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AUTOMOTIVEMEGATRENDSMAGAZINE | Q2 2014

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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.

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Publisher:AW Megatrends Ltd1-3 Washington BuildingsStanwell Road, Penarth CF64 2AD, UK

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Editor:Martin Kahl

Business Editor:Megan Lampinen

Manufacturing & MaterialsDavid Isaiah

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> ABOUT THIS ISSUE

Welcome to Automotive MegatrendsMagazine – the Connected Car issue.

Google's self-driving car, built in Detroit,was a wake-up call for the mainstreamautomotive industry. It's time to preparefor semi-autonomous cars, developed - ifnot built - by industry outsiders.

What are the implications of increasinglyautonomous, increasingly connected cars?This issue explores a wide range ofconnected car topics, from highlyautomated driving to cloud technology, viaEthernet, Big Data and voice recognition– all of which help to shape the connectedfuture envisioned by Chris Borroni-Bird inour exclusive interview.

Automotive Megatrends Magazine is aboutmore than connected cars, however, andour tour of the megatrends shaping theautomotive industry of the future takes ineMobility, Powertrain Innovation, FreightEfficiency, Manufacturing & Materials, theRetail (R)evolution and Safety.

Enjoy the magazine and join the debate:

Martin Kahl, Editor

Contents

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 thatvery task. Martin Kahl asks why

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

> Connected Vehicles

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 IntegratedEngineering Solutions at Tech Mahindra

20 - Driving in the CloudMegatrends 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 carInfineon’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 carEthernet cuts cabling cost and weight, increasing bandwidth and data transfer speeds. Rachel Boagey considers the role of Ethernet inthe development of connected and autonomous cars

39 - Different needs, same speeds: India's just as connected as the WestWhen it comes to the evolution of connectivity, India has what it takes to keep apace with developed markets, says Sudip Singh, Globalhead of Engineering Services at Infosys

46 Connected cars in a connected era31 Big Data - big opportunity or big problem

https://www.linkedin.com/groups?home=&gid=8129034&trk=anet_ug_hm


IN THIS ISSUE IN THIS ISSUE

56 - EV retail - whats 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

58 - Will changes in F1 reach cars on Highway 1?Rudolf Hart asks whether motor sport can ever be truly relevant to passenger vehicles

> eMobility

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

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

54 - How wireless charging could increase EV salesQualcomm’s Anthony Thomson tells Megatrends why he believes wireless charging will help boost the EV market

> Powertrain Innovation

61 - Indian transmission manufacturers face control system challengesMike Savage, Chief Engineer at Drive System Design, works closely with a number of Indian companies and reflects on the challengesthey 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 sameamount. Martin Kahl investigates

66 - Life beyond Euro VIRachael Hogg discusses life after Euro VI with Federal-Mogul’s Gian Maria Olivetti

69 - Eaton’s supercharger rollout gathers paceEaton’s Jeff Schick talks to Megatrends about how superchargers can help meet performance criteria whilst still enabling OEMs toachieve tightening fuel economy targets

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

28 In the connected future, you’ll need to be agile,says Lixar

34 Increasing vehicle complexity requires securesoftware solutions

40 Getting louder – the rise of the voice inautomotive HMI

44 Built-in versus brought-in: the big telematicsdebate

IN THIS ISSUE


> Manufacturing & Materials

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 whySouth America’s two largest new vehicle markets need each other

96 - Landfill gas and the smell of green energyFuture generations will despair at how long it's taken to use rubbish as an energy source

100 - Lightweighting drives materials innovation, inside and outMaterials 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

> Freight Efficiency

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

82 - Truck industry calls for global emissions harmonisationCO2 and greenhouse gas are global problems requiring global solutions. The truck industry wants harmonisation - Daimler’s WolfgangBernhard calls it “an historic opportunity that we cannot afford to miss” - but regulators appear more cautious. By Oliver Dixon

80 UPS shares its recipe for natural gas success

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

98 Nissan takes early advantage of Nigeria’s newauto policy

76 - North American HD buyers warm to 13-litre drivelinesTruck buyers are increasingly considering 13L engines instead of 15L options. By Oliver Dixon

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

IN THIS ISSUE


> Safety

121 - Autonomous cars, driven by safetyMarkus Pfefferer, of Ducker India, looks at how the latest developments in car safety technology are bringing the autonomous car closerto 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…againeCall 2015 has become eCall 2017

> Retail (R)evolution

112 - Forget 2014 – India’s OEMs focus on the long termIndia’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 saleseBay Advertising’s Phuong Nguyen looks at how car brands can capitalise on the increasingly blurred lines between on- and offlinechannels to boost sales across the board

108 Digital marketing is the new normal for carmanufacturers

117 Truck aftersales: Roadmap to excellence

106 Ford enjoys life in the Quick Lane

124 Communications technology challengessafety regulators

126 - Expect a busy year for NHTSA rulemaking and enforcement2014 is set to bring strict enforcement of distraction, crash avoidance and recall policy

102 - Retail challenges demand more integrated approach, and soonThe car retail industry needs to get ahead of the game, or risk getting left behind, as McKinsey’s Hans-WernerKaas explains to Megatrends

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As the safety ratings of organisations likeEuro NCAP and the US Insurance

Institute for Highway Safety (IIHS) becomeharder to achieve, the role of electronics andadvanced driver assistance systems (ADAS)will become increasingly important. One ofthe outcomes of this will be to take theindustry ever closer to semi-autonomous

and fully autonomous cars. Indeed, safetysuppliers like TRW see semi-autonomous andultimately fully autonomous driving as thelogical outcome of safety technologydevelopments.

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

is preparing to test its autonomous carprototypes in Gothenburg; and at the 2013Frankfurt Motor Show, Daimler’s ChiefExecutive, Dieter Zetsche, was driven onstage at his press conference by theMercedes-Benz S 500 Intelligent Drive,the same self-driving S-Class thatfamously followed the route taken byBertha Benz in 1888 when she madethe first ever long-distance car journey.

Even BMW, for so long the champion ofFreude am Fahren (“the joy of driving”), isdeveloping its own autonomous cartechnology to relieve the driver of thatvery task.

Proponents of autonomous carsusually underline their usefulness inallowing drivers to relinquish controlof the vehicle to technology designedto work in tedious, repetitivesituations like slow-moving traffic jams.

BMW is taking a different approach toreach the same ultimate goal bydeveloping the technology to work atmotorway or expressway speeds. “In our


BMW’s highly automated car:the ultimate driving machine?BMW, the champion of driving pleasure, is developing autonomous car technology to relieve thedriver of that very task. Martin Kahl asks why

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opinion, highly automated driving involves thedriver being able to press a button when thecar is travelling at 130kph motorway speed,and for the car to take over the driving task,”

explains BMW’s Dr Werner Huber, ProjectManager Driver, Assistance andEnvironmental Perception at BMWGroup Research and Technology. “On theone hand, this involves high complexitydue to the vehicle’s speed. On theother hand, there’s reducedcomplexity due to the type of traffic- there are generally good roadmarkings and road signs, there is

nothing coming in theopposite direction, and

there is nothing crossingin front of the car.”

Drivers who are usedto regular slow-moving,bumper-to-bumper citytraffic might considertravelling at speeds of130kph (81mph) to beenjoyable, rather thantedious. For Huber, “Thefun of driving is on theweekend on a ruralroad, in the

mountains. Standing in a traffic jam or drivinga few hundred kilometres along a boringhighway is not fun. You can use the time forother things. And a long boring trip is not asafe trip. You get tired, you get inattentive.”

Here, BMW’s autonomous car technologycan take over what Huber refers to as therelatively simple job of driving - keeping inlane, and not colliding.

Driver taking back control?

Much of the discussion about the role of the“driver” in an autonomous car has centredon whether that driver is able to instantly oreven quickly take back control of the vehicleif required. However, even after a fewminutes of autonomous drive travel, a drivermay be completely unaware of theirsurroundings. “We cannot rely on the driver

“Traditionally, ConnectedDrive has beenrelated to infotainment, safety and comfortservices,” says Simon Euringer, head ofConnectedDrive engineering for BMW, Roll-Royce and Mini. “For 15 years, we’ve beenequipping cars with SIM cards, connected toour back-end and our call centre. Now we'retaking ConnectedDrive to the next level,enabling mobility services. We’ll take you fromA 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 yoursmartphone and it will take you to your car. While you're in the car it will be on-boardnavigation; it help you find parking, and then switch you to public transportation.

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

And there’s a considerable overlap between ConnectedDrive and BMW’s highlyautomated 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 automateddrive button, and sit back to make full use of ConnectedDrive. The highly automated driveprogramme and BMW’s ConnectedDrive go hand in hand, says Euringer, “freeing up timethat can be used more productively.”

The new era of ConnectedDrive is here; but beyond what BMW is offering now, what isbeing 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 manysituations we can already handle with autonomous driving.

Euringer concedes that there is still considerable work to be done to be able to bringthe driver safely back into the loop from a car in highly automated drive mode, but addsthat the legal situation presents a greater challenge. “Ultimately, you’re handing over thedriving task to an algorithm. If the car is about to hit an obstacle, whether it’s a personor another car, and the driver is not in the loop, then ultimately an algorithm has to takean 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, whichsays the driver is liable in all situations. But what if you hand over the task to analgorithm? What then?”

Megatrends | 9

The new era of ConnectedDrive: making mobility smarter

automotivemegatrends.com

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in a critical situation; we must rely on a verygood car,” says Huber. For this reason,BMW’s vision of highly automated drivinginvolves taking the driver out of the drivingloop. “Give the driver the chance to doother things. Then it's a real benefit. It's nota benefit to sit behind the steering wheel andjust observe what the car is doing. And if thecar does 99% of the job very well and in 1%it fails, and as a driver you’re expected tointervene, well, that's not fair.”

What drivers do with their time whilst beingdriven autonomously must also be carefullyconsidered. Someone eating or reading alarge newspaper, for example, has littleopportunity to quickly take over the controlof the vehicle.

Achieving highly automated driving istherefore not only a technical issue, saysHuber – it’s also about identifying whatpeople can do with their time.

BMW has shown that its highly automatedcars are capable of overtaking buses, slalomdriving, and even drifting. However, this wasto illustrate technical capability, and toillustrate how the vehicle can respond incritical situations. “In reality, highly automateddriving is not about drifting,” grins Huber.

“Normally the car will be driving at highwayspeed, the driver will be in position, and wehave to offer them some form ofentertainment, or change the interior displaysso that he can work in the car. But you haveto also offer the ability to quickly regaincontrol of the driving task. That means thecontrols and steering wheel must be there.The displays must function in a way that theycan be used during normal driving, but theyshouldn't disturb the driver when the car isin self-drive mode. Yet the driver should beable to quickly return to full driving mode.”

Much of the technology is already inplace

Just as Daimler highlighted that its self-drivingMercedes-Benz S-Class used essentiallyexisting technology, so too is Huber keen toemphasise that BMW’s highly automated

vehicle technology is a logical extension ofexisting technology. “We have automatic gearshift; we have automatic throttle, we haveelectric power steering and we can talk toeach brake,” says Huber. “So the basictechnology is already available. We're alsoable to drive into a garage by controlling thecar remotely with a key. We already haveeverything onboard every BMW.”

There is, however, a key difference betweenBMW’s normal cars and the self-drivingprototypes: a high-precision differential GPS(DGPS). “GPS is precise to between 1 and 5metres, depending on the satelliteconstellation. In this car, if we want to drivesay, through a path of cones, it needs to bemillimetre accurate,” explains Huber. “That'swhy we implemented the DGPS. In a laterhighly automated car, we will have a veryprecise map to localise the car. That meansthat unlike driver assistance systems, we needto install additional and more precisetechnology to steer the car. But other thanthe environmental sensors, we don't needtoo much more for an autonomous car.”

