive and Consumer Electronics at Nuance, recently spoke to Megatrends regarding the role of voice in the automotive HMI, saying, “Consumers want access to the apps and content they know and love on their smartphones, coupled with apps specific for the in-car experience.”

However, Weil suggested that “these

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experiences must be accessed in a way that avoids dangerous driver distraction.” But to achieve these goals, there are many hurdles for OEMs to jump, not least of which are the importance of delivering a great user experience, and providing more than what already exists in mobile handsets.

Nuance is a supplier of speech solutions for OEMs such as Audi, BMW, Ford and Hyundai, and has developed Dragon Drive Connect, an automotive grade in-car service that integrates content services and applications that have been optimised for in-car use. Using Dragon Drive Connect, drivers can stay focused on traffic and driving conditions by interacting with the in-car systems in a hands-free and eyes-free way. “Voice recognition, natural language understanding and text-to-speech technologies enable intuitive interaction with the car, thus reducing possible driver distraction,” explained Weil.

Drivers don’t need access to thousands of services while driving, he explained, maintaining that this would in fact serve as more as a hindrance than a benefit to safe driving. “Drivers need access to content and services that relate to the driving experience, such as services focused around navigation, telematics, infotainment, communications, and vehicle maintenance.”

OEM developments

Ford puts its efforts into hands-free control and minimising driver distraction, and its Ford SYNC in-car system allows users to control a wide range of in-vehicle systems using their voice. Ford’s SYNC uses speech technology

by Nuance. Fatima Vital, Director of Marketing, Automotive & Consumer Electronics at Nuance, told Megatrends, “Voice recognition, natural language understanding and text-to-speech technologies enable intuitive interactions with the car, thus reducing possible driver distraction.We expect that voice interactions will become the main way of accessing content and apps in the connected car – closely integrated with other modalities, such as touch, handwriting or gesture control.”

Julius Marchwicki, Ford SYNC Product Manager, explained to Megatrends how the OEM makes safety a focus of its HMI: “Complex tasks should be able to be executed with a simple voice command within the car, and most OEMs now are strongly leveraging voice. The technology is only getting better and creating better experiences for consumers inside the car.

One of the first things we think about is safety and we are looking to provide valueadded services for the consumer. With the additions of new capabilities and automotivemegatrends.com

CONNECTED VEHICLES

the voice in automotive HMI functionalities, we always look at driver distraction testing and safety testing to try to get the best experience possible.”

Jim Buckzkowski is the Global Director of Electrical and Electronics Systems and Advanced Research at Ford, and spoke to Megatrends about how effective voice applications are for tackling driver distraction. He said, “We do a lot of research here on driver distraction and have a simulator that allows us to test people in a safe environment but actually in a car inside a chamber where we can simulate actual driving. We focus on how long it takes for drivers to complete a task, and monitoring

the driver's gaze to see how often they're looking away and for how long. We know it’s really important that looking away from the road should be short and not sustained for a long period of time.”

Buckzkowski also explained the importance of OEMs not allowing drivers to be faced with tasks that require repeated glances away from the road. He said, “We spend a lot of time looking at different ways of designing human machine interfaces, and test these different interfaces and different HMIs and so on to see what works. Voice recognition definitely is a significant improvement over picking up and hand-holding a device and

trying to operate that device in your hand while you're driving.”

Voicing an opposing view

Despite its benefits to driver safety and its ability, unlike other applications, to minimise driver distraction, Bryan Reimer, Research Scientist at MIT’s Age Lab believes that although there is a great role for voice in cars, its benefits aren’t always as good as they seem.

To reach this conclusion, MIT carried out a study with support from Toyota’s Collaborative Safety Research Centre, finding that using voice commands for simple tasks, like searching for a radio station or changing the climate settings, is quicker and less taxing for a driver. But using voice controls to perform more complex tasks—such as tuning the radio—often takes longer than doing those things manually, causing drivers to glance away from the road to select from a menu or confirm that the system has recognised their speech correctly.

Reimer told Megatrends, “Any non-driving related activity can become a safety relevant distraction if a driver is engaging with it at an inopportune time. Our work as well as the work of others shows that “voice command interfaces” are not hands free eyes free ways of communicating with your vehicle. They draw upon visual, manipulative and cognitive resources that must be measured and considered in a holistic view of resource allocation.” automotivemegatrends.com

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CONNECTED VEHICLES little bit more shy about it. But there is a possibility that it’s even more generational than it is cultural.”

Harsh vehicle environment

The challenging audio environment of a car can also be a barrier to effective voice applications, and noise that comes from the car, from road noise to crying children, can be factors that judge how reliable voice applications really are.

Developments in hardware, software and connectivity are required before voice technology can be really successful, especially when coping with difficult instructions.

Danny Shapiro, Director Automotive, NVIDIA, explained to Megatrends, “I think there are two aspects of making sure voice applications are effective in the car: one is making sure you have good microphones, and multiple microphones in the car, and two is software; a lot of software is needed to be able to enable noise or echo cancellation.

There's a huge amount of research that's been going on in that space, but now we need to bring it into the vehicle.”

Creating a voice for the older generation

Driver choice

Luc van Tichelen, VP, Embedded Professional Services – Automotive at Nuance, explained that although voice applications are useful in the car environment, certain tasks can’t be done at the wheel without distracting the driver. He said, “Some things aren’t as important while driving, so it is essential that notifications such as a new email isn’t an attention-getter in the car.” In this case, explained Tichelen, “The driver should be allowed to pick up the information when they are ready to look at that screen, in the form of a small pop-up rather than a voice notification.”

Unsuspecting driving aids

Waze is a smartphone app that drivers will need to bring into the car. However, the company’s Head of Global Communications & Creative Strategy, Julie Mossler explained the safety benefits of the app, which provides turn-by-turn navigation and direction via audio, meaning the driver does not have to look at their phone. “Safe driving is core to everything that we do,” said Mossler, “and all of the features that we choose have to pass the safe driving test. As a global driving society, GPS is largely excessive in the car, so much like a GPS, we recommend that docking your phone in a proper car dock and 42 | Megatrends

plugging it into a power outlet is going to give you the best results.”

Lost in translation

Dealing with language barriers and accents often proves difficult for voice control and recognition, but Mossler explained that Waze’s smartphone navigation app is available in 45 languages and 200 countries. She said, “I think that you eliminate a lot of that risk when users can speak in their native language. And, hopefully, if you speak one of the 45 most common languages in mobile technology you're going to be just fine. Aside from that, we also do have manually written directions that you can look at on the screen.

So, between those two things we don't really hear about language being an issue.”

Ford’s Buckzkowski also explained how the OEM’s HMI caters for different regions and languages, saying, “Voice recognition technology continues to get better at adapting to more extensive languages, while also becoming more conversational, rather than just providing words and commands.”

He continued, “HMI is placed on the screen differently based on languages in different regions of the world. We also know that in some regions people are very quick to adopt to talking to their car. Others are maybe a

A consideration for OEMs to bear in mind when implementing their infotainment systems into cars is the specific age categories for which they are catering. As the younger generation may want complex technology in their car, it becomes even more important to use voice technology to ensure they are not getting distracted from the main task at hand. However, another consideration is older drivers. The general consensus is that voice recognition will be used to perform more complex tasks in a vehicle as it can help bypass many menu stages that previously would have left drivers’ eyes off the road for long periods of time.

Nuance’s van Tichelen also explained the importance of considering the older generation of drivers, saying, “These drivers will prefer using the information from a functional point of view. They don’t necessarily need all of the advanced features, and often hate looking for what they need.”

An audible future?

Despite developing rapidly, voice technology remains a contentious issue. Ford’s Buckzkowski told Megatrends, “We know there is room for improvement, but it's going to continue to advance in the future.”

Buckzkowski is one of many who think voice will become prevalent in vehicles going forward, with developments of voice applications in the automotive industry so far showing the potential for a successful future. However, it is clear that much more work is needed to make voice applications largely successful. automotivemegatrends.com

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Built-in versus brought-in: the big telematics debate Rachel Boagey asks key auto industry players which is better: built-in or brought-in?

Building connected cars is no longer just an option for vehicle manufacturers, but with increasing technological demands from their consumers, it is difficult for OEMs to know which telematics solutions to adopt for their next generation platforms.

Although advantages of both built-in and brought-in systems are vast, there are some key disadvantages for OEMs to bear in mind as they battle to keep their vehicles up to date, maximise sales and minimise the risk of their brand becoming irrelevant.

The debate as it stands

Investment bank RBC Capital Markets believes connected vehicles will grow at a 25%+ CAGR through the end of the decade, by which time more than 75% of vehicles produced will have some level of connectivity to the Internet. But what form that

integration will take is a source of great debate, essentially boiling down to embedded versus portable connectivity.

The main advantage of built-in systems is that they do not rely on external devices, eliminating compatibility or interoperability issues that can often be problematic when bringing devices into the car. This therefore allows greater flexibility for the OEM’s business model, providing strong connections to services demanded by consumers, such as navigation and on-board infotainment. The built-in system also provides the OEM with control over what content to provide to the driver, unlike brought-in systems where inevitably, the driver decides what they want to do and when.

Chris Schreiner, Director for the Automotive Consumer Insights service at Strategy Analytics, told Megatrends that “From a user

experience perspective, the built-in and beamed-in options are best,” noting that with embedded solutions, each app or feature has been designed for the system, and is therefore well integrated, seamless and easy to use, and consumers have no issue with knowing what does and does not work. “The research we did on the Tesla Model S showed how easy a well designed embedded solution can be,” Schreiner continued. “All participants, young and old, tech savvy and not, were able to do everything easily, and scored highest on our usability ratings.”

Mark Rose is Head of Automotive M2M at Vodafone. Over the last few years, Vodafone has launched many M2M collaborations and strategies in an attempt to drive its automotive M2M business. Megatrends spoke to Rose, who described embedded connectivity as a key area for the communications provider. He said, “Our key area is looking at connecting cars through embedded connectivity within the car, and I think on the back of the eCall regulations and the way the whole industry is moving that we'll see, over the next four or five years, probably upwards of 50% - 60% of cars using embedded systems.”

Borrowed time

Embedded, or built-in systems do not provide all the answers, however, and a main consideration for OEMs using built-in devices is the high system costs involved, and of course the main risk of the embedded modem becoming obsolete. Allowing consumers to integrate their own usually current mobile devices overcomes the problems of long vehicle development cycles, allowing for the software to be easily adapted to customer preference.

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automotivemegatrends.com

CONNECTED VEHICLES Of course, there are ways around the risk of ageing embedded devices, and Tesla has shown the way forward for OEMs with its over the air software updates to quickly sort out the problems that often arise when bringing a new car to market, as well as update the software further down the line, similar to the capabilities of a smartphone.

New standards, new demands

Innovative apps are everywhere, and as a consumer expects them in their hand, the expectation then falls onto the automotive industry to try to make the technology suitable for the car environment.

Julie Mossler, Head of Global Communications & Creative Strategy at community smartphone navigation app, Waze, told Megatrends, “I think car manufacturers have no choice but to innovate. So, as it is today with the average vehicle, you can buy it new from the dealer, and the minute you drive it off the lot it's not relevant any more, at least from the console and the user entertainment experience. So you're seeing a trend in more customisable technology that doesn't require you to buy a new vehicle.”

By 2016, most cars will have smartphone integration, according to a report from Juniper Research, entitled ‘Infotainment & Commercial Uses, Insurance & Vehicle Recovery 2012-2016.’ As a result, a new class of brought-in solutions is emerging, where the lion’s share of the application processing is done on the phone. For this, cloud connectivity comes via the 3G network and the phone and head unit communicate via Bluetooth, and consumers can tether their existing smartphone to the car via Bluetooth or USB cable, enabling full access to their personal contacts and playlists.

However, this is not to say that brought-in connectivity comes without its own downfalls, as this form of connectivity is reliant on the quality and performance of the mobile device, which may not always be adequate for enabling certain technologies, better handled by a car’s embedded device.

Eyes on the road

The increasing complexity of in-car infotainment systems of course runs a risk of driver distraction; controlling how much information drivers have access to while operating the vehicle becomes more difficult when smartphone integration is involved, as the OEM is less able to control the apps to which the driver has access.

Waze can be downloaded with Android, Apple or Windows to allow drivers to share

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real-time traffic and road information. Having a navigation app on a smartphone for use in a car rather than integrated in a dashboard may sound like an accident waiting to happen, but Waze’s Mossler said,“The greatest benefit is providing turn by turn navigation and direction. These are audio directions – you don't have to look at your phone.”

Making sure that having a brought-in device, such as a mobile phone in a car isn't going to contribute rather than decrease driver distraction is a huge consideration for mobile apps, and Mossler said, “All of the features that we add to the app have to pass the safe driving test. As a global driving society, GPS is largely excessive in the car, so much like a GPS, we recommend that docking your phone in a proper car dock and plugging it into a power outlet is going to give you the best results. With the normal GPS, you don't encourage users to look at the screen.There is very minimal engagement with the screen, and we also were the first company to prohibit texting within the app while driving.

So, if we can tell that your car is moving, we will pop up a blocker that requires you to call yourself a passenger before you're able to type in any addresses or change anything on the map.”

The hybrid approach

Despite the ongoing built-in versus broughtin debate in the industry, OEMs are not necessarily wedded to one telematics solution, suggesting that there may in fact be very little to debate about.An example of this comes from GM, which offers the embedded OnStar solution, while also offering a tethered MyLink solution.

Despite Vodafone’s current focus on embedded solutions for the connected car, Rose was keen to point out the importance of acknowledging that any OEM will have a dual strategy of both embedded and tethered, and said “I think it is important for OEMs to adopt a joint approach and at Vodafone, we ensure that what we do with our phones works well with cars and anything we can do in that space, we do. The

primary focus is on getting the connectivity actually embedded within the car, and I think there is ultimately more that you can do once you have that capability and it drives an enhanced experience for the end customer.”

Director of Automotive at NVIDIA, Danny Shapiro, also spoke to Megatrends regarding the telematics debate, stating that the implementation of such technology in the connected car is in fact going to be a mixture of all methods. Shapiro said, “I think we're going to see hybrid offering the best experience. We're not expecting people to get rid of their mobile devices, but I think what you’ll see is OEMs as well as the major OS companies trying to come up with better and safer integration.”

Ford has also demonstrated the importance of a multitiered approach to the connected car. Julius Marchwicki, SYNC Product Manager, told Megatrends that the built-in, brought-in and beamed-in connected strategies are a vital part of keeping cars up to date, and fulfilling consumers’ connected requirements. Marchwicki said, “Different connectivity approaches are not an ‘and/or’ thing, and we're probably always going to deliver infotainment or information through a brought-in device, but for certain types of functions we'll use more of an embedded or built-in type of strategy to deliver those features to our customers.”

The future debate

It seems as though the built-in versus brought-in debate will continue for some time to come, and as OEMs partner with consumer electronics suppliers more frequently, split decisions between built-in and brought-in will continue to arise.

Ultimately, although the OEMs are the ones making the cars, the choice will be down to the consumer, and what they are willing to accept to make the car an extension of their increasingly connected world.

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CONNECTED VEHICLES

Connected cars in a connected era The connected car sees multiple industries, technologies, and ecosystems converge with different business models, writes Frost & Sullivan’s Krishna Jayaraman

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he connected era is leading to the integration of multiple industry domains, bringing together communications, automotive and consumer electronics.

Currently, most automotive OEMs are promoting proprietary systems with specific eco-system partners, and the argument about open or closed architecture platforms rumbles on.With companies like Google and Apple entering the mix, the revolution is starting; Android and iOS are shifting from smartphones to become automotive standards.

At International CES 2014, Google announced its open consumer electronics development ecosystem for the automotive industry. The Open Automotive Alliance consists of Google, GM, Honda, Audi, Hyundai, and chipmaker NVIDIA, and will focus on allowing OEMs to

easily bring cutting-edge technology to drivers.

Additionally, Google is commercialising its Google Glasses technology, with Hyundai already listed as one of its partners for the 2015 Genesis. Also at CES, BMW demonstrated a way of controlling its new i3 electric car with Samsung's Galaxy Gear smart-watch, using Bluetooth wireless technology.

Another major trend in connected vehicles is over the air (OTA) updates: 60-70% of recalls in major automotive markets like North America and Europe due electronic faults are software-related. From a vehicle manufacturer perspective, OTA updates provide several advantages. As well as cutting operating costs, including warranty and recall costs, they provide the ability to offer new functional updates to customers. Managing software remotely and offering timely updates has been a major challenge over the lifecycle of the vehicle. Now OEMs like GM, Audi, Mercedes-Benz, BMW and Toyota are working on 4G LTE technologies, which offer higher bandwidth and will aid timely updates, and Tesla has conducted several successful OTA updates.

Collaboration of consumer electronics and automotive

Infotainment systems are evolving from a closed loop of technological limitations to an open ecosystem. This has been influenced considerably by end users’ familiarity with smartphones and the availability of in-car Internet connectivity. The impact from the

46 | Megatrends

smartphone domain is evident in consumer demand for applications, and this has already been taken into consideration with OEMs creating applications for various functionalities, like remote services, diagnostics, navigation, social networking, radio and entertainment. MirrorLink 2.0 and HTML5 are among the prominent technologies being used to bring the best of smartphones into the car. That OEMs are introducing dedicated app stores shows the influence of the smartphone industry.

The constant issue: driver distraction and HMI

Automotive OEMs have to stay abreast with technology implementation for brand differentiation, while making sure it’s not dangerous for the driver; the process of human interaction with the car should be easy and simple, to provide a safe driving environment.

A major part of developing a human machine interface (HMI) solution process is driven by consumer preference for various controls in a car; designing an interface that is complicated and has a long learning curve does not serve the purpose. For example, the greater the number of sub-menus a driver has to go through to access a particular feature, the more the time the driver’s eyes are off the road. In the case of touchscreens, drivers need to look at the screen to keep track of applications that they access.

On the visual side, there has been a focus on splitting information between available displays like HUDs, clusters and central automotivemegatrends.com

CONNECTED VEHICLES displays. While the touchscreen is becoming a commodity, technologies like touchsensitive buttons, gesture control, and handwriting recognition are gaining popularity. Interestingly, despite the potential for natural voice recognition to reduce distraction, a study by the AAA suggests that sending a text or an e-mail is potentially dangerous and adds mental stress. This, coupled with minor errors in recognition of accents could distract drivers. In the same way, European luxury OEMs are reluctant to implement touchscreens, as they believe the act of reaching out to touch a screen could be dangerous.

Nonetheless, the idea is slowly changing with technologies like haptic feedback and proximity sensing becoming a reality.

The connected car and Big Data

The growth of Big Data is being led by the growth of connected vehicle technology.The ability to collect gigabytes of data from an array of sensors and control units creates the possibility of offering a multitude of services to end users. There is a need to harness partnerships with crucial ecosystem partners who can use this data for value-added services. From a consumer perspective, it might look like integration of a connected ecosystem with smart cars, smart devices, smart homes and a smart environment - but what does it mean to the automotive industry?

The opportunities provided by Big Data are numerous, encompassing an array of services like prognostics, vehicle relationship management (VRM), fleet management solutions, insurance, digital retailing, and location-based services like traffic information and parking. The real deal for OEMs here is to have a Big Data framework; a clear connectivity strategy with the ability to pull large volumes of data, and most importantly, partners to help them harness the true power of this data. Some examples include Ford’s capability to collect 25 gigabytes of data per hour and GM’s OnStar, which collects real-time data from the car, analyses it and gives the information to the user.

Although the opportunities are numerous, so too are the concerns; the debate over privacy and connected cars is one of the key challenges to the successful use of Big Data, with growing unease among consumers about the collection and sharing of personal data.

Automated and connected: leveraging information overload

One of the prime reasons for the transition to automated driving is driver distraction, which has risen with the growth in information and communication technologies. In-vehicle connectivity will be one of the major game changers in the services segment. In automated vehicles, OEMs would have the freedom to offer maximum services in the infotainment domain as distraction will no longer be a restraint on the content delivery. Services like Internet browsing, gaming and video playback will be allowed and will open up multiple business opportunities.

Safety and security features, like eCall and bCall, are referred to in the post-crash scenario, so telematics (V2V and V2X) will play a significant role in communicating, sending and receiving data, as well as extending the reach of digitisation. The next

generation of content and apps will have to add value to the customer based on valuable vehicle data that OEMs need to open up to third party developers, such as the Ford Bug Labs OpenXC project. Opening up vehicle data will also allow entrenched IT companies to add valuable analytics on the data and provide value to OEMs, drivers and dealers through dedicated portals that will go beyond static diagnostic emails and alerts.

Autonomous vehicles will also aid the insurance telematics market, with controlled driving enabling users to be entitled to insurance benefits and reduced premiums.

The car of the future

The connected car is the convergence of multiple industries, technologies, and ecosystems with different business models.

This is a potential revenue stream for OEMs who are offering more connected services.

Amidst the challenges of keeping the HMI easy, cost-effective, and reducing distraction, OEMs are focused on potential revenue streams and brand differentiation.

Frost & Sullivan expects more than 90% of the vehicles in 2020 to be connected; there will be a wide array of services irrespective of vehicle segment. The future systems will have a specific set of standards to make it future proof, and the answer will be to counter distraction with technology. OEMs are likewise taking different approaches; the debate will be between tethered (brought-in) or embedded technology. Packaging telematics services with connectivity will dominate: OEM strategies will involve packaging solutions and data plans as a part of the vehicle offering. Clear strategies implementing data from all vehicle systems and adhering to common standards will lead to a connected era.

Krishna Jayaraman is an Industry Analyst with Frost & Sullivan’s Automotive and Transportation Telematics and Infotainment Research Practice. automotivemegatrends.com

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Virtual power plants could provide a vital boost to EV sales EV sales are hampered by a lack of sufficient infrastructure; the roll-out of infrastructure is hampered by high costs. Machina Research’s Emil Berthelsen believes a boost to both could come from virtual power plants

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ake a stroll along a random street in central Copenhagen, Denmark on a sunny afternoon you may be inclined to think of the growing adoption of electric vehicles (EVs) as well under way: there are designated parking spaces, multiple EV charging points, and EVs on charge. However, this does not tell the whole story.There are many different ways in which the future of the electric vehicle may develop. One interesting aspect, which will be explored in this article, relates to the role EVs will play in energy markets.

Figure 1: Global M2M Public Electric Vehicle Charging Points 2013-2023

EV adoption requires additional charging points

According to an article in the Danish newspaper, Berlingske Tidende, there were over 2,000 EVs in Denmark in March 2014 and sales are on an upward trend. However, this is nothing compared to Norway where 3,000 EVs were sold in March 2014 alone, capturing a 6.1% share of the market, or the Netherlands where one in 20 cars sold is an EV.These two markets are the global leaders in EV adoption, whereas the case in Denmark illustrates the more common trend.

Fiscal incentives have helped to stimulate the market, such as exemption from tax or VAT, and up to 50% discounts on company car tax, or free charging at public charge stations and exemption from tolls. Issues such as the cost of EVs remain an inhibitor to their adoption, but one practical component is the lack of ample public EV charging points and their standardisation.

Machina Research estimates that there were 71,000 public EV charging points at the end

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Source: Machina Research

of 2013, a figure which is set to grow to 1.8 million by 2023, as shown in Figure 1.

High costs hamper roll-out of EV charge point infrastructure

The EV charging sector has proved volatile in recent months. There were some negative headlines at the end of 2013 with names like ECOtality, Better Place, and Fisker Automotive announcing bankruptcies.

However, more positive news is emerging with companies like ChargeMaster, Ecotricity and ChargePoint increasing infrastructure deployment. ChargePoint, for instance, has implemented over 17,000 charging stations worldwide and acquired new investment to expand much further. Also, Elon Musk, founder of Tesla Motors, has announced his intention to build super charging stations across Europe. In fact, to meet the

requirements of the forecast 20 million EVs by 2020, these infrastructure deployments will certainly need to start now.

Successful financing is critical to all of these plans. Where hardware cost is the main component in home charging points, keeping the cost relatively low, public charging points include such additional costs as the connection to breaker boxes or in the case of fast charger installations, higher voltage transformers. The costs of installing public charging points are significant, anywhere between four and eight times higher than domestic charging points, so early providers have needed to explore ways of limiting the capital burden solely on their businesses.

One model, as launched by a leading service provider, involves handing over ownership of the charging point to their enterprise customers as a means of generating automotivemegatrends.com

EMOBILITY

additional revenue through either direct or indirect revenue streams.

On a less cost demanding note, connecting EV charging points remains critical for billing and booking purposes, and to that end, cellular connections have provided flexibility and lower installation costs than fixed lines.

Quicker and cheaper deployment, combined with in-built power sources in the charging points, underpin Machina Research estimates that by 2023, 87.9% of EV charging point connections will be connected through cellular technologies.

Figure 2: Multiple roles of Electric Vehicles in Energy Markets

Distributed Energy Resources

Demand Response

EV charging points and virtual power plants

The growth of electric vehicles together with the associated installation of EV charging points is picking up pace. This has significant implications for energy markets, and in particular the concept of ‘virtual power plants’.

Electricity energy markets have started to see significant changes. As more and more renewable energy resources are connected to the market, ‘greener’ and relatively cost competitive energy resources are introduced. This additional, yet intermittent (due to for example weather conditions) supply is managed through virtual power plants enabled with intelligent and real-time software solutions. A virtual power plant balances the demand and supply of energy at a grid level, and ensures a continuous and balanced supply not from one single energy producing resource but virtually thousands of resources and short term storage facilities.

This has opened a substantial opportunity to explore greater flexibilities in the demand and management of electricity, including that enabled by EVs. It goes without saying that EVs will create a significant level of additional electricity

automotivemegatrends.com

Distributed storage

Source: Machina Research

demand which needs to be addressed by energy markets. However, the good news is that this demand will have some flexibility in terms of recharging times. Furthermore, and more interestingly, when connected it will also provide an impressive resource of shortterm, quick burst energy when required by markets., i.e. energy stored in batteries which could be tapped into by power companies at times of peak demand. This could secure net positive commercial trading value if suitable market conditions were achieved. Naturally, there will always be a need to strike a balance between the requirements of the owner of the vehicle (i.e. to ensure the vehicle is

charged and ready to drive), the requirements of the energy market (i.e. to serve the demand side requirements) and the trading prices available.

What is important to note in this greater energy scheme is that private EV charging points become significantly more involved in the wider energy market structure. To the buyers of EVs and providers of EV charging points, there is an additional revenue opportunity.

Emil Berthelsen is a Principal Analyst at Machina Research

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“Infrastructure, infrastructure, infrastructure” - the main barrier for FCVs With Hyundai's fuel cell car now available commercially in the US as well as Europe, Rachael Hogg asks key industry players whether they expect FCVs to go mainstream any time soon

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014 looks set to be the year that fuel cell vehicles finally begin to make a commercial impact on the industry.While this will be in small numbers at first, Hyundai’s ix35 Fuel Cell, the first commercially-available production fuel cell vehicle (FCV) will be leased from select California dealerships this year, before the Honda FCX Clarity and Toyota 2015 FC launch in 2015. However, while this exciting technology which has always been “ten years

automotivemegatrends.com

away” is finally arriving, the barriers to its mainstream adoption rear their heads.

Many bodies, from OEMs, to suppliers, to governments are in agreement that infrastructure is probably the single biggest barrier to the effective deployment of FCVs. There are issues arising over location, cost, and the support required. Dr Timothy Lipman, Co-Director, UC Berkeley Transportation Sustainability Research

Center said,“The vehicles are coming, now it’s infrastructure, infrastructure, infrastructure, but who is going to pay for it? Having operated our station for the last three years, they do require significantly more maintenance than a gasoline station does.”

Dr Wolfgang Bernhart, Partner, Roland Berger Strategy Consultants agreed, “The availability of hydrogen infrastructure is a key reason why FCVs haven’t yet made it to the

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EMOBILITY What next for the fuel cell car?

Reno

Automotive World Briefing What next for the fuel cell car?

Sacramento

San Francisco

San Jose

California

In Development

Los Angeles

Open Bus San Diego

Fuel cell station locations in California. 9 stations are currently open with a further 48 under development including 2 bus fueling stations.

mainstream. Public funding is probably necessary for the first couple of years, since investment cannot be justified by a proper business case. There are means to produce hydrogen in a sustainable way, but the cost to build infrastructure is expensive.”

It seems almost impossible that a hydrogen infrastructure could be rolled out without the support of governments, but, as with EVs, this support cannot last forever. Dr Lars-Peter Thiesen, Manager of Advanced Technology Strategy at GM Europe said, “In the future it will be important to receive funding in order to offset the higher price of these technologies and vehicles. However, one should be very clear that it won’t make sense from an economic point of view to have incentive systems running over decades.”

Convenience

Consumers need convenience, and to be persuaded to buy an expensive FCV, they will want the same convenience that they have from a gasoline or diesel car. Catherine Dunwoody, Executive Director, California Fuel Cell Partnership explained the situation in California: “The main challenge right now 52 | Megatrends

is building up a sufficient network of stations that give customers the convenience to fuel with hydrogen in the same way they fuel with gasoline today. In 2012 we published our roadmap, which established the need for 68 stations state-wide to provide that convenience. We partnered with one of our university partners who have a modelling tool they’ve developed to look at traffic patterns and locations of existing stations and travel times and demographics, and identify how many stations are needed in each of those early market regions. Then we also worked with OEMs to determine where the connectors and destinations need to be so that those people who want to go away for a weekend have access to fuel.”

Some think this needs to go further though, and that being able to refuel at home, like with an EV, would be more convenient. Lisa Jerram, Senior Consultant, Navigant Research said, “The infrastructure is really the key thing. If you can figure out some breakthrough, if there’s some kind of innovative financing, or you could figure out a way to have more distributed refuelling or home refuelling, that would make a huge difference. The concern is that you have to

For decades, fuel cell vehicles (FCVs) have been ‘ten years away’, but key launches in 2014 and 2015 could see these vehicles begin to make a commercial impact on in the industry.

This Automotive World report features exclusive insight from key automotive industry stakeholders, and considers the prospects for the fuel cell vehicle as those products make their way into the market.

For details on how to access the report, go to:

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put stations in place, and you put in a major investment and hope a sufficient number of vehicles will use them. It has to grow over time to match the demand, and that is a major investment.That’s why you’re seeing all these governments involved as well as putting together a hydrogen roadmap and figuring out how to make it happen.”

Infrastructure is coming

However, despite the current severe lack of infrastructure, projects are being developed around the world. In April 2014, a £31m (US$51m) deal was announced to make hydrogen vehicles a viable choice for motorists across Europe.The HyFIVE project (Hydrogen for Innovative Vehicles), with five OEMs – Honda, BMW, Toyota, Hyundai and Daimler – along with ITM Power, Air Products and Fuel Cells and Hydrogen Joint Undertaking, and co-ordinated by the office of the UK’s Mayor of London, will see 110 FCVs deployed in several European locations, and will also see the development of hydrogen refuelling stations. Locations for the new refuelling stations in London, Aarhus and Odense (Denmark), and Innsbruck (Austria), are being decided, and should be operational by 2015. Chris O’Keefe, Senior Manager, External Affairs, Toyota Motor Europe, said, “We believe the HyFIVE programme will provide practical insights into how best to encourage and benefit from hydrogenpowered transport. The HyFIVE project provides an excellent forum for this, ensuring the benefits of fuel cell electric vehicles can automotivemegatrends.com

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be appreciated and realised through coordinated use and demonstration.”

Alongside the 110 vehicles, six new refuelling stations will be built. But will six prove sufficient?

Hydrogen highways

Europe is not the only market investing in fuel cells. Other recent investments include a US$3m injection from the US Energy Department for FuelCell Energy, to increase the competitiveness of the fuel cell market in the US, help cut costs, and improve performance. There are also plans either in place, or scheduled over the coming years to create ‘hydrogen highways’. In Japan, the government plans to add up to 100 hydrogen stations by 2015, covering 50% of the installation costs, and other companies such as JX Energy, Toho Gas and Iwatani Corp, Toyota Tsusho and Air Liquide also plan to create stations. There are similar hydrogen highway initiatives in Germany, Italy, Scandinavia, the US, South Korea, and Canada.

A hydrogen fuelling station rollout is under way in California.According to Toyota and the University of California-Irvine, 68 hydrogen fuelling stations across California would be sufficient for a viable fuel cell vehicle launch supporting at least 10,000 fuel-cell vehicles in five major urban areas. Members of the CaFCP have recommended five geographic clusters where the first owners of FCVs

automotivemegatrends.com

should live: Berkeley, South San Francisco Bay Area, Santa Monica and West LA, Torrance and nearby coastal communities, and Irvine and southern Orange County. Around 34 of the 68 stations are now open, in the planning stages or have funding allocated, and an additional US$65m is available to provide support to build and operate stations until they become profitable.

Saehoon Kim, Team Leader, Kia Motor Corporation Fuel Cell Vehicle Team said, “It is clear that hydrogen infrastructure should be in place in order to operate FCVs. Opening an entirely new market that requires new infrastructure such as refuelling stations would not be easy if all burdens are given to the automotive industry alone. Close collaboration between all stakeholders, OEMs, energy suppliers, and governments around the world is mandatory to trigger establishing necessary infrastructure, consequently increasing readiness of mass

production of FCVs.” Toyota has recently announced it will not be renewing its contract with Tesla Motors for its Rav4 EV components, and will instead be focusing on its fuel cell efforts.The OEM also announced it has given a loan of US$7m to FirstElement Fuel, as part of a collaboration to help build hydrogen fuel stations in California.

GM’s Thiesen, however, sees a combination of affordability and infrastructure availability helping with the deployment of FCVs: “If we want to bring these cars to the market as an industry, I guess the most important aspect is to make these cars affordable for more customers within an available infrastructure region. This maximises the deployment and strengthens the infrastructure in the sense that the single refuelling stations will enjoy high volumes of traffic, which means that the investment pays off much more quickly.”

It is unlikely that by 2020, there will be widespread deployment of FCVs, but in parts of the US, parts of Europe, Japan, and South Korea, volumes will grow. More OEMs are likely to make vehicles available, and will be increasing their production numbers.

However, this will only happen with an appropriate infrastructure in place. At the moment, baby steps are being taken to develop said infrastructure, but if OEMs, suppliers, and government bodies want FCVs to be a success, those baby steps quickly need to become major strides.

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EMOBILITY

How wireless charging

could increase EV sales

Qualcomm’s Anthony Thomson tells Megatrends why he believes wireless charging will help boost the EV market

By Rachael Hogg

D

espite early optimism in the mid-to-late 2000s regarding the potential for a future electric vehicle (EV) market, sales continue to disappoint, with many OEM EV programmes continuing to operate well short of initial targets. Numbers are steadily increasing though, as new EV models begin to increase consideration. In the past two years, global EV sales have quadrupled, from around 45,000 vehicles in 2011, to more than 200,000 in 2013.

However, looking at overall vehicle sales, consumer uptake of EVs has been limited to less than 1% in nearly every market. In certain markets, fiscal incentives are driving sales. In Norway, EV buyers are offered an incentive of around €11,500 (US$15,600) per allelectric vehicle, about 55% of the vehicle’s base price, and in the Netherlands, incentives stand at around €38,000 for a plug-in hybrid EV (PHEV), around 75% of the vehicle’s base price.

Despite these incentives, which are widely agreed to be unsustainable over the long term, range and charging infrastructure have continued to present bigger barriers to the mainstream uptake of EVs. However, Qualcomm believes it has the answer. The San Diego-headquartered wireless charging technology supplier believes wireless charging will turn the EV market around.

The limited range of EVs has always been an issue, but instead of plugging in at a motorway point for 30 minutes, or overnight at a consumer’s house, Qualcomm eventually sees lanes on highways where a car can pick up power as it drives.

Anthony Thomson,VP Business Development and Marketing at Qualcomm said, “This

54 | Megatrends

would completely remove range anxiety and give a car virtually unlimited range. Then potentially, battery size could come down.”

However, to get to this point, there will need to be several steps in-between. There is the possibility for slower dynamic or semidynamic charging first. This could take place at long taxi ranks where vehicles are continually crawling forward, at traffic lights or in congested city areas. Thomson said, “You could imagine the roll-out of charging at traffic lights, or in cities where cars stand still for five or ten minutes.”

Static wireless charging

Before getting to this stage however, there will need to be a rollout of static wireless EV

charging, which Qualcomm envisages could be commercially available in as little as three years. Thomson said, “Most of the top tier OEMs producing EVs have some level of activity, whether at R&D level or advanced engineering moving into series production.

We’re confounded by the fact that EVs are bridging between series and advanced engineering, and quite a few parts haven’t made it to series yet, so it’s not straightforward. In the press, senior executives from OEMs have said that in five years’ time, there may not be a plug-in hybrid, and it will all be wireless charging. So the earliest production date is sometime in 2017.” However, details about collaborations are kept to a minimum. Qualcomm said it is working with OEMs and suppliers, but only automotivemegatrends.com

EMOBILITY named Renault, with which it has been working for years on ways to trial the technology, find out about user experience, and the safety systems required.

Qualcomm believes that wireless EV charging could revolutionise the industry. The system works through inductive power transfer, with one pad on the ground, and one on the vehicle. Thomson explained, “You have a power supply and a pad, and create an oscillating current in them at a very high frequency of 85kHz. You take the power out of the grid at 50/60Hz, and take it up to 85,000Hz which creates a very dense magnetic field. You don’t want the field spraying everywhere, so it needs to be controlled.When you put the coil into it that is mounted on the vehicle, you induce a current in the coil at a high frequency, but need to lower it to an appropriate frequency.

Most battery chargers feed batteries with DC, and you convert the energy into DC and feed it off the batteries.”

Having to precisely align the car would defeat the purpose of wireless charging, says Thomson; in theory, providing a vehicle is parked within a defined area, it should charge.

This is dependent on several things however, including the type of magnets used, and the size of the pads. “We’ve got the system operating at around 150mm in the X and Y direction,” said Thomson, “so it gives quite a big operational area where you can get full power and efficiency.”

The overall view is that wireless charging would be much easier for consumers, who would generally be charging their vehicles once or twice a day. Thomson said, “It will make the EV a better user experience.”

Money, money, money

The question of who will pay for the installation of charging infrastructure is almost as much of an issue as the availability

of the infrastructure itself. There is continuing debate over whether the cost should be charged to the consumer, picked up by the OEM, paid for by a charging operator, or be supported by governments and local authorities. Thomson said it would depend on the location of the charger: “Our theory is that the car would come with a charger to use at home, so the cost would be on the consumer. At the work place, it would be an employer or building owner, at a supermarket it will be the owner, but in public it is back to the charging operator.” In other countries, Thomson envisages entire networks owned by the power generator.

He said, “In Europe and the US, I think the charging network operator would be predominant, but it would be utilities in other markets.”

The current state of EVs

Although EV sales are starting to pick up now, there is still a combination of factors which prevent this growth from being significant. “It’s a combination of legislation and having governments accept we can’t continue with levels of pollution and emissions,” said Thomson. “The cars are too expensive, especially when you look at the limited nature of features and performance when compared with a petrol or diesel vehicle. Cost needs to come down, and charging infrastructure is lacking. There’s a false impression from OEMs that charging will happen at home, but this is changing.”

Although there is a need for EV charging infrastructure, Thomson says that the plugin bollards cause significant “visual pollution”, something else which could easily be overcome with the introduction of wireless charging.

Efforts are being made to change the perception of EVs, through initiatives such as Formula E. These show that EVs can deliver high-performance, and be cool, rather than odd and unsightly. “The media needs to

debunk some of the myths around EVs, and there is still an underlying feeling that they are inferior vehicles. We need to get across that they are superior in many ways, and in the right environment, with the right use case, they far exceed an ICE. For commuting, the vehicle is very fit for purpose.”

Although EVs are perfectly acceptable for commuting distances, many people cannot afford a commuting car and a long-distance vehicle also.Thomson said, “There is a worry that you spend the same amount of money as an ICE and end up with an inferior product.” Purchasing a fuel cell vehicle would overcome the range anxiety, but Thomson thinks there are even more concerns with an FCV: “There’s a joke that hydrogen is the fuel of tomorrow, and will always remain so. In theory, hydrogen is good, but in practice it requires huge infrastructure, and sophisticated and expensive systems. I can’t help thinking that an EV is a better proposition if you can have a big enough battery that you can move around off the grid, and an infrastructure that allows a longer range.”

Realistic expectations for EV sales figures are quite good, and Thomson said that German OEMs are increasing EV production to keep up with demand. The technology is still relatively new, and according to Thomson, “you can’t expect everybody to leap at it, but an EV with a small battery, and an on-demand energy supply is high-performing, cheap to run, and cheap to maintain.” While EV sales may not have matched analyst predictions, Tesla, for example, has proven with its Model S that by addressing the common concerns about EVs, the car becomes “a phenomenal proposition, but at a cost.” Tesla has overcome issues of styling, and crucially, of range. So perhaps that is the answer: remove the hassle of plugging in, and eventually remove the hassle of waiting to charge at all with dynamic charging, and EVs could finally have their moment.

Qualcomm is a Founding Technology Partner of the FIA Formula E Championship, and will supply its wireless EV charging system and new connected fan experiences

automotivemegatrends.com

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EMOBILITY

EV retail – what’s needed for success?

Elon Musk's direct sales approach for Tesla has raised numerous questions for the mainstream OEMs, especially those selling EVs. By Megan Lampinen

T

esla has been grabbing headlines and stirring up debate with its insistence on a direct sales approach for its all-electric vehicles. In one of Chief Executive Elon Musk’s more recent blog postings on the subject, he brought up a number of reasons why the traditional franchised dealer approach did not make good business sense for vehicle manufacturers of electric vehicles (EVs). Not surprisingly, these arguments have proven as contentious with some camps, as many of Tesla’s other business strategies have.

Conflict of interest

To begin with, Musk claims that automotive dealers “have a fundamental conflict of interest between promoting gasoline cars, which constitute virtually all of their revenue, and electric cars, which constitute virtually none.” Not only that, but it is simply “harder to sell a new technology car from a new company when people are so used to the old. Inevitably, they revert to selling what’s easy and it is game over for the new company.” The new company in this case is Tesla or another EV start-up.

Anil Valsan, Global Lead Analyst at EY, sees EV retail “not as a conflict of interest as such but more as a challenge. Difficult because it takes a lot more investment in terms of time, coaching of the customer, convincing them, etc. The playing field can be levelled if the

56 | Megatrends

dealers are properly compensated and supported for selling EVs.”

Russell Hensley, Associate Partner in McKinsey’s Automotive Practice, believes EVs could prove useful in attracting new buyers to dealerships. He told Megatrends: “Certainly short term it [promoting EVs] could be advantageous for dealers as it would diversify the potential segments to which they would appeal. Customers for gasoline cars and EVs will, in the short to midterm, likely come from quite different customer segments.” He went on to add: “Net-net the selling price for EVs is greater than that of gasoline cars, so fewer would need to be sold for the same revenue.”

Bernard Lycke, CECRA’s Director General, told Megatrends that he “strongly disagrees” with Musk’s comments. CECRA represents the interests of automotive dealers and repairers in Europe. “Dealers are selling what is put on the market by the manufacturers.

They receive (and have to pay) very extensive and expensive training which allows them to be able to sell (and to repair) the products that they are selling,” he explained. “Their remuneration is based on the margin system; therefore if the margins that Tesla would propose, would be in conformity with the normal uses, there should not be any problem to motivate dealers to sell Tesla products which are in addition attractive cars.”

General Motors has also expressed satisfaction with the current retail model used for its own electrified vehicles. “We sell EVs successfully through our existing retail network – Volts and Spark EVs through Chevrolet dealers and the new ELR through Cadillac dealers,” a spokesperson told Megatrends. ”Our dealers have made significant investments in their facilities and in training their personnel to provide whiteglove treatment to EV customers.”

Karl Brauer, Senior Analyst for Kelley Blue Book, had this to say: “Traditional car dealers are driven by the same motivation that drives Elon Musk – profit. If dealers see far more demand for traditional cars priced between US$15,000 and US$35,000 than they see for pure electric cars priced between US$35,000 and US$110,000 it’s not Space X science to assume the US dealer body will build its business around traditional cars.”

Aftersales and service

Another key area of concern flagged by Musk involves aftersales and services. He notes that EVs inherently require less service than traditionally powered vehicles, meaning dealers stand to make less profit on that side of the business: “An even bigger conflict of interest with automotive dealers is that they make most of their profit from service, but electric cars require much less service than gasoline cars. There are no oil, spark plug or automotivemegatrends.com

EMOBILITY

fuel filter changes, no tune-ups and no smog checks needed for an electric car.”

Musk goes on to indicate that profiting from the provision of service could be unethical, and that he has “made it a principle within Tesla that we should never attempt to make servicing a profit centre”. This is followed by a comment that “overcharging people for unneeded servicing (often not even fixing the original problem) is rampant within the industry.”

KBB’s Brauer told Megatrends “Service requirements are theoretically more expensive for traditional cars versus electric cars, but not enough to make up the difference in up-front purchase price. And in reality electric cars aren’t always as low maintenance as they claim to be. Many of them have been recalled or suffered unexpected failures. A sweeping statement about rampant, unnecessary service charges on traditional cars is as accurate as most sweeping statements.”

CECRA’s Lycke concedes that “EVs generate less aftersales, but less does not say ‘none’ and this argument is valid for all EVs and not only for Tesla. And we see that EVs from other brands are sold by dealers.”

Hensley noted: “Some of the systems on EVs will likely require less service, e.g., electric motor. Given the different economics in terms of total cost of ownership, a different value proposition will need to be conveyed by the dealer.”

EY’s Valsan believes dealers should look at other areas to compensate: “If they lose out on service they can offer other services to compensate, such as diagnostics, charging equipment, etc.”

Recalls

Another key area under dispute involves recalls. Tesla’s Musk, who squabbled with the National Highway Traffic Safety Administration (NHTSA) last year over the use of the word ‘recall’, prefers to fix faults wherever possible via over-the-air updates.

“All Tesla Model S vehicles are capable of automotivemegatrends.com

over-the-air (OTA) updates to upgrade the software, just like your phone or computer, so no visit to the service centre is required for that either,” Musk notes.

Whether this is called a ‘remedy’, as Musk prefers, or a ‘recall’, NHTSA’s term of choice, the time will eventually come when a fault arises. National Automobile Dealers Association (NADA) Chairman Forrest McConnell recently highlighted the importance of dealers when it comes to recalls. “When something goes wrong on the assembly line, vehicle manufacturers turn to their franchised auto dealers and the dealerships’ service departments to make things right – all at no cost to the customer.

The franchise system is a network that consists of more than 17,700 new-car dealerships across the country which support their customers beyond the point of sale.”

He goes on to note that effectiveness in handling vehicle recalls was “one of the important reasons why state policymakers adopt the franchised dealer system for the distribution, sale and service of new motor vehicles.” The wide distribution and service channels of franchised dealers can respond to recalls faster and more efficiently than a single manufacturer or factory store, Forrest believes. “The franchised dealer network will always be a model that benefits both our customers and manufacturers alike. And it’s a network that is irreplaceable.”

Breaking the rules

Overall, dealers may need to adapt.

McKinsey’s Senior Partner Hans-Werner Kaas observed: “Dealers cannot oppose fundamental forces of market trends long term, and dealers will need to find a business model which works including economics if the product mix shifts more to EVs.” EY’s Valsan believes that changes are needed in today’s retail model to adjust for the special requirements that EVs pose: “The current sales model itself doesn’t necessarily work. It requires a lot more hand-holding with the customer, less of a sales pitch and a

lot more support. From a sales model perspective, that will need to evolve.”

However that model evolves, Tesla wants permission to do its own thing. It most recently attracted the support of top executives at the Federal Trade Commission. In a blog posting, three FTC executives backed Tesla’s retail strategy on the grounds that consumers are shopping in new ways today and that varied approaches aid competition.

Some OEMs, GM included, say they support market competition in general but want to ensure that the regulations are applied equally to all industry players. A spokesman for GM told Megatrends: “General Motors believes that competition is healthy and welcomes all competitors, including Tesla.

However, we feel that all vehicle manufacturer should be required to play by the same rules in the marketplace.”

While Tesla’s dealer battle is centred on the US, few other OEMs have chosen the direct sales approach in Europe. “In Europe, the distribution of cars is still made via the networks of the dealers.There are of course also manufacturer-owned dealerships but they are still an exception (approximately 3% of all outlets) rather than the norm. In general, existing manufacturer-owned dealerships in Europe often serve as a solution for high-cost metropolitan areas and/or as marketing and retail laboratories,” observed Lycke.

The situation varies between European countries, with domestic OEMs in France and Germany traditionally investing more heavily in directly-owned dealerships. As a result the share of manufacturer-owned dealerships there is relatively high – 18% in France and 14.5 % in Germany. However, in Italy and the UK the share of manufacturer-owned dealerships is much lower at about 7%.

“As for the general trends, I can only say that, at present, there is little evidence to suggest manufacturers are moving extensively into wholly-owned networks,” Lycke concluded.

Megatrends | 57

POWERTRAIN INNOVATION

Will changes in F1 reach cars on Highway 1?

Rudolf Hart asks whether motor sport can ever be truly relevant to passenger vehicles

A

raft of technologies, aimed at making Formula One more efficient and more relevant to road cars, arrived on track in 2014. The changes brought significant challenges that stretched the imagination of engineers up and down the pit lane. As a result, the niche supplier base that serves F1 was called upon to provide knowledge and expertise to overcome these challenges. But the question remains: can what goes on track ever be truly relevant to passenger vehicles?

As the first Formula One cars turned a wheel during the 2014 test sessions at Jerez and Bahrain, engineers, drivers and mechanics were witnessing the outcome from the biggest set of F1 rule changes in a generation.

Gone were the high-revving 2.4-litre naturally-aspirated V8s, replaced by smallercapacity 1.6-litre turbocharged V6 engines with a fuel limit of 100kg (around 135 litres), ushering in an era of efficiency that had been years in the planning.

Some ten years ago, Max Mosley, whilst head of the sport’s governing body the FIA, predicted that the OEMs participating in the sport were spending too much and would leave. Inevitably, he was right; BMW and Toyota left, and Renault became solely an engine supplier. Honda also sold its F1 team, though it too is set rejoin as a pure engine supplier next year. A series of consultations ensued on what the future of F1 should be, with input from manufacturers both in and outside the sport.

Naturally, it wasn’t easy to get consensus among vehicle manufacturers, but with an eye very much on what was happening on the road, the outcome was a small capacity fourcylinder turbocharged engine. Progress was slow even after the decision was made, not helped by Mosley’s infamous departure from office, but eventually agreement was reached.

58 | Megatrends

There was, however, one further change to those plans: a switch to a V6, favoured by Ferrari for relevance to its road car range and promoter Bernie Ecclestone, who feared a ‘four pot’ wouldn’t deliver the expected aural spectacle.

The 2014 rules ushered in other changes that would be of equal relevance to their road car powertrains’ brethren. Eight-speed transmissions appeared, primarily to cope with the rises in torque from the hybrid aspects of the ‘power unit’, no longer called an engine thanks to its hybrid make up.

KERS, the kinetic energy recovery system used by F1 since 2009, underwent a rebirth and is called ERS-K (Energy Recovery System Kinetic).

Today’s systems now have twice the power output and around five times the energy storage of the previous system. ERS-K was joined by a new energy recovery technology called ERS-H. Standing for Energy Recovery System – Heat, it is mounted on the engine's turbocharger, providing the ability to spin the turbo up (to a maximum of 100,000rpm) itself to reduce lag or, deliver recovered energy

back to the engine via the ERS-K. Brake technology also advanced, with brake-by-wire becoming popular due to the increased performance of the energy recovery system, which requires much greater variations in rear wheel braking torque than before.

The complexity of the power units could not be underestimated and, despite hours of dyno running, only when packaged snugly in the tight confines of a carbon fibre F1 chassis did the magnitude of the challenge become clear.

Seemingly perennial

The Renault Energy F1 V6 Power Unit

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POWERTRAIN INNOVATION

champions Red Bull endured some of the toughest running problems during testing.

Like many of the teams, it suffered reliability issues, such as heat from the exhaust damaging the delicate carbon fibre that is almost shrink-wrapped around the engine.

The gradual migration of F1 tech to road cars

In an anonymous Oxfordshire industrial estate, a bright light shone and continued to shine for 24-hour periods in those early months of 2014. Zircotec, a technology spin-off from the UK’s nuclear industry, is a specialist in plasma-spraying. This niche process uses a gas torch to fire a range of powdered ceramics or metals at twice the speed of sound.

Zircotec’s coating technology was originally used in pipework around nuclear reactors but today the automotive and motorsport markets make up around 70% of its turnover.

The attraction for F1 is Zircotec’s ability to prevent heat

automotivemegatrends.com

damage to composite materials, offering the ability to lower surface carbon temperatures by over 125 degrees Celsius.

Its ThermoHold coating is relied upon by the F1 fraternity for body work, brake ducts and engine heat shields, enabling engineers to package composites close to heat sources such as turbos.

This was no more true than at the start of the 2014 F1 season. “The sheer complexity of the new power units and the heat management has led to technologies like Zircotec’s becoming crucial to the reliability and to some extent the performance and reliability of the cars,” says the supplier’s Managing Director, Terry Graham. “We have been working with designers and engineers for the past two years to design in our technologies, optimising packaging and extending the life of composites. As a technology that is just 300 microns thick, we can usually offer an additional valuable air gap that lagging or sheeting cannot.”

As with other aspects of motor racing, it is often asked whether the sport truly improves the breed; Zircotec believes it does. It cites the

migration of its ThermoHold for Composites into OEM manufacture, and explains that Aston Martin’s One-77 used the exact same coating on its diffuser and under-hood air intakes to protect composites from damage.

Graham also cites another of its products, ZircoFlex, a thin flexible aluminium/ceramic platelet heatshield. Most F1 teams, he says, use it to solve problems in the field, and it is now also making its OEM debut.

A Tier 1 supplier has found the 0.25mm thin self-adhesive material to be the ideal method for solving a heat issue for a vehicle currently in mass production. “Despite rigorous testing and development, it is possible for problems to occur in the field, often requiring complex tooling changes to solve,” claims Graham. “Just like in F1, we have been able to resolve this issue – it can be a long- or short-term fix, but we have enabled production to continue and minimise further failures in the field.”

Graham is keen to highlight that the introduction of new powertrains is exciting the motorsport engineers and whilst reliability is key, they are already looking at ways to find performance in other areas that could equally have some relevance to road vehicles. “There has been a rise in motorsport in the use of carbon fibre in electronics systems, notably for junction boxes and supporting looms,” he says. “This can be particularly useful when looking to improve EMC performance. Zircotec has been developing a highly conductive surface coating that can be applied to composites or materials. We sense that this may be of interest for EV and hybrid powertrains. As many look to increase the use of composites to improve efficiency and range, our coating could be a good way to solve electrical interference problems without a weight penalty, something OEMs are increasingly keen on.”

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To learn more about Garmin solutions customized for your business, contact your Garmin Automotive OEM Sales Rep, visit Garmin.com/infotainment or email Mkt.Autooem@garmin.com

©2014 Garmin Ltd. or its subsidiaries

POWERTRAIN INNOVATION

Indian transmission manufacturers face control system challenges Mike Savage, Chief Engineer at Drive System Design, works closely with a number of Indian companies and reflects on the challenges they face acquiring new skills to meet market demand for increasingly sophisticated products

I

ncreasing demand for automated and semiautomated transmissions in developing markets such as India presents new challenges for local suppliers and OEMs. Having made the transition from supplying on a ‘make to print’ basis to full Tier 1 status, transmission suppliers must now master the issues surrounding control system engineering, while local OEMs must compete with joint ventures supported by know-how from overseas partners.