To a layman, then, it appears to be ‘simply’ acase of making the systems talk to eachother, but Huber adds a strong sense ofreality to such thoughts: “We don't rely onthat. We have a back-end connection for car-to-X, where the X is called the back-endcentre. Through crowd sourcing, cars help toimprove the centre’s understanding of what'sgoing on outside. And the centre is necessaryto supply the car with a high definition digitalmap, which we cannot buy in. For themotorways we are driving at present, wehave a specific HD map, but we would needit for the whole network.”

And that needs to also be a highly precisetopographic map. Huber says BMW has thealgorithms to develop such a map in-house,and in the future, it will be combined withdata from other vehicles to constantlyimprove the map. “This is why we need thisconnection to a back-end, to improve thequality of the environmental model, andamend the situational interpretation of whatis going on. If a car further up the trafficqueue brakes hard, then we don't have to

wait until the traffic pulse moves down theline of vehicles to our car. We know itelectronically – a hard brake and everythingcan stop at the same time.”

Not before 2020

So the big question is: when will this become areality? “Not before 2020,” says Huber, echoingtimescales suggested by other companies thathave committed to launching self-driving cars,including Nissan. Aside from the technologicaldevelopment that is still needed, the legalframework crucially needs to be established.

2020 seems close, but in consumer electronicterms, that's a long way off. “Yes, but inautomotive terms, autonomous driving meanscompletely changing the architecture of a car,”says Huber. “We need more redundancy. A datanetwork in a car is designed for therequirements it has to fulfil, and there is norequirement for redundancy. If anything fails,then it fails. We just have to ensure that the caris still safe. In an autonomous mode you havethe same requirement, but there is no driverto intervene if the steering or brakes fail. If suchthings happen in an autonomous car, it must beable to self-diagnose and it must be able tosurvive ten or 15 seconds until it's safe. So wehave to find approaches for redundancy. Andwe are working on those concepts. The datanetworks of cars will change in the future, thatis certain, but I'm confident that we can handleit. It's a question of cost too. But these areproblems we can solve.”

Google has opted for a self-driving car thatoperates at low speeds in urbanenvironments. Huber suggests that BMW seesinner city applications as being further downthe line. For now, BMW’s focus is on highlyautomated motorway and expressway driving.

“We know the sensors we need for themotorway scenario. Highly automated innercity driving is still far away. At BMW we aretalking about the highly automated motorwayscenario, perhaps travelling like that for a fewhundred kilometres. That's how we see thefirst step in handing control over to the car.”Freude am Fahren? It might be time toconsider reworking that marketing slogan.


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A Bird’s-eye view ofthe futureChris Borroni-Bird talks to Megatrends about the future ofmobility. By Rachel Boagey

As the connected car develops, consumerswill demand vehicles that are even safer,

more comfortable and more environmentally-friendly than today, and fully reflect the levelof consumer electronics that people expectin other aspects of their lives. This is the visionof the future of mobility of advancedtechnology expert, Chris Borroni-Bird, whobelieves consumer desires for the ‘idealconnected car’ now need to be made reality.

Megatrends spoke to Borroni-Bird, VicePresident of Strategic Development atQualcomm, about his vision of the future ofmobility, and the steps that need to be takenby the automotive industry to produce that‘ideal connected car’.

Cars that can see around corners

Borroni-Bird joined Qualcomm fromGeneral Motors in 2012, the latest step in acareer spent developing technology thathelps vehicles communicate with each otherand with their surroundings, with theultimate aim of eliminating collisions, reducingvehicle weight and improving efficiency.

Qualcomm is a semiconductor company,perhaps best known for its work withsmartphones and tablet computers, but it hasrecently made headway into the automotiveindustry, increasingly the direction for manytraditionally non-automotive suppliers suchas Apple and Intel. Qualcomm is nowproducing cellular chips and technology forcars and automotive-specific technologies,including wireless charging and wirelessvehicle-to-vehicle (V2V) communication.

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Future mobility will be developed aroundelectric vehicles (EVs) that talk to each otherand use only wireless technology, believesBorroni-Bird. “Qualcomm is working towardsaddressing consumer and societal trendswith wireless connectivity solutions, alongwith mobile processing technologies and, ofcourse, wireless charging.”

These increasing consumer and societaldemands, says Borroni-Bird, will requirevehicles to be ever more locally networked– that is, “have the ability to communicatewith each other at near distance for collisionavoidance purposes.”

When combined with the increasinglywidespread number of sensors for collisionavoidance, Qualcomm’s technology will beable to improve this performance, saysBorroni-Bird. Cars will be able to performfunctions that drivers cannot, such as seeingaround corners, or quickly and safely adaptingto bad weather conditions.

In late 2013, Qualcomm, alongside Honda,developed a system to prevent vehicle-to-pedestrian collisions, enablingcommunication between the two. Thesystem involved a pedestrian carrying asmartphone equipped with Qualcomm’sDSRC modules, and an Acura TL, which wasalso equipped with the device. In this case,both the driver and the pedestrian werealerted that a collision was imminent, eventhough they were unable to see each other.The interest in such technology is clear:were all cars and pedestrians equipped withsimilar sensors, incidences of cars collidingwith pedestrians stepping out from behindparked cars, for example, might no longerinvolve serious or fatal injuries, or indeed anycollision at all.

An automotive world stored in theclouds

Many OEMs are introducing cellularconnectivity into their vehicles to provideconsumers with the in-car infotainment theyrequire and desire, and these connectionscan also prove useful for providing furtherconnectivity for the car, such as driverassistance technologies.

Congestion is a major issue, especially inmany cities, having a negative impact on traffictimes as well as energy usage. Borroni-Birdsees a role for vehicles linking to the cloudvia cellular connection. “We see that it canhelp in terms of enabling more accurate andmore frequent map updates,” he says, “as wellas information about problems that areoccurring down the road.”

This can range from traffic time predictionsto warnings about weather conditions. “It’snot inconceivable that a car in the futureencountering patches of ice in a certainlocation could send that information to the

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

Despite the possibilities that vehicleconnectivity can provide in terms of sharinginformation between vehicles, Borroni-Birdhighlighted the potential for furtherconnectivity between vehicles andinfrastructure to make cities smarter in thefuture. “Connectivity both locally for collisionavoidance as well as to the cloud for trafficand road information is going to beincreasingly important in the future.”

Hungry cars

With increased connectivity, however, comesincreased data, and vehicles will continue togenerate and transmit data to the cloud.“There is a lot of work needed on thenetwork side to support these hungry carswhich have insatiable appetites for data, andthere’s going to be a need for more powerfulprocessing on the vehicle,” says Borroni-Bird.

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

generation of cellular networks. In citycentres, where you have tremendousquantities of sensor data to generate, that’swhere you may need the greatest capacity interms of bandwidth.”

City transport – autonomous andefficient

According to Borroni-Bird, autonomousvehicles have the potential to ultimatelychange the business plan for shared mobilityservices, if the vehicles can ‘self-balance’themselves at the end of each day and bebrought back to the starting point ready forthe beginning of the next day. “I think it wouldimprove the finance on the business side ofa shared mobility service,” he explains. “Atthe moment, car share companies have tosend people out to drive the vehicles back atthe end of the day to where they may beneeded at the beginning of the next day.They’re experimenting with new businessmodels, such as incentives for people to takestrides against the flow, so to speak, for asubsidised rate. If the vehicles could driveautonomously, that would be very attractive.”

automotivemegatrends.com14 | Megatrends

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

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

Although people may still own a car foroccasional long distance trips, Borroni-Birdbelieves a shared EV may be attractive fordaily use during the week. “And if it can goand park itself because it’s autonomous, thenit certainly would play into the need forwireless EV charging, because if the vehicle’sparking itself you don’t want someone to beresponsible for plugging it in.” Look atQualcomm’s offerings, and it’s clear thatautonomous vehicles and wirelessly chargedEVs form a central role in the company’svision of the smart city of the future.

Indeed, Borroni-Bird’s long-term vision forshared vehicles includes semi-dynamiccharging, something he believes would makesense in places like for taxi ranks and atintersections, where cars spend a significantperiods of time. “Wireless charging should besomething that people don’t have to thinkabout, he explains. “It’s just part of the long-term vision, beyond benefits in the home andstatic charging in public parking spaces.”

From high-end to mainstream

Technology currently being introduced inhigh-end vehicles will be mainstreamtechnology in ten years’ time, due in part tothe declining cost of said technology, as wellas rising demand. This is not a newphenomenon, but the trickle-down oftechnology is increasing. “You’ll see morevehicles that have mild hybridisation and morevehicles that have capability of collision-avoidance technologies,” he says, “like forwardcollision warning, lane detection and so forth.”

The changing face of automotivedesign

Through implementing technologies such asEthernet into their cars, OEMs have beensignificantly reducing not only connectivitycosts but also the very weight of cabling intheir vehicles. However, most vehiclescurrently carry over 3kg of mass in terms ofpassive safety content, such as energyabsorbing foam and airbags, seatbelts and thecrash structure itself.

By changing the face of technology, andenabling vehicle autonomy, Borroni-Birdbelieves there is potential for a completeredesign of the car as we know it. “It’ll needa structure, obviously, for ride and handlingpurposes, but you wouldn’t need as significanta mass of structure if you don’t have toworry about crashing,” he says. “Today, youhave a choice between steel, aluminium andcarbon fibre, but if you didn’t have to worryabout crashes, then it may open up the spaceto new materials that might be lessexpensive, or lighter, or more recyclable, oroffer some other benefit. And that in turnopens up opportunities for changing theshape of the vehicle. You might be able toenter through the front of the vehicle insteadof the side, as you would no longer beworried about frontal impact.”

Despite there being much that could be doneto change the design of the vehicle, Borroni-Bird concedes that it is a long way fromhappening. Nonetheless, he maintains that itcould occur sooner in a segregated communitylike a campus. “In terms of the mixedenvironment that we assume is the dominantmodel, it will probably be decades before youget to a point where the penetration ofautonomous vehicles is such that you can beginto think about that seriously.”

The automotive world in 2025

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

Nonetheless, in the next ten years, Borroni-Bird sees efficiency being one of the maingame-changers. “You may see a greaterfraction of vehicles having some kind of amild hybrid, maybe 42V or 48V systems topromote start-stop capability. You’ll see moreplug-in hybrids and more pure batteryelectric vehicles, but unless there’s abreakthrough in battery technology or a realchange in the price of fuel, or some extremeregulatory action that we don’t know aboutjust yet, I think the vehicles will in manysenses be not that different from today.They’ll be capable of a certain level ofautonomous driving, such as the limitedspeed, highway assist operations that arelikely to be introduced.”

The road to the future

As the industry moves into an exciting newphase of product development, designing thecar of tomorrow to meet new technologicalinnovations is currently one of the mainchallenges facing OEMs and suppliers.Despite constant innovation inside thevehicle, the slow automotive developmentcycle is still a drawback for consumer desires.Regardless of the changes that will occurinside and outside of the car within the nextten years, it is clear that considerable workstill needs to be done before Borroni-Bird’sconnected vehicle vision becomes reality.

Quality SoftwareMakes the Car Better.

Continuous Delivery Makesthe Software Better.

Accelerate Software Delivery

www.electric-cloud.com

/ @electriccloud

Quality Software

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Just a few years ago, the very concept of aself-driving car was the stuff of science

fiction.

However, in the past year alone, technologistshave made huge strides in developingautonomous vehicles, with varying levels ofoperational autonomy now being tested. Yet,much of the underlying technology requiredto build truly autonomous vehicles, such ascameras, sensors, radars and imaging systemsis already available. We already let aircraft andships make decisions and pilot themselves.What’s the red light holding up cars?

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

more than 700,000 accident-free miles in itsself-driving cars on the streets of MountainView, California, without the assistance of ahuman driver. General Motors, Toyota,Mercedes-Benz, Audi, BMW and Volvo are alltesting their own full or partially autonomoussystems. Volvo has demonstrated its‘autonomous valet parking cars’ in Europe,and Nissan has said it intends to launchautonomous cars by 2020.