The appetite for technologies such as AMTs (automated manual transmissions) is fuelled by a combination of factors.The convenience of automatic shifting makes driving less tiresome in crowded urban conditions, but the high cost of fuel deters buyers from choosing a conventional torque converter automatic. It is also in the manufacturers’ interests to develop AMTs because it provides an automatic option that can be delivered using existing manual transmission manufacturing facilities.

automotivemegatrends.com

The new Maruti Suzuki Celerio, with its AMT branded as EZ Drive, is one of the first to reach the market; other OEMs include Mahindra, which has launched the Quanto autoSHIFT, and Tata, which has announced that it will soon make AMT available on all models. All promise the fuel economy of a manual transmission with the convenience of an automatic.

One of the keys to market acceptance lies in effective control of the AMT, including design of the shift control algorithms and strategy, implementation of each shift event and calibration of the software to suit a range of different operating conditions. Though the Indian automotive industry has considerable software expertise, direct experience of engine and transmission control systems is scarce. Few engineers in the region possess the practical calibration experience required to structure a suitable

development programme and deliver a robust and validated solution.

Local companies without the support of experienced partners are investing in technology transfer from specialist engineering consultancies, in order to grow their capability in this area.Their initial goal is to secure market share within their domestic region but, in the longer term, the expertise gained will support a thrust into more mature export markets. In this respect, Indian manufacturers have much in common with those from other developing markets, such as China.

AMTs also have great appeal to heavy vehicle operators, where in Europe, USA and Japan it is now the norm to specify such a transmission in heavy trucks and buses. The systems are proven to save fuel and reduce whole life costs as they also help prevent driveline damage from driver abuse. The Indian market is still focused on initial purchase price, so AMT sales are limited to specialist imported vehicles, but all Indian truck makers have AMT development programmes in process. It’s only a matter of time before AMT-equipped trucks will be seen on Indian roads.

Megatrends | 61

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POWERTRAIN INNOVATION

Want to improve truck mileage and cut emissions? Just add water!

Fierce Fuel Systems proposes mixing diesel with water to improve truck fuel consumption by 20%, and reduce emissions by the same amount. Martin Kahl investigates

automotivemegatrends.com

Megatrends | 63

POWERTRAIN INNOVATION

T

hanks to advances in diesel engine technology, new medium and heavy duty trucks have never been as clean as they are today. These developments, however, count for nothing for the millions of older trucks on the world’s roads. Over time, the older vehicles will come out of circulation, but that could take decades; in the meantime, those vehicles’ emissions and fuel consumption continue to take their toll on the environment - and on fleet operators’ bottom lines.

mix diesel and “water?Why Easy: improved emissions and better fuel mileage

A small company headquartered in the shadow of the Chrysler Technical Centre in Auburn Hills, Michigan, may just have the answer to this problem – and it’s an unexpected one.

Fierce Fuel Systems proposes mixing diesel with water for increased fuel mileage of up to 20%, and a significant reduction in emissions.

“Diesel-water emulsion is not a secret - it's been around since the 1930s,” explains Fierce Fuel’s President and Chief Executive, Louis Conti, “but it's been plagued with a number of operational issues. The main challenge is keeping the fuel emulsified for an extended period of time, which has always required a relatively high volume of surfactant to keep the emulsion in suspension. Specifically, the varying size of the fuel encapsulated water bubbles has provided cause for concern.” The technology may have been around since the 1930s, but to date diesel-water emulsified fuel has been produced in large quantities using land-based processing systems with three-phase motors that burn energy quickly.

Furthermore, adds Conti, the cost of creating emulsified fuel was more expensive than straight run fuel.

Several factors enable Fierce to overcome these challenges. Firstly, Fierce uses a patented vacuum-based production process that reduces the fuel to vapour and reconstitutes it along with the entrained water and chemicals added by the refinery.

Secondly, in order to reduce energy and transportation costs, Fierce’s systems - the X1and X2O - use 12 volts DC, drawing power from the battery bank. “We're able to use that energy from the alternator, which is

64 | Megatrends

- Calvin Visser, COO, Fierce Fuel Systems

10 micron water bubbles surrounded by molecules of diesel fuel (2500x magnification)

already being driven,” says Conti. Thirdly, Fierce produces its diesel-water emulsified fuel in micro batches. Historically, emulsified fuel has been produced in very large bulk batches, and stored in underground tanks.

Doing so causes numerous problems, including separation of the diesel and water; the natural occurrence of atmospheric water entering the mix inside in the tank; and of course, transporting the fuel from the tank to point of distribution.

“We've developed an on-board system, and we meter the water and fuel in. We blend it in micro batches, using our technology, and include an emulsifier,” says Conti. “We sequester the return fuel to prevent it getting back into the truck’s tanks.”

Adding water to fuel seems counter-intuitive.

Does this not dilute the fuel, effectively eliminating a similar percentage of the diesel’s potential?

Conti accepts the reasoning behind the question, and responds with confidence: “There is of course a loss of potential energy with higher water ratios. However, units never use 100% of the power available.

Losses are negligible. We've had customers with brand new trucks driving six miles straight up the side of a 6% grade mountain, on 30% water, without noticing much of a difference in performance while using less fuel and cutting 20% in EGR temperatures.”

At this point, Fierce Fuel’s Chief Operating Officer, Calvin Visser, interjects: “Why mix diesel and water? Easy: improved emissions due to lower combustion temperatures and better fuel mileage. And we can do that very consistently. Independent third party testing shows an almost linear impact: if we add 30% water, we're saving about 27% of fuel, and that's on a chassis dynamometer.” The Fierce system uses precise ratios of water and fuel, along with a very small dose of emulsifier while processing.

Chassis dynamometers measure constant load, rather than real world performance.

“We see that, when you begin to extrapolate the data, actual fuel savings will be greater because of the times when drivers coast as opposed to driving on constant throttle, as would be tested on a chassis dynamometer.”

In Conti’s view, testing on a chassis dynamometer is a worst case and non-biased controlled scenario.

The process of emulsification takes place onboard the truck, requiring the fitment of specific equipment.The X1 and the imminent X2O, the two systems currently being promoted by Fierce, are intended for trucks already on the road. The X1 can be used on all trucks, while the X2O is designed for nonhigh pressure common rail (HPCR) vehicles.

Conti explains why Fierce is targeting the aftermarket. “Newer engines use HPCR systems. The X1 emulsifier unit has a logical solution that helps keep the paraffin and entrained water from condensation, and chemicals added by the refinery in the fuel are freshly blended into a homogeneous mix so that when it goes into the high pressure common rail, there's no risk of free water.”

Free water in this sense means the uncontrolled quantities of water in the fuel; this is one of the causes of the complaints about fuel quality in the US and thus one of the greatest challenges to high-tech engine component manufacturers; indeed, concern is such that the senior executives from Bosch, Continental, Delphi, Denso and automotivemegatrends.com

POWERTRAIN INNOVATION

Stanadyne signed the Common Position Statement of the Joint (FIE) Manufacturers in March 2012 outlining their concerns, and stating that “minimum standards of fuel quality are essential to maintain durability and emission compliance over a longer duration.”

Boasting a 50,000sq-ft facility with a laboratory, assembly area and warehouse, Fierce differs from other small companies with breakthrough technologies in that it does not license its technology – it manufactures its own products.

Fitting the X2O the system takes three hours, with no modifications required to the engine, meaning that the engine can continue to operate with standard diesel fuel when desired, and is the default condition when the system is off. “The whole point is that the diesel-water emulsified fuel only enters the engine when the truck has reached the correct operating temperature,” explains Visser. “300 gallons of diesel would require 50 to 60 gallons of water, and another smaller tank of emulsifier. We run it all through an integrated control system that we put behind the cab.” Fuel delivery is controlled by a series of valves, and significantly, the controller or driver can switch back to ‘pure’ diesel automatically or with the press of a button on the touch screen display in the cab.

“Fuel accounts for the largest part of any trucking company's standard cost,” says the company’s COO. “Trucking companies in the US operate on fairly thin margins, so a 20% saving means anywhere between US$800 and US$1,200 a month per truck, depending on driving conditions and loads, that can go directly into that fleet’s bottom line, or be reinvested to improve profitability. We see that as a compelling argument for older trucks, not to mention the fact that we're reducing emissions as well.”

The savings have been highlighted; how about the cost of the system? “The unit's going to cost US$13,500 for the water emulsion system,” says Visser. “The return on investment is ten to 18 months, depending

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on miles driven. It's a very compelling business case for a fleet owner or independent operator.”

One of the concerns with any technology which requires a system to be added to a vehicle is the weight of that system. “Both units weigh about 200-240lbs (90-110kg),” explains Conti. “Then you add the weight of the water, at 8lbs a gallon, and you could be looking at 500-600lbs including the water unit.” However, the weight of the water is equal to the diesel that has been saved, so essentially the added weight is around 240lbs.

“The weight makes less of an impact in performance, but it’s a consideration for those hauling close to their legal limit,” adds Conti, “but when you're looking at a vehicle that typically moves 80,000lbs, it's not significant.” And it’s for the heavy-weight long-haul applications that this diesel-water emulsion system is intended: although dieselwater fuel has been used for many years in numerous applications, including industrial and marine, Fierce Fuel is focusing on trucks.

“The form factor for our design and the technology that we control lends itself to smaller engines. The system is flexible and can be used on anything under 30-litres,” says Conti.

This tees up our next question: can this technology be applied to light duty vehicles?

“We can do it on a half-ton pickup. We can do it to a Volkswagen Passat. We can do it to any diesel engine, even a single cylinder generator,” says Visser,“but we'd rather target it at long haul, over-the-road applications at this time with other units in development for smaller commercial vehicles in the three to 10-litre range.”

The fuel system must be purged of the diesel-water emulsified fuel before the engine is shut off, something that Conti suggests would quickly become part of the driver’s routine, or can be handled automatically by the system controller. “It takes about three to 15 minutes in most cases and is a function

of a vehicle’s specific engine and driving conditions.”

So, how close is Fierce to putting this into series production? “We have trucks trialling the technology.We're currently in the process of starting mass production, and we do have commitments from a few fleets,” says Visser, adding that Fierce Fuel is poised to launch its X1 and X2O products in the summer of 2014.

Fleet managers are faced every day with a catalogue of fuel saving, emissions-reducing technologies; why should they invest in Fierce Fuel technology?

Conti takes this question: “Aerodynamic solutions, so far, have been the easiest plum to pick, but they offer diminishing returns.You can add aerodynamics to the truck for a small gain, and then add skirts to the trailer and maybe save a little more, but add the two together and you might still only see a small cumulative value.We're offering a production system that provides a fuel improvement straight away of between 17% and 22% while under continuous load. Imagine what you can then do when you begin to add all the other things, like technological and aerodynamic improvements.”

Selling green technology is not as easy as selling technology that offers an immediate financial benefit, and Conti returns to this theme as we wrap up. “It can cost US$30,000 to upgrade an existing truck to new technology that meets today's emissions standards or go with an alternate fuel such as CNG or LNG. For US$13,500, you can get 80% of the way there and save money on fuel.” Furthermore, he adds, diesel-water emulsions are well documented by a number of universities, large corporations and government agencies.

Installing an infrastructure for alternative fuels is a slow, costly undertaking, and considerably more complex than finding somebody who sells diesel fuel and water, concludes Visser. After all, he adds, “clean water is commonly available.”

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Life beyond Euro VI

Meeting Euro VI requirements has been tough for the truck industry.Will it even be possible to meet the next round of commercial vehicle emissions regulation – for now referred to as Euro VII? Rachael Hogg discusses life after Euro VI with Federal-Mogul’s Gian Maria Olivetti

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t is hard to imagine now, that only 21 years ago, there was no European emissions legislation. It was in 1993 that the Euro I levels were introduced, and these standards were achieved with small incremental changes. Fast forward to 2014, and OEMs, Tier 1, and Tier 2 suppliers are continually battling with the ever tightening emissions legislation. Between Euro I and Euro VI, particulate matter (PM) levels have fallen 97%, and NOx has fallen 95%, but what comes next? Euro VI was tough, but will the next round of CV emissions regulation – referred to for now as Euro VII – be impossible?

In 1992, the industry was prepared with Euro 0, before Euro I the year after, which dealt solely with NOx, HC, and CO. In 1996, Euro II saw the first adoption of a PM limit and all engines were required to meet the same limit levels. Euro III came in 2001, and engines were now required to meet emissions levels on the road. In 2006, aftertreatment was required for the first time, using either Selective Catalytic Reduction (SCR), or Exhaust Gas Recirculation (EGR), and onboard diagnostics required to monitor emission control. Euro V came three years

after Euro IV, imposing further NOx, and PM reductions. Then in 2014, Euro VI came into effect, with the tightest emissions levels to date. To meet the regulations, OEMs have resorted to both SCR, and EGR, with a Diesel Particulate Filter (DPF). How well these technologies are adopted and integrated, will give some indication as to whether OEMs will have a chance in meeting Euro VII targets.

Gian Maria Olivetti, Chief Technology Officer, Federal-Mogul explained to Megatrends that when Euro VII or similar does come into play, the emissions standards will not be much lower than they currently are. He said, “Euro VI, and VIB has been a revolution for cars and trucks, in terms of which kind of aftertreatment should be applied. I think after Euro VI, the focus will be on fuel economy – CO2 emissions, not pollutant emissions. The big challenge will not just be compliance with 95g in Europe in 2020 for passenger car emissions, but I think it will go much further, to 70-75g. That will be the major challenge.”

Euro VII is not yet fixed, but Olivetti said, “as usual, it will be politics and legislation, not just the industry. Five to six years after, there will

be the next step. But, the real big challenge in front of us is what will happen around 2020 to reduce CO2 emissions. It will not be Euro VI.”

There is a serious question over whether OEMs and suppliers will be able to keep making reductions, in whatever shape or form they appear. Euro VI presented many challenges, including a significant increase in the cost of truck chassis, and extra weight.

Olivetti said, “In future, the requirements regarding CO2 reduction and fuel economy will be very challenging in Europe, so I see that as a major problem to us as a supplier – to be able to provide a solution that should be able to significantly help to achieve the target of CO2. The main problems will be CO2, global pollution, and fuel economy.”

Beyond Euro VI

Some OEMs and suppliers are already planning for life beyond Euro VI, and although there will be difficulties, Olivetti believes engine efficiency still has a long way to go: “We still have a great margin to improve the efficiency of the engine, particularly gasoline.

Over the last ten years, gasoline was close to diesel, but diesel is starting to maintain its gap again. The same goes for heavy duty. Today, 42% efficiency is targeted. We have programmes targeting 45% efficiency – complete efficiency of the engine. There are many things that could help efficiency, not just our components. For example, you could use exhaust energy recuperation. Work is going on to recover all the losses in an engine, through the exhaust, or cooling, and to some extent that is easier in heavy duty engines. In the next two to four years, we will see additional devices for recovering energy, and I think there is a great margin for improvement, much more than what we have seen in the past decade, because the focus for heavy duty has been on emissions.”

The standards have affected engines in a number of ways. Fuel injection systems have moved from low-pressure systems, to 66 | Megatrends

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POWERTRAIN INNOVATION

electronic, high-pressure systems reaching up to 2,700bar. Combustion pressure is up; to more than 200bar, and turbochargers are now variable-geometry models, which help driveability as well as meeting emissions standards. And there are the aforementioned complex aftertreatment systems.

What happens inside the engine presents even more challenges. Olivetti said that one way Federal-Mogul can help OEMs and suppliers move beyond Euro VI is to directly contribute to reducing fuel consumption and CO2 emissions by reducing the internal friction of the engine. “We have components, like our new DuroGlide coating for piston rings, IROX, or specific piston design and skirt coating that allows a direct reduction of friction. Friction in the engine still remains one of the areas in which you can still improve a lot of engine efficiency.” Olivetti said that in the future, there will be a need to provide a technology allowing customers to make the calibration required, which will operate at a higher temperature, with higher peaks in pressure, so the environment around the combustion chamber is becoming much more challenging for components in terms of functional performance and durability.

Federal-Mogul offers new materials and new solutions for pistons, like DuraBowl, that remelts in the bowl rim area. There is also a steam piston allowing higher temperature, higher pressure, and the same with the material and coating for the ring and bearing.

Olivetti said, “We are developing solutions that allow our customers to increase the pressure, increase the temperature inside the combustion chamber, and have more freedom in their calibration to reduce friction. Higher pressure, higher temperature, and higher load are all going in the direction to allow for more aggressive combustion calibration, and more aggressive downsizing

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of the engine. All that will give our customer the possibility to further reduce fuel economy.”

Globalisation

Emissions standards have historically been different globally, which has caused problems for OEMs and suppliers. However, Olivetti said that one of the megatrends driving the industry today is globalisation, with OEMs using the same engine platforms around the world. He said, “Many manufacturers are becoming global, so you can find Daimler trucks everywhere around the world, including China.” The World Harmonised Heavy Duty Cycle also aims to balance emissions legislation between Europe and the US. Olivetti said, “It is not adopted by North America, because the US still has some concerns.They want to use their own way to measure the engine.

“Looking to the next step, there are many engines common between Europe and the US. Volvo engines are made for Europe and North America, and Daimler. Many heavy duty trucks in North America have European designed engines, so I think there will be a lot of pressure from OEMs to have the World Harmonised Cycle adopted in North America too.This will maybe come into effect around four years from now.”

There is currently still differentiation from country to country in the heavy duty market.

Some countries still operate on the equivalent of Euro IV, which Olivetti said requires completely different products to Euro VI: “For Euro VI there is a certain refinement of the product and the challenge for the next engine is different. For countries where it [Euro VI] will come in the next few years, like India and China, we start to apply some advanced technology.” This technology is not the same as Europe and the US however, because their use of aftertreatment is not so diffused. Olivetti envisages that in four years’ time, the technology will be broadly aligned, more or less, everywhere, as companies in countries like China are already asking for the next generation legislation that will be implemented in around four years, bringing them in line with Europe.

A date has not been set for Euro VII, or even a confirmation of name, but 2020 looks likely for the next round of emissions standards.

Not much, if anything is known about the standards, but industry experts are predicting that the next round will focus more heavily on CO2 emissions, rather than pollutant emissions, which have been significantly cut by almost 100% since the first regulations in 1993. Euro VI was tough for OEMs and suppliers, and Euro VII is set to be even tougher.

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Eaton’s supercharger rollout gathers pace

POWERTRAIN INNOVATION

Eaton’s Jeff Schick talks to Megatrends about how superchargers can help meet performance criteria whilst still enabling OEMs to achieve tightening fuel economy targets

By Martin Kahl

T

he term ‘supercharger’ may currently be drawing media attention as Tesla rolls out its electric vehicle (EV) charging network, but those outside the EV world will have a different understanding of the term.

Eaton, a leading global supercharger supplier, describes a supercharger as “a device used to force more air into an engine”. Force air into an engine, and combine it with increased fuel delivery, and greater power can be derived from the engine. The difference with turbocharging is key: while turbochargers are driven by hot exhaust, superchargers are mechanically-driven.

Although it sounds like an advanced technology, supercharging is not restricted to super cars. Eaton offers a broad range of supercharger applications, from 1.2-litre engines and small vehicles through to 6.2-litre engine applications and performance vehicles,

Supercharging is not used exclusively – there are numerous cases of supercharging and turbocharging being used in combination, usually where downsized engines require higher output, or when they are used across additional vehicle platforms. “We're seeing compound boosting as a trend in the marketplace, and here the supercharger

technology is very applicable,” says Schick, who has responsibility for managing the business unit globally, including engineering, marketing, sales, and the advanced manufacturing-related process technology for the production of the product as well.

“In terms of fuel economy and downsizing, many engine manufacturers think about alternative combustion processes. They're reverting to things like the Miller cycle technology versus the auto cycle, and the Miller cycle uses late intake valve closing, which helps eliminate pumping losses in the engine. When you do that, you lose some power performance. In order to overcome that loss of power, boosting, specifically supercharging, is very applicable.” Eaton has recently highlighted the Nissan Note as an application where Miller cycle technology, using its supercharger in a 1.2-litre engine, has enjoyed considerable success.

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explains Jeff Schick,Vice President and General Manager for Eaton's Supercharger Division, which sits within Eaton’s Vehicle Group. “The device is used to improve transient response and acceleration, especially in high power density applications. High horsepower or kilowatt-per-litre engines require supercharger boosting technology. As the downsizing of engines occurs and the average displacement of engines continues to be reduced, and those engines are still needed in heavier vehicles, the initial transient response or acceleration is achieved through supercharging.”

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Front cover Bearing plate Rotor housing Inlet port Bypass actuator Integrated bypass valve Outlet port Four-lobed rotors with 160-degree twist Drive pully

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The 2013 Ford Mustang Shelby GT500 was equipped with an Eaton supercharger

Most superchargers are used in vehicles with 2.0-litre engines and above. Eaton’s first supercharger application was used in the 1988 Ford Super Coupe, “and it has evolved significantly since then,” says Schick. “We're now on our TVS-style rotor technology, which has increased efficiency in our device to around 74% - 75%, enabling us to target an increasing number of supercharging applications.” Schick cites as an example the 3.0-litre technology used by Audi, which came into production in 2008; that, he says, was used for both downsizing and fuel economy. “The current trend is to reduce engine sizes, and to be able to use engines across a multitude of vehicle platforms. That requires engine architectures that have a wider range of horsepower and torque requirements.”

Schick’s reference to the first supercharger being offered in 1988 is an interesting one: this is not a new technology, but the rate of

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installation and penetration is increasing.“Even last year, we saw 30% year-on-year growth in terms of unit fitment of superchargers,” says Schick, and that growth is being driven by the need to downsize because of fuel economy and emissions regulations.“Generally speaking, all global vehicle regions are migrating towards 95g CO2/km. In the US, the EPA is shooting for 54.5 mpg by 2025. Regulations are driving engine performance and design.”

With 2025 being such a significant year for powertrain technology in the US, is Eaton expecting an increase in penetration specifically in the US market to meet the 54.5 mpg target?

“Yes,” says Schick. “Right now, the industry is really searching for the right combination of technologies, from combustion techniques to valve train technologies. Eaton has variable valve train technology as well, which is right in the sweet spot of engine air management,

along with boosting technology. The jury is still out on which technologies will be the most widely adopted. I'm convinced it will be a variety of technologies tailored to customer applications and market expectations, for not only fuel economy and emissions reduction, but also driveability.”

However, Schick acknowledges the need to balance great fuel economy and reduced emissions with performance. “If it takes 60 seconds to accelerate from 0 to 60, that's not going to be accepted by most drivers in most vehicles! Some form of boosting or boosting system is required to get that power back when it’s needed.”

Superchargers may have their benefits, but they are up against a range of technologies that can also help increase performance, reduce fuel consumption and lower emissions. What are the main alternative technologies against which superchargers compete? It depends on the application, explains Schick. “Turbocharger and twin turbocharging technology could be viable technologies. It depends on the engine and automotivemegatrends.com

POWERTRAIN INNOVATION

“The 1.2-litre engines are going down to 1.0-litre, and there are even considerations for 0.8-litre engines” - Jeff Schick, Vice President and General Manager for Eaton's Supercharger Division, engine specification, and how the mix of engine combustion technology and boosting architecture can achieve those requirements.”

the engine performance specification. If you're looking at the fuel economy version and the eco version of an engine and an engine family, you might pick a combustion technique like Miller cycle, for which supercharging is required to achieve the low end torque factor that is lost in the Miller cycle. But you still can achieve fuel economy benefits in the range of 3-5% or more.

“If that's what you're looking for in your engine, supercharging is the answer. If you're looking for a mid-specification, mid-power engine in a mid to small vehicle, turbocharging might be the appropriate boosting application.

If you're looking for a high output version of that engine, then compound boosting is the trend. A supercharger at the low end, plus a turbocharger at the high end, is a very palatable boosting solution for engine performance.”

As with any technology, cost is a major consideration. Schick explains the trade-offs to consider when deciding whether superchargers are viable: “It’s a case of examining the target vehicle, the required

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At present, the 1.2-litre engine application on the Nissan Note is at the smaller end of the scale. Eaton shows 1.0-litre applications on its website, but below that, the technology enters the realms of diminishing returns. “It depends what you want to do with your engine,” says Schick.“The 1.2-litre engines are going down to 1.0-litre, and there are even considerations for 0.8-litre engines.”

The adoption of superchargers to date has been somewhat region-specific, with adoption in the BRIC markets slower than in other parts of the world. This Schick attributes to where most engine design decisions are made, namely Japan, Europe, and the US. As those countries prove the benefits of superchargers, vehicle manufacturers in markets like China and India will examine the applicability of those engines and engine architectures, to see how they can help them meet fuel economy and emissions reduction requirements in their countries. “They may be a little further behind in terms of the emissions requirements, but we see a convergence in the range 95g to 120g CO2/km across the globe, in the 2020 to 2025 timeframe,” says Schick. “This technology will also be applicable in those regions, where the drive cycles don’t involve much high speed, but here’s a lot of starting and stopping, or transient type responses. In those applications, the supercharger, along

with a Miller cycle or some more alternative combustion process, is very applicable. Over the next five to ten years, supercharging technology will also be required to meet emissions targets in those regions.”

Supercharger technology is adaptable, not just for different geographic applications, but also for different engine geographies. There is no engine layout for which they cannot be used, says Schick, when asked whether they could be used in opposed cylinder engines, or the three and even two-cylinder engines which are gaining popularity Europe.

“Superchargers are not exhaust gas driven, so they can be used on any engine architecture. There really isn't any [engine architecture] that I would classify as most suitable.” Indeed, in an application where exhaust gas energy is lacking, like a 2-cylinder engine, a supercharger would have an advantage over a turbocharger, he adds.

There’s considerable room for further development in supercharger technology, believes Schick, who says he expects further improvements in performance and efficiency.

“I also see the drive technology moving forward, with technologies like clutch deactivation and boost on demand delighting engine designers, enabling them to really tailor and tune an engine to the drive cycle and driving performance of any vehicle.” A combination of how the supercharger is driven, as well as improvements in the device, concludes Schick, will make superchargers “even more desirable” as engine technologies evolve over the next decade.

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FREIGHT EFFICIENCY

North American fleets wage war on carbon NACFE’s Mike Roeth outlines the most promising opportunities for increasing fleet efficiency and doing so profitably

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he fuel costs faced by the tractor-trailer industry have been swiftly and steadily rising over the past decade (Figure 1). By 2012, fuel costs had reached US$0.641 per mile, as reported by the American Transportation Research Institute, surpassing even the costs for the driver (wages plus benefits).These costs have driven all fleets to include fuel efficiency in their new equipment specifications and operational strategies, but many do not know where to start.

In light of this trend, investment into proven technologies and practices that allow a truck or fleet to increase fuel efficiency – meaning that it can do the same amount of business Avg Annual US Diesel Price/Gallon

Source: US EIA - Feb 2014

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while spending less on fuel – is a hugely promising option for the industry.

A compounding issue is the vast diversity of needs in the industry.These needs are driven by multiple, and sometimes seemingly, incompatible demands. The equipment must operate in differing duty cycles, driven by variations in operating locations (urban, rural, or a combination), geographies (mountainous/flat, hot/cold, etc.), access to capital and strategy for risk and even the business model of the fleet itself (lease vs buy equipment, use company drivers or independent contractors, in-house or contracted maintenance). These combine to

create a significant challenge for end-users to determine what technologies to pursue and which companies to consider purchasing from.

The North American Council for Freight Efficiency (www.nacfe.org), an emerging nonprofit dedicated to doubling the efficiency of North American goods movement, is working in the industry to better identify and deliver the information needed for fleets to choose the best strategies for each of them.

NACFE takes a data-driven and industrysharing approach to use prior experiences and best practices of early adopters to accelerate the overall adoption of technologies that eventually will be purchased at high scale.

To better understand the history of adoption, in 2010, the Council created a best practices sharing methodology to document and learn from these early adopting fleets in order to provide an early roadmap for the industry on technologies to improve the efficiency of Class 8 tractor trailers. By the third, annual fleet fuel study completed, in mid-2014, data has been accumulated on the purchasing habits of 11 fleets, made up of over 41,000 tractors and nearly 130,000 trailers. Information gathered and shared includes the percentage of each year’s purchases that included 70 currently available technologies for lowering fuel consumption and the overall fuel efficiency of their fleets.