The move towards the development ofautonomous vehicles, however slow, isinevitable and is likely to progress withincremental developments such as advanceddriver assistance systems, park assist systems,integrated vehicle health monitoring andautonomous systems.

The human and economic case

The human and economic case for greaterautonomy is compelling. Moving from point‘A’ to point ‘B’ involves multi-factordecision making about mode of transport,route, time constraints, safety, comfort,weather, luxury and convenience. In manycases, rules or machine learning-baseddecisions are likely to be objectively betterthan those made by a human. One of thecentral arguments in favour of moreautonomous modes of transport is thesafety value they offer. As is welldocumented, some 90% of road accidentsstem from human error. At a trivial level, weare already safer and better off if we let amodern vehicle park itself.

Autonomous cars? We’re nearly there...Self-driving cars are no longer the stuff of science fiction, writesKarthikeyan Natarajan, Senior VP & Global Head of IntegratedEngineering Solutions at Tech Mahindra

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More seriously, making vehicles autonomousglobally could save US$300-400bn ofsocietal and economic impact, taking intoaccount loss of human life, socialconsequences and insurance claims. There ismuch to be gained by removing the humanelement. Ultimately, there is no reason thattechnology cannot make roads driver-free.As Google’s driverless car tests haveproven, there's a serious case that the self-driving car, with proper intelligentinfrastructure, could be safer than theaverage driver.

Clearly, vehicles equipped with intelligenttechnologies that enable more efficientdecisions and driving styles can provideimproved fuel efficiency. There is also thepotential to improve journey times and trafficflow, freeing up owners’ time. Technologicalcars also open the door to solving one of thegreat conundrums of the industry. Aconnection to the OEM can continue toprovide updates, patches and improvements,and deliver an ongoing relationship with theconsumer. The door is open to OEMs to dowhat has eluded them for a century: to keep

adding value after the car has left the dealerforecourt.

The ecosystem: physical, legal andeconomic infrastructure

Apart from the primary technology requiredto build road-safe autonomous vehicles, hugeregulatory and infrastructure challengesremain. Autonomous vehicles make senseand will offer a viable alternative to manually-controlled cars only if the infrastructure is inplace to support them.

Just as electric vehicles require anecosystem of charging points that canquickly charge a vehicle without bringingdown the electricity grid, so too willautonomous vehicles require significantinvestment in new infrastructure. Intelligenttraffic lights and smart lanes with sensors toassist automated parking are just a start.

Moreover, specific safety regulations andtraffic rules within individual countries mustbe taken into account. Any autonomousvehicle system must be adaptable to anygiven regulatory regime. What happens whenthe cars cross national borders? Can weexpect a self-driving car to drive on the leftof the road onto a ferry at the UK port ofDover, and have it drive off on the right sideof the road when it reaches Calais in France?Clearly, cars must be programmed to tailortheir intelligent drive systems to differentgeographies and cultures.

Then there are less tangible factors toconsider. It has, for example, been argued


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18 | Megatrends

that autonomous vehicles, built withadvanced sensing and tracking capabilitiesand constantly monitored, pose a threat toprivacy. While this feature will improvevehicle performance, it creates newsecurity concerns and risks commercialmisuse. Whilst most of us are comfortableto receive targeted advertising from, say, afree satnav programme, will we feeldifferently if we’re targeted on the basis ofdata from our car?

Finally, there is the cultural challenge. Areconsumers ready to change a fundamentalpart of everyday life? Can someone give upthe pleasure of driving? This final hurdle couldwell be the most significant; but there will benew rewards, such as, for example, sitting inthe driver’s seat without beingdiscombobulated by rush hour traffic!

How will the industry change?

Culturally and ergonomically, driverless carsneed not resemble the cars of today. Forinstance, in a completely driverless car ordigital cockpit, is there even a need for asteering wheel? And if human intervention isrequired, is there a better way to operate thecontrols than a steering wheel? We can alsosafely assume that the role of ‘intelligence’within such cars must be significantly greaterthan it is today.

These changes are reflected in an alreadychanging business ecosystem. OEMs aregreat at building desirable, functionalmachines, but increasingly recognise thatpartners are needed to develop, test and

implement the artificial intelligence andmachine learning that must underpin thenext generation of cars.

The automotive industry has anticipated thischange for a few decades, growing a partnerecosystem. It started with the inclusion andintegration of electronics and artificialintelligence into cars. Next-generation carsinclude electronics in everything frombraking systems, engine and powertrain, tobody controls and infotainment, enabled withadvanced driver assist systems (ADAS)integrating with multiple types of sensorinputs, radar and image fusion and analytics,not forgetting the electronics and software.System architecture, integration and systemtesting would be more challenging than everbefore. With autonomous vehicles, suchrequirements will only increase.

With the primary technologies already fallinginto place, the greatest hurdle is nottechnological but cultural and commercial.Bluntly, we need a more agile commercialecosystem to create and adopt technologyfaster than ever before. We need to defineboundaries for our personal data. The valuechain - encompassing developers, contentand app providers, telcos, insurers and OEMs- still has to catch up with the implications ofmore autonomous vehicles.


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CSC has conducted a considerable levelof research into the use of the cloud in

the automotive industry. The consulting andoutsourcing solutions provider recently cameup with a research project entitled “Drivingin the Cloud”. Megatrends asked Paul Scott,Industry Strategist, Global VerticalManufacturing at CSC, to explain the thinkingbehind this project.

“Driving in the Cloud is our vision of howthe automotive industry will work in thefuture,” says Scott, “and it focuses on thelifecycle of the car, essentially from thecradle to the grave. There are basically twoparts to this picture: the traditional part,namely engineering and manufacturing; andthe ‘new world’ around aftermarket andservice which is being driven by keytechnology trends: cloud technology, BigData and social media.”

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

“There’s already a huge amount of data. Thequestion is, what data to extract, what datato analyse? And then what should be donewith the data afterwards, and how should itbe used within an organisation? An OEMorganisation includes sales, marketing,customer service and dealers, so it has tochannel this information to the right peopleto use the information in the right way.”

Interestingly, Scott believes that concernsabout data security and privacy have changed.“I think we've gone past that thoughtprocess. I think organisations have realisedthat the huge volumes of data need to be

stored in some form of cloud-basedarchitecture to allow easy access to it.Some of it is going to be made available toinsurance companies or other thirdparties who want to sell services. So I seethe cloud playing a big role goingforwards.”

The OEMs are losing the race

The connected car is increasingly seen asoffering opportunities to non-traditionalautomotive suppliers, and in terms of whathappens to that data, Scott believes the carcompanies are being outplayed byinsurance companies, for example. “Theyalready have their dongles and black boxesin some cars, and are using thatinformation. So why doesn't an OEMcapture and sell the information to theinsurance companies? This goes back to

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

one of my earlier points - how can anorganisation take the data created by thecombination of consumer and vehicle anduse it to generate revenue?”

One oft-cited area is predictive maintenance,which can be used to get people to comeinto an authorised repair shop to get their

car repaired. Scott agrees. “Underwarranty, over 80% of people go intoauthorised repair shops; once a car

is out of warranty, thisdrops down to below25%. You can argue aboutthe percentages but

there's a huge drop andtherefore a huge potential for

OEMS to capture additionalservice revenue and spare parts revenue.”

This would suggest that there's a potentialfor the OEMs to capture that service, butthere's also an opportunity for smallerplayers, if they were able to buy that data, tojoin the race.

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

Built-in or brought-in?

Delivering the desired connected vehicleexperience is another area of debate,specifically around the question of brought-in or built-devices. “The OEMs are pursuingdifferent routes and it will be interesting tosee how the strategies unfold. If the OEMsare not careful, the car display will bereminiscent of a dumb terminal to gain accessto infotainment and navigation informationstreamed from the cloud.” A dumb terminalin the car pairing with an occupant’ssmartphone for infotainment and navigationwould create a serious challenge for theOEM wanting to ensure some ownership ofthat experience. This suggestion leads Scottto repeat his comment that some OEMs “arelosing that race”.

With third parties generating data andcontent, the OEMs are losing out. “An OEMstands to win if it's using data that it'sgenerating itself,” explains Scott. “What datadoes the OEM have? It has data from its cars- how its cars are performing, how far a caris being driven, and when the next service isdue. By understanding when the next serviceis due, and connecting that with where theconsumer normally gets that car serviced,the OEM can prearrange a serviceappointment. What happens when the redlight error message appearing in thedashboard can be diagnosed, and appropriateaction suggested and organised by the OEM?Wouldn't it be nice if the customer servicedesk automatically made contact with the

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

Turn customers into brand advocates

Some suppliers, including Arynga and RedBend, and OEMs like Tesla, are alreadyoperating free, over-the-air software updatesthat can prevent such red light warningsoccurring. “In other industries, particularlythe aerospace industry, we're doing somework on Big Data analytics, involving figuringout what has caused an error,” says Scott.“When an error takes place, you then analysethe events that took place prior to the error.The more errors you get, the better you canunderstand the importance of the events.

“The next sophisticated step of predictivemaintenance is to figure out whatcombination of events or factors arerelevant,” he continues. “Once those start tooccur in sequence, you can transmit amessage to the driver with a suggestedrelevant preventative or emergency action.This is important in terms of safety and interms of the customer experience. Get thecustomer experience right and somebodywill go from a customer to a loyal customerand from a loyal customer to being anadvocate of the brand. And I think that's oneway the data can be used in a much moresophisticated predictive way, saving moneyfor the consumer and giving the consumer asafer driving experience.”

And this could prevent large OEMs fromissuing multi-million unit recalls. “Of course.If you know when errors are occurring, youcan send an early warning back to therelevant engineering or risk department sothey can assess what needs doing, and takeappropriate 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 avictory, because of the volumes ofcommunication that will take place. Once weget into car-to-car and car-to-infrastructurecommunications, the levels of communicationwill increase further still, and the potential forrevenue generation is very high. Theinfrastructure providers will also claim avictory. But I think those who canorchestrate everything will be the realwinners.”

And that might not necessarily be atraditional automotive industry player at all.“It could well be another party entirely,”concludes Scott. “The infotainment race isnot an OEM race any more. It’s a SiliconValley race. Own the user interface and youare in pole position for the revenue streams!”

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The number of lines of code in a singleautomotive electronic control unit

(ECU) already often reaches into the tens ofmillions. However, as emissions and safetyregulations tighten, the role played byelectronics is set to see the use of softwarein automotive applications increase manytimes over. Add to this the rising demand forinfotainment and consumer electronicscapabilities in cars, and the scene is set forvehicles driven by software. This softwareneeds to be written quickly, verified andconstantly maintained; errors can have hugeimplications.

Developers are expected to work atincreasing speeds, and subsequently have lesstime to spend on manual maintenance tasks,and it is here that companies providingsoftware production management solutionscan gain a competitive edge. Electric Cloudhelps to get software to market at a fasterrate, by assisting companies to automate,accelerate and analyse software build-testdeployment processes. The US-basedcompany works across a variety of industries,including automotive. Andreas Dharmawan,

Senior Director of Solutions and Services atElectric Cloud spoke to Megatrends aboutthe increasing complexity of cars, and thesoftware delivery challenges presented bythe automotive industry.

Electric Cloud focuses on manymarkets, but what is the automotiveaspect of your company?

Marc Andreessen, Groupon and LinkedIninvestor, said a few years ago that ‘software iseating the world’. The automotive industry isusing software at a rapidly increasing rate andcustomers demand the same services in theircars as on their smartphones. If you look atthe technology to reduce traffic congestionand increase fuel efficiency, cars now havesoftware for this. Much of the automotivesupply chain is hiring software engineers whoare in a very competitive market.

OEMs can conduct considerable softwaredevelopment on the test side, but can’t workfast when the module they build goes intomultiple models. For a supplier, the testmetrics become even more complicated.