With 70 technologies, 11 fleets and 11 years of data, this process provides nearly 8,500 automotivemegatrends.com

FREIGHT EFFICIENCY data points of purchasing behaviour on new features with these end-users.

This information allows the organisation to share some key insights with the industry.

They include: • 108,000 miles per truck in 2013; • 3.1 trailers for every tractor; • Average age of tractors was 3.5 years and 6.2 years for trailers; • 15% of the tractors pull refrigerated trailers; • 11 years of adoption experiences for 70 technologies; • And the average mpg of all tractors in the study was 6.77, up 13% since the start of the study in 2011.

Armed with this powerful dataset, much can be learned about the past and inferred to help forecast the future of these features to support a significant improvement in tractor trailer fuel efficiency. The opportunity is enormous: there are about 1.5 million tractor trailers operating in the US, consuming something like 26 billion gallons of diesel fuel. For every 1% reduction in fuel use, 260 million gallons of fuel, or about US$1bn per year are saved. A subset of the findings is now shared here. This includes a comparison of how the 11 fleets vary, an example of some adoption curves, the overall adoption rate compared to fuel consumption and finally the consistency of how the various technologies are adopted by these different fleets.

Tech Adoption Rate

Fleet adoption diversity

As with nearly all consumed products, from business-to-consumer or business-tobusiness, end-users tend to fall in different categories when new offerings become available. Some adopt early while others wait for them to experience the benefits and potential risks of being on the leading edge of new technologies. The 11 fleets in this study are no different. Fleets B, D and J can be considered as early adopters who have continued to expand their adoption, while E, I and K although later adopters have closed the gap to their more innovative counterparts. This may infer that as the fuel costs continue to rise, some end-users are more aggressively benchmarking and in some cases moving to adopt these new products earlier in the overall adoption experience of a given product.

Technology adoption curves

Given the data provided, 70 technology adoption curves were created for these recognised potential fuel saving devices currently available on today’s NA tractor trailers. It is important to keep in mind that these charts show the adoption practice of only 11 fleets; although large, they represent about 2.5% of the overall trucks in NA. It also automotivemegatrends.com

Trailer Aerodynamics

recognises each fleet as a single decision in the adoption calculation rather than by total volume of tractors or trailers procured. This does, though, provide a good new insight into not only the current level of adoption but in the ramp over the last decade. For example, the ramp up of purchase of trailer skirts to over 70% is the quickest current rate of all technologies.

Fuel saved compared to technology adoption

Now that we understand directionally the uptake over time of these various technologies, many additional questions come to mind. What impact do these technologies have on the fuel efficiency of the trucks in the fleet? What is the payback on Megatrends | 73

FREIGHT EFFICIENCY Technology Adoption vs IFTA mpg

investment of each of these technologies?

The list of questions goes on. The individual fuel efficiency of this fleet of tractors is shown below and is shaped rather like a bathtub. In the first third of this time period under study, 2003-2006, the impact of the introduction and purchase of EPA04 and EPA07 emissions level engines caused an overall decrease in fuel efficiency. In the second third, 2007-2010, procurement of new fuel economy technologies began to stabilise and overcome the degrading effect of the emissions engines. Finally, in the years 2011-2013, the fuel efficiency of this fleet improved from 6.34 to 6.77 mpg, a nearly 7% improvement. The study team also created a business as usual prediction, one that compares these fleets with a baseline fleet which only procured a few of the highest adopted technologies. Given this, these fleets

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NACFE’s Fleet Fuel Studies provide useful insights into adoption trends in the industry as well as into the specific practices of different major fleets, and NACFE hopes that this information could alone spur additional investment, particularly by fleets that may be lagging behind the overall industry when it comes to certain widely-adopted technologies. However, in the course of conducting the studies, it became clear that some technologies are still only being adopted by the most progressive or innovative of fleets in spite of their showing strong potential for achieving cost-effective gains in fuel efficiency. In order to facilitate the wider industry’s trust in and adoption of such technologies, NACFE and the Carbon War Room (CWR) formed Operation Trucking Efficiency, and began a series of reports, called “Confidence Reports,” which will take an in-depth look at those most-promising but least-adopted technologies one-by-one. Look for these reports over the next few years. are saving over US$7,200 per truck per year in fuel related to a fleet which is not buying these technologies. A basic analysis was conducted on the payback of the technologies that provide the majority of the savings for these fleets. That review determined a paynack for these technologies of about three years.

Fleet consistency of adoption

Finally, the consistency of adoption by the various fleets was evaluated. Here, each of the 70 technology decisions by each of the 11 fleets is compared using a categorisation methodology showing whether the technology is being purchased by the fleet, how quickly it increased to 100% of all purchases or even if that fleet decided to stop buying them. When stacked by the

most popular, other fleets now have a roadmap of technologies that should be considered and ones that possibly should be analysed more deeply. Also, they can compare themselves to some of these fleets to better understand which ones are most applicable to their needs.

In conclusion, new technologies are becoming much more available to improve tractor trailer efficiency, but this poses both opportunities and challenges. Each fleet must determine the best set of solutions for its individual needs, and this study data can assist them in doing so. Doing nothing and losing ground in fuel cost competitiveness to other fleets is not an option.

Mike Roeth is the Executive Director of NACFE and Trucking Operations Lead, Carbon War Room

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North American HD buyers warm to 13-litre drivelines Truck buyers are increasingly considering 13L engines instead of 15L options

By Oliver Dixon

O

ne of the key trends to have emerged from the North American truck market in recent months is the apparent willingness of a broadening scope of truck buyers to consider down-speccing engine displacements in favour of a 13-litre as opposed to the more common – and traditional – 15-litre driveline.

A number of factors are influencing this shift. On the one hand, the additional weight of the post-EPA 10 SCR systems has necessitated something of a rethink in terms of maintaining payload parity.

Additionally, as length of haul has reduced – a trend likely to continue with the combined impact of the driver shortage and the opening of a widened Panama Canal – the days of the long distance journey, and subsequently high horsepower vehicles, have diminished. But ultimately, this shift seems to be driven by one key factor above all else. Fuel efficiency is now the key metric – when bundled with total cost of ownership (TCO) – by which a North American truck is now judged. If a 13-litre option allows for better fuel efficiency than its 15-litre counterpart, its attractiveness grows exponentially.

76 | Megatrends

Topography and gross combination weight (GCW) appear equal as determining factors if we take a read across from Scania’s experience in Europe: “In Sweden and in Norway as well, about half of the Scania trucks sold are fitted with the 16-litre engine.

The figure for Italy is even higher, so I would say that topography is as important as high GCW when it comes to the use of large engines,” says Scania’s Hans-Ake Danielsson. Italy, Sweden and Norway allow permissible GCW of 50, 60 and 56 tons respectively (110.2 lbs, 132.2 lbs and 123.5lbs) as compared with the US Interstate weight limit of 80,000 lbs (36.2 tons).

“Historically, US 13-litre engines have had poor durability relative to big bore engines,” says Steve Duley, VP Purchasing at Schneider National. Quite often, their life to overhaul is 30-50% less than a 15-litre. The reason for this, however, is not necessarily due to the cubic dimension of the engine. automotivemegatrends.com

FREIGHT EFFICIENCY “One of the best engines we ever operated was the Detroit Diesel S60 11-litre,” says Duley. “We have used 15-litre DDC for best durability and best MPG, but this is because of how DDC has focused and designed the 15-litre versus the 13-litre.

We use the 13-litre when we need to reduce overall vehicle weight.We would use the 13-litre if or when it has the right combination of durability and fuel efficiency.”

“We have made the transition to 100% 13-litre and a lot of fleets are starting to catch on,” says Bill Bliem, SVP Fleet Services at NFI. “The 15-litre is still the predominant engine in most fleets though. We were able to make the switch because of our governed speeds as well as the fact that we don’t run the Rockies much. We have no power problems and did it mainly for weight and fuel economy with our direct drive transmissions.”

“In general, the shift to 13-litre engines basically means a shift towards proprietary engines,” comments Chris Visser, Senior Analyst at ATD / NADA. “At present, the majority of late-model used trucks still feature the ISX, with proprietary engines progressively more common in the newer the trucks.

Vieth.

“With 13-litre sales starting in earnest in the second half of 2010, I think it will be interesting in the next several

“In terms of residual values, the 13-litre Paccar MX seems to be doing the best in the used market, with buyers paying slightly higher prices for trucks so-equipped in most cases – the exception being the T660, but only by a slight amount. Volvo’s D13 brings years to see how used truck buyers value 13-litre versus 15-litre units. Right now, the paucity of late model equipment is probably mooting that argument, but when we look a few years down the road, it would not surprise me to see premium valuations placed on 15-litre equipped units.”

higher pricing when paired with the iShift in most models, but when paired with a manual, it generally trails the ISX. International’s MaxxForce suffered severely in the used market, while there isn’t enough information surrounding the Daimler DD13 to comment fairly.”

“Let’s not forget the secondary market’s historical preference for 15-litre equipment and the discounting of 13-litre equipped trucks,” says ACT Research analyst Kenny automotivemegatrends.com

“We see an opportunity to lower weight and hence improve freight efficiency by using smaller engines, and even potential for better fuel economy,” says Mike Roeth, of Trucking Efficiency, a joint collaboration between the North American Council for Freight Efficiency (NACFE) and the Carbon War Room.

“Also, as we see aerodynamic drag, on both tractors and trailers, continue to be reduced as well as lower rolling resistance wheels, it simply takes less power to haul the freight,” Roeth continues. “In the recent past and maybe even currently, the truck and engine builders have focused on improving 15-litre power plants and so these engines have

remained very good from a fuel efficiency standpoint.

We think, due to the opportunities, that a trend will continue over the next years to lighter displacement engines.”

“Daimler Trucks North America is dedicated to providing customers full vehicle solutions that pace the industry in terms of fuel efficiency and lowest real cost of ownership,” says Rich Shearing, Vice President of National Accounts, Daimler Trucks North America.

“Over 40,000 orders, in less than one year, for the Freightliner Cascadia Evolution powered by the Detroit DD15 is tangible evidence of this strategy paying off in the market place.

“Both the Detroit DD15 and Detroit DD13 feature best-in-class fuel economy and lowcost maintenance and service. The DD15 is the industry’s benchmark in overall fuel efficiency and is slightly ahead of the DD13.

We do not foresee a market shift towards 13-litre engines. However, we will continue to witness customers seeking the lowest real cost of ownership as exemplified by the success of the Freightliner Cascadia Evolution.”

Navistar’s Jack Allen says the OEM expects the overall market for 13 litres and 15 litres “to normalise at about 50/50. That’s where it’s been and that’s our expectation. Within Navistar right now, it’s a little more weighted

Megatrends | 77

FREIGHT EFFICIENCY Daimler's Detroit line

toward the ISX – I think closer to 60% – and that’s primarily just based on the reputation of the ISX and its familiarity with the customers in the marketplace today. And, the 13-litre with SCR is a new product. It’s performing exceptionally well for the customers that have it. So over time we do expect that ratio to normalise around 50/50.”

Volvo is 91% captive for Volvo powertrain on all trucks built at present, “so 9 out of 10 of our output is powered by Volvo,” says Goran Nyberg, President of North American Sales & Marketing at Volvo Trucks. “We have both our own D16 and the Cummins ISX as a solution, but the dominant engine that we’re selling is the D13. Everyone now knows that the 13-litre is a million mile engine and it’s more about fuel efficiency, torque reliability and average speed and I think we tick all of these boxes.”

The OEM believes 13-litre engine use will continue to grow as motor carriers place a premium on fuel and weight savings, explains John Moore,Volvo Trucks powertrain product manager. “The average engine rating for an over-the-road truck is 450 horsepower and 1,650 lb.-ft. of torque, regardless of displacement. The Volvo D13 model is our most commonly spec’d engine in North America and is available in ratings to 500 horsepower and 1,850 lb.-ft. of torque.

Power density and durability of today’s 13litre engines rival 15-litre engines of just a decade ago. If you compare our production in recent years, you’ll see that the average horsepower spec’d by 13-litre engine customers exceeds the horsepower of the trucks spec’d by 15-litre engine customers.

“With the growing power density of today’s engines, we see great opportunity for motor carriers to look toward 13-litre or even 11-

78 | Megatrends

litre engines. By right-sizing their engines, motor carriers can shed hundreds of excess pounds that can be transferred into additional payload,” continues Moore. “On average, a Volvo 13-litre engine weighs more than 300 lbs (136kg) less than competing big-block engines and a Volvo 11-litre engine is nearly 400 lbs less than our 13-litre engine. It’s important to match engine displacement with the operation.While a 13-litre engine provides sufficient power to pull bigger grades, our 11litre engine is also a very reliable coast-to-coast engine. We still see a large number of motor carriers carrying around unneeded engine weight because they’re operating under the old belief that lower power density engines are more reliable.

used to decide the best engine for the different applications. “These include GCW and topography which define the power and torque needs; and the customer’s business model which defines the cost per mile or cost per hour requirements.

“Inputs include fuel economy, maintenance costs, weight and uptime. The requirements for transport efficiency (cycle times) can be another factor here, and residual value and the planned second life market also need to be considered.

“With the push for increased fuel efficiency and struggles recruiting and retaining good professional drivers, we anticipate automated manual transmissions (AMTs) will also grow in prominence. Our Volvo I-Shift AMT, introduced to North America in 2007, accounted for about 70% of all invoiced units with Volvo engines in 2013.”

“With Mack’s 1860 lb.-ft. torque rating, we offer an engine that can easily handle all Class 8 segments,” explains Horton. “The muscle of the Mack MP8 has the brawn necessary to manage the toughest loads, but is trim enough that it minimises weight and maximises fuel efficiency. The Mack MP8’s regen system, which enables a driver to stay on the road while the system regenerates, coupled with high-quality performance standards, increase vehicle uptime.”

Mack’s Powertrain Product Marketing Manager, Roy Horton, says several factors are

A version of this article first appeared on AutomotiveWorld.com

Speaking during Paccar’s Q4 earnings call in January, former Chief Executive Mark Pigott endorsed Allen’s comments.The OEM secured a share of the 13-litre segment towards the upper end of 30%, he said: “We did high-30%, 37%, 38% and our goal is to keep growing it.

As we look at the entire industry of last year for North America, the 13-litre…is about 50% of the market, and the 15-litre is about 50%.

And we think that the 13-litre will continue to grow…we’ve now manufactured over 50,000 engines at our Mississippi factory, and it’s doing well on the launch.”

While it’s very difficult to argue with Daimler’s position that the DD15 in the Cascadia Evolution is now the benchmark product in North America – a market share in excess of 40% makes a very clear point – the gradual pick up in residual value, as evidenced by the Paccar MX, is noteworthy.

While there will remain a proportion of the North American trucking industry that will stay wedded to 15-litre specifications for the medium term, there does now seem to be at least a willingness to experiment with a lower displacement approach.

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UPS shares its recipe for natural gas success

Megan Lampinen talks to Mike Casteel, Director of Fleet at UPS, about the use of natural gas as a fleet fuel

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lobal logistics specialist UPS has emerged as a leading proponent of natural gas – both CNG and LNG – for its fleet of delivery vehicles. It operates one of the largest private fleets of CNG-powered vehicles in the US and its LNG fleet isn’t far behind. The company is adding 700 new LNG-powered tractors by the end of this year. Mike Casteel, Director of Fleet for UPS, is a strong supporter of the fuel, but most notably only within certain circumstances. He spoke to Megatrends on 80 | Megatrends

the combination of factors that make natural gas an ideal fuel choice for fleets.

Ingredients for success

“Where we have been able to deploy natural gas, we have had a combination of circumstances that are in place,” he explains.

“The fleet profile has to be conducive to natural gas deployment. We have to have some economy of scale, large numbers of

vehicles that run relatively high miles. The objective here is to use a lot of fuel to displace a lot of traditional fuel.”

The key is for natural gas use to save more money than the initial upfront investment required.These initial costs include setting up a natural gas fuelling island on company property - and the cost of setting up a natural gas station is relatively high compared to establishing a diesel island, he notes.

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FREIGHT EFFICIENCY

As for relying on a public natural gas fuelling network instead, Casteel does not view this as a viable option. “The only way to do this is to control our own fuel infrastructure. It’s time and access to the station,” he explains.

The company can’t take a risk of something delaying a journey that means it can’t get access to the fuel it needs. “Operationally it’s not practical,” he concludes.

UPS has made a significant investment in its own fuelling network, and operates seven or eight CNG stations and a similar number of LNG stations, with about five more LNG locations to begin operation by September.

Then there is the initial cost of the vehicle, though Casteel observes that this is coming

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down. “To convert a vehicle to use CNG from a gasoline engine, if you can do it in scale, the cost is not that high,” he says.

It is only when these factors all work together that Casteel sees natural gas as the right choice: “When those combinations of things come together, it will work. But as large as our fleet is, there is a limited number of locations where we can make all of that come together and use enough or displace enough fuel to save enough money to pay for the upfront investment.”

Alternatives

UPS has been testing numerous types of powertrain options in its fleets, including

biomethane diesel, propane, ethanol, battery electric and hydraulic hybrid in addition to CNG and LNG. But among all these alternatives, Casteel concludes: “Very little today can compete with natural gas on a largescale deployment.” For hybrid vehicles, he notes that these typically use some portion of fossil fuel. For all-electric vehicles,“the battery technology in place today remains prohibitively expensive in how it relates to our duty cycle. We have a lot of stops and starts per day, and we carry a lot of weight, so full electric is difficult for us to deploy.” On top of that, the source of the energy used to power the EV is in many cases a fossil fuel. “Add the whole thing together and today, large-scale deployment of natural gas is the only thing we can make work on that scale.”

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FREIGHT EFFICIENCY

Truck industry calls for global emissions harmonisation

CO2 and greenhouse gas are global problems requiring global solutions.The truck industry wants harmonisation - Daimler’s Wolfgang Bernhard calls it “an historic opportunity that we cannot afford to miss” - but regulators appear more cautious. By Oliver Dixon

W

hile the notion of a single truck product appropriate for all global markets remains firmly in the realm of the hypothetical, ongoing trade negotiations between the United States and Europe have ushered in the possibility of a common harmonised heavy duty truck emissions standard applicable to both markets.

Speaking earlier this year at the Mid-America Trucking Show, Head of Daimler’s truck business, Wolfgang Bernhard placed the current emissions debate into clear context: “We need to sweep away some of the non-tariff barriers. For example, if I look at the emissions standards in the US and in Europe, they are so similar,” he said. “Despite the fact that they are so similar, the industry has to spend a lot of money to ensure compliance with both in terms of different parts, different testing and different development. If we could agree that everyone recognises each other’s standards, all the money that is being wasted right now on two different standards could be put to far better use.”

It’s not difficult to see where Bernhard’s logic comes from. The impact on fixed cost absorption accruing from a harmonised standard would be significant, albeit not one without downside risk. In times of an up cycle, gross margin would improve markedly but the opposite could apply in the down cycle. Bernhard’s thesis would thus seem to be one that views the positive as outweighing the negative once that amplitude averages out through the entire cycle.

This is not a new argument. However, what is new is the adoption of a regulatory environment on both sides of the Atlantic that views greenhouse gas (GHG) as being the key

82 | Megatrends

determinant of future emissions mandates.

The previous regulatory environment – one that concentrated upon the management and reduction of PM and N0x – was one that developed out of a regional focus. GHG – and the reduction of C02 – is positioned as a more global imperative. Unsurprisingly so: what is C02 in London is also C02 in Lexington, Kentucky. What has proved a restraint to a common goal previously is not the goal in itself but the means by which attaining - and more pertinently, measuring success are facilitated.

“US, EU, and Japanese standards all provide stringent emission controls,” comments Sean Waters, Director of Product Compliance and Regulatory Affairs, Daimler Trucks North America.

“Recognising each other's standards as valid would provide benefits for manufacturers, fleets, and consumers.

Certainly there is the benefit to manufacturers of reduced R&D costs and, in turn, cost of vehicles - a benefit to fleets. Additionally, allowing manufacturers to focus more engineers on different value-added tasks, as opposed to focusing effort on variations of the same emission-reduction tasks, provides further benefits to the fleets, such as further improved total cost of ownership.”

volt, or the FMVSS versus EU braking standards, and local parts and services capabilities must all be considered. Fuel is also a consideration. While ultra-low-sulphur diesel is common in the US, Canada, Australia and much of Europe, other global markets contain a patchwork of standards.”

Whereas Waters and Alt both point to the upside benefits of an agreement, Waters also points to the downside impact of continued fragmentation. “By contrast to the savings from harmonised standards or laws that provide for mutual recognition of other countries' standards, divergent standards increase costs and create further issues,” he explains. “With the EU focusing its efforts on full-vehicle procedures for GHG minimisation, US laws that regulate the engine separately from the vehicle miss potential system-level improvements like the optimised, fuel-saving powertrains in which Daimler invested so much effort. Moreover, California's proposal to mandate NOx emissions an order of magnitude lower than today's near zero levels will deprive fleets in the state of many of the fuel savings and GHG emission reductions that are developed for customers elsewhere in the country and the

“Common standards would free up significant engineering and financial resources that could be directed toward innovation of new technologies, rather than developing multiple products to comply with multiple regulatory standards,” says Susan Alt, SVP Public Affairs for Volvo Group North America. “Harmonisation of emissions standards could enable Volvo Group to adjust where its conventional models are exported throughout the world, but emissions standards are just one of the elements that must be considered before adjusting which brands and models serve each market.

Electrical systems, such as 24 volt versus 12 automotivemegatrends.com

FREIGHT EFFICIENCY world. The cost required to develop such unique engines, after-treatment, and the onboard diagnostics associated with them would significantly increase California vehicles' costs, and potentially disrupt the market.”

While much common ground exists between the EU and the US in terms of the need to focus upon GHG, enabling this in terms of a future common mandate is a far from simple task. Many within the industry on both sides of the Atlantic see the Transatlantic Trade and Investment Partnership (T-TIP) negotiations currently ongoing between the US and Europe as offering an environment suitable for pursuing this aim. As such, the debate moves away from one predicated upon industry issues towards one more prone to a broader political influence.

The European Commission appears to be at least in part supportive of an exploration of a common standard: “The Commission is well aware that there are the differences between the European legislation on emissions from heavy-duty vehicles (Euro VI) and the corresponding US legislation,” commented a spokesperson. “Up to now, nobody has analysed whether these differences also lead to different environmental performances. At the same time, the costs of these differences for industry are considerable.

“Regarding technical aspects, the discrepancies between both pieces of legislation at the level of technical prescriptions are important. Hence it would be very difficult to set out a harmonised standard that is operative in the short term.

However, the Commission considers that, even if the approaches used are different, the level of environmental protection provided could well be similar, hence exploring equivalence of both rules in the frame of the T-TIP is worth considering, thus avoiding costs of compliance for the industry.”

The US EPA is rather more cautious: “EPA continues to monitor the negotiations and the suggestions being made by stakeholders,” says a spokesperson. “We understand that various methodologies for determining where

equivalence can be determined for certain safety requirements are being proposed or studies are being pursued. The discussions of whether some measures or standards can be considered collectively or whether such measures are required to be examined individually for purposes of driver safety and to meet legal objectives is ongoing.”

But Ian Graig of Washington DC-based Global Policy Group sounds a note of warning.While T-TIP negotiations are ongoing, the current political environment in the US may not be amenable to a successful resolution.

“Many members of Congress are either opposed to or only weak supporters of T-TIP and the Trans-Pacific Partnership (TPP) talks, with both liberal Democrats and conservative Republicans seeming especially wary of any free-trade negotiations,” he explains. “While most business groups are supportive of T-TIP in particular, trade liberalisation is not a top priority in Congress at this time.”

The role of Congress is particularly important here; the Administration needs Congress to revive presidential ‘fast-track’ trade negotiating authority, which is also known as trade promotion authority (TPA).

Fast-track authority would place a time limit on Congressional consideration of legislation to implement any trade agreement, and would prevent Congress from amending such implementing legislation after it is introduced.

This is, according to Graig, essential in the case of complex trade negotiations like T-TIP.

“The T-TIP talks can continue without trade promotion authority, but a revival of TPA is needed before those talks are completed and a deal is signed and implemented,” he says.

“Thus at some point the Obama Administration and Congress will need to reach a deal on trade promotion authority if the T-TIP talks are to succeed.”

While this could provide a significant – and arguably a growing – roadblock, the heavy truck industry could be aided in its aims by the fact that it is not the only industry that seeks commonality across both markets.

Moreover, as Graig points out, the environmental lobby is likely to be less alarmed by any move towards harmonisation.

“Environmental groups in the US have long been wary of free-trade agreements, and have pushed US negotiators to include environmental provisions in recent FTAs,” he comments. “This is probably a bit less of a concern with T-TIP, however, since the US and EU both have relatively stringent environmental laws.As a result, a T-TIP accord would be unlikely to pose a threat to US environmental standards or to create a situation in which production was shifted abroad to take advantage of weaker environmental rules.”

automotivemegatrends.com

This is a high stakes game: the benefits of harmonisation are, from an industrial perspective, plain to see. The downside – namely continued fragmentation of regulations that seek the same result – are similarly clear. While the OEMs have a clear vested interest in the pursuit of harmonisation, it is difficult to see quite how either the environmental or the political stakeholders within this debate would be alarmed by a move towards such an end.

So will we see harmonisation?

“Yes, I think it is increasingly likely that this will happen,” say Scania’s Chief Executive, Martin Lundstedt. “Emissions that are local – NOx and particulate matter – were dealt with by Euro VI. Now we are talking about global emissions, CO2, and there I am pretty sure harmonisation will happen.

global

“However, it will be interesting to see how much this will be led by legislation. I believe the market economy will have a major role to play. CO2 is fuel, and fuel is money. There we have a natural business logic that we didn’t have for NOx and particulate matter, where there was a negative offset between fuel consumption and particulates. For NOx and particulates, it was more efficient and effective to legislate than it is on CO2.”

“A common standard does not mean a lower standard, and it’s important for T-TIP to focus not just on short term adjustments but upon long term benefits,” says Wolfgang Bernhard.

“It is an historic opportunity that we cannot afford to miss.”

2020 Vision: a first look at GHG 20 for US M/HD trucks Automotive World Briefing 2020 Vision: a first look at GHG 20 for US M/HD trucks

Based on discussions with OEMs, suppliers and analysts, this Automotive World report provides an early indication of industry sentiment towards the potential scope of “GHG 20”.

For details on how to access the report, go to: http://goo.gl/DT5McC Megatrends | 83

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It’s GST time, say India’s business leaders Will India’s new government finally implement the long-awaited GST? By David Isaiah

A

t every single Automotive Megatrends India commercial vehicle conference, one issue has been raised over and over by industry leaders from truck manufacturers, suppliers and logistics providers: the need for GST.

Yet while GST in India has been most eagerly awaited by the industry, it is no closer to implementation now than in 2007, when a committee was established to design a model and to set up the back-end processes necessary for GST implementation. With a new government, however, could things be about to change?

The current situation

The Goods and Services Tax (GST) is essentially a tax which will replace all indirect taxes levied on goods and services by the central and state governments in India, and is being seen as the next logical step towards a comprehensive indirect tax reform in the country. At present, the range of taxes in force includes Central Sales Tax, State Sales Tax, Octroi (at the city level), Entry Tax (for entering into states) – and the list goes on.

So how exactly will GST benefit India's CV and road freight segments, and more broadly, the country's economy itself? Taxation at a national level, rather than by each individual state, will result in more efficient cross-state transportation, smoothing the paperwork for road freight companies, and bringing down logistics costs.

At present, each of India’s 28 states taxes goods that move across their borders, at different rates. As a result, freight that moves across the country through

84 | Megatrends

various states is taxed multiple times.Worse, there are long delays at interstate checkpoints, as state authorities review and examine freight, and apply the relevant taxes and fees.