Many software modules need to be marriedinto the hardware module, because softwareis an embedded system, so it’s not justrunning on Pentium or ARM chips. It goesinto a different engine control unit. This couldbe for powertrain, transmission, ignitionfiring, or lighting. Even though the process ofembedding software into hardware is semi-automated, it is not fully orchestrated. Thereare many manual tasks. We have also noticedthat sometimes the team building thesoftware is located in a different time zoneto the team doing the testing, which leads tolost time.

What does Electric Cloud do forOEMs and suppliers?

Many of the manual processes need to beorchestrated. Electric Cloud can orchestrateand model an existing process. OEMs orsuppliers don’t need to change the way theywork. We help the automotive industry intwo ways: one is orchestrating the build, test,and release process to eliminate timeconsuming and error prone manual tasks, andeliminating the delays of cross-timezone


Rachael Hogg talks to Electric Cloud about managing the increasing complexity ofautomotive technology

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Cars of the future will be drivenby software, says Electric Cloud


work. The second is pure acceleration - muchembedded software is written in C/C++, andElectric Cloud accelerates the build time forC/C++. The top five embedded companies inthe world are Electric Cloud customersbecause they do a large volume of C/C++build, and we can reduce a build thatpreviously took six hours, into 20 minutes,through massive parallelisation.

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

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

How important is the automotiveindustry within your company, andwhat role will it play in ElectricCloud's business strategy long term?

Automotive is a growth business - wewould like to grow our company rapidlyand see automotive as a sector where wecan grow. We are promoting andevangelising continuous delivery. Many of

our existing customers are on thattransformation. We want to always be theleader in the continuous delivery space andto move it to automotive.

One area of concern is reliability andthe avoidance of software-relatedmalfunctions. How can your systemhelp car manufacturers overcomebugs?

Our product allows the development teamto move faster between build and test.Because we have the technology of massiveparallelisation, a lot of the first permutationshave complex build and test metrics. If youcan iterate every day, you discover bugsalmost every day. When you discover thesebugs, the development team can fix it sooner.In the past, the product would be releasedwithout adequate bug fixing and these bugswould be discovered by customers. Ourcustomers can move the bug peak to earlierin the test cycle, so a developer cancollaborate and reduce or eliminate allpriority one and zero bugs, and confidentlyrelease the software.

The ability to display the progress of eachteam, and the status of each artefact as itgoes through the pipeline of continuousdelivery is also important. We can maintaina module through our artefact repository,and show the health of a particular module

as it goes through the product lifecycle. Atthe end, you can have a bill of materials interms of software. This allows faster rootcause analysis.

Finally, could you please comment onwhat you see as the key megatrendsshaping the automotive industry ofthe future, and how you areaccommodating these in your productdevelopment?

Mobility is changing because the populationgrowth is accelerating. There is a trend ofpeople moving into urban settings. Thenumber of available roads in the world is notgrowing as fast as the number of cars. I donot see everyone adopting publictransportation in a few years. It has valuesand strengths, but personal transportation isstill highly desired. The migration is moretowards smaller cars.

The technology that drives the car willchange as well. Instead of focusing oncombustion technology, the market willfocus on electric or hybrid technologies. Alot of alternative technology goes intosmaller cars, so I see more personaltransportation devices. All of these thingsrequire software. This is not only going intothe car, but into the infrastructure, becausethe vehicle needs to communicate with boththe driver and the road.

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As far as the consumer is concerned,connected vehicles will significantly alter

the driving experience. The blending ofvehicle-to-vehicle (V2V) communications,cloud connectivity and consumer electronicstechnology will make driving safer, but behindthe scenes, increased connectivity must bematched with increased data security. This isa significant challenge for the industry’sengineering and business practices.

Megatrends spoke to Shawn Slusser, VicePresident, Automotive Business at InfineonTechnologies Americas, about the challengeof ensuring safety and security, and how therapidly developing connected car requiresthe industry to incorporate design forsecurity into vehicle development.

The connected car will enable many features,such as apps, content from the cloud, and theability to update the software in the car.Autonomous driving features will utilise theability to communicate with other vehiclesand even roadside objects for safety. All ofthis connectivity introduces security risks,said Slusser. He also highlighted that Infineon,which supplies semiconductors forautomotive electronics systems, has parallelexpertise in the global market for smart cardtechnology, the chips that provide securityfor payment cards, passports and otherelectronic ID, and other applicationsrequiring protection of critical data. Thisperspective underlies advice on how theindustry can protect against security threatsas levels of connectivity increase.

Battling the “Dark Side”

Widespread connectivity to the Internetchanged the computer industry in manyways, not least of which was individual andorganisational exposure to security risks.Now the car is increasingly incorporatingInternet capability, making it morevulnerable to outside threats. “New

functionalities often harbour new risks, sowhat we can learn from the past, and fromother industries, can undoubtedly apply tothe car industry,” said Slusser.

He noted the importance of distinguishingbetween two types of risk in the connectedcar. Safety risk refers to the danger ofunintentional errors occurring in electronicsystems. The industry is tackling this challengethrough the well-developed concept offunctional safety embodied in ISO 26262.Security, meanwhile, involves protecting againstintentional attacks on systems and software.“These include tampering, theft, or dataprivacy, and are risky to the connected car.”

Slusser describes intentional attacks as “DarkSide” scenarios, referring to the Star Warsfilms. “We have a job to fight against the DarkSide,” he said. “These risks should be a wake-up call to the industry that we need toaddress automotive security immediately.”

While this may sound like Hollywood,university research teams(www.autosecure.org) have alreadydocumented successful attacks on carsystems. In another incident reportedearlier this year, two Spanish researchersdescribed a device made for under US$20that, after being wired in to the CAN busof a car, would give an attacker the abilityto remotely manipulate vital vehiclesystems.

Slusser noted that all automotivestakeholders need to be involved indeveloping the security systems that protectagainst intentional attacks. He said, “To solvethese problems takes more than just OEMsand Tier 1s; it’s really a whole ecosystemproblem. This will involve everyone fromsuppliers like us to our customers, to theOEMs, to insurers and regulatory bodies. Allof the different stakeholders will have a roleto play.”

New functionalities, newrisks: it’s time to securethe connected carInfineon’s Shawn Slusser tells Rachel Boagey about the urgent need to address the security ofincreasingly connected cars

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

Megatrends | 25

What’s next?

So what does this mean for the car industry?“It means there are some newrequirements,” said Slusser. “In order for thebenefits of connectivity to be enabled in thecar, the industry has to incorporate securityinto the design process at the start of vehicledevelopment.”

Slusser described five major elements inelectronic system security: secure memoryto store password and certificationinformation; cryptography capability;authentication to verify identity; an assured“root of trust;” and revocation capability thatallows access to be denied. “These security

elements will need to be included in futurevehicle electrical architectures,” explainedSlusser. “Specialised security hardware andsoftware will be necessary.”

Infineon’s expertise with the securitytechnologies to protect digital information inthe car comes from the company’s longparticipation in the smart card industry.“Smart card chips, which are really specialisedmicrocontrollers dedicated to securityfunctions, have been around since the 1980sand have been become very sophisticatedand well-hardened against attacks,” explainedSlusser. The next stage, he said, is to enablethis type of security technology inautomotive systems. “We have the essentialelements of security technology figured out.As an industry, we now need to adapt thistechnology to the car.”

This means that companies working onsecurity, such as Infineon, need to figure outthe level of security technology required fordifferent automotive systems, and thus whichECUs in the car require targeted securityfeatures. “First you figure out what applicationsneed security and to what level,” said Slusser.“Then the specialised hardware and softwareto address those needs can be implemented.”

An important part of meeting securityrequirements is that developments mustoccur beyond the car. “You have to enablethese security devices in the car and also inthe ecosystem of automotive design,” he said.“Security practices have to become a part ofthe development cycle and ultimately

embedded into the IT infrastructure of theindustry in order to protect the secret keysassociated with the hardware Root of Trust.”

OEMs therefore have to adopt a newdevelopment process to enable thecomponents in their cars to be secure.Slusser said, “The typical automotivedevelopment programme today doesn’tconsider electronics security, but it is has tobe heavily considered in the near future.”

Lagging behind

To achieve security in the connected car,Slusser sees a need for new roles and newexpertise. 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 withsecurity expertise. To create a ‘trustedenvironment’, changes in manufacturing needto happen to secure connected devices.”

While the promise of the connected carmarks a major change in personaltransportation, its success relies in large parton how well the industry protects against therisks of the ‘Dark Side’ concluded Slusser.Today the automotive industry hasconsiderable work to do to develop thenecessary expertise for implementingsecurity technology. To catch up, it mustdevelop a robust security ecosystem that canadapt and build on smart card technology tomake security an integral part of futurevehicle architectures.


ISO 26262 is intended to be applied to safety-related systems that include one or moreelectrical and/or electronic (E/E) systems andthat are installed in series production passengercars with a maximum gross vehicle mass up to 3500 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

ISO 26262

26 | Megatrends

- Shawn Slusser, Vice President, AutomotiveBusiness, Infineon

We need ‘Jedi Master’ security architects andengineers with security expertise. To create a

‘trusted environment’, changes in manufacturingneed to happen to secure connected devices

“

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Canadian software company Lixar hasbeen gradually making its way into the

automotive segment over the past three tofour years, working with such big names asDelphi, Verizon and QNX. It specialises inaftermarket connected car products, withexperience in building car-to-cloudenterprise strength systems and mobile iOSand Android applications for automotiveuse. Within the automotive space it hasworked on vehicle diagnostics, geo-fencing,geo-location, mileage tracking, BluetoothKey Fob connectivity, fleet management andautomotive data analytics, with an everwidening array of projects.

Megatrends asked Lixar’s Chief Executive, BillSyrros and its Director of Innovation, JustinMoon, about the growth of the company’sautomotive business and the keymegatrends 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 onmobile connected transportationtechnology." An initial partnership with QNXSystems led to other automotive projects,covering visual displays, mobile applications,cloud-based systems and data analytics.

"Our interests are highly innovative and highlyspecialised development and technologies,"commented Syrros. "And being able to saythose words and connect them to automotiveis sometimes hard to believe, given the cyclesin the world of automotive."

Entry to the automotive segment posescertain challenges for any new company, butparticularly for software companies likeLixar. "Traditionally the automotive sectorhas been slow to move in terms ofintegrating new technology. The long cyclesin which those technologies get integratedin the cars means that it is difficult to besuccessful for software companies likeours," said Syrros.

However, the industry is evolving at adramatic rate, and Syrros noted "We slowlysee that those traditional ways of thinkingare starting to change."

Safety

As Lixar has discovered, the move into theautomotive segment automatically bringssafety to the forefront. "At the end of theday, whatever we do in automotive, thesafety aspect is the number one issue thatpeople should be concerned with," statedSyrros.

When it comes to connected cars, Lixarsees safety as the driving force. "When youhear the term 'connected car', many peoplesee the advantages from an infotainmentperspective, but Lixar is interested indeveloping technology that leads to a saferenvironment. As more technology is packedinto vehicles, things like distraction reallycome into focus," said Syrros.

Moon believes design is key to balancing thedemand for new technology withoutcompromising on safety. "It comes down todesign and fundamentally understandinghow to leverage that information," he said."You'll see governing bodies push standardswith regard to distraction which couldpotentially hinder innovation andtechnology moving forward. The idea ofleveraging technology in a proper way,disseminating information in the proper way,will allow us further progression from atechnological standpoint. At the same time,understanding how to interact with thedata, we can further reduce distraction."

The human factor

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


In the connected future, you’llneed to be agile, says LixarMegan Lampinen talks to Lixar's Bill Syrros and Justin Moon about the company’s transitioninto the automotive space and the trends driving its business strategy

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going to start seeing moving forward isbringing the driver back into the conversationand the human factor," he said. This involvesunderstanding how to leverage the data anddo something relevant with it. "Understandingwhen I need to deliver specific pieces of data,how I deliver it, which screen it goes to, how Iinteract with it... Understanding how toleverage that data not just from a Big Dataenvironment, but how I as a human willinteract with it," Moon explained.