According to EOS Intelligence, truck delays currently average five-to-seven hours at interstate checkpoints. As a result, a 2,137km trip from Delhi in the north to Chennai in the south typically takes seven days, implying an un-inspiring speed of 12.7 kph. Owing to these delays, and traffic jams, Indian trucks average 80,000 km per year, compared to 400,000 km in the US.

Major reform

65% of India’s freight is moved by road, a fact which leads EOS Intelligence to see GST as critical for India. The planned GST system seeks to replace around 15 state and federal taxes/tariffs, for a single tax at the point of sale. According to the firm, GST could be the single biggest reform since India's pro-market reforms in 1991.

"At a macro-economic level, it is forecast that implementation of GST alone would add 1.52 percentage points to the GDP growth rate, and could lead to an economic gain of as much as US$517bn," says Manmeet Malhi, Senior Project Manager, EOS Intelligence.

Conversely, with close to 2.5 million trucks in India, the non-implementation of GST has resulted in a significant portion of India's GDP remaining on the country's roads, on average, for 15 days, unutilised. This makes it the most expensive transportation in the world. In fact, says Raghav Himatsingka, Director of Indian logistics provider, Ideal Movers, the complicated tax structure in India means many logistics decisions are taken based on the tax regime rather than operational efficiency.

According to Rakesh Batra, Partner and Sector Leader Automotive at EY, "The freight transport industry is highly fragmented, with operators facing increased competition,

lower profitability despite an increase in freight rates, increased fuel costs and the continued heavy administrative burden due to an array of indirect taxes. If we factor in the proposed regulations like the end-of-life vehicle policy being advocated, the impact on the freight transport by road will be even more severe at least in the short run.”

New political regime, new tax regime?

Given that the concept of GST has been discussed for a good many years now, there is renewed interest and hope that it will now be implemented thanks to the massive upheaval in the country's political scenario in the recent federal elections. The Bharatiya Janata Party (BJP) won with a clear majority, resulting in the charismatic and controversial Narendra Modi being appointed as the 15th Prime Minister of India.

Modi, previously the Chief Minister of the state of Gujarat, is known, among other things, for a pro-development, pro-business stance. The country now expects its new Prime Minister to deliver on his election promises. Among the various reforms expected of the new government is GST.

"GST was first discussed in 2006 and a launch date was tentatively set for 2010,” observes Abdul Majeed, a Partner at PricewaterhouseCoopers in India.“There has been a delay of over four years now for several reasons. However, there is a need for consensus both at central and state government levels for this to be implemented. Having won by a majority, the incoming government may take up this long pending tax reform."

According to Himatsingka, one of the hurdles standing in the way of GST implementation is a perception that this will cut individual states’ tax revenues. If this issue is addressed, he believes there should be no problems in implementation.

"There is a lot of optimism from the new government because it's the first time in 30

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FREIGHT EFFICIENCY

years that we have a single party majority in the parliament, so they are expected to take strong decisions," says Himatsingka.

The strong central government is also instilling optimism amongst CV manufacturers, that the long-awaited GST may finally be implemented. Heavy-duty CV manufacturer Asia Motor Works (AMW), an outspoken advocate for GST, not only feels the industry needs it to be implemented this year, but that and there’s every hope it of becoming a reality.

When, not if?

"We are hopeful of some significant progress in GST implementation, especially with a strong central government. Reimbursement to states on any revenue loss would be a bottleneck which will be overcome, resulting in some upward revision of overall rates," says AMW's President – HCV, A Ramasubramanian.

It’s more a matter of when, not if, says EOS Intelligence, with all major political parties acknowledging the benefits of GST. The question, then, is when it will be implemented. The previous government was not decisive in this regard, and, as a result, was unable to push through the necessary constitutional changes.

"However, it is believed that contentious issues such as revenue sharing with states had already been resolved,” explains Malhi. “And given that the benefits accruing from GST are now widely acknowledged across political parties, one has to believe that passing the bill in the parliament and implementing it latest by 1 April 2015, will be the priority."

Modi's views on GST will be interesting to observe. As Chief Minister of Gujarat, his government opposed attempts to pass the 115th Constitution Amendment Bill, 2011 to enact GST. The reason: concern over loss of tax revenue to the tune of Rs140bn (June 2014: US$2.35bn) per annum.

"Given the huge development wave the new government has promised, GST will be a natural first step to create a unified regime and to bring the various states together," says EY’s Batra.

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India stands to gain

In introducing GST, says the Confederation of Indian Industry (CII), from a general perspective, India stands to gain from higher economic growth, simplification of administration and improvement in compliance, a more secure and stable base for centre and state revenues, more capital investment through elimination of tax cascading, free flow of goods and services within the common market in India, promotion of manufacturing in India, and the removal of trade biases against goods manufactured in India.

GST's benefits are expected to be felt by various sectors, from industry to central and state governments, trade and consumers. As GST is expected to reduce the overall production costs by 10-15%, this is expected to have a favourable impact on the prices of products; this will translate into increased demand for goods and benefits to consumers.

"With a unified GST across India, logistics and distribution costs could go down by almost a tenth,” observes Batra. “This will be a direct result of consolidation of stockyards and creation of hubs in arterial locations, rather than having to develop stockages in every state due to differing tax regimes. Provided octroi is subsumed under GST, the direct result will be administrative simplification. Key, however, will be deployment of systems and incremental changes that need to be brought to accompany GST, such as, for example, the ability to track the movement of goods.”

Road freight and truck manufacturing – two clear GST beneficiaries

Two segments that GST will impact significantly are road freight transport companies and CV manufacturers. AMW is hopeful that the implementation of GST will help progressively modernise trucking in India, bringing it a step closer to global standards.

"Progressively, the inventory on wheels should come down by four to seven days in a fairly short period,” says AMW's Ramasubramanian. “The need for larger vehicles will go up and turnaround time will be a premium factor. Over a period of time,

say 12 to 24 months, one should see an improvement in vehicle demand, especially in long distance haulage. During this period, the type of vehicles should shift to those capable of faster and safer travel."

This will raise efficiency, believes Ramasubramanian. As a result, operating economics will start to move towards overall value added beyond just fuel and initial costs.

While the Indian CV industry will still be producing cost effective vehicles, horsepower, turnaround times and on-road reliability will compete with fuel and EMI (equated monthly instalment – the way vehicle loans are spread across a loan period) as equally important operating factors. Both freight operators and manufacturers would have to progressively adapt to these realities.

Ideal Movers’ Himatsingka feels two things are likely to happen with the introduction of GST. "Firstly, since companies will not need warehouses in every state, we can expect large regional logistics parks to develop.

Perhaps the government - both central and state - may also actively encourage logistics providers to invest in infrastructure to develop these hubs. This will lead to overall efficiency and reduction in costs for the entire system. It should also lead to modernisation of logistics infrastructure and greater collaboration for shared resources amongst non-competing companies/industries."

Small fleets with fewer than five trucks constitute nearly two-thirds of the Indian truck market. If GST were to be introduced, says PwC's Majeed, it would enable fleet owners to save money and upgrade their fleets, thereby increasing the efficiency of their delivery times across states.

"While the benefits of GST for freight companies and commercial vehicles are undeniable, it is tough to estimate how and to what extent it will translate into new vehicle registrations. Moreover, it is also plausible that demand might become concentrated on particular segments," states Malhi.

However GST manifests itself, its impact on the economy as a whole is expected to be positive, and these two particular stakeholders look set to benefit directly.

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MANUFACTURING & MATERIALS

Steel to play a key role in

meeting 2025 mpg targets David Isaiah talks to Dr. Blake Zuidema, Director of Automotive Product Applications at ArcelorMittal

V

ehicle manufacturers worldwide are increasingly facing the need to make their vehicles lighter than ever, in order to meet stricter emissions standards. At the same time, there is an increasing requirement to deliver vehicles with higher fuel mileage.

Such requirements have seen OEMs and suppliers turn to newer materials, such as aluminium alloys and carbon fibre reinforced plastics (CFRP), to achieve weight reductions. Each of these materials has its own advantages and disadvantages, and in most cases, a common disadvantage has been that of cost.

Steel still holds an advantage when costs come into play, and while aluminium and carbon fibre composites feature in premium and sports cars, the mass market still relies on steel. However, with the emergence of aluminium as a key lightweighting material in the global automotive industry, manufacturers of conventional automotive steel have had to up their ante.

Steel suppliers now contend that steel automotive body structures can, in the near future, be as light as today's aluminium bodies. Advanced high-strength steels (AHSS) are a step in this direction, and the industry has now seen several generations of these steels.

into a 15% weight reduction in Nissan's vehicles.

Steel manufacturer ArcelorMittal has been working on, and investing in, AHSS. One of its key product lines for the automotive sector is Usibor, a presshardened boron steel, featuring an aluminium-silicon coating. Usibor was developed specifically for the metal forming technique known as hot stamping, and it has strength of 1,500 MPa after being hot stamped. As a result, it is used mainly for the production of structural parts including Apillars, B-pillars, frontal and rear bumpers, various types of rails, and the tunnel floor.

Megatrends spoke with Dr. Blake Zuidema, Director of Automotive Product Applications at ArcelorMittal, about the supplier’s investments in automotive body structure design technology.

Lessons learned

ArcelorMittal's involvement in internal body structure design programmes has resulted in the company turning this understanding inwards, into its own product development system.

"This has allowed us to look at each part of the automobile body structure, both individually as well as holistically,” explained Zuidema, “and helped us to understand what kinds of material properties are required to make each part as light and safe and fuel efficient, and as low cost, as possible."

Some OEMs, like Nissan, have turned to AHSS to reduce overall vehicle weight. The OEM eventually wants AHSS to account for up to 25% of all of a vehicle's parts, by weight, for new production models. The OEM will start working towards this in 2017, and reaching this target will translate

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MANUFACTURING & MATERIALS

"We've used what we've learned about the properties that are needed to make each part as light and safe and low cost as possible, and have developed a whole new family of products around that understanding,” explains Zuidema. “So, today you'll see a number of advanced products, like the Usibor press hardened steel that was a feature in the Acura MDX door ring; you’ll also see things like higher strength dual-phase steels, the new high formability steels, even some higher strength exposed steels for use in other body panels."

The use of Usibor in the Acura MDX's door ring has been well received, says Zuidema, with numerous OEMs expressing interest in the concept. This three-way collaboration between ArcelorMittal, Honda and Magna’s Cosma International, involved replacing the Acura MDX door ring components with the Usibor-based lightweight laser-welded hotstamped door ring. The result was a 14% weight reduction.

Global products, local markets

North America and Europe already have more stringent fuel and emissions standards in effect than many other markets, especially emerging markets. Megatrends asked Zuidema whether ArcelorMittal develops automotive products for North America and Europe, and then adapts them for emerging markets as necessary, or if emerging markets required the development of specific products, for reasons of cost, for instance.

"While the regulations in North America and in Europe are particularly challenging today, we see a movement all around the world

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MANUFACTURING & MATERIALS towards ever-increasing fuel economy and CO2 tailpipe emissions standards,” said Zuidema. “Virtually all developed and developing countries around the world are enacting some sort of CO2 and fuel economy legislation. So, these lightweighting solutions are going to become increasingly important, not just in North America and Europe, but all over the world."

Another important trend shaping the industry is that of vehicle manufacturers’ rising use of global platforms. Fewer platforms or architectures now underpin more cars globally than ever before.“In terms of imports and exports, there are a number of instances where an automaker may wish to produce vehicles in one region and ship them to another, because of the economies of scale.”

For those reasons, explains Zuidema, “it is extremely important that we have these advanced lightweight, cost effective, low carbon footprint steel solutions available in all of the markets that we participate in around the world."

Other materials

There are, at present, many kinds of steels being used by OEMs worldwide, with varying degrees of strength, stiffness and weight.

However, there is also a growing enthusiasm for aluminium, as demonstrated by Ford's latest generation F-150 pick-up, which features significant quantities of aluminium.

Other new materials, such as CFRP, are both light and strong.

According to Zuidema, the levels of weight reduction that are now possible with advanced steels, combined with the advancements made in powertrain technologies, mean the fleet of vehicles in North America can reach future fuel

economy goals without going to other lightweight materials.

"Aluminium is, obviously, much more expensive, so, if an OEM can get a vehicle to its prescribed fuel economy with steel, it would be at a much lower cost. Carbon fibre is substantially more expensive. Obviously, we're continuing to watch developments, but we're not seeing the advancement in cost in some of these carbon fibre materials to really allow them to break into the mainstream of automobiles that most of us buy and drive every day.

"The other thing that we're watching very carefully is the total lifecycle of carbon footprint that is provided by each of these vehicles,” adds Zuidema. “We've shown, through our CO2 emissions models, that cars built of steel have a much lower total lifecycle carbon footprint than vehicles made with aluminium or carbon fibre."

The reason for this is that while aluminium is light and is an advantage when it comes to vehicular emissions and fuel economy, production of a component out of aluminium, or carbon fibre, results in more CO2 emissions than if the part were made of steel.

"The result is that the small differences in the use phase of fuel economy between the two do not make up for the difference in the manufacturing phase. And the steel cars, we've shown, provide a much lower overall lifecycle carbon footprint when all of the phases – manufacturing, use and recycling – are considered."

Looking to the future

Zuidema identifies two key megatrends driving automotive product development: fuel economy and the need for global solutions.

Fuel economy is, in Zuidema’s view, the key automotive megatrend, but it needs to be delivered in automotive products that are also safe and affordable. "One of the things we don't want to do is to achieve lower tailpipe emissions and end up putting more carbon into the environment over the entire life of the vehicle,” he explains. “So these overall global challenges are driving the steel industry as much as anything right now. And, obviously, you can see that they're also having a profound influence on the automotive industry.”

The growing importance of global solutions is thanks to the rise of the aforementioned global platforms, off which OEMs are building an increasing number of global vehicles. As a result, the need is also growing for solutions, support, and products in all regions of the world.

To fulfil the demands of these automotive megatrends, ArcelorMittal is developing Martensite 2,000 MPa strength products, and a next-generation version of Usibor, which could provide a minimum of 1,800 MPa.

The use of hot stamping is already increasing across the automotive industry, but Zuidema sees further significant opportunities for that technology and for higher strength, higher formability grades of steel. “Usibor products enable the carmaker to get the highest strength possible into very complicated geometry parts, particularly within the passenger compartment,” he explains. “The growth of Usibor will increase over that time frame.”

Zuidema says ArcelorMittal has looked at the long-term trends in advanced steel applications, and, both in terms of the current trajectory, as well as advanced solutions for 54.5 mpg cars that will be required in the US by 2025. “We see the total advanced steel content in the body and structure rising to something in the 60% to 65% range, which is a considerable increase from where it is today.”

88 | Megatrends

With BMW leading the field in terms of highvolume carbon fibre production, and Ford committing to aluminium for its best-selling pick-up, the race is on for the strongest, lightest, cheapest and ‘greenest’ material for automotive applications. automotivemegatrends.com

MANUFACTURING & MATERIALS

Is Canada’s automotive manufacturing going down under?

Canada must take urgent measures to prevent its vehicle manufacturing industry suffering a similar fate to Australia’s, warns Manmeet Malhi Canadian-made vehicles, where competitors from the US and the EU have been benefitting from preferential access, as a result of their respective FTAs with South Korea. And, more importantly, the agreement also provides an opening to the vital and burgeoning wider Asian automotive market, which is currently one of the most exciting automotive markets in the world. South Korea is the perfect choice to launch Canada’s move to deeper economic integration with Asia.

O

n 11 March 2014, the governments of Canada and South Korea concluded negotiations on a free trade agreement, almost nine years after negotiations first started in 2005. Under the terms of the agreement, Canada will phase out the 6.1% tariff levied on cars manufactured in South Korea (mainly by Hyundai and Kia), over a period of three years. South Korea will reciprocate by eliminating the 9% tariff on cars manufactured in Canada, immediately.

Union leaders and OEMs in Canada are worried that this deal would prompt a flood of South Korean imports and will be detrimental to the country’s domestic automotive manufacturing industry. Unifor, a union representing 39,000 workers in the country’s automotive sector, estimates that 33,000 manufacturing jobs in Canada could be lost due to the pact. There has been outcry over certain provisions (or lack of provisions) in the FTA as well, with the Canadian government being accused of failing to negotiate better terms for its domestic automotive manufacturing industry. For example, Canada failed to include the ‘snap90 | Megatrends

back provision’ included in the FTA between US and South Korea. Such snap-backs allow a roll-back of tariff reductions, if South Korea resorts to non-tariff barriers, such as currency manipulation, for example to subsidise exports. Meanwhile, the Canadian government defended the agreement, saying that such fears were exaggerated; in 2012, a study undertaken for the Department of Foreign Affairs, Trade and Development concluded that the impact of elimination of import tariffs from South Korea would only have a modest impact on domestic production, cutting output by just over 4,000 vehicles, equivalent to 0.2% of the current output.

With Canada importing 131,000 vehicles (worth US$2.23bn) in 2012 from South Korea, while exporting a paltry 3,000 vehicles (worth US$92m) in return, it is clear that Canada does not manufacture the type of vehicles that are in demand in South Korea; in the immediate term, only one automotive industry will gain from this FTA: South Korea’s.

However, the trade agreement offers improved access to the Korean market for

It is quite ironic, that ever since Canada signed the FTA with South Korea, all the discussion has centered on South Korean imports flooding the Canadian market; looking at the big picture, it’s not hard to ascertain that the real problem for Canada is the lack of geographic diversification of its export-oriented domestic automotive manufacturing.

With nearly 90% of vehicles manufactured in Canada geared for export, the country has one of the most export-oriented automotive industries in the world. And although Canada is the largest vehicle exporter to the US (followed by Japan), and remains a ‘global top ten’ vehicle manufacturer, the country’s automotive exports are limited to North America; 97% of the deliveries are shipped to its NAFTA partners, mainly to the US. Not surprisingly, Canada is the only country that is so dependent on a single market for its automotive exports. So the obvious question is, what’s wrong in concentrating on a single market? And the answer is equally banal: nothing, as long as you hold on to your market share.

It is interesting to note that despite the exclusive focus on the US, Canadian automotive exports to the country lost a significant market share in the world’s second largest automotive market. Canada’s share in overall US automotive imports dropped to

automotivemegatrends.com

MANUFACTURING & MATERIALS

Toyota Manufacturing plant, Cambridge, Canada

20% last year, from a peak of 31% in 2000 and an average of 25% since the mid-90s.And one of the main reasons for the loss of market share is Mexico, which has made significant gains at the expense of Canada. Since NAFTA was signed 20 years ago, automotive production in Mexico has more than tripled and automotive exports have quadrupled.

Moreover, Mexico is expected to overtake Japan as the 2nd largest automotive exporter to the US in 2014 and eventually overtake Canada as the largest automotive exporter to the world’s biggest economy in 2015.

Most major automotive manufacturing countries, such as Japan, Germany, South Korea, the US and Mexico (Canada’s NAFTA trading partners), have diversified their automotive export markets. While US exports outside of NAFTA now exceed 10% of overall US production (a fourfold increase over the past decade), corresponding figures are even stronger for Mexico, which now exports almost 20% of its automotive production beyond North America.

The recent FTA with the EU provides Canada with the opportunity to diversify its automotive export markets and reduce its dependence on the US.This might be the last opportunity to save Canada’s automotive manufacturing industry from meeting the same fate as Australia’s.

Although Canada produced 2.37 million vehicles in 2013 and is still one of the top 10 automotive manufacturers in the world, it is

easy to draw comparisons with the Australian automotive manufacturing market:

• In the past, the local automotive manufacturing industry in both countries was heavily protected by tariffs, which led to a thriving domestic automotive manufacturing industry;

• Neither country has a strong domestic brand; for example, South Korea has Hyundai and Kia, Germany has VW, Daimler and BMW, while Japan has Toyota and Honda;

• Both countries have small populations and high vehicle penetration rates, implying that they don’t have a voracious appetite for purchasing new vehicles;

• Both countries have a rather strong currency, which has meant that they have found it harder to compete with relatively low-cost automotive manufacturing destinations such as Mexico and Thailand.

Consequently, the automotive manufacturing industries in both countries have become dependent on exports to support and sustain the heavy investments made in developing a robust automotive cluster.

Moreover, both Australia and Canada are rich in natural resources and not surprisingly economies of both countries are driven by the primary sector. To satiate the ambitions of

their respective domestic agri-food, farm product and mineral resource businesses, both countries have had to enter into FTAs to gain access to new and bigger markets. Naturally, some compromises have had to be made and unfortunately, in both countries, it has been at the expense of the automotive sector.

In Australia, this culminated with Ford,Toyota and GM’s Holden taking the drastic decision to close their Australian manufacturing operations; this has meant that come 2017, Australia will no longer be producing any passenger cars.

The list of challenges facing the Canadian automotive manufacturing industry is long, and the future of an industry that employs 115,000 highly skilled workers looks bleak. But the precedent set by automotive OEMs in Australia should serve as a wake-up call to automotive manufacturing stakeholders in Canada – international automotive manufacturers owe no loyalty to Canada, and they will shift production to countries, such as Mexico, which are more competitive and can deliver sustainable bottomline growth.As Canadian automotive output was more than ten times that of Australia, it might be premature to think that a country with such a huge automotive manufacturing infrastructure and legacy could go down; but unless steps are taken to fix the structural problems in the industry, there’s a very real chance that it could die a long, painful death.

Manmeet Malhi is a Senior Analyst at EOS Intelligence.

Honda of Canada Manufacturing, Alliston

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All change for OEM manufacturing strategies in Argentina and Brazil?

CARCON Automotive’s Julian Semple considers likely changes in import and export agreements between Argentina and Brazil, and why South America’s two largest new vehicle markets need each other

T

o meet demand in South America’s two largest markets, OEMs have implemented a manufacturing strategy which involves assembling different vehicle models in Argentina and Brazil, and exchanging them in order to benefit from the terms of the Mercosur trade agreement.

The existing trade agreement between the two countries has been in effect for the last

14 years. Negotiations are under way to write a new agreement covering imports and exports that is expected to guide future trade between Argentina and Brazil.

In June 2014, the two countries extended the current agreement by another year, to 30 June2015. Under the terms of the extension, for each US$1m of cars imported from Argentina, Brazil can export US$1.5m to that

country. Previously, the agreement called for US$1.95m exported by Brazil versus US$1m imported from Argentina.

The new vehicle markets in Argentina and Brazil are currently topped by fairly similar segments, with the sub-compact B-segment accounting for more than 50% of sales.

Here we take a closer look at activity in the new vehicle markets in Argentina and Brazil, and consider the longer-term impact of these trade negotiations.

Argentina in 2013: it was a very good year…

Full year vehicle sales in Argentina in 2013 totalled 955,000 units, a 13.5% increase yearon-year. The growth was driven by the high rate of inflation - officially 10%; in reality, 30% - which made customers look on cars as a secure investment. There was also a high discrepancy between the official dollar and 93 | Megatrends

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OEM

Country

Models produced

Fiat

Argentina

Palio and Siena

Fiat

Brazil

Bravo, Dobló, Ducato (van), Fiorino, Grand Siena, Idea, Linea, Palio, Weekend, Punto, Siena, Strada (pick-up) and Novo Uno

Ford

Argentina

Focus and Ranger (pick-up)

Ford

Brazil

Trucks, Fiesta, New Fiesta and EcoSport

GM

Argentina

Agile and Classic

GM

Brazil

Celta, Cobalt, Cruze, Montana, Onix, Prisma, Spin, S10 (pick-up) and TrailBlazer (SUV)

Honda

Argentina

City

Honda

Brazil

City, Civic and Fit

Iveco

Argentina

Trucks

Iveco

Brazil

Trucks and Daily (van)

Mercedes-Benz

Argentina

Trucks and Sprinter (van)

Mercedes-Benz

Brazil

Trucks and buses

PSA Peugeot Citroen

Argentina

C4, C4 Lounge, Berlingo, 207, 308, 408 and Partner

PSA Peugeot Citroen

Brazil

Boxer VAN, C3, C3 Picasso/AirCross, Hoggar (pick-up), 207, 208,

Renault

Argentina

Clio, Fluence and Kangoo

Renault

Brazil

Duster, Logan, Master (van) and Sandero

Toyota

Argentina

Hilux PU and Hilux (SUV)

Toyota

Brazil

Corolla and Etios

VW

Argentina

Fox Suran (SpaceFox) and Amarok (pick-up)

VW

Brazil

Fox, Gol, Polo, Saveiro (pick-up), SpaceFox,Voyage and Up!

94 | Megatrends

the black market dollar, which made vehicle purchasing a good deal for those with foreign currency (historically, Argentineans have saved US currency).

The number of vehicles imported into Argentina rose by 18.5% in 2013, from 488,864 units in 2012 to 579,060 units; meanwhile, exports grew by 4.8% in 2013, from 413,500 to 433,300 units. Brazil was the source of most imported vehicles, and the destination for most of Argentina’s vehicle exports. …while Brazil’s 2013 disappointed

The decline in Brazil’s new vehicle market in 2013 has been well documented; the total, of 3.76 million units, was down by 0.91% on 2012’s figure of 3.8 million units.

The decline was attributed to the banks tightening conditions for loan approvals, and a lower full year GDP, which ended at 2.3% compared to the 3.5% forecast at the start of 2013.

New vehicle imports fell by 10.8% in 2013 from 784,100 units in 2012 to 699,600, due to the higher IPI tax on imports. Exports, however, grew substantially in 2013. At 563,300 units, the total was up by 26.5% (2012: 445,200), with the main destination being Argentina.

2014 won’t be a great year for either market

Argentina’s automotive market is showing signs of slowing in 2014, and year-to-date sales in May were down by 22.7%, at 328,700 vehicles, compared to 425,500 in the same period last year. automotivemegatrends.com

MANUFACTURING & MATERIALS The accompanying chart shows that in Brazil, B-segment cars account for almost 70% of its light vehicle production, followed by pickups, which account for 12%.

Foreign exchange

With a few exceptions, OEMs that have plants in both countries produce different vehicle models in each country and exchange them, as detailed in the accompanying table.

This strategy avoids duplication of manufacturing processes in the two countries and provides higher volumes of a given model at one plant only, while optimising investment in tooling and facilities.

What does this all mean for the future?

There are, of course, other OEMs producing in Brazil that don’t have plants in Argentina, such as Hyundai, Mahindra, Mitsubishi, Nissan and Suzuki. Over the next two years, the following light vehicle brands will also begin production in Brazil: Audi, BMW, Chery, JAC Motors, Jeep and Land Rover.

Since both countries levy high taxes on vehicles not produced in the Mercosur countries or Mexico, which has a trade agreement with Mercosur, OEMs that plan to enter or increase sales in either Argentina or Brazil will need to develop a manufacturing strategy that also looks at the other country, and possibly also Mexico.

Brazil is again experiencing a market slowdown; the YTD May sales total of 1.4 million vehicles marks a 5.5% decline over the equivalent period in 2013, when sales reached 1.48 million vehicles.

South America’s two largest vehicle markets need each other

The Argentinean automotive industry is highly dependent on exports to Brazil. Vehicle production was up 3.5% from 764,500 units in 2012 to 791,000 in 2013. Argentina produced a total of 257,500 vehicles from January to May 2014 and 137,000 were exported, mainly to Brazil. Currently, exports account for 52% of Argentina’s vehicle production. The latest CARCON forecast for 2014 sees production of 600,000 light vehicles in Argentina, a 23% drop from last year.

million units, with the increase attributed to higher demand in Argentina.

In the period January to May 2014, Brazil produced a total of 1.351 million vehicles, with 146,000 units exported, mainly to Argentina. Currently, exports account for 10% of Brazil’s vehicle production. The latest CARCON Automotive forecast for 2014 sees production of 3.3 million light vehicles in Brazil, a 5% drop from 2013.

Vehicle trade between both countries is vital, but there’s an important additional step to take in order to conquer new export markets: recent OEM strategies have seen new products launched in South America that are of global standard, and could easily be exported providing the price and rate of exchange are favourable. This scenario is completely different from the one we have seen in the past, where vehicles built in the region were outdated and had lower technological and safety content, and certainly could not perform on the global stage.

Julian Semple is a Senior Consultant and Manager at CARCON Automotive.

As illustrated by the accompanying chart, 40% of light vehicle production in Argentina is made up of B-segment cars, followed by pickups at 25%.

Like Argentina, vehicle production was up in 2013, rising by 9.9% from 3.4 million to 3.74

automotivemegatrends.com

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Landfill gas and the smell of green energy

MANUFACTURING & MATERIALS

Future generations will despair at how long it's taken to use rubbish as an energy source

By Martin Kahl

M

aking money from old rope – or indeed any waste product – has long been something of a Holy Grail in manufacturing. It’s a safe bet that future generations will despair at how long it has taken to come up with a means of using rubbish as an energy source. There’s gold in them thar hills of landfill waste – literally. As well as the gold, a considerable proportion of the electronics goods alone that are thrown away contain silver, precious metals and rare earth.

Unfortunately, the quantities of these materials in any one device are very small, so the trick lies in accessing them.The combined worth in a landfill site may run into attractive multi-digit dollar values in a single location, and into billions globally, but so too does the cost of developing and maintaining efficient means of extraction.

However, the unpleasant smell of a landfill site indicates something much more easily and immediately accessible: gas. Given the rate at which landfill sites are being filled, this could reasonably be considered a renewable energy source.

96 | Megatrends

Toyota has recently announced that it is converting landfill gas to manufacturing energy at its Georgetown, Kentucky plant.

Toyota’s largest plant outside Japan currently builds the Toyota Camry and Avalon ranges, the Venza and engines. The Lexus ES 350 will be added in 2015, when the landfill gas system is also scheduled to become operational. The OEM claims the power generated from landfill gas will be sufficient to build 10,000 cars annually.

Toyota is not the first OEM to use landfill gas in vehicle production. Together, GM’s Orion (Chevrolet Sonic, Buick Verano) and Fort Wayne (Chevrolet Silverado, GMC Sierra) plants use landfill gas power to save 89,000 metric tons of CO2 manufacturing emissions, equivalent to the greenhouse gas output of 18,542 cars. GM also saves US$10m in energy costs across the two facilities. Since the early 2000s, BMW has been using landfill gas to power manufacturing at Spartanburg.

The South Carolina plant is becoming the centre of production for BMW’s SUV range, and current expansion plans will shortly see it become the OEM’s largest plant globally, with output of over 400,000 upa. And in

Mexico, Nissan is working with ENER-G to source gas from a landfill site close to its Aguascalientes plant (Nissan March, Versa, Note, Sentra and Frontier) to power its manufacturing there. 2.475 MW of clean energy are delivered to Nissan, which it says is sufficient to produce 37,000 vehicles per year.

Landfill site operators have for some time used the waste gases to power on-site operations; piping it off-site to local manufacturing facilities for commercial gain is a new, but growing business strategy.

At present, OEMs’ efforts focus on converting gas to manufacturing energy. The next step could be to use it to power cars.

Some landfill gas is already being used in the production of biomethane which, once processed, can be used in CNG and LNG as a transport fuel.

That unpleasant landfill smell? That’s the smell of money and green energy.

This article was first published as a Comment on AutomotiveWorld.com automotivemegatrends.com

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MANUFACTURING & MATERIALS

Nissan takes early advantage of Nigeria’s new auto policy In April, Nissan's Lagos plant rolled out its first locally-assembled vehicle, a Patrol SUV, giving the OEM first-mover advantage in Africa's most promising new market. By David Isaiah

E

arly this year, Nigerian President Goodluck Jonathan voiced his government’s commitment to implementing the country’s new national automotive policy. It is perceived that this new policy will encourage investments in the country’s automotive industry, and is expected to increase the inflow of technical expertise as well.

Nissan has a stake in the country’s developing automotive industry and has set up its own vehicle manufacturing plants in the country.

On 25 April, Nissan rolled out its first locallyassembled vehicle, a Patrol SUV, at the manufacturing plant in Lagos. This follows a

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signing of a Memorandum of Understanding in 2013, between the Renault-Nissan Alliance and West African conglomerate, Stallion Group.

“For Nissan, Africa is our strategic growth driver. Demand for cars is growing quickly in African markets as demonstrated by the first model being produced a mere seven months after the announcement of the new automotive policy. By acting quickly to begin production in Nigeria, we are securing for ourselves first-mover advantage,” said Takashi Hata, Nissan Senior Vice President and Chairman for the Africa, Middle East and India region.

Among the top-ten countries of the world, by population, Nigeria is one of only two countries that do not have a developed automotive industry. The country has a large population and currently ranks seventh in the world. What it also has is a growing middleclass segment of around 38 million. This rise in the middle class, the government says, translates into a potential vehicle market of around one million vehicles annually.

Annual spending on vehicle import was more than Nigerian naira 550bn (US$3.5bn), making this segment the second largest user of foreign exchange. Because of its large automotivemegatrends.com

MANUFACTURING & MATERIALS

Nissan’s Nigerian assembly has started with the Patrol SUV

population, the country also has a potentially large workforce. Setting up manufacturing operations in this country would also provide access to automotive markets in West and Central Africa.

However, significant challenges persist.

Nigeria’s sales have performed poorly, and the National Automotive Council attributes this to factors such as low patronage by government and the general public; very low capacity utilization; poor perception of locally made vehicles; high-cost operating environment; insufficient government protection policy; absence of low-cost longterm funds; weak and deteriorating infrastructure, and inconsistency in tariff policy.

The new policy addresses factors of the country’s automotive industry such as industrial infrastructure, skills development, standards, investment promotion and market development.

The automotive sector is a key component of the Nigerian Industrial Revolution Plan

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(NIRP), a five-year programme developed by the Federal Ministry of Industry, Trade and Investments. The Automotive Industry Development Plan was formulated after consultations with existing local automotive manufacturers and global vehicle manufacturers. Some like the Renault-Nissan Alliance and Toyota have indicated their willingness to invest in Nigeria, if there is a comprehensive automotive industry development plan in place.

“An automotive industry will create significant good quality employment and a wide range of technologically advanced manufacturing opportunities. This industrial base can then form the foundation of other modern advanced manufacturing activities.

For example, commercial vehicle production will lead to the manufacture of agricultural, mining and railway equipment, military hardware and transport,” the policy states.

Nissan says its growth strategy in Africa gained momentum with the introduction of

Nigeria’s new automotive industry policy this year. In fact, the OEM claims to be the first major vehicle manufacturer to build a car in Nigeria, in response to the introduction of the new policy.

“We are grateful to the Nigerian government for implementing automotive legislation that is conducive to investment and that was instrumental in our decision to open an assembly plant in partnership with the Stallion Group, already our exclusive distributor in Nigeria,” Nissan South Africa Managing Director Mike Whitfield has said.

Whitfield also heads Nissan’s Sub Sahara Africa region.

In addition to the Patrol, Nissan's production plans include the Almera and NP300. Since the announcement of the policy, the National Automotive Council says it has been receiving inquiries from OEMs such as Volkswagen, Honda, Kia and Tata Motors as well.

A version of this article first appeared on AutomotiveWorld.com

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Lightweighting drives materials innovation, inside and out

Materials suppliers play a key role in automotive product innovation, from unseen under-the-hood applications to Class A surfacing. Megatrends talks to DSM about lighting and lightweighting

By Martin Kahl

F

rom lightweight aluminium bodies to ultra-high strength steels via hemp, wood and other natural fibres, a variety of new materials and manufacturing techniques are enabling the automotive industry to replace traditional parts with lighter alternatives.

One of the most significant materials developments is the arrival of carbon fibre reinforced plastic (CFRP) in mainstream cars.

The recent launch of the BMW i3 marked the first large-scale series production run of the material, bringing it out of the realms of the supercar and within reach of the car buying public.

Paying LIPA-service to CFRP

CFRP is of huge interest to stakeholders at every stage of the automotive supply chain, from vehicle manufacturers down to the materials suppliers. One such materials supplier is DSM, the Heerlen, Netherlands headquartered global diversified group which delivers materials to the health, nutrition and materials sectors. DSM’s interest in CFRP led to the company becoming the plastics materials supplier for LIPA, a European consortium of industry and academia formed to develop and validate mass-production process technology for plastics composites.

CFRP’s high manufacturing costs to make it a truly viable consideration. Although CFRP offers several advantages, such as high stiffnessto-weight and strength-to-weight ratios, its use in the automotive industry will remain limited until manufacturing costs can be reduced, believes Keith Siopes, Automotive OEM Manager at DSM.

“CFRP composites will likely have limited mainstream usage until the price of carbon fibres, and the manufacturing costs, come down to a level that make them commercially viable versus alternatives, or until all other alternatives to achieving regulatory mandates have been exhausted,” Siopes tells Megatrends. “Until then, there will likely be several niche opportunities for high performance platform derivatives and special cases.” DSM, he says, is evaluating a variety of combinations of alternative base resin, filler, design and processing to optimise performance, weight and costs.

Efficiencies in cost and manufacturing

DSM is primarily a plastics supplier; while its participation in LIPA is for a future role in automotive CFRP, the company already offers a wide variety of products for the automotive industry, the three key ranges being Stanyl, Akulon and EcoPaXX. Almost all OEMs use Stanyl resin in timing chain systems, says Siopes. “In some systems, it has shown fuel economy improvements of 1% and CO2 emissions reductions of 2-3g/km.”

The second key product range for DSM is Akulon polyamide 6, which is used to help reduce the weight and cost of oil sumps.“The new Mercedes S-Class features a breakthrough oil sump made from our unique Akulon Ultraflow polyamide 6, which weighs 50% less than its metal equivalent, while meeting every performance criteria.”

LIPA – “Lightweight Integrated Process Application” – has resulted in the development of an automated manufacturing process for automotive thermoplastic composites. This involves preheating a preform of thermoplastic impregnated continuous fibres, known as an organic sheet, transporting it robotically to an injection mould, and overmoulding it with thermoplastic to create the final part.

However, despite the use of CFRP in a €35,000 (US$49,000) BMW, it is essential that projects like LIPA continue to research ways of reducing

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Another resin, used as an alternative to metal for weight reduction purposes, is EcoPaXX. Siopes explains: “This high performance, biobased polyamide 410 resin is made principally from castor beans. It’s the material of choice to replace metal for weight reduction in many demanding automotive applications.”

These include high temperature applications such as engine and crankshaft covers.

Exterior parts and lighting

A glance at DSM’s product range suggests that much of what it offers is targeted at improving the vehicle's efficiency through under-the-hood products, but Siopes is keen to emphasise that DSM also offers products for visible areas of the vehicle. “We currently supply Akulon resin for many exterior trim applications, including roof racks, door handles, grille opening reinforcements, exterior mirrors and cowl vent grilles. In many of these applications, Akulon UV has helped reduce costs by eliminating the need for painting.”

Lighting is another area with potential for innovation in thermoplastics. “It is one of the most demanding automotive areas when it comes to thermoplastics, but also one of the most potentially rewarding,” says Siopes. “There is huge potential for nextgeneration plastics that combat outgassing and encourage miniaturisation. Thanks to their ability to operate at very high temperatures, they can also contribute to increasingly bold new designs. We offer materials that address these complex demands in a wide range of applications.”

Siopes lists a number of lighting product lines, including front light frames, bezels, lens holders, daytime running lights and

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park and turn lights, lamp holders and sockets, and thermal conductive plastic solutions for new LED systems.

Agility to satisfy emerging requirements

With a range of products reducing weight, cost and manufacturing complexity, the role of a materials supplier like DSM is dictated by the needs of each customer. “Our value propositions vary, depending on the needs or issues to be addressed by customers at different stages of the value chain,” says Siopes. “For example, Akulon Ultraflow is a robust technology that we developed and applied to our Akulon PA6 product line several years ago. It offers the superior flow, good aesthetics and fast injection moulding process cycles versus alternatives. For injection moulders, Akulon Ultraflow enables higher manufacturing throughput, and in some cases, it has helped streamline the manufacturing process by eliminating the need for post-moulding shrink fixtures to attain flat parts.”

This, Siopes explains, enables OEMs and suppliers to expand the design pallet for ‘difficult to mould’ designs, and enables cost and weight reduction. He adds that it may also lower tooling investment because faster cycles translate to fewer tools required for high volume programmes.

“As the technology in vehicles becomes more complex, there’s an alphabet soup of needs and developments stewing,” grins Siopes. These needs require numerous combinations of thermo-electro-mechanical performance, coupled with long-term resistance to various oils and chemicals. The trick, he says, is to be adept at anticipating these emerging needs. “Companies that develop and commercialise products, processes and designs, to meet one or more of these needs, at the right time and at the right price, will earn preferred supplier status with the OEMs,” Siopes summarises. “At DSM, we’re committed to earning and maintaining preferred supplier status through ongoing partnering, needs assessment and customer-focused solutions development.”

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Retail challenges demand more

integrated approach, and soon

The car retail industry needs to get ahead of the game, or risk getting left behind, as McKinsey’s Hans-Werner Kaas explains to Megatrends

By Megan Lampinen

T

he global automotive retail industry is becoming unrecognisable from what it was 20 years ago, and the pace of change is only picking up. Digitisation is reshaping the traditional sales and service formats, and customers themselves are changing their interaction and communication patterns in response to the rise in mobile technologies and social media. McKinsey's 2013 Retail Innovation Consumer Survey takes a closer look at the changes taking place in automotive retail and the various strategies currently 102 | Megatrends

being adopted. McKinsey’s senior partner Hans-Werner Kaas spoke to Megatrends about the latest research findings and possible future directions for the industry.

Dealership numbers

McKinsey's analysis takes into account responses from around 4,500 customers across the US, Europe, and China - regions with a marked difference in the dealer landscape. In the former two regions, the

number of new-car dealerships has fallen by 15% since 2008. Kaas explains: "The reduction of dealerships in the US and Europe was driven by the necessity of economic pressure during the recession of 2008-09. That was a natural consolidation, so remaining dealers can become more profitable."

In 2009, both General Motors and Chrysler made headlines with their drastic dealer reduction programmes, implemented as part of their bankruptcy restructurings. GM

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slashed its US dealer count by 42% to 3,605 by the end of 2010. Chrysler shut down 789 US dealerships, representing 14% of its sales volume. At the time, Chrysler's then Vice Chairman and President Jim Press commented: “The unprecedented decline in the industry has had a significant impact on our sales and forced us to reduce production levels to better match the needs of the market. With the downsizing of operations after the sale and reduction of plants and production, similar reductions must be made to the size of the dealer body.”

"economic health is required for any dealer.

Each OEM needs to make sure that it does not lead to an unhealthy, economically unviable dealer body by increasing the numbers in too strong a manner."

In fact, a 2013 report from Sanford C Bernstein warned that an increase in the number of car dealership in China would be likely to result in declining profits for

dealers. It warned that “a crunch in returns is inevitable.”

China's dealer network growth comes despite the new car registration restrictions in place in several big cities. Implemented as a means of curbing high pollution levels, these caps limit the number of individuals that can purchase a new car at a given time.

"I'm sure that the Chinese policy makers will

In China, meanwhile the number of dealers has more than doubled since 2008. "When you look at China, it is a completely different situation and has seen a dramatic growth market over the last ten years," says Kaas.

"Although China's economic growth rate has softened a little recently, it is still growing substantially on a very high basis now. You need to provide access to the increasing number of car buyers, including the first time car buyers."

As a result, dealerships are not just growing in number but are also expanding to new regions around the country. "They have moved beyond the Tier 1 and 2 cities, into Tier 3 and 4 cities," notes Kaas.This could go too far, though, and Kaas cautions that

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RETAIL (R)EVOLUTION weigh carefully the requirements from an environmental standpoint, fighting pollution, against the further economic development of society," observed Kaas. "You certainly might see a thoughtful selection of a dealer network of where the locations are for an OEM and the minimum size of a dealer.

Those decisions will absolutely become more critical."

Shrink the dealer network - it’s time for virtual reality

McKinsey believes that globally, the dealer network needs to shrink. With nearly 50% of dealer networks underperforming, additional closures would effectively reduce performance spread. This alone, though, will not be enough: "While reducing performance spread is a prerequisite for improving current retail network performance, it will, on its own, neither ensure future success nor transform today’s dealer network into a modern, multi-format, innovative sales and service experience for the customer."

In general, it wants to see more fully integrated customer relationship management and dealer performance management systems. McKinsey believes this allows both dealers and OEMs to better use customer data and provide real-time transparency and insights into retail performance.

Audi has emerged as one of the leaders in this approach. The German OEM has been supporting its dealerships' digital marketing by offering dealers a standardised set of digital tools (search engine optimisation and banner advertisements) to help them generate more qualified leads. At GM, more than one-third of the OEM's dealers have started offering the OEM's new online shopping tool ‘Shop-Click-Drive’. The software allows users to arrange a test drive, settle on the price of a new car, receive an

estimate of the trade-in value of their old car, apply for financing, and arrange vehicle delivery. Kurt McNeil, GM's US Vice President of US Sales Operations, told us the tool makes "it easier for the dealer to build a personal relationship with the customer.”

Others, including Mercedes-Benz, BMW, and Ford are providing iPads to their dealers for sales staff to use with customers.

The technology goes far beyond this, however, as some showrooms do away with physical cars altogether. Jaguar Land Rover's Virtual Experience is a portable system that allows customers to engage and interact with an almost life-size high-resolution image of any model. That's a digital image, not a physical model. The portable system can be set up almost anywhere – showrooms or public spaces – to provide virtual ‘hands-on’ access to the range.

Audi is also an early mover in the digital retail sphere. It now operates three ‘Cyberstores’ - located in Beijing, London and Berlin – and it plans to open 20 worldwide by 2015. These virtual brand centres are located in the heart of thriving urban centres, where space is at a premium.

With no room to display a full range of vehicles, these locations instead display Audi's entire model range completely in digital and “almost true-to-life” form, projected on floor-to-ceiling projection surfaces. Prospective customers can use media technology to configure a customised Audi, book a test drive or directly order the production of their car.

Other brands are dropping the reference to vehicles altogether, as seen with the likes of Lexus' Intersect brand experience space in Tokyo. Opened last August, the location is described as “unique-luxury spaces where people can experience Lexus without getting behind a steering wheel. Neither a dealership, nor a traditional retail space, guests are able to engage with Lexus through design, art,

fashion, culture, film, music and technology.”

Instead of seeing physical Lexus cars, visitors can buy a coffee and view a lifestyle and culture exhibition. Moving on to the second floor they can purchase various luxury items and snack at a café.

Mark Templin, Executive Vice President of Lexus International, explained that the locations are meant to serve as a “comfortable and inspiring space for interaction among people and between people and cars.”

New strategies build brand perception – but do they sell cars?

McKinsey is optimistic on the impact of these various alternative approaches, but so far there is little data to indicate their effectiveness in generating car sales. "The jury is still out in terms of actual conversion of sales leads. Nevertheless, what those new formats do is certainly help to reinforce and build brand perception," says Kaas. "As a caveat comment, such a new format alone cannot be the ultimate and only driver of sales conversion. What we emphasise and what we have empirically proven in our research is that you need an integrated approach of all the touch points of a consumer and you need to know for a consumer or segment what the preferred touchpoints are - whether it's word of mouth referral to friends or online forums in the decision phase. However, the decision phase still happens in a dealership.That information and the relevance of touchpoints is absolutely critical. I think all OEMs will step up their efforts in understanding their customers there.

Transformation is vital...and inevitable

McKinsey believes dealerships will remain a crucial touch point for consumers, but the variety and number of touchpoints is growing. "In understanding touch point preferences it's more important to look at the demographics and preferences of a consumer that characterises his attitudinal characteristics but also purchase and usage preference.And different consumer segments will have different types of touch point journeys," says Kaas.

The end message from Kaas is that transformation is inevitable if dealerships are to meet the coming market challenges.There is no 'one size fits all' approach for all dealerships, but a general integration of traditional techniques with new formats offers the most promising strategy, and on that will both keep customers happy and improve dealer profitability. The important thing now is to start acting or risk getting left behind: "Those that do not move ahead could find themselves driven out of business in the mid to long run.... So there is no time to lose – the time to act is now."

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How the GENIVI Alliance Works The GENIVI Alliance is an automotive and consumer electronics industry association that drives collaboration among vehicle manufacturers and suppliers, to build open source infrastructure for in-vehicle infotainment (IVI) systems. IVI is a rapidly changing and expanding field within the automotive industry. It covers many types of vehicle infotainment applications including music, news and multimedia, navigation and location services, telephony, internet services and more. The alliance aims to align requirements, deliver reference implementations, offer compliance programs, and foster a vibrant open-source IVI community.

The majority of GENIVI’s work is conducted through the technical and marketing teams and groups. There are currently six topical “expert groups” – Automotive, CE Connectivity, Location-based Services, Media and Graphics, Networking, and System Infrastructure. The EGs establish and prioritize the technical requirements, identify and enhance components that implement those requirements, and together develop the GENIVI Compliance Statement.

In Asia, regional expert groups also develop specific requirements unique to their locations. All of these requirements are collected, reviewed and integrated by the System Architecture Team, resulting in a comprehensive compliance specification.

The Program Management Office develops and monitors the technical working plan resulting in a regular, six-month release cadence. The Baseline Integration Team provides a continuous build environment where EGs and members can test their developed software against a number of GENIVI compliant Linux distributions.

The GENIVI compliance program is a key deliverable of the alliance, providing the set of specifications for GENIVI member companies to measure their products and services. Those that meet the specifications may be registered as GENIVI compliant and listed on the GENIVI website. Compliant platforms consist of Linux-based core services, middleware, and open application layer interfaces. These are the essential but non-differentiating core elements of the overall IVI solution set.

Automobile manufacturers and their suppliers use these compliant platforms as their common underlying framework and add to it their differentiated products and services (the consumer-facing applications and interfaces).

GENIVI is identifying these common automotive infotainment industry requirements to establish an open and robust baseline from which to develop products for the common good of the ecosystem.

The GENIVI Alliance is open for membership to all organizations engaged in the automotive, consumer electronics, communications, software, application development and related industries that are invested in the success of IVI systems and related products and services.

OEMs

First Tiers

OSV, Middleware, Hardware, and Services Suppliers

Silicon

www.genivi.org

RETAIL (R)EVOLUTION

Ford enjoys life in the Quick Lane

OEMs are looking beyond sales as the ever more lucrative service sector promises steady payback

By Megan Lampinen

C

ustomer care is becoming increasingly important for automotive manufacturers, and as a result, they are starting to become more involved in the after-sales and service sector. Not only does this make for better customer relationships with dealers and improve brand loyalty, but it provides a lucrative and steady source of revenue to balance the cyclicality of the new car market. Megatrends spoke with three top Ford executives about the company's own efforts in the service segment and its ambitions for the future.

Quick and easy... and lucrative

"We see service becoming more and more critical in the whole ownership experience," explained Frederiek Toney, Vice President of Global Ford Customer Service.

Ford started to make significant moves into the service sector about 20 years ago, said

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Toney, with a focus on quick and easy maintenance and repair. "We wanted to improve the overall ownership experience by providing our customers with a fast and efficient maintenance service at dealerships across the world. It helps us connect with the customers in a way that fits in with their fastpaced lifestyle," said Toney.

The first store, called Rapid Fit, emerged in the UK in 1993 and was the inspiration for the now expansive Quick Lane Tire and Auto Center network in the US, which launched in 1997. Quick Lane centres offer routine vehicle maintenance like oil and filter changes, brake repair, tyre replacement and general light repair services - no appointment necessary. A service takes between 30 and 45 minutes any jobs requiring more intensive work are relocated to a different service shop. All vehicle makes and models are serviced, not just Ford.

The business has benefited from the trend of longer ownership - drivers are now keeping their cars for longer, giving service providers an even more important role. "We are seeing ten-plus years for cars on the road in both Europe and the US," said Toney.This has been driven both by recession concerns by buyers, hesitant to make big purchases in a background of economic uncertainty, and by improvements in technology. "Cars can run better for longer. With people taking good care of their cars, there's no reason for them not to be durable and lasting.”

Conquest customers

Notably, the Quick Lane service has proven effective in not only retaining Ford customers, but bringing in new ones. Don Cape, Global Quick Lane Business Manager, noted: "Our Quick Lane dealers continue to retain and capture conquest owners at a higher rate than our non-Quick Lane dealers. automotivemegatrends.com

RETAIL (R)EVOLUTION If you give customers the service the way they want it and they have a good experience, they will come back. We've seen year over year, our Quick Lane dealers continue to perform better.That's one of the reasons we at Ford are so bullish in support of Quick Lane."

As a network, non-Ford vehicles account for about 25% of the services carried out at Quick Lane centres. However, at some dealers this can reach up to 80%. The potential for conquest sales in such an instance is huge: "That Quick Lane dealer has those customers coming in that he can market a new car to. That's a big advantage to our dealer network," said Cape.

Involvement in the service side of things also provides a constant revenue stream compared to the more cyclical car market. A recent study from McKinsey, 'Innovating Auto Retail', found that less than 20% of dealer margin in the US came from new car sales the remaining margin came from services and parts and used car sales.

Cape explained: "It's very similar to our dealership fixed operations business, which is very stable. It's a great revenue source for that dealership and Quick Lane is no different. Our dealer operators say it gives them another revenue stream so they can manage their cash flow. Every day they have couple thousand dollars of revenue that they're taking in. It's a very stable business, unlike maybe the new car market that can be cyclical."

Expansion

In early February, Ford opened its 700th Quick Lane centre in the US, located in Texas.

Last year, the business reported record sales of nearly US$800m. Expansion is also under way in Europe, where there are three

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facilities in operation in the UK, with two more coming up. By the end of the year, Ford plans to add 25 more sites to the UK. Unlike the US facilities, these UK locations and any future European ones will also offer official annual vehicle check services.

Elsewhere, centres are also operated in the Middle East, Central American/Caribbean, Asia Pacific, Canada and South America. In the next three years, Ford is aiming for a total of 1,000 locations globally. "That's our goal," confirmed Massimo Pasanisi, Executive Director, Operations for Customer Service, Ford of Europe. "We're adding 50 to 75 per year globally."

That's a substantial growth outlook for a company previously heavily focussed on the sales end of the business. "It's just a successful context that works in every market," said Toney. "The whole 'easy in, easy out' for service is in demand.And we're meeting that demand."

While the company is optimistic of the opportunities that lie ahead, Toney admits there are certain challenges to future growth and profitability: "The challenges will be the same we always face - making sure there's a right business proposition for the customer, for the dealer and for Ford."

For instance, expansion plans in expensive, urban cities like London pose a challenge.

"When you get into places like London with limited space, then the cost of acquiring property is always a consideration. One of the things we're doing as a global team is to have a flexible approach to facilitate a Quick Lane outlet," explained Toney.

There is also the likelihood of new players appearing on the scene. Where Ford has had such success, others may wish to try their hand as well. "There's intense competition

presently," said Toney. "We expect other OEMs will try to do the same thing that we're doing. Frankly, that's the way of the world.We embrace competition. It's all about how you treat your customer that's important."

Both product and service provider

Gradually, Ford as a brand is developing as both a service and a product provider. "We see the brand developing very nicely where we're going to be providing a full family of vehicles, smart sales and service programmes and investing in the communities that we serve all across the world," said Toney. "We see everything coming together very nicely in terms of retention and development of those customers."

The McKinsey retail study also highlights the importance of a strong synergy between OEMs and their dealer network. The study's authors note: "OEMs will continue to require a strong dealer network – to serve as local brand ambassadors and provide cus¬tomers with high-quality vehicle maintenance and service in a convenient location."

As the market evolves, Toney remains open to evolving with it. So far, the focus at the Quick Lane locations has been on areas like tyres and brakes, but this could change as vehicles take on increasing levels of electronics. In the future, Toney conceded that an expansion into new areas was possible, provided it was kept to a basic level.

Overall, Toney remains optimistic on Ford's investment in the service side. "Selling the car is just the beginning. Retaining customers is about how well we take care of them in the service side," said Toney. "It allows us to compete with our competition, who actually do this quite well.We're trying to outperform them, and we're doing a nice job of it."