The movement towards this focus, Moonbelieves, is an inevitable one: "You're going tosee more and more that this will become an'in your face' and upfront trend movingforward. It has to. Just look at the vastamount of data that exists today in thecurrent connected vehicles."

Just the beginning

Syrros believes the automotive industry ison the cusp of several dominant trends,which will all contribute to a dramaticallychanged interpretation of the car in thefuture: "Most of the presentations I've goneto lately address what the car of the futurewill look like in 2025. We're in 2014 andwe're just starting to push out and doeffective and measurable things today, but it'sjust the beginning."

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

of that difference stemming from the energyefficiency boom and connected vehiclebooms. Safety, which he described as "thatslow moving juggernaut", is also at workbehind the scenes. "By 2020, the level ofelectronics in vehicles is going to be tentimes greater than what you see today, if nota hundred times. It's going to be so muchmore significant in the future."

The key for Lixar now is to place itself inthe best position for moving forward."We're pushing the envelope fromaftermarket connectivity to OEMconnectivity," explained Moon. "We're verymuch interested in how to create value thatoverarches that. Right now we are one ofthe largest aftermarket connectivityplatforms. How do you transition the valuefrom an aftermarket connectivity base? Howdo you maintain that consumer movingfrom an aftermarket device to a built-indevice? We're starting to look at what thatstrategy looks like."

Overall, Moon believes that most OEMs willtry to migrate to some form of built-insolution. For those in the aftermarketsolution space, the question becomes how toenhance value and increase the consumerbase while transitioning technology. "Thereare all kinds of players trying to figure outthat," said Moon.

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

New talents are required," Moon added."Agile companies are going to pave the wayin that respect." With its muscles warmed upnow through projects with QNX, Delphi andVerizon, Lixar is positioning itself fortrailblazing work ahead.


Bill Syrros, Chief Executive

Justin Moon, Director of Innovation

ibm.com/software/data/bigdata/industry-auto.html

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CONNECTED VEHICLES

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

Big Data – big opportunityor big problem?


CONNECTED VEHICLES

The future connected car will be apowerful device in transmitting and

providing data, and will be able to collect datafrom on-board diagnostics for analysispurposes. With this in mind, Big Datapresents a huge opportunity for automotivecompanies to meet the demands of theirmore demanding, tech-savvy customers.

According to Frost & Sullivan, Big Data willbe worth US$122bn in the automotiveindustry by 2025; with 70-80% of carsexpected to be connected, Big Data will havea key role to play.

For large manufacturers, dealerships and fleetmanagement businesses, however, all of asudden a Big Data challenge has arisen, withmany left wondering how this data should bestored, accessed and used.

Why do we need Big Data?

Every second, a telematics device willproduce a data record includinginformation such as date, time, speed,longitude, latitude, acceleration ordeceleration, cumulative mileage and fuelconsumption. These data sets can representapproximately 5MB to 15MB annually percustomer. With a customer base of 100,000vehicles, this represents more than 1terabyte of data per year.

Andreas Mai, Director Smart ConnectedVehicles, Cisco, recently described Big Dataas food for thought, inspiring OEMs to thinkoutside the box of the usual use for data, andinstead using data collected from the car in amore productive way, namely to generatecash. “Everyone wants to see the money,” hesaid. “The internet of cars will unlockUS$1400 in benefits per year, per vehicle.”

Aside from making money, however, BigData offers many benefits to multipleparties, including drivers themselves. Maiexplained, “Big Data has big benefits forvehicle users, allowing lower insurancepremiums, lower operating costs, andultimately creating savings.”

Jamyn Edis, Founder and Chief Executive atconnected car start-up company, Dash Labs,explained to Megatrends that through BigData, live and dynamic information is able tore-price particular features if an OEM ischarging too little or too much. He said, “BigData, along with the connected car, has theability to book your parking space before youleave home, and predict traffic jams.”

Edis also explained that in the future, carbuyers will be able to profile a car’s pricingfrom day one to find out if it has had anyaccidents or been involved in any illegalactivity. “Most cars in the UK and the US havea digital footprint, it’s just a case of miningthat data and figuring how to use it,” heexplained. “If you compare cars with real

estate, where there is an ability to create ahistory of every house since it went on themarket, that’s what we might start to seewith cars - more and more data transfer andlots of Big Data that will enable buyers tocheck out the car in detail.”

Collaborate and benefit

While some may be puzzling over data, andwhat to do with it, others are reaping therewards of one of the main benefits oftelematics data: improved customerexperience. Through monitoring Big Data incars, it becomes possible to reduce warrantycosts, increase safety, and create a datasharing network between the dealer,customer, OEM and others. OEMs currentlydevelop different approaches to reach theirtargets; yet Frost & Sullivan predicts that the

“killer” OEMs will be those that can usepredictive data analytics to effect a 1-3%reduction in warranty costs along with otherimportant software and firmware over-the-air updates.

Cosmin Laslau, Research Analyst in EnergyStorage at Lux Research, spoke toMegatrends about the importance of thepartnerships needed to develop theconnected car. “These collaborations are veryimportant. Continental will collaborate withIBM to enable vehicle-to-infrastructure (V2I)functionality: Continental anticipates sendingdetailed data from individual vehicles, likeposition, speed, and deceleration, which IBMwill process efficiently its computinginfrastructure expertise. The resultingaggregated and processed data will enableContinental and IBM to develop automotive


CONNECTED VEHICLES

grade products with a high degree ofautonomous and anticipatory capability.”

Storing the data

Finding a place to store this data is currentlya challenge for the industry, and transportingdata from the car to the cloud is appearingas a viable option. But it would be naive tothink that this method of collecting andsending data would not also bring with it ahost of problems.

Cisco’s Mai said, “The more connected carsare, the more data can be made use of andstored, but then congestion of airwaysbecomes an issue. Offloading data andswitching the ways a vehicle can connect tothe cloud is mission critical.”

Joe Speed is the Internet of Things Leader atthe Linux Foundation. Speaking to Megatrendsin his previous capacity as IoT Leader at IBM,Speed described the car as just one of the‘things’ in the Internet of Things. He alsodescribed the connected car as a Big Dataproblem. “In an average car, there is between1 and 5 gigabytes an hour of data produced,”he explained, “and when you consider thatthere are around 60 million carsmanufactured each year, that is a lot of data.”

Speed suggested that rather than discardingthe data, OEMs can do interesting things withit, but the trick lies in finding a way to manageand store the data. “Http has no quality ofservice, is not reliable and not designed forwireless,” he said, noting that there must bea better way to manage car data.

MQTT, the Message Queuing TelemetryTransport, is a messaging protocol of choicefor the emergence of Big Data. It was

developed by IBM, which took the decisionto make the technology open source. “Half adozen manufacturers are already buildingMQTT into their cars and trucks because itis military grade secure,” explained Speed.“The platform can currently connect 21million vehicles per rack.”

Vehicle management

Sarwant Singh, Senior Partner, Frost & Sullivan,recently spoke to Megatrends in a webinarentitled “The Internet of cars part 1 – BigData”. Another benefit of Big Data, highlightedby Singh, is the role it can play in warranty andvehicle management. “Some recent recallscould have been prevented or managedbetter,” said Singh, “as the manufacturers couldhave used Big Data to predict that a failure washappening or just used it for a much bettermanagement of recalls.”

Singh also noted that Big Data is alreadybeing used today in other services, andsuggested that the automotive industry couldlearn from industries such as aviation, whereremote diagnostics are used to remotelymanage and predict maintenance onaeroplanes. “This is something that can beadopted by the automotive industry to allowrecalls to be better managed,” said Singh.

A question of privacy

Another challenge that Big Data brings isdata security, which Mai described as a hottopic across the industry. He said, “There aretremendous amounts of security risks andthreats in the connected vehicle space.”

Dash Labs is launching a low-cost, easy-to-install device that analyses car and driverperformance, allowing the driver the

opportunity to drive more economicallyand safely.

The app produced by Dash allows the supplierto collect consumer data, collecting diagnosticinformation from the vehicle’s computer viathe on-board diagnostic reader. “We can pairthis information with the sensors on yoursmartphone, and that can act as your GPS,compass, and barometer,” explained Edis.“Because we integrate with the socialnetworks, we now know the demographics ofthe driver. We could find out from Facebookthat the driver is a woman within this agebracket, and likes to do this online, with thesefriends. Whatever you can infer as a developerusing Facebook or Twitter or Google+, that’sall stuff that’s helpful to us.”

However, the question remains, are peoplegoing to be willing to take Big Data to as faras it is able to go? Speed mentioned that ageneration divide undoubtedly exists whenit comes to privacy concerns, and thatyoung people seem alarmingly unconcernedabout privacy. “I’m noticing people my ageare very much privacy conscious but as longas young people are getting something ofvalue, it doesn’t seem to be a big concernfor them. Some of the concern we try toput into protecting personally-identifiableinformation is putting energy into the wrongparts of the problem.”

The future connected car will undoubtedly bea data machine, collecting data from on-boarddiagnostics for analysis, in an aim to save theconsumer money in their overall drivingexperience. The argument posed by Dash’sEdis suggests that a conventional family couldbenefit from Big Data monitoring their drivinghabits; the question is, are we really ready forour data to be mined in this way?


CONNECTED VEHICLES

It’s an oft-cited anecdote, but it’s worthrepeating: there are now more lines of code

in a single vehicle than there were in the firstrocket on the moon. As vehicle complexityincreases, however, so do the challenges forboth OEMs, and suppliers.

The many millions of lines of code in a car –there could be tens of millions of lines ofcode in a single electronic control unit (ECU)– need to be carefully managed, and suchcomplexity requires powerful multicoremicroprocessors. The myriad recalls just inthe first half of 2014 highlight the need forthe automotive industry to prove andguarantee system reliability – and that meanssecure software solutions.

Green Hills Software is a large independentembedded software provider and has beeninvolved with automotive industry Tier 1s,Tier 2s, and OEMs for over 20 years. Thecompany focuses on a number of verticalmarkets, including automotive. As DanMender, the company’s Vice President of

Business Development, explained toMegatrends, there is a movement towardsECU consolidation, which is evolving toinclude some autonomous drivingfunctionality, and some legacy ECU software.“There’s a hypersensitivity to make suresystems can be validated and tested andsupport the level of reliability, availability andfunctionality that’s needed in the car, withoutfailure.”

OEMs and suppliers now need to be able torun a complex processor, adhere to stringentsafety and security standards, and consolidatefunctions in a provable way. “We help OEMswith the idea of ECU consolidation, how thenext generation of infotainment systems willbe multifunctional, and how they can takeadvantage of that in a powerful ECU design,but in a safe and reliable way,” said Mender.“This allows them to consolidate functions inone box, increase reliability of theelectronics, and reduce the cost. Havingfewer individual ECUs in the systemincreases quality and reliability.”

The evolution of in-vehicleinfotainment (IVI) platforms

There has been a movement towards opensource software platforms like GENIVI,Android, Linux, or a combination of these.There may be the need to run two platformsin combination with more critical applications,and that presents yet more complexity. GreenHills does not develop infotainment stacks,like Linux or QNX, but provides the platformthat runs them safely and securely, within theOEM and Tier 1’s platform. To support theevolution of IVI platforms, Green Hills deliversa scalable, flexible safety-certified platformallowing the OEM or Tier 1 to run whateverIVI infotainment stack they choose, explainedMender. “OEMs and Tier 1s are focused on abroad set of markets and customerrequirements that can be driven by not onlygeographical aspects, but by different groupsof individuals looking to purchase vehicles.Whether that is the digital natives or Gen Ys,they all have different things they’re lookingfor. One size does not fit all.”