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Digital marketing is the new

normal for car manufacturers

Car brands are increasingly identifying digital platforms as core pillars of their marketing strategy, says Google’s Global Head of Automotive

By David Isaiah

E

ven in a traditional industry, like the automotive industry, the prevalence of digital marketing is increasing rapidly. Many vehicle manufacturers are working to try to understand the impact a generational shift is having on their marketing, and user experience as well. With regard to automotive marketing, there’s an important shift from monologue to dialogue.

Consumers no longer want to be told, for instance, about what car to buy and why; rather, they want to experience it on their own, and to have a say in that experience.

This is something that has been tougher for OEMs to come round to. OEMs were, in fact, among the first to realise the importance of a digital presence, setting up websites and online tools to configure cars.

spend increasing periods of time researching, and a significant portion of that online, brands have the opportunity to reach and influence potential buyers.

In general, the perception has been that vehicle manufacturers have fallen behind when it comes to digital marketing of automotive brands, owing to the emphasis on

offline marketing efforts. Guerriero, however, feels that the situation is, in fact, the opposite for most automotive brands. According to Google, automotive marketers continue to evolve and innovate their approach to engaging with consumers online.

"It's no secret that several brands now identify the digital platform as a core pillar to

When it comes to marketing, vehicle manufacturers have historically focused all of their attention, money, investments and resources on the retail experience, with the online experience remaining more of an afterthought. Now, however, there is a growing realisation that the online experience needs to be the primary thought.

This is primarily because consumers increasingly don't want to experience dealerships the way OEMs tell them to, in order to buy a car.

One company that has been making significant advances in this area is Google.

According to the company, technology and digital advancement are having a transformative effect on the vehicle shopping and purchase experience.This has resulted in a highly informed and empowered buyer.

Digital marketing

The shift towards digital media has transformed how people shop for vehicles, says Meredith Guerriero, Google’s Global Head of Automotive. As potential consumers 108 | Megatrends

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their marketing strategy. As an example, as part of a multi-country European launch of the Captiva, Chevrolet wanted a centralised online destination to promote the vehicle, and used high profile YouTube celebrities to produce a collection of short films demonstrating the vehicle's features," said Guerriero during her keynote address at Automotive World’s Megatrends USA 2014 conference, held earlier this year.

Technology

Technology has well and truly started driving changes within the digital space, where vehicles are concerned. For instance, future generations are likely to never ask for, or even write down directions. Technology is making a mark on how automotive marketers can solve problems for consumers, and also start to integrate technology into what consumers are asking for.

"What if we used Google Maps to bring them into the dealership and they could start to experience this online without even having to get into their current car or public transportation to go check out a vehicle?

What if we're able to bring them into the vehicle? We can actually do this now and some of the OEMs are testing this out and I think this is the perfect showcasing of where you can also extend and take advantage of these trends," said Guerriero.

much better quality than others. However, the quality paradigm is diminishing.

Secondly, there is unlimited access to information, empowering potential buyers.

This access to information allows consumers to carry out all of their research online, whenever it is required. There is another factor with regard to the media factor, and that is social interactions – the online word of mouth.

According to Guerriero, this is almost like crowd sourcing, with consumers seeking out the wisdom of the crowds, and trying to understand everything that is available about the vehicle, as well as the dealerships.

The consumer is therefore more openminded, and this brings us to the third key area driving this new paradigm shift. For the most part, consumers are no longer loyal to a brand. Google says it has begun to see a major shift in recent years; according to the company's figures, three in four consumers say they are likely to switch to a new brand, while less than one in two purchased the brand that they initially considered.

Thus, the traditional sales funnel no longer applies in the era of digital marketing. As a result, vehicle manufacturers need to be more nimble, both from a technology standpoint, and within their marketing campaigns.

"If we watch a user search for Toyota, they might end up with a General Motors brand.

We're also seeing that even if they are searching for fuel economy, or pricing, they might almost get down to a purchase of a vehicle, and then start the process all over again. And also, the purchasing process and the research have shrunk down to three months. This is very fast," said Guerriero.

Opportunities

According to the 2013 Netpop Global Auto Study, 81% of potential buyers use online sources to learn about cars. Of this, 50% use their smartphones at various stages of the process. For instance, 68% use their smartphones to decide on the make or brand of a car; 68% use smartphones for purchase decisions on the type or model; 46% use this for features; 60% for price and

Purchasing process

There is also a change with regard to the purchasing process. The abundance of information within the digital space is showing consumers a different way to shop for vehicles. This paradigm shift, says Google, this is being driven by three areas – industry, media and consumer.

The first of these is the quality parity in the automotive industry. Earlier, there was a much larger quality gap within different models and brands. As a result, it was easier for buyers to say they would buy a particular brand, as they feel it would deliver

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Ain't nobody here but us chickens: Mercedes-Benz made the bold move of running a TV commercial featuring no cars

financing; and 53% to decide on the dealer/seller.

The smartphone, therefore, is turning into an important component in the car purchasing process. As a result, when an OEM or dealer is thinking of providing potential buyers a seamless experience, the smartphone needs to be top of mind. While this brings new opportunity, it also brings a wealth of new challenges and new thinking for the OEMs.

"A lot of people think that if their website is good, then it’s good; but really, all of these different areas are taking place on the smartphone - the make, the brand, the type, the model, the features, even financing and pricing and obviously dealer and seller. They are trying to find all and any info on their smartphones," Guerriero says.

OEMs online

To illustrate frictionless customer experiences and the blurring of offline and online boundaries, Guerriero mentioned the example of Audi Cam, a service which enables customers to see and hear about necessary repair work, and to authorise it through a mobile phone or personal computer. A handheld camera produces narrated film clips that are embedded in a customer-specific, PIN-protected web page that is emailed to the customer. This page includes video and audio commentary, VATinclusive pricing for each job, personal technician and service team profiles and action buttons for automatic authorisation of work.

Toyota, meanwhile, has been innovating with the shopping experience. Its Collaborator, which the company launched late last year, is a social car shopping platform geared to bringing in participation and conversation.

110 | Megatrends

This is an example of an OEM working to understand the generational shift, and using it for its digital marketing initiative.

Mercedes-Benz's advertisement for Magic Body Control, a sensor-based system which scans the road ahead and adjusts the car's suspension accordingly, also gained mention at the Megatrends conference. "With this, they've entered the content game, which is what the users are asking them to do. It grabbed attention and definitely gained consideration and that's ultimately what we're trying to do, to follow what the users and consumers want us to do," said Guerriero.

Digital platforms to lead new car sales leads

Analysis published by Frost & Sullivan early in 2014 suggested that global passenger car

companies are desperate to innovate and adopt a new retail model to the next generation of car buyers. This shift has been further driven by high real-estate costs, expensive resources, and the need for innovation to stay afloat.

According to the study, such factors have resulted in many automotive dealerships resorting to shrinking their store spaces by around 20%, and instead opting for digitisation as a mode of interacting with prospective customers. While European OEMs are pushing for standalone digital formats, North American OEMs appear to prefer digitisation within existing franchise models.

By 2020, 60-70% of new car sales leads will be generated by a digital platform, says Frost & Sullivan, be it via websites, mobile sites, social media or apps.

Audi Cam is a service which enables customers to see and hear about necessary repair work, and to authorise the work by phone or online

automotivemegatrends.com

With electronics, we’re going places you’ve never been.

Johnson Controls, a leading supplier of electronics, offers full in-vehicle infotainment, connectivity and driver information solutions. By bringing together adaptive cloud and vehicle-based information sources with highly intuitive user interaction, we’re achieving new levels in driver satisfaction without sacrificing safety. To learn more about our electronics capabilities visit us at johnsoncontrols.com.

RETAIL (R)EVOLUTION

Forget 2014 – India’s OEMs focus on the long term India’s auto industry sees 2014 as a year to forget, but the market has serious long-term potential

By Martin Kahl

A

t Automotive World’s Megatrends India 2014 conference, one overriding message from automotive industry leaders struggling with a stagnant domestic market was that the 2014 parliamentary election would effectively split the year in two, with strategic decisions and any recovery on hold until after the result had been declared.

Following strong growth in India’s new vehicle market over the last decade, sales had widely been expected to mirror in performance the growth of China’s new vehicle market in the early 2000s – if not in volume, then at least in percentage terms. However, weak and even negative sales in the last two years have left the country’s new vehicle market well short of earlier expectations.

Passenger vehicle sales in calendar 2013 declined for the first time since 2002, falling

11% to 1,807,011 units. The health of the Indian medium and heavy commercial vehicle sector is much more troubling; in 2013, sales were down 29% to just 215,000 units.

Comments made by various key players in the Indian market in several recent Automotive World interviews suggest that, in terms of vehicle sales, 2014 will be an unremarkable year – “a year to forget”, in the words of Piyush Minot, India Managing Director, ZF India. There is, however, optimism that the passenger and commercial vehicle sectors can recover over the medium and long term to levels that would put India up alongside some of the world’s largest vehicle markets.

A structural crisis

Rakesh Batra, Partner and National Leader Automotive Sector at EY, said he believes

Passenger Vehicle production, domestic sales and exports CY12

2,000

the current crisis is structural, rather than cyclical, “largely driven by macro-economic conditions and the slowdown of the economy where we went from 8% growth rate to under 5%. That has really impacted consumer confidence.” Furthermore, he said, rising inflation – already over 8% – has resulted in higher fuel prices and higher interest costs.

2014 will be “another write-off year,” with little to indicate an uplift in sales, said Batra.

“Recognising the difficult conditions, the government has recently reduced excise duties on most vehicles, but it’s a very shortterm measure. Is that going to result in a reinvention of sales and growth back to double digits? Probably not.”

Passenger Vehicle domestic sales by segment CY12 3,600 CY13

CY13

1,800

2,800

1,600 1,400

2,000

1,200 1,000 800

1,200

600 400

400

200 0 PCs

UVs

Vans

-400

Production

Domestic sales

Exports

Source: SIAM, EY analysis

112 | Megatrends

automotivemegatrends.com

RETAIL (R)EVOLUTION Global Medium-Heavy Vehicles Production Outlook (000’s units)

Source: OE LinkTM 2014

Unsurprisingly, Batra sees the 2014 parliamentary election as pivotal in 2014, with the country’s economic recovery dependent on the outcome of the election.

“If a stable government comes in, if consumer sentiment returns, if interest rates get under control, then the macro-economic situation gets better.”

Although Batra expects 2014 to be a slow year, with flat to negative growth, he believes there could be an improvement towards the end of the year.“Providing we do have macroeconomic growth coming back, and a stable government being able to form at the centre, then I expect by the end of the year, when we come around to the next festival season, which is around September, October, then we should start seeing some lift in sales happening, and hopefully a better 2015.”

2014 – a year to forget…

From a supplier perspective, ZF India’s Piyush Minot is more optimistic about the Indian market in 2014. Minot told Automotive World at Megatrends India 2014 that the high number of Indian and global vehicle launches at the 2014 Delhi Auto Show in February will act as a stimulus for new car buyers; this, coupled with the government’s recent reduction in taxes, will inspire buyers. “2014 for the passenger car industry should be fairly good,” said Minot. “It won’t be at the levels of previous years, but it will not be negative.”

The commercial vehicle industry, however, has a flat year ahead of it – “a year to forget”, says Minot. The CV industry depends on the automotivemegatrends.com

industrial manufacturing index and infrastructure projects “which are not being implemented due to various policy reasons, as well as government regulations.”

…but longer-term, the outlook is positive

Over the medium and longer term, the outlook for the automotive industry in India is still positive, believes EY’s Batra. “As long as we have macro-economic growth, back to levels of 7% or 8%, that’s going to drive an increase in per-capita income, and given our low penetration rates, and no alternative options for personal mobility, it’s going to result in higher sales of vehicles.”

Looking out five to ten years, Batra expects to see a return to growth.“There is a lot of pentup demand. A vehicle is an aspirational product, and consumers will want to fulfil their aspirations.” At Megatrends India 2014, there was talk of India being a market of 8 million units by 2020, but Batra is more cautious.“Will it be 8 million? Probably not, because we’ve lost two years of 15-16% growth, but we’ll probably be around 6 to 6.5 million units of domestic sales, and then a couple of million units export, which will still, from a manufacturing perspective, make this an 8 to 9 million unit market for passenger vehicles.”

“By 2020,” says ZF’s Minot, “it is said that we should be reaching a number of around 9 million passenger cars. Due to the slowdown in the last two years, we might be on a growth path…whether it will be 9 million units will be seen in the coming years.”

A market with potential

According to Stefan Jacoby, Executive Vice President Consolidated International Operations, GM, “Our long-term outlook on India is positive, but the short-term expectation is rather flat or negative.”

Jacoby, who has responsibility for over 100 countries and territories in Africa, Asia Pacific, Europe and the Middle East, told Automotive World that in terms of growth rate, “it will be similar to China. It may not be as dramatic as China, but there are areas in India which are pretty much under-developed, and these could create greater demand.”

Ford, too, is positive about the longer-term prospects for India’s new vehicle market.

“We believe in the future of India,” said Jim Farley, the OEM’s Executive VP, Global Marketing, Sales and Service, during an interview with Automotive World at the 2014 Delhi Auto Show. “By 2020, we expect that the industry size could be in the order of 7 million units, up from 3.2 to 3.3 million units this year. The energy is fantastic.

Despite the challenges in the Indian auto market, the opportunity is still so easy to understand.” Farley’s forecast was echoed by Ford India’s Executive Director of Manufacturing, Tom Chackalackal, in his presentation at Megatrends India 2014.

Megatrends | 113

RETAIL (R)EVOLUTION

Market leader Maruti Suzuki – which has a market share of around 43% – is embarking on a new model offensive to attract new customers through the launch of innovative products like the Celerio with Automatic Gear Shift (AGS). Kenichi Ayukawa, the Managing Director of Maruti, Suzuki’s largest subsidiary, said “As far as sales are concerned, we expect the domestic market [for Maruti] to grow from 1.1 million units annually to 1.5 million, while exports may increase from 120,000 units to 200,000 or 300,000 units.”

Maruti sold 1.064 million units in the 2013 calendar year.

Honda’s commitment to India is absolute, and the OEM is in the process of a major expansion of its Indian manufacturing footprint. “India is one of the most important markets for Global Honda,” said Takanobu Ito, President and Chief Executive of Honda Motor Co., speaking to Automotive World recently. “We will increase our sales target to 300,000 units annually by the end of March 2017. This is three times more than the sales achieved last year.”

“

We have easily the potential for 500,000 units, making it the second biggest truck market in the world

- Marc Llistosella 114 | Megatrends

India’s truck market could “easily” reach 500,000 units

In a panel discussion on the commercial vehicle day of Megatrends India 2014, it was agreed that India’s truck market has the potential to reach volumes of up to 500,000 units within ten years.

Marc Llistosella, Chief Executive of Daimler India Commercial Vehicles and Chief Operating Officer of Daimler Trucks Asia, said the Indian truck market is “on its knees”, using the word “shattered” to describe the market’s prospects in 2014. “If we exceed 210,000 units above 6t, it will be a good surprise.”

However, Llistosella expressed full confidence in the market’s potential: “we have easily the potential for 500,000 units, making it the second biggest truck market in the world.” A market of 450500,000 units could be achieved by 2018, he said, but getting there requires progress and

change both politically and in terms of business culture.

Ravi Pisharody, President – Commercial Vehicles business unit at Tata Motors, said he believes the Indian CV market could reach the half-a-million-unit mark. A Ramasubramanian, AMW Motors’ President, expects the market to reach a slightly lower level of 400,000-450,000 units in ten years’ time.

At Scania Commercial Vehicles India, Managing Director Anders Grundstromer’s confidence in the Indian market is based on expectations that goods volumes transported by road will double between now and 2020. As a result, he sees India becoming a 400,000 to 500,000 unit CV market.

ZF’s Minot provides a supplier’s perspective on India’s longer-term CV outlook: “We at ZF believe the commercial vehicle industry will not only bounce back, it will reach new all-time highs. By 2020, we expect the 6t and above segment to be at roughly 500,000 units.”

Mid-May, and the outcome of the election, could not have come soon enough. The election result itself is unlikely to have any immediate impact on India’s new vehicle market, but a significant milestone was reached, enabling political and business communities to begin building the country’s economic recovery – and economic growth translates very quickly into rising vehicle sales.

A version of this article first appeared on AutomotiveWorld.com

automotivemegatrends.com

RETAIL (R)EVOLUTION

Car brands must harness the online experience to drive forecourt sales

eBay Advertising’s Phuong Nguyen looks at how car brands can capitalise on the increasingly blurred lines between on- and offline channels to boost sales across the board

T

he way people browse and buy cars has changed. In just a single generation, the rise of omnichannel – shopping across multiple sales channels and devices – and the development of mobile technology have created an increasingly fragmented and complex shopping journey that resembles more a complicated tube map than the traditional linear ‘funnel’ of moving from awareness to consideration to transaction.

The automotive sector is no exception.

A recent report by eBay and Deloitte into The Omnichannel Opportunity found that almost two thirds (63%) of consumers surveyed in selected European markets use multiple shopping channels when spending over £100 (US$170) – a feat easily achieved when cars are involved. This means that OEMs need to be present at every ‘stop’ along the way in order to engage prospective customers however and wherever they are now shopping.

But this involves more than having an optimised homepage for the smaller screen; to be successful within this environment, car brands need to take advantage of the range of opportunities available online to inspire, inform and reassure consumers at every step in the purchase journey, and throughout the entire lifecycle of their car.

Using insights to inspire

Having a presence across multiple channels is half the battle won, but that alone won’t bring in the sales. Car brands need to be able to target the right consumers with the right messages at the right time to guide them towards, or indeed inspire, a purchase.

Fortunately, with the wealth of data insights available online, this has never been easier. By combining observed insights, such as search and purchase history, with demographics and real-time targeting, OEMs can now segment their audiences much more effectively and automotivemegatrends.com

identify where consumers are in their shopping journey to create relevant and targeted campaigns based on facts rather than assumptions. For example, instead of immediately targeting young men with sports cars, behavioural insights might reveal that older women are a lucrative group of automotive enthusiasts.

Car brands can even spot external factors that may impact a motorist’s choice of vehicle. For example, if someone were to search for pushchairs and a new car simultaneously, a brand could infer there had been a change to their family status and use creative messaging to inspire the shopper with a ‘safe’ and ‘family-friendly’ car while they’re in a researching frame of mind.

Aligning messages across all channels

It’s important that car brands don’t think of their various sales channels in silos – in the eyes of the consumer, whether on or offline, it’s all shopping. If communications are inconsistent or disjointed, they risk confusing and ultimately losing customers along the way.

This means they need to take an integrated, almost channel agnostic, approach to campaigns, where messages are echoed across the board to ensure customers remain informed.

That doesn’t mean replacing in-store sales with online though. The Omnichannel Opportunity research found that increasing awareness of products through websites, apps and online marketplaces has a positive effect across all sales channels – not just online.

When BMW, for example, launched a Value Service page on eBay to promote its fixedprice servicing programme for selected BMW models, it used targeted advertising campaigns to not only drive customers to its page online, but to also increase footfall to its dealership network.

Going beyond the purchase

Contrary to popular belief, the purchase journey doesn’t end once a decision has been made. Studies show that thousands of shoppers continue researching an item even after they’ve made the purchase as they look for confirmation that they have made the right choice.And when the decision involves as high-ticket an item as a car, the doubts are likely to increase.

It is therefore vital that car brands continue developing their relationship with the consumer – online and on the forecourt – beyond the sale, offering messages of reassurance and support to encourage trust.

If nurtured well, and with the extended lifecycle of a car, the relationship can also help to build loyalty and lead to future opportunities to grow sales in parts, accessories and services after the initial purchase. By keeping a record of when a car was bought, consumers can then be targeted at key milestones with replacement tyres, serpentine belts or brake pads, for example.

To maximise sales in the long run, it’s worth the investment.

There are many OEMs now harnessing their online presence effectively, but as technology evolves, so does the purchase journey. Car brands cannot afford to become complacent, and must continue to leverage their online capabilities to keep pace with the increasingly omnichannel consumer; fail to do so, and they risk watching their customers switch over to brands ready to accompany them throughout the entire purchase journey and beyond.

Megatrends | 115

WE MADE SMART CARS

EVEN SMARTER

BY COMBINING REAL-TIME TRAFFIC DATA

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WHAT’S AHEAD? That question is on the minds of everyone who works at Infosys. From breakthrough strategies to flawless execution, our mission is to design the right innovations for each unique business challenge and deliver tomorrow’s enterprise today. That’s our promise.

RETAIL (R)EVOLUTION

Truck aftersales: Roadmap to excellence

Roland Berger Strategy Consultants presents an overview of findings from its work with a variety of clients in the field of commercial vehicle aftersales

I

n recent years, the importance of commercial vehicle aftersales business has grown strongly, and with it the need for excellence to unleash its full potential.

Margins in new truck sales are eroding, hence the growing significance of aftersales for profits. At the same time, competition has become fiercer, with new players such as Original Equipment Suppliers (OES) and independent retailers entering the market.

In response, Original Equipment

Manufacturers (OEMs) require three pillars of excellence in aftersales: know your customer, unleash your current potential, and exploit new potential.

the one side, and changes in the value chain and competitive landscape on the other. Within this, eight key trends can be identified (fig. 1).

The truck aftersales business is subject to a number of influences. These can be broadly separated into product and market factors on

• Goods transportation is growing globally (1% p.a. in Europe, 4% p.a. in China in the medium term);

A.TRENDS IN THE COMMERCIAL VEHICLE AFTERSALES BUSINESS

Figure 1: Overview of key trends in the commercial vehicle industry

automotivemegatrends.com

With regard to products and markets, demand-driving factors for truck aftersales services are:

Megatrends | 117

RETAIL (R)EVOLUTION Figure 2: Key topics in aftersales excellence

• The truck vehicle parc is expanding and shifting from medium/heavy trucks to light commercial vehicles (LCVs); • The average age of truck parcs is rising; • Maintenance intervals are increasing, as components become more durable; • Increasing vehicle complexity is driving the complexity of aftersales services.

With regard to changes in the value chain and competitive landscape, the factors are:

• New intermediaries such as insurance companies and service providers are entering the market. At the same time, chains and specialists are putting pressure on prices and margins, and more and more customers have service contracts; • Share of large fleets is increasing, giving them larger potential to put pressure on market prices; • Requirements for vehicle uptime and efficiency are growing, also in emerging markets.

B. EXCELLENCE IN AFTERSALES

To face the challenges mentioned above, excellence in aftersales is essential and is built upon three pillars: know your customer, unleash your current potential, and exploit new potential. These can be broken down into 11 key topics (fig. 2).

Know your customer

1. A holistic customer needs management system tackles the challenge of insufficient customer knowledge. OEMs should employ a centrally coordinated marketing approach for aftersales, based around the following steps:

• Identify customer needs and define homogenous customer segments;

118 | Megatrends

• Define a product management service strategy; • Design and plan a marketing campaign.

These steps lay the foundation for a service and parts strategy. They have a direct impact on the OEM's market awareness, market share and sales volume.

2. Achieving a sound price/strategy differentiation requires three steps:

• Review current pricing methodologies and systems and establish a stable process for managing spare parts; • Replace inconsistent discount structures (e.g. for NSC, importers and dealers) with a central discount management system (involving modifying discounts and consolidating discount groups); • Develop a fixed price and lifecycle pricing strategy for maintenance and repairs, and implement it globally.

In parallel, OEMs should develop promotional materials that effectively communicate their pricing strategy.

3. OEMs should integrate all customerrelated information and data into a comprehensive customer relationship management (CRM) system for aftersales. This should at least include the following data: • Organisational information (e.g. the name of the key account manager); • Relevant workshop data (e.g. preferred workshop timeslots); • All vehicle-related information.

A robust CRM system can contribute significantly to customer acquisition, customer relations and customer retention.

The company should also draw up customer KPIs and sales projections on different levels (by product, product group, region, etc.). A

data warehouse can provide relevant information in real time to support central and local sales activities.

Unleash your current potential

4. OEMs should look at how they can manage and improve repair times.

Consistent standard repair times support the sales organisation and meet customer requirements. If standard repair times are lacking, firms should take three steps: • Reduce repair times for each work step; • Reduce procurement time for parts; • Reduce the voluntary setting of working times.

5. An installed warranty cost management system creates transparency about potential financial risks in the short to medium term. OEMs should follow two steps:

• Implement and interlink proper processes and systems; • Develop and safeguard the effective management of accumulated data, which will involve consistent data screening, thorough data analysis and implementing an effective early warning system.

Most organisations have substantial potential to integrate existing data (e.g. "Big Data" from data warehouses) and increase the accuracy of existing data (e.g. sales forecasts). This can form the basis for more accurate planning.

6. Service processes should be professionalised.This requires defining and implementing proper KPIs and corresponding systems for managing the aftersales business. Using "as-is" analysis as a starting point, OEMs should define, plan and implement any required actions, employing a robust rollout planning process and effective steering mechanisms. automotivemegatrends.com

RETAIL (R)EVOLUTION Figure 3: Aftersales excellence cube

Customer Needs Management Market needs Triad markets Emerging markets Low-budget markets

> Customer needs/segments > Service strategy > Campaign processes/-planning >…

Price Strategy/Differentiation

> (Re-)positioning > Lifecycle pricing > Discount structure > … > Fixed price offers > Sales promotion

AS Customer Relationship Mgmt. > Integr. syst. (organiz., workshop, customer/ vehicle) > Networked data flows > Customer acquisition

> Customer retention > Relationship mgmt. > Sales promotion > Data WH/KPI >…

Know your customer

1

2

3

Repair Time Mgmt./Improvement

4

Warranty Cost Management

5

> Time reduction per working step > Red. parts procurement time > Red. of voluntarily set working times >…

> Process/system implementation > Screening, analysis, monitoring: early warning > Auditing >…

Sales Channel

> Key Account Management > Spare Parts Salesman >…

Market Management

> Margin steering > Bonus system > Steering regions/ countries

> AS penetrat. rating > Sales force training >…

8

9

Service Process Professionalization 6

Portfolio Innovation/Extension

10

Branding/Labeling

Operational Execellence

11

> Service KPIs > Gap closed by measure definition > Rollout planning and steering process >… > Packaging processes > Identification labeling > Product labeling >…

7

> Remanufacture parts > Telematics > Connected services > Service contracts

> Fin. insurances > Partnerships >…

> Parts availability at POS > … (customer satisfaction) > Logistic organization (density of warehouses)

Unleash your potential

Growthnew Exploit potential

Brand & product specifics

Aftersales Excellence pillars and topics

7. Professionalising branding and labelling concepts is key.This usually comprises three elements: • Packaging; • Identification labeling; • Product labeling.

Employing company-wide standards for packaging prevents damage during transportation and increases brand identification. Identification labelling includes the labelling of parts with the brand name and an identification number to increase the identification of genuine parts and improve brand recognition. Labelling defined parts emphasises the brand and increases identification.

Exploit new potential

8. OEMs should identify additional sales channels. Relevant steps are as follows:

• Establish a key account management system for aftersales to realise the full potential of the spare parts business; • Create a direct connection between company headquarters and key accounts to ensure active steering; • Set up a dedicated sales team that actively sells spare parts to end customers (e.g. in independent workshops) to boost aftersales revenues.

Ideally, companies should follow the above steps in specific regions and then roll out the concept internationally.

9. Market management is an important additional element in exploiting new potential in aftersales. OEMs should follow these steps: • Set up and roll out a consolidated margin

automotivemegatrends.com

steering system, employing a "closed loop process" for managing focus markets; • Introduce a bonus system with quarterly/monthly status reviews; • Draw up and implement guidelines for steering countries and regions in a professional manner, including escalation processes; • Design and implement active sales-force training.

10. Portfolio innovation/extensions enable companies to offer new products with clear added value for customers. Besides partnerships (e.g. for roadside assistance, service contracts, financial insurance), the most important growth areas are remanufactured parts and connectivity.As the truck parc ages, demand for fair value repairs and remanufacturing is steadily increasing.