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

34 | Megatrends

CONNECTED VEHICLES

However, while one size may not fit all, theredoes need to be a degree of flexibility. GreenHills provides an ASIL-qualified platform onwhich its customers can run any combinationof guest operating systems they choose forinfotainment. Mender said, “They may have alegacy infotainment platform, but want to addAndroid to bring in an app storeenvironment, in a safe and reliable way.” Theability is needed to flexibly run theinfotainment experience of choice based ongeography, cost, and a targeted consumergroup, such as Millenials. Different vehicleplatforms, he said, will also offer differentexperiences, from entry level vehicles in theBRIC countries, to high-end vehicles sold inChina, the US, and Europe.

Autonomous driving and security

The race to launch the first commerciallyavailable autonomous car has been on foryears; most recently, Google released designdetails of a prototype of its first self-drivingcar. Although a fully autonomous vehicle isstill years away, the level of driverless featuressuch as self-parking and automatic brakingare increasing. Around 90% of collisions onthe road are due to driver error, and Menderbelieves that addressing that withautonomous technology will be valuable forgenerations.

As vehicles become increasinglyautonomous, and increasingly connected,there is a growing concern over safety andsecurity. “We’re helping our customers withthe highest levels of safety and security,” saidMender. “In some cases, that’s the ISO26262standard, where it has the ASIL ratings, from

ASIL-A to ASIL-D. Our software productshave been qualified to the highest levels ofASIL. We can help our customers with designarchitectures and philosophies that are safeand secure.”

To solve some upcoming performancechallenges in the autonomous vehicle realm,it will be necessary to take advantage of themulticore processors available on themarket, but that poses a safety challenge.Similarly, there are predictions that by 2020,there will be over 150 million vehiclesconnected to the Internet. Securitysurrounding that communication andconnectivity may not have been ignored, butmany agree that not enough focus has beenplaced on it.

New vulnerabilities are being presentedevery day, said Mender. “One area we focuson is guaranteeing that information gets to

where it needs to be, and is notcompromised, hacked, or used in a maliciousway. Our drive is to make sure theautomotive industry isn’t putting its collectivehead in the sand and thinking no-one willhack cars. If we don’t do the right thing, it willbe easy to capture transactions or steal dataof the owner of the vehicle.” OEMs andsuppliers need to consider data security atthe beginning of their development, he added,rather than as an afterthought.

As the automotive industry movesincreasingly towards connected vehicles, theneed is growing for understanding policiesand architectural aspects to deliver systemsthat are both reliable and secure. Withvehicles beginning to transmit and manageBig Data, discussions will be focused on thesafety and security of systems to support thecontinuous and increasing growth in thenumber of lines of code.


INTEGRITY Multivisor Secure Virtualization

3D GPU Ethernet USB CAN Wi-FiCPU

Megatrends | 35

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INTEGRITY Secure VM

General PurposeOperating Systems Graphics Safety Applications

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ADAS

With significant increases in the volumeand complexity of in-car electronics,

networking solutions that offer low-cost, highspeed transmission and bandwidth arebecoming ever more necessary.

Ethernet bypasses traditional cabling forconnectivity, allowing all vehicle componentsto connect with lighter and more effectivewires, and enabling manufacturers to reduceconnectivity costs by up to 80% and cablingweight by up to 30%. This also provides acost-effective, scalable solution to theincreasingly connected car.

According to ABI Research, Ethernetpenetration in new vehicles will grow from1% in 2014 to 40% in 2020, quickly becomingthe technology of choice for some of thebiggest OEMs.

Assisting connectivity where otherscan’t

‘Connected car’ is an umbrella term used toencompass many elements of in-carconnectivity, but in reality, the phrase refersto everything made possible by an in-car LTEconnection, from infotainment to assistedvehicle technology and full autonomy.

There are currently as many as nineproprietary automotive networkingspecifications including LIN, CAN/CAN-FD,MOST and FlexRay.

These standards offer relatively lowbandwidth and performance compared toEthernet, which enables an open, high-performance network for poweringin-vehicle infotainment and ADAS, improvingthe ability to share data from a common

source to the entire network. One of themain advantages of Ethernet is that is can runalongside standard vehicle cables used forother in-car networking technologies, andrequires no extensive fitting procedure,saving cost.

“The emergence of drive-by-wire, theexplosion of in-vehicle sensors for ADAS andautomated driving, and the adoption ofconnected infotainment, poses new


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

CONNECTED VEHICLES

Ethernet:

CONNECTED VEHICLES

challenges for in-vehicle networkingtechnologies in terms of cost, bandwidth,cable harness weight, and complexity,” saidABI Research Vice President and PracticeDirector, Dominique Bonte. “Ethernet is nowbeing considered as a replacement for legacybus protocols such as MOST and FlexRay bycar OEMs including BMW and Hyundai.”

Megatrends spoke to Timothy Lau, AssociateProduct Line Director, Connected Car atBroadcom, who explained the benefits of in-car Ethernet to aid connectivity speeds. Lausaid, “The technologies available today offervery low performance in terms of overallthroughput or bandwidth for networkapplications. For instance, CAN and LIN busonly support up to 2Kbps bandwidth, andFlexRay can go up to 10Kbps. Ethernetsupports up to 100Mbps.”

To create a solution for existing in-car low-performance networks, Broadcom developedBroadR-Reach, an automotive-qualifiedEthernet standard. This enables multiple in-vehicle systems to simultaneously accessinformation over a single unshielded twistedpair cable. Lau explained, “BroadR-Reach isdesigned specifically to address the stringentrequirements of the automotive industry,delivering a bandwidth of 100Mbps over anunshielded single twisted pair cable. Byeliminating the need for expensive,cumbersome shielded cabling, manufacturerscan significantly reduce connectivity costs.”

Complex data requirements

As the connected car develops, the vastamount of data generated undoubtedlyrequires improved processing techniques andtechnologies. According to Mario Mueller,BMW’s Vice President of IT Infrastructure, in2012, BMW had around one millionconnected cars on the road, generating overone million data requests daily. The companynow has three million connected cars on theroad, and beyond 2018, it expects to have 10million connected cars generating over 100million daily data requests, equivalent to 1TBof data every day. Sarwant Singh, SeniorPartner, Frost & Sullivan recently discussedincreasing data and the need for an improved

coping method in an Automotive Megatrendswebinar entitled ‘The Internet of Cars Part 1– Big Data’. He said, “The fourth-generationBMW 7 Series uploads 81Mb of data in tenhours, but thanks to Ethernet, the fifthgeneration 7 Series takes 20 minutes toupload 1 gigabyte of data, showing just howeffective this technology can be to managethe vast levels of data management required.”

BMW sees the importance in taking thetechnology one step at a time to ensurereliability and use of Ethernet. A BMWConnectedDrive spokesperson toldMegatrends, “To introduce a new in-carnetworking technology is a major change forcar manufacturers as it represents a crucialinfrastructure for a vehicle’s smoothfunctioning. To ensure the best quality forcustomers, it is therefore advisable to startsmall, that is, to connect only the cameras tothe optional surround view system electroniccontrol unit (ECU) as in the X5, and extendto more models and electronic control unitsfrom there.”

Autonomy – a strong case forautomotive Ethernet

Many OEMs are now focusing their researchtowards the autonomous vehicle, whichrequires organisation of millions of lines ofdata – a strong case for Ethernet inside thecar. Lau said, “You need to be able to takedata and send it very quickly to the ECU thatis making decisions on what the car needs todo to react to that data.”

Deployment of low-cost automotiveEthernet also means that high-end featuressuch as infotainment and ADAS features suchas surround-view parking and lane departurewarning can be deployed in a much broaderrange of vehicles, beyond just very high endmodels.

BMW recently commercialised Ethernet fora 360-degree camera parking assist systembased on Broadcom’s BroadR-Reachtechnology, the first OEM to use thetechnology in a vehicle. The car uses single-pair twisted wire, 100Mbps Ethernet toconnect its driver-assistance cameras.

A BMW spokesperson told Megatrends,“Ethernet-based in-car networkingharmonises the communication conceptsinside the car with communicationconcepts used outside the car. This makesit easier to integrate a car as a node intothe worldwide communication network.Environmental information gathered fromoutside a car including other cars can thusbe gathered more readily. Also, data ratelimitations are fewer inside the car and real-time information exchange will besupported. However, already todayautonomous driving is technically possible.The main challenges in the way ofautonomous driving are more in juridicaland customer acceptance domains.”

While the industry has only witnessed thefirst applications of in-car Ethernet, it is thenext logical step to consider Ethernet forother in-car applications.

"Ethernet could be the catalyst for bringingthe automotive industry a step closer toconnected vehicles," says Frost & SullivanSenior Research Analyst, DivyaKrishnamurthy. "With its capability to simplifythe networking architecture, higher uptakerates are expected in the near future."

The importance of standards

Standardisation is essential to enable new,innovative in-vehicle applications, reducingtime-to-market and ensuring availability,lifecycle, upgradability and interoperability.This will play a key role in establishing the


Evolution of Network Bandwidth

CONNECTED VEHICLES

networked car of the future, believes Lau –“helping automotive OEMs minimise designrisk with proven platforms to meet stringentenvironmental demands and rigorousindustry requirements.”

As demonstrated by the BMW X5, largeOEMs and technology providers arecollaborating to encourage wide-scaleadoption of Ethernet-based networks as thestandard in networking applications.

Broadcom has helped set up the OPENAlliance special interest group (SIG) topromote BroadR-Reach as a de factoautomotive Ethernet standard. The OPEN(One-Pair Ether-Net) Alliance now has over200 members after being founded in 2010 byBMW, Broadcom, Freescale, Harman andHyundai.

The alliance is beneficial to Broadcom andother companies pushing automotiveEthernet as it expands the use of thetechnology in cars. Lau said, “The automotiveindustry always wants standardisation whenit comes to implementation of advancedtechnologies. They want to ensure theirmultiple suppliers, sources, and healthycompetition to ensure that additional featuresets and innovation continues to happen inthe industry.”

Lau explained the OPEN Alliance helps fulfila desire from OEMs to have stability ofsupply to ensure pricing stays competitive,along with driving innovation. He said,“Different manufacturers continue toinnovate on this technology, driving thingslike lower power, smaller size, and overallinnovation.”

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

Security advantages

As the connected car evolves, so too doconcerns about network security. Byleveraging automotive Ethernet as thenetwork backbone, however, networksecurity features such as messageauthentication and encryption protect thecar from malicious attacks, eavesdropping andthe installation of non-service-approveddevices.

Andreas Mai, Director Smart ConnectedVehicles, Cisco, confirmed to Megatrends that,“In the future, Ethernet will play a veryimportant role, not just for infotainment butfor ADAS and autonomous vehiclesspecifically.”

Mai emphasised the importance of havingefficient and secure communications in theconnected car that cannot be establishedwith the traditional CAN network. Hecontinued, “If you look at security specifically,the CAN network doesn’t have enoughcapacity to carry the encryption overheadnecessary to carry and protect messageseffectively. From both angles, performanceand security, we see a role for Ethernet in theeco networks.”

Lau agrees safety is always a major concernwhen operating with low bandwidths, andargued it is also becoming a requirementfrom a consumer perspective. He said,

“Consumers are looking for increased safetyrequirements in their vehicles and anythingthat can contribute to increased vehiclesafety will be of interest.” Lau especiallyattributed these consumer demands to theincreasingly popular vehicle-to-infrastructurebenefits, and how they will continue to drivethe additional need for higher bandwidth inthe car.

A bright future for Ethernet?

Despite the first automotive applications ofEthernet now in the market, Ethernet has notyet achieved widespread industry backing. Lauexplained his perception of certain geographicaltrends that have emerged so far: “My sense isthat the entire automotive industry isinterested in Ethernet for vehicle networkingin their next generation vehicles, but I noticethat vehicles today that have implemented orembraced a lot of the digital networkingtechnology, seem to be in geographic areas thatembrace BroadR-Reach Ethernet first.”

As for future market expansion, Laucontinued, “Europe is in the lead in adoptingthe technology right now, but very quickly,Japan, Korea and other areas will beimplementing these types of very advancedsystems at a low cost.”

There is no limit to the data rates needed inthe connected cars in the future, and alreadytoday there are specific applications in carsfor which the transmitted data rate exceeds100 Mbps. As more challenges arise for theconnected car, and growing amounts of dataneeds to be managed, automotive Ethernetbecomes even more of a viable option tosolve those problems.


Connected car developments may bekicking off in the world's mature

markets, but they won't be limited to theseregions. Megatrends spoke to Sudip Singh,Global head of Engineering Services atInfosys, about the evolution of connectivityin different regions around the globe, and theforces at work behind the scenes.

While Infosys is an Indian company, Singhoperates out of its Texas office and has beenwith the company for nearly 20 years. Infosysclassifies itself as an ecosystem integrator andthe automotive segment is just one of severalin which it is active. As head of its engineeringservices, Singh's work involves the vehicledomain. "This is an extremely exciting timefor the connected car," he notes. "Things arealready moving extremely quickly. We areseeing a tremendous amount of action in thetelematics space, the connected car spaceand the Internet of Things."

Western origins

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

by safety requirements. "In the US, Europeand Japan, the focus is sitting on the edge ofsafety, security and personalisation. In aconnected car, they are looking at somebodywho can be a companion, who can make youmore productive, can allow you to be moresocial, can allow for you to improve. It is thisentire suite of services which a connectedcar is providing in the western world."

However, the sector's development inemerging markets, notably India, has comefrom another direction and has only beenmade possible through the rising use ofsmartphones. "It is the extremely broadprevalence of the mobile device which existsand has become ubiquitous in the Indianmarket,” says Singh. “It is driving behaviourfrom a richness of application experience, asopposed to safety or security."

Most notably, safety and security require acertain level of infrastructure that is notpresent in India. As Singh explains, "Safety andsecurity presume a certain baseinfrastructure around 911 [emergencyservices number in the US]. In India, that

infrastructure is not as well developed. Whatis well developed and in some ways hasbecome an expectation of the consumer,who is the end client, is a very rich interfaceon the application side. The application perse is driving behaviour in India, compared tothe safety or security part of it."

Leaning on infrastructure

Singh believes connected cars can become awidespread reality without necessarily being afunction of the vehicle-to-vehicle (V2V) andvehicle-to-infrastructure (V2I) networks beingestablished across the US, Europe and Japan.For the likes of India, the proliferation ofmobile devices will be sufficient to ensure afuture for connected car technology. Singhpoints to Google's autonomous vehicle and itstrial operations in the US: "We have scenariowhere Google's car is driving here in the USwithout a fully established infrastructure."

Singh believes that the initial V2V and V2Iconceptualisation did not factor in theproliferation of mobile devices, and in India,"smartphones have become a part of life."

This, Singh says, "has taken a lot of folks bysurprise. It was not anticipated that you canpotentially develop on the back of thetechnology that now exists on the mobiledevice. You are now able to go ahead and notneed to lean on a V2V, V2I sort ofinfrastructure to first be established."

This opens up possibilities for connected cartechnology around the world. "That willensure connected cars could operateanywhere. I don't feel that India will need towait behind the western world. It will not bea poor cousin to the western world."

Not only will India keep apace with otherregions, but it could even emerge as a leader."In the connected car space and the Internetof Things, I expect the Indian market to be atparity or in some ways even drive behaviour,”Singh concludes.

Different needs, same speeds:

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

By Megan Lampinen

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40 | Megatrends

Keeping a driver’s eyes focused on theroad ahead has always been of great

importance, but with the increase of in-vehicle connectivity demands, OEMs areunder even more pressure to reduce driverdistraction. Many OEMs such as Tesla arealready scrapping the use of the buttons intheir vehicles, favouring touch screens andspeech-interfaces, which now need to bemore efficient and user-friendly.

The use of voice applications can help tobypass numerous menu stages, and controlmany in-car functions thought to bedistracting to the driver. Despite this, manyargue that voice is not suitable for controllingall in-car applications, often taking longer toperform complex tasks than manualadministration. With that in mind, is voice thelogical next step towards safe in-vehicleinteraction?

Driver relevant content

Arnd Weil, Vice President and GeneralManager of Automotive and ConsumerElectronics at Nuance, recently spoke toMegatrends regarding the role of voice in theautomotive HMI, saying, “Consumers wantaccess to the apps and content they knowand love on their smartphones, coupled withapps specific for the in-car experience.”However, Weil suggested that “these

experiences must be accessed in a way thatavoids dangerous driver distraction.” But toachieve these goals, there are many hurdlesfor OEMs to jump, not least of which are theimportance of delivering a great userexperience, and providing more than whatalready exists in mobile handsets.

Nuance is a supplier of speech solutions forOEMs such as Audi, BMW, Ford and Hyundai,and has developed Dragon Drive Connect, anautomotive grade in-car service thatintegrates content services and applicationsthat have been optimised for in-car use. UsingDragon Drive Connect, drivers can stayfocused on traffic and driving conditions byinteracting with the in-car systems in ahands-free and eyes-free way. “Voicerecognition, natural language understandingand text-to-speech technologies enableintuitive interaction with the car, thusreducing possible driver distraction,”explained Weil.

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

OEM developments

Ford puts its efforts into hands-free controland minimising driver distraction, and its FordSYNC in-car system allows users to controla wide range of in-vehicle systems using theirvoice. Ford’s SYNC uses speech technologyby Nuance. Fatima Vital, Director ofMarketing, Automotive & ConsumerElectronics at Nuance, told Megatrends,“Voice recognition, natural languageunderstanding and text-to-speechtechnologies enable intuitive interactionswith the car, thus reducing possible driverdistraction. We expect that voice interactionswill become the main way of accessingcontent and apps in the connected car –closely integrated with other modalities, suchas touch, handwriting or gesture control.”

Julius Marchwicki, Ford SYNC ProductManager, explained to Megatrends how theOEM makes safety a focus of its HMI:“Complex tasks should be able to beexecuted with a simple voice commandwithin the car, and most OEMs now arestrongly leveraging voice. The technology isonly getting better and creating betterexperiences for consumers inside the car.One of the first things we think about issafety and we are looking to provide value-added services for the consumer. With theadditions of new capabilities and


Getting louder – the rise of

Major advances in natural language and voice recognition mean that talking to your car will soonbe the norm, writes Rachel Boagey

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functionalities, we always look at driverdistraction testing and safety testing to try toget the best experience possible.”

Jim Buckzkowski is the Global Director ofElectrical and Electronics Systems andAdvanced Research at Ford, and spoke toMegatrends about how effective voiceapplications are for tackling driverdistraction. He said, “We do a lot of researchhere on driver distraction and have asimulator that allows us to test people in asafe environment but actually in a car insidea chamber where we can simulate actualdriving. We focus on how long it takes fordrivers to complete a task, and monitoring

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

Buckzkowski also explained the importanceof OEMs not allowing drivers to be facedwith tasks that require repeated glances awayfrom the road. He said, “We spend a lot oftime looking at different ways of designinghuman machine interfaces, and test thesedifferent interfaces and different HMIs and soon to see what works. Voice recognitiondefinitely is a significant improvement overpicking up and hand-holding a device and

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

Voicing an opposing view

Despite its benefits to driver safety and itsability, unlike other applications, to minimisedriver distraction, Bryan Reimer, ResearchScientist at MIT’s Age Lab believes thatalthough there is a great role for voice incars, its benefits aren’t always as good as theyseem.

To reach this conclusion, MIT carried out astudy with support from Toyota’sCollaborative Safety Research Centre, findingthat using voice commands for simple tasks,like searching for a radio station or changingthe climate settings, is quicker and less taxingfor a driver. But using voice controls toperform more complex tasks—such astuning the radio—often takes longer thandoing those things manually, causing driversto glance away from the road to select froma menu or confirm that the system hasrecognised their speech correctly.

Reimer told Megatrends, “Any non-drivingrelated activity can become a safety relevantdistraction if a driver is engaging with it at aninopportune time. Our work as well as thework of others shows that “voice commandinterfaces” are not hands free eyes free waysof communicating with your vehicle. Theydraw upon visual, manipulative and cognitiveresources that must be measured andconsidered in a holistic view of resourceallocation.”

the voice in automotive HMI

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Driver choice

Luc van Tichelen, VP, Embedded ProfessionalServices – Automotive at Nuance, explainedthat although voice applications are useful inthe car environment, certain tasks can’t bedone at the wheel without distracting thedriver. He said, “Some things aren’t asimportant while driving, so it is essential thatnotifications such as a new email isn’t anattention-getter in the car.” In this case,explained Tichelen, “The driver should beallowed to pick up the information whenthey are ready to look at that screen, in theform of a small pop-up rather than a voicenotification.”

Unsuspecting driving aids

Waze is a smartphone app that drivers willneed to bring into the car. However, thecompany’s Head of Global Communications& Creative Strategy, Julie Mossler explainedthe safety benefits of the app, which providesturn-by-turn navigation and direction viaaudio, meaning the driver does not have tolook at their phone. “Safe driving is core toeverything that we do,” said Mossler, “and allof the features that we choose have to passthe safe driving test. As a global drivingsociety, GPS is largely excessive in the car, somuch like a GPS, we recommend thatdocking your phone in a proper car dock and

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

Lost in translation

Dealing with language barriers and accentsoften proves difficult for voice control andrecognition, but Mossler explained thatWaze’s smartphone navigation app is availablein 45 languages and 200 countries. She said,“I think that you eliminate a lot of that riskwhen users can speak in their nativelanguage. And, hopefully, if you speak one ofthe 45 most common languages in mobiletechnology you're going to be just fine. Asidefrom that, we also do have manually writtendirections that you can look at on the screen.So, between those two things we don't reallyhear about language being an issue.”

Ford’s Buckzkowski also explained how theOEM’s HMI caters for different regions andlanguages, saying, “Voice recognitiontechnology continues to get better atadapting to more extensive languages, whilealso becoming more conversational, ratherthan just providing words and commands.”

He continued, “HMI is placed on the screendifferently based on languages in differentregions of the world. We also know that insome regions people are very quick to adoptto talking to their car. Others are maybe a

little bit more shy about it. But there is apossibility that it’s even more generationalthan it is cultural.”

Harsh vehicle environment

The challenging audio environment of a car canalso be a barrier to effective voice applications,and noise that comes from the car, from roadnoise to crying children, can be factors thatjudge how reliable voice applications really are.Developments in hardware, software andconnectivity are required before voicetechnology can be really successful, especiallywhen coping with difficult instructions.

Danny Shapiro, Director Automotive,NVIDIA, explained to Megatrends, “I thinkthere are two aspects of making sure voiceapplications are effective in the car: one ismaking sure you have good microphones, andmultiple microphones in the car, and two issoftware; a lot of software is needed to beable to enable noise or echo cancellation.There's a huge amount of research that'sbeen going on in that space, but now we needto bring it into the vehicle.”

Creating a voice for the oldergeneration

A consideration for OEMs to bear in mindwhen implementing their infotainmentsystems into cars is the specific agecategories for which they are catering. As theyounger generation may want complextechnology in their car, it becomes evenmore important to use voice technology toensure they are not getting distracted fromthe main task at hand. However, anotherconsideration is older drivers. The generalconsensus is that voice recognition will beused to perform more complex tasks in avehicle as it can help bypass many menustages that previously would have left drivers’eyes off the road for long periods of time.

Nuance’s van Tichelen also explained theimportance of considering the oldergeneration of drivers, saying, “These driverswill prefer using the information from afunctional point of view. They don’tnecessarily need all of the advanced features,and often hate looking for what they need.”

An audible future?