Truck connectivity gives rise to a multitude of solutions, setting the scene for enhanced services and new business models such as vehicle management, load monitoring, driver/time/legal management and operations/logistics management. These developments enable OEMs to meet customers' requirements for solutions that reduce total cost of ownership (TCO).

11. To ensure continuous improvement, operational excellence within the aftersales organisation is a prerequisite. This includes optimising the availability of parts at the point of sale (POS), which in turn reduces delivery time and contributes directly to increased customer satisfaction. OEMs should analyse and where necessary adjust their parts availability, overall logistics concept (local warehouse vs. regional hub, consignment stock vs. vendor managed inventory, etc.) and warehouse densities.This will create a basis for effectively handling spare parts. Managing customers using key

indicators such as the volume of parts sales and margin contribution helps to create transparency. Fully-automated analyses form the basis for deriving appropriate actions, such as developing a multi-brand strategy to serve different customer groups and offering tailored solutions.

C. ROADMAP TO AFTERSALES EXCELLENCE

Detailed fields of action for OEMs with regard to how they organise their aftersales and their service portfolio can be defined within an "aftersales excellence cube" (fig. 3).

Even though all three pillars need to be addressed, OEMs cannot implement these actions in a generalised manner.They need to be adapted to specific markets, brands and products. For example, they should distinguish between Triad, emerging and lowbudget markets, each of which requires appropriate strategies. They must also adjust their strategy in line with their different brands (in the case of multi-brand OEMs) and vehicle segments. For example, premium heavy-duty trucks offer very different opportunities from entry-level LCVs in terms of the aftersales product portfolio, pricing strategy and margin potential.

With the aftermarket business offering huge potential on both the revenue and margin sides, OEMs require comprehensive guidelines to conquer the multidimensional challenges and create a sound business concept. By following the steps outlined above, they can effectively achieve aftersales excellence.

Norbert Dressler and Philipp Grosse-Kleimann are Senior Partners at Roland Berger Strategy Consultants. Sebastian Gundermann is a Principal at Roland Berger Strategy Consultants

Megatrends | 119

LET’S GO DRIVING

IN THE CLOUD

T TO O CHOO CHOOSE SE THE RIGHT P PATH ATH T TO O THE FUTURE, Y YOU’VE OU’VE G GOT OT T TO O KNO KNOW WY YOUR OUR CUS CUSTOMER TOMER — and kno know w ho how w tto o use ttechnology echnology tto o deepen tha thatt rrelationship. elationship. CSC helps the w world’s orld’s leading aut automotive omotive firms rrapidly apidly analy analyze ze da data ta and driv drive e aut automotive omotive sales, aft aftersales ersales and servic services es — in the cloud. Find out ho how wy you ou can engage cus customers tomers and tak take ey your our rrelationship elationship tto oa higher le level. vel.

LEARN MORE A AT: T: csc. csc.com/drivinginthecloud com/drivinginthecloud VISIT OUR SES SESSION SION A AT: T: A Automotive utomotive W World orld Mega Megatrends trends US USA A 20 2014 14 1:30 p p.m., .m., S Stream tream 3 ““Capturing Capturing Wallet Wallet Shar Share eo off Millennials — Knitting T Together ogether All the De Devices” vices” Da David vid W Woodhead, oodhead, CRM and Digital T Transformation ransformation Pr Practice actice P Partner, artner, CSC

Autonomous cars, driven by safety

SAFETY

Markus Pfefferer, of Ducker India, looks at how the latest developments in car safety technology are bringing the autonomous car closer to reality

A

n essential component of many a classic sci-fi movie, there has nonetheless been a great deal of real world experimentation with autonomous vehicles for almost a century now. Similarly, discussions on automated highways began in the 1939 New York World’s Fair as part of ‘The World of Tomorrow’. However, it is only recently that these experiments have reached anywhere near fruition.

The progress made by Google in its selfdriving technology has been the most widely reported, and the company announced in

May that it had begun assembling prototypes of its own self-driving car. However, Google is far from the only player in this field. OEMs and Tier 1 suppliers worldwide are carrying out extensive work that will enable them to put semi-autonomous, and then fullyautonomous vehicles on the roads.

The impact of autonomous vehicles

The biggest advantage of semi-autonomous and fully-autonomous vehicle control will be a significant increase in road safety. Every year, 1.24 million people in the world die due

Fatality vs.Total Miles Travelled: 1998 - 2012

Source: NHTSA, Ducker Analysis

automotivemegatrends.com

to car crashes.Vehicle crashes remain one of the largest causes of deaths worldwide and cause an even greater number of car-related injuries. According to a recent UN Road Safety Collaboration study, 90% of traffic incidents are caused by human error. Thus, the safety aspects of automated cars move quickly to the fore.

Vehicles that use advanced electronic sensing and processing will also deliver additional tangible benefits, including fuel savings, mobility and convenience, reduced travel time, and more efficient use of roadways.

Safety benefits

Since 2005, the adoption of active safety technologies such as anti-lock braking systems (ABS) and electronic braking systems (EBS) have contributed to the steady decrease in the number of automobile crashes. For example, in the US, the total number of fatalities caused through car crashes peaked in 2005 and has declined rapidly since. The steady decline coincides with OEMs adopting electronic stability control (ESC) as a standard feature in the US, and the federal mandate in 2007, which required OEMs to install electronic stability systems on all passenger vehicles manufactured on or after 1 September 2011.

Megatrends | 121

SAFETY CASE STUDY: Adoption in the US

• Lane departure warning (LDW) systems were available in 51 vehicles in model year 2011 and 69 vehicles in model year 2012; in model year 2013, LDW was offered in 124 vehicles;

In a three-year study conducted by the National Highway Traffic Safety Administration (NHTSA) between 2008 and 2010, ESC saved more than 2,200 lives in the US. NHTSA research has consistently shown that active safety systems, such as ESC, are effective in helping a driver avoid dangerous crashes. NHTSA also estimates that adoption of ESC alone could save as many as 10,000 lives a year and eliminate approximately 200,000 injuries.

In fact, research by the Insurance Institute for Highway Safety (IIHS) in the US revealed that, if every vehicle on the road were equipped with technology such as forward collision and lane departure, blind spot detection and adaptive headlights, then nearly one-third of all crashes could potentially be avoided.

Active safety technology

Advanced driver assistance systems (ADAS) is the term used to describe a set of electronics-based technologies that are designed to aid in safe vehicle operation, help prevent crashes by keeping cars at safe distances from each other, alerting drivers to dangerous conditions and protecting those in the car and on the street from crashes that may occur. ADAS also provides functions that Electronic Safety Technologies

will serve as important elements of computer-controlled autonomous operation in the future.

Almost all new vehicles have stability control, anti-lock braking, airbags, occupant detection and various kinds of alarms. Building on these traditional capabilities, active safety technology is evolving through four stages, as outlined below.

The first stage includes passive warning and convenience systems, such as: • Rear-view cameras • Radar for blind spot detection, • Cross-traffic warnings that help with reversing out of parking spaces between larger vehicles.

Slightly more advanced versions may include camera image processing for traffic sign recognition, 360 degree views of the car on the road, in-cabin monitors to alert distracted, inattentive or sleepy drivers and other advanced features.

Second stage

In the second stage of development, these systems can briefly take active control of the

• Forward collision warning systems were available in 50 vehicles in MY 2011; this rose to 79 vehicles in MY 2012 and 167 vehicles in MY 2013.

car to assist in parking, prevent backing over unseen objects and avoid collisions by braking or swerving. Sometimes the system actively controls an individual car function, such as adaptive headlamps that automatically adjust to bends in the road ahead.

Third stage

The third stage involves semi-autonomous operation, when the car takes over driving in certain circumstances; someone must be in the driver’s seat ready to resume control.

One example is traffic assistance or highway lane self-driving, including adaptive cruise control, which changes speeds automatically to keep pace with traffic on expressways.

Both adaptive cruise control and lane keep assist will be required for expressway driving to keep the car centred in the lane and at a safe distance from other drivers. Lane keep assist is another example of the use of a front or rear camera to guide the car along the middle of the lane. Park assist will take full control during parking in crowded parking lots and garages. Additionally, in-cabin driver monitoring, when detecting an incapacitated driver, may initiate a fully automatic stopping manoeuvre to pull a car to the side of the road and stop it safely.

Fourth stage

When cars move to fully autonomous operation, the driver seat may be unoccupied.

This will herald the onset of ‘ghost cars’ that could be used by a child, a disabled or elderly person who is unable to drive.

The evolution of autonomous vehicles

The evolution to driverless vehicles will involve merging existing safety systems with new ones. Today, most new cars appear with passive and even some active ADAS safety features, and availability is increasing rapidly.

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SAFETY Safety Technology Penetration (Penetration %) 2013 2020

70%

30%

50%

3%

7%

Blind Spot Detection

2% Reverse Assist

5%

Automatic Parking

10% 1%

4%

Sorround View Sys.

3%

2%

Lane Dep Warning

5%

Adaptive Cruise Ctl.

3% Forward Collission Warning

Source: Wards Auto, RBC, Ducker Analysis

For instance, according to latest OICA statistics, it can be estimated that:

• Adaptive cruise control is available in almost 25% of new cars worldwide • Side object detection or blind spot detection: more than 20% • Lane departure warning or lane keep assist: nearly 20% • Autonomous park assist: 10%

Adoption rate of autonomous vehicles

As with almost all innovations,ADAS features tend to be introduced in high-end products first, where cost is less-closely scrutinised by the end-user, before migrating down to medium-priced vehicles. There are some examples of ADAS technology being pioneered in commercial vehicles because these are features especially valuable for safe operation, such as rear-view cameras.

Reverse assist cameras and sensors notwithstanding, the systems with the highest rate of adoption globally currently are blind spot detection, forward collision warning and lane departure warning. But even for these three systems, the global penetration rates in 2012 were merely 2.1%, 2.3% and 2.6% respectively, which much of the input coming from European OEMs. Challenges

While ADAS features are steadily finding acceptance today, moving to semi-automated and fully automated operation faces social, legal and technological challenges. The issues of potential car crashes will have to be addressed by state laws and insurance companies. Who will be at fault - the consumer or the manufacturer? Add to this a period of adjustment, as drivers become accustomed to the changing roads.There will be a large gap between cars equipped with the new systems and older cars that are still on the road. Currently, in the US, the average age of vehicles has reached an all-time high of more than 11 years, and in 2013, it’s estimated that the US car parc was around automotivemegatrends.com

250 million. By 2020, the forecast is for 275 million cars and the vast majority of vehicles within the parc are unlikely to have any ADAS installed. If these legal and social issues require time to resolve, so do the challenges facing technology.

Cars require electronic safety systems to be small, light-weight, inexpensive and offer high performance. The trunks of many of the current self-driving prototype cars are packed with advanced electronics that are worth much more than the host vehicles. To change these experimental cars into production units will require reliable and powerful electronics that are much smaller in size.

Equally important are system safety and reliability – not only for the benefits of safe driving, but also because crashes that are caused by electronic failure can delay innovation and the acceptance of new technologies. Reliability is especially critical in

an automobile, where high temperatures, large voltage swings and vibrations can unduly stress electronic components.

Systems will need to have a failure recovery mode that remains safe to persons in and around the vehicle if something goes wrong.

These design challenges will take time to address and further advancements in technology are required in order to make a vehicle road-ready. Realistically, fullyautonomous vehicles that are ready for sale will not make an appearance for the next ten years or so. However, we can expect to see a steadily increasing number of vehicles offering some level of assisted driving to help make them safer while reducing fuel consumption and adding convenience for drivers.

Markus Pfefferer is the Managing Director of Ducker India, a division of consulting and research firm Ducker Worldwide.

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SAFETY

Communications technology challenges safety regulators Ian Graig looks at the impact of communications technology in three high-profile areas of automotive product development: driver distraction, vehicle-to-vehicle communications, and autonomous vehicles

V

ehicle safety regulation in the United States is increasingly concerned with the impact of emerging communications technologies on active vehicle safety and crash avoidance.

That is not to say that passive safety issues are being ignored, as regulators continue to look at ways to improve the performance of vehicles in protecting occupants in the event of a crash. But the agenda of regulators and OEMs alike is increasingly focused on the impact of advanced communications technologies on vehicle safety – both the positive but also the potentially negative impact.

For example, regulators want to ensure that ever-more ubiquitous “infotainment” devices do not distract drivers and thus raise the risk of crashes. At the same time, however, regulators are working with industry and research institutes to harness emerging communications and vehicle automation technologies that can sense and respond to hazards, calculate risks, warn drivers, or potentially take preemptive actions to reduce

the number of crashes. This focus on the impact of communications technology is particularly evident in three related highprofile issue areas: driver distraction, vehicle-to-vehicle communications, and autonomous vehicles.

Driver distraction

For years, the National Highway Traffic Safety Administration (NHTSA) of the Department of Transportation has focused on ways to reduce driver distraction resulting from the growing availability of in-vehicle and handheld infotainment devices, including cell phones. Indeed, the issue of driver distraction was a top priority of Ray LaHood during his four-and-a-half years as President Obama’s transportation secretary.

After years of study, often involving collaboration with leading universities and the automotive industry, NHTSA has adopted a three-step approach to reducing driver distraction through a series of voluntary guidelines. In April 2013, NHTSA released the first of these guidelines, in this

case aimed at limiting driver distraction resulting from the use of communications, entertainment, and navigation devices installed in new passenger vehicles. The guidelines cover original equipment in-vehicle electronic devices that a driver operates through “visual-manual means”. The guidelines recommend a limit on the time a driver must look away from the road to perform any task, and also recommend that OEMs disable many functions unless a vehicle is stopped and in park. The guidelines are expected to lead to increased use of voice commands, which the guidelines do not restrict. Some studies have found voiceactivated commands can also be distracting, however, and NHTSA will turn to that issue in a later set of guidelines.

NHTSA opted to write non-binding guidelines rather than a mandatory Federal Motor Vehicle Safety Standard, and drew heavily on voluntary automotive industry standards that have been followed for several years. As a result, OEMs are expected to comply with the new guidelines. The automotive industry has acknowledged the risk of distracted driving but warned that overly restrictive limits on built-in devices could lead drivers to use more distracting mobile devices for the same functions.

NHTSA is now addressing the second phase of its driver distraction efforts, in this case looking at visual-manual interfaces of portable and aftermarket devices, with a goal of publishing guidelines by the end of this year. The third phase will address auditory/voice interfaces. NHTSA may consider the distraction guidelines in reshaping its New Car Assessment Program (NCAP), which is used for the government's five-star safety ratings system for light vehicles.

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SAFETY V2V technologies

NHTSA has also aimed to ensure that the NCAP ratings take into account the newest crash-avoidance technologies, including lane departure warning and forward collision warning. These technologies, which depend on advanced sensors and radar systems, have been appearing in growing numbers of passenger cars. The next step in developing such active-safety technologies, however, lies with the ongoing development of advanced vehicle-to-vehicle (V2V) communications that allow vehicles to exchange information about their speed, location, direction of travel, braking, etc.

In early February, NHTSA announced plans to move forward with developing a proposed rule that would require V2V communications technology in new vehicles. The longanticipated announcement was based on a study of over 3,000 vehicles conducted by NHTSA and the University of Michigan Transportation Research Institute in Ann Arbor, Michigan. NHTSA is expected to require new vehicles to be equipped with wireless dedicated short-range communications chips that would enable vehicles to communicate with one another, opening the door to many active safety technologies. NHTSA reportedly could also consider rules related to on-board sensors or potentially automatic braking systems. On-road pilot studies of V2V technologies also continue.

V2V and related vehicle-to-infrastructure (V2I) technologies are viewed as having great potential in reducing crashes, but myriad challenges related to issues such as privacy, data ownership, and technology standards still need to be overcome. Another key challenge is the availability of wireless spectrum, with Internet service and content providers lobbying for access to spectrum that to date has been devoted solely to automotive safety applications.The expansion of V2V and V2I technologies is nonetheless seen as a potentially significant advance in crash avoidance that could also reduce

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vehicle emissions by boosting more environmentally sound driving practices, improving traffic flow, reducing starts and stops, and providing better real-time traffic information.

Autonomous vehicles

The next step beyond V2V and V2I technologies is one that has captured the imagination of even Washington policymakers who rarely deal with vehicle safety: autonomous or self-driving vehicles. In 2012, Nevada became the first US state to approve the testing of autonomous vehicles on public roads, and Google, Audi, and Continental are conducting tests in the state. California has approved legislation that would allow testing of autonomous vehicles on its roads as well, and other states may do so. Google has announced plans to produce autonomous vehicles in the Detroit area for use in on-road testing. Congress has held hearings on the issue, and lawmakers at times seem enthralled by the possibilities of autonomous vehicles.

NHTSA envisions a five-step evolution toward fully autonomous vehicles, starting with vehicles that have no automation but feature some V2V warning technology (like

forward-collision warning). Subsequent steps would find the driver yielding more control to automated systems, such as adaptive cruise control and lane-keeping assistance, and eventually ceding steering, braking, and throttle control to a truly self-driving vehicle.

NHTSA is undertaking research on autonomous vehicles, including technologies to allow “platooning” of connectedautomated commercial vehicles.

The near-term introduction of such “automated driving” features as self-parking and adaptive cruise control may help pave the way to truly autonomous vehicles, but a host of legal and regulatory questions will need to be addressed before truly autonomous vehicles are widely used on US highways. Key challenges include liability, price, and data protection. In fact, commercially viable autonomous vehicles are not expected to be on US highways until the mid-2020s. The potential for a dramatic reduction in vehicle crashes ensures that autonomous vehicle technology will remain a “Holy Grail” for regulators, OEMs and safety advocates for years to come.

Ian C. Graig is the Chief Executive of Washington, D.C. - based Global Policy Group.

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SAFETY

Expect a busy year for NHTSA rulemaking and enforcement 2014 is set to bring strict enforcement of distraction, crash avoidance and recall policy

By Chris Grigorian

W

e can expect 2014 to be a busy year for NHTSA rulemaking and enforcement activity. The agency is set to push forward with research and possible rulemaking on advanced crash avoidance technologies, driver distraction, and autonomous vehicles, and with implementing enhancements to its recall processes. It is also likely to continue its aggressive enforcement, buoyed by the recent doubling of the statutory civil penalty maximum and the threat of criminal penalties. To reduce their compliance risks, and to prepare themselves and their products to meet these new regulatory developments, manufacturers are urged to update their safety compliance policies and to implement regulatory monitoring programmes.

NHTSA recall label

In terms of crash avoidance technologies and autonomous vehicles, NHTSA has been carefully studying the safety benefits of various warning technologies. These include blind spot detection and advanced lighting; intervention technologies, such as lane departure prevention, crash imminent braking (CIB), and dynamic brake support (DBS); and automatic pedestrian detection and braking.

It has also been studying vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) communications as a way to improve the effectiveness of these systems.

The agency has indicated that it will decide next steps after analysing research data, and

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if the safety benefits outweigh the costs, it could propose requiring these systems in vehicles. NHTSA has also been actively researching autonomous vehicles to position itself to regulate them should they become commercially available, and we expect it to continue devoting substantial resources in this area.

Driver distraction is another area of focus for NHTSA. Last year, NHTSA adopted the first of its three-phase federal guidelines to address driver distraction from in-vehicle electronics. That phase applies to original equipment in-vehicle electronic devices used by the driver to perform secondary tasks, such as communications, entertainment, and navigation, through to visual-manual means. The agency is proceeding this year with subsequent phases, which will cover portable and aftermarket devices and auditory-vocal interfaces. Although these guidelines are ‘voluntary’, they are expected to significantly influence the design and performance of such devices in future model years.

In response to Congressional mandates and the agency’s own internal review, NHTSA is rolling out significant enhancements to its recall processes this year.These enhancements – which include a new recall lookup system to enable consumers to search recalls by VIN, new requirements governing owner communications, and required electronic submission of defect correspondence – are intended to streamline the recall process and

increase recall completion rates, which have averaged 70% recently.

Significantly, we expect NHTSA to continue the aggressive enforcement approach witnessed in recent years, with a particular emphasis on recall timeliness. Manufacturers should take note that NHTSA asserted the maximum penalty against manufacturers at least five times since 2010. Last year, the civil penalty maximum doubled to US$35m, so we will not be surprised to see penalties in that range soon. A significant new concern for manufacturers is the potential for criminal liability, as recently seen in the recent Toyota deferred prosecution agreement, which included a US$1.2bn penalty. And the industry may face new enforcement regulations and even higher penalties as a result of Congressional response to the GM ignition switch investigation and hearings.

In light of these risks, it is critical that manufacturers adopt compliance policies that provide the necessary internal guidance for identifying, investigating and reporting safety defects.

Christopher Grigorian is a partner at Foley & Lardner LLP in the Washington, DC office. His practice focuses on federal motor vehicle safety law, antitrust, trade regulation and related litigation.

This article first appeared as a Comment on AutomotiveWorld.com automotivemegatrends.com

REDUCE PER-UNIT PRODUCTION COSTS WITH GREEN HILLS AUTOMOTIVE SOFTWARE PLATFORMS In-Vehicle Infotainment ^ĞĐƵƌĞ ǀŝƌƚƵĂůŝnjĂƟ ŽŶ ĨƌĂŵĞǁŽƌŬ ĨŽƌ >ŝŶƵdž ĂŶĚ ŶĚƌŽŝĚ ďƵŝůƚ ŽŶ ƚŚĞ /Ed 'Z/dz ZdK^ ĞŶĂďůĞƐ ǀŝƌƚƵĂůŝnjĞĚ ĂŶĚ ƌĞĂůͲƟ ŵĞ ƐĂĨĞƚLJ ĐŽŵƉŽŶĞŶƚƐ ƚŽ ƌƵŶ ĐŽŶĐƵƌƌĞŶƚůLJ͘

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SAFETY

Crunch time for fleet market, warns Global NCAP ‘Five star’ safety will determine winners and losers in global fleet market, writes Global NCAP’s Secretary General, David Ward

O

nly buy cars awarded ‘five stars’ in consumer crash tests. That is the core recommendation of the Global New Car Assessment Programme’s (Global NCAP) new guidelines for organisations operating vehicle fleets. Launched at Global NCAP’s 2014 Forum in Melbourne, Australia, the new guidelines provide new ‘best practice’ for global companies seeking to meet corporate social responsibility goals and their duty of care to employees.

Our new guidelines are consistent with the United Nation’s Global Plan for Decade of Action for Road Safety 2011-2020 which recommends that fleet managers “purchase, operate and maintain vehicles that offer advanced safety technologies and high levels of occupant protection”.

The challenge is how to do this when all too often cars are sold in emerging markets that may look similar to five-star European models, but which do not offer the same levels of safety. Of the record level of 65 million new passenger cars built last year, as many as a third would fail to pass the UN’s front and side crash tests, and do not have air bags, anti-lock brake systems (ABS) or electronic stability control (ESC).

To overcome this lack of regulation or harmonisation with global standards, our new guidelines advise fleet purchasers to only select vehicles that have been awarded by New Car Assessment Programmes (NCAPs) with a ‘five star’ safety rating. There are now nine NCAPs or similar consumer test programmes around the world. However, not

128 | Megatrends

Fleets adopting five-star safety policies will incentivise manufacturers to phase out models without safety features such as the Nissan Tsur

all markets are covered by NCAPs and so we also recommend that, before purchase, fleet managers ask the manufacturers to confirm that the selected model will meet the most important minimum United Nations vehicle safety standards. The combination of demanding ‘five stars’ and a minimum safety guarantee will ensure that companies can be confident that they are meeting best practice in fleet safety.

It also makes good business sense. Equipping a vehicle with ABS and ESC helps avoid crashes from happening at all, so investment in these crash avoidance technologies reduces all the costs of crashes, including injury, property damage and loss of business use of the vehicle.

That is why Global NCAP now also highly recommends Autonomous Emergency Braking (AEB), which is a new safety system that is just beginning to be included in the most advanced consumer rating programmes.

Making the ‘five star’ commitment is rapidly becoming a bench mark for responsible fleet management. Organisations that have already done so include BHP Billiton, the world’s largest resource extraction company, and the Governments of Australia and Sweden. The safety leadership shown by BHP Billiton was recognised in Melbourne by HRH Prince Michael of Kent, who presented the company with Global NCAP’s 2014 Innovation Award.

This ‘five star’ action has given a strong signal to the marketplace by insisting on vehicles with good levels of safety, and manufacturers have responded by changing the safety specification to ensure that they can secure valuable orders.

As part of the UN Decade, more and more organisations will be adopting Global NCAP’s recommendations for fleet safety. Our guidelines also help companies to implement the new road traffic safety standard ISO 39001.This important ISO initiative identifies vehicle safety as a significant factor for fleet operators seeking to reduce death and injury in road crashes.

And that task is becoming harder each year as the world’s vehicle fleet is set to double from one to two billion in little more than ten years. Already 1.3 million people are killed and up to 50 million injured annually in road crashes worldwide. By 2030, the World Health Organization forecasts that road crashes will become the fifth leading cause of death, rising to 2.4 million fatalities per year.

To prevent this avoidable carnage on our roads, the UN Decade of Action supports policies to cut by 50% the level of fatalities forecast in 2020. This would save five million lives, 50 million injuries and avoid US$3trn in social costs.

By adopting Global NCAP’s guidelines, fleet managers can play their part in achieving the UN Decade’s ambitious but realistic lifesaving goal. Their global purchasing power is enormous. By rolling out ‘five star’ fleet policies, they will be ensuring that their purchase decisions meet best practice in safety management. And by providing ‘five star’ safety, vehicle manufacturers will gain the most lucrative deals in the automotive business. This is how the power of the marketplace can be harnessed to make cars safer across the world. automotivemegatrends.com

SAFETY

European Parliament delays eCall…again eCall 2015 has become eCall 2017. By Martin Kahl

C

ellphone network unreliability is something to which we’ve all become accustomed. No network can claim 100% coverage, 100% of the time. In city centres, we expect strong, reliable coverage, but we’ve come to accept the occasional weak, patchy or absent signal, the likelihood of which increases as we venture “off the beaten track”. And it’s for those off the beaten track locations – rural roads, high mountain passes – that European regulators want to implement what’s become known as eCall.

In the event of a critical collision, this panEuropean SIM card-based emergency call system sends a message to Public Service Answering Points, or PSAPs; the 112 message – voice or text, depending on the severity of the incident – informs emergency services of a vehicle’s location and status, and dispatches appropriate assistance.

For so long, eCall was expected to come into effect at some time in 2014 or 2015; then it

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was definitely going to be some time in 2015, and then really definitely at some time in October 2015. Now, following one of several industry-shaking European Parliamentary votes last week, we have an exact date: member states must have the appropriate infrastructure in place by 1 October 2017.

While it looks like the confirmation of a date, it’s just as much as the confirmation of a delay. Make no mistake – like the new EU truck cab rule, there’s no disputing the sentiments behind eCall, or its potential to save thousands of lives. But it raises some challenging questions.

It’s taken since 2004 to get this in place, and the push for it has come from the OEMs. Whilst the regulators worked on fixing a date, the OEMs and suppliers went ahead and developed the technology anyway. Much of what’s required for eCall is already in place, and in use, with numerous OEMs offering broader telematics services that include eCall capability.

But at least there’s a date in place, providing clarity to all parties concerned. OEMs and suppliers now know when their new cars will need to be equipped with SIM cards and eCall technology; emergency services can ensure their PSAPs will be ready, and telecoms companies will need to develop the infrastructure to enable an accurately transmitted emergency call from anywhere in Europe, no matter how deep in the countryside or high on the mountain pass that vehicle might be.

More difficult to comprehend than the equipping of cars with the appropriate technology, and the way the resultant costs will be absorbed and distributed, is the enforcement of this mandate. The technology will need to be certified; not just new technology for sale from October 2017 onwards, but existing solutions which include eCall capability as part of a wider offering. And the legal framework must be rock solid: who will be liable when a call transmission fails?

We now have a date.We now also have many questions. But at least we have two more years to come up with some answers.

This article first appeared as a Comment on AutomotiveWorld.com

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