Despite developing rapidly, voice technologyremains a contentious issue. Ford’sBuckzkowski told Megatrends, “We knowthere is room for improvement, but it'sgoing to continue to advance in the future.”Buckzkowski is one of many who thinkvoice will become prevalent in vehiclesgoing forward, with developments of voiceapplications in the automotive industry sofar showing the potential for a successfulfuture. However, it is clear that much morework is needed to make voice applicationslargely successful.


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Building connected cars is no longer just anoption for vehicle manufacturers, but withincreasing technological demands from theirconsumers, it is difficult for OEMs to knowwhich telematics solutions to adopt for theirnext generation platforms.

Although advantages of both built-in andbrought-in systems are vast, there are somekey disadvantages for OEMs to bear in mindas they battle to keep their vehicles up todate, maximise sales and minimise the risk oftheir brand becoming irrelevant.

The debate as it stands

Investment bank RBC Capital Marketsbelieves connected vehicles will grow at a25%+ CAGR through the end of the decade,by which time more than 75% of vehiclesproduced will have some level of connectivityto the Internet. But what form that

integration will take is a source of greatdebate, essentially boiling down to embeddedversus portable connectivity.

The main advantage of built-in systems is thatthey do not rely on external devices,eliminating compatibility or interoperabilityissues that can often be problematic whenbringing devices into the car. This thereforeallows greater flexibility for the OEM’sbusiness model, providing strong connectionsto services demanded by consumers, such asnavigation and on-board infotainment. Thebuilt-in system also provides the OEM withcontrol over what content to provide to thedriver, unlike brought-in systems whereinevitably, the driver decides what they wantto do and when.

Chris Schreiner, Director for the AutomotiveConsumer Insights service at StrategyAnalytics, told Megatrends that “From a user

experience perspective, the built-in andbeamed-in options are best,” noting that withembedded solutions, each app or feature hasbeen designed for the system, and istherefore well integrated, seamless and easyto use, and consumers have no issue withknowing what does and does not work. “Theresearch we did on the Tesla Model S showedhow easy a well designed embedded solutioncan be,” Schreiner continued. “Allparticipants, young and old, tech savvy andnot, were able to do everything easily, andscored highest on our usability ratings.”

Mark Rose is Head ofAutomotive M2M atVodafone. Over the lastfew years, Vodafone haslaunched many M2Mcollaborations andstrategies in an attemptto drive its automotiveM2M business. Megatrendsspoke to Rose, who described embeddedconnectivity as a key area for thecommunications provider. He said, “Our keyarea is looking at connecting cars throughembedded connectivity within the car, and Ithink on the back of the eCall regulations andthe way the whole industry is moving thatwe'll see, over the next four or five years,probably upwards of 50% - 60% of cars usingembedded systems.”

Borrowed time

Embedded, or built-in systems do notprovide all the answers, however, and a mainconsideration for OEMs using built-in devicesis the high system costs involved, and ofcourse the main risk of the embeddedmodem becoming obsolete. Allowingconsumers to integrate their own usuallycurrent mobile devices overcomes theproblems of long vehicle development cycles,allowing for the software to be easily adaptedto customer preference.


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

44 | Megatrends

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Of course, there are ways around the risk ofageing embedded devices, and Tesla hasshown the way forward for OEMs with itsover the air software updates to quickly sortout the problems that often arise whenbringing a new car to market, as well asupdate the software further down the line,similar to the capabilities of a smartphone.

New standards, new demands

Innovative apps are everywhere, and as aconsumer expects them in their hand, theexpectation then falls onto the automotiveindustry to try to make the technologysuitable for the car environment.

Julie Mossler, Head ofGlobal Communications& Creative Strategy atcommunity smartphonenavigation app, Waze,told Megatrends, “I think

car manufacturers have nochoice but to innovate. So, as

it is today with the averagevehicle, you can buy it new from the dealer,and the minute you drive it off the lot it's notrelevant any more, at least from the consoleand the user entertainment experience. Soyou're seeing a trend in more customisabletechnology that doesn't require you to buy anew vehicle.”

By 2016, most cars will have smartphoneintegration, according to a report fromJuniper Research, entitled ‘Infotainment &Commercial Uses, Insurance & VehicleRecovery 2012-2016.’ As a result, a new classof brought-in solutions is emerging, wherethe lion’s share of the application processingis done on the phone. For this, cloudconnectivity comes via the 3G network andthe phone and head unit communicate viaBluetooth, and consumers can tether theirexisting smartphone to the car via Bluetoothor USB cable, enabling full access to theirpersonal contacts and playlists.

However, this is not to say that brought-inconnectivity comes without its owndownfalls, as this form of connectivity isreliant on the quality and performance of themobile device, which may not always beadequate for enabling certain technologies,better handled by a car’s embedded device.

Eyes on the road

The increasing complexity of in-carinfotainment systems of course runs a risk ofdriver distraction; controlling how muchinformation drivers have access to whileoperating the vehicle becomes more difficultwhen smartphone integration is involved, asthe OEM is less able to control the apps towhich the driver has access.

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

real-time traffic and road information. Havinga navigation app on a smartphone for use ina car rather than integrated in a dashboardmay sound like an accident waiting to happen,but Waze’s Mossler said, “The greatest benefitis providing turn by turn navigation anddirection. These are audio directions – youdon'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 tocontribute rather than decrease driverdistraction is a huge consideration for mobileapps, and Mossler said, “All of the featuresthat we add to the app have to pass the safedriving test. As a global driving society, GPS islargely excessive in the car, so much like aGPS, we recommend that docking yourphone in a proper car dock and plugging itinto a power outlet is going to give you thebest results. With the normal GPS, you don'tencourage users to look at the screen. Thereis very minimal engagement with the screen,and we also were the first company toprohibit texting within the app while driving.So, if we can tell that your car is moving, wewill pop up a blocker that requires you to callyourself a passenger before you're able totype in any addresses or change anything onthe map.”

The hybrid approach

Despite the ongoing built-in versus brought-in debate in the industry, OEMs are notnecessarily wedded to one telematicssolution, suggesting that there may in fact bevery little to debate about. An example of thiscomes from GM, which offers the embeddedOnStar solution, while also offering atethered MyLink solution.

Despite Vodafone’s current focus onembedded solutions for the connected car,Rose was keen to point out the importanceof acknowledging that any OEM will have adual strategy of both embedded andtethered, and said “I think it is important forOEMs to adopt a joint approach and atVodafone, we ensure that what we do withour phones works well with cars andanything we can do in that space, we do. The

primary focus is on getting the connectivityactually embedded within the car, and I thinkthere is ultimately more that you can doonce you have that capability and it drives anenhanced experience for the end customer.”

Director of Automotive at NVIDIA, DannyShapiro, also spoke to Megatrends regardingthe telematics debate, stating that theimplementation of such technology in theconnected car is in fact going to be a mixtureof all methods. Shapiro said, “I think we'regoing to see hybrid offering the bestexperience. We're not expecting people toget rid of their mobile devices, but I thinkwhat you’ll see is OEMs as well as the majorOS companies trying to come up with betterand safer integration.”

Ford has alsodemonstrated theimportance of a multi-tiered approach to theconnected car. JuliusMarchwicki, SYNCProduct Manager, toldMegatrends that the built-in,brought-in and beamed-in connectedstrategies are a vital part of keeping cars upto date, and fulfilling consumers’ connectedrequirements. Marchwicki said, “Differentconnectivity approaches are not an ‘and/or’thing, and we're probably always going todeliver infotainment or information througha brought-in device, but for certain types offunctions we'll use more of an embedded orbuilt-in type of strategy to deliver thosefeatures to our customers.”

The future debate

It seems as though the built-in versusbrought-in debate will continue for sometime to come, and as OEMs partner withconsumer electronics suppliers morefrequently, split decisions between built-inand brought-in will continue to arise.Ultimately, although the OEMs are the onesmaking the cars, the choice will be down tothe consumer, and what they are willing toaccept to make the car an extension of theirincreasingly connected world.


The connected era is leading to theintegration of multiple industry domains,

bringing together communications,automotive and consumer electronics.Currently, most automotive OEMs arepromoting proprietary systems with specificeco-system partners, and the argument aboutopen or closed architecture platformsrumbles on. With companies like Google andApple entering the mix, the revolution isstarting; Android and iOS are shifting fromsmartphones to become automotivestandards.

At International CES 2014, Google announcedits open consumer electronics developmentecosystem for the automotive industry. TheOpen Automotive Alliance consists of Google,GM, Honda, Audi, Hyundai, and chipmakerNVIDIA, and will focus on allowing OEMs to

easily bring cutting-edge technology to drivers.Additionally, Google is commercialising itsGoogle Glasses technology, with Hyundaialready listed as one of its partners for the2015 Genesis. Also at CES, BMWdemonstrated a way of controlling its new i3electric car with Samsung's Galaxy Gearsmart-watch, using Bluetooth wirelesstechnology.

Another major trend in connected vehiclesis over the air (OTA) updates: 60-70% ofrecalls in major automotive markets likeNorth America and Europe due electronicfaults are software-related. From a vehiclemanufacturer perspective, OTA updatesprovide several advantages. As well as cuttingoperating costs, including warranty and recallcosts, they provide the ability to offer newfunctional updates to customers. Managingsoftware remotely and offering timelyupdates has been a major challenge over thelifecycle of the vehicle. Now OEMs like GM,Audi, Mercedes-Benz, BMW and Toyota areworking on 4G LTE technologies, which offerhigher bandwidth and will aid timely updates,and Tesla has conducted several successfulOTA updates.

Collaboration of consumerelectronics and automotive

Infotainment systems are evolving from aclosed loop of technological limitations to anopen ecosystem. This has been influencedconsiderably by end users’ familiarity withsmartphones and the availability of in-carInternet connectivity. The impact from the

smartphone domain is evident in consumerdemand for applications, and this has alreadybeen taken into consideration with OEMscreating applications for variousfunctionalities, like remote services,diagnostics, navigation, social networking,radio and entertainment. MirrorLink 2.0 andHTML5 are among the prominenttechnologies being used to bring the best ofsmartphones into the car. That OEMs areintroducing dedicated app stores shows theinfluence of the smartphone industry.

The constant issue: driver distractionand HMI

Automotive OEMs have to stay abreast withtechnology implementation for branddifferentiation, while making sure it’s notdangerous for the driver; the process of humaninteraction with the car should be easy andsimple, to provide a safe driving environment.A major part of developing a human machineinterface (HMI) solution process is driven byconsumer preference for various controls in acar; designing an interface that is complicatedand has a long learning curve does not servethe purpose. For example, the greater thenumber of sub-menus a driver has to gothrough to access a particular feature, themore the time the driver’s eyes are off theroad. In the case of touchscreens, drivers needto look at the screen to keep track ofapplications that they access.

On the visual side, there has been a focus onsplitting information between availabledisplays like HUDs, clusters and central


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

46 | Megatrends

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displays. While the touchscreen is becominga commodity, technologies like touch-sensitive buttons, gesture control, andhandwriting recognition are gainingpopularity. Interestingly, despite the potentialfor natural voice recognition to reducedistraction, a study by the AAA suggests thatsending a text or an e-mail is potentiallydangerous and adds mental stress. This,coupled with minor errors in recognition ofaccents could distract drivers. In the sameway, European luxury OEMs are reluctant to

implement touchscreens, as they believethe act of reaching out to touch a

screen could be dangerous.Nonetheless, the idea is slowlychanging with technologies like

haptic feedback and proximitysensing becoming a reality.

The connected car and Big Data

The growth of Big Data is being led by thegrowth of connected vehicle technology. Theability to collect gigabytes of data from anarray of sensors and control units creates thepossibility of offering a multitude of servicesto end users. There is a need to harnesspartnerships with crucial ecosystem partnerswho can use this data for value-addedservices. From a consumer perspective, itmight look like integration of a connectedecosystem with smart cars, smart devices,smart homes and a smart environment - butwhat does it mean to the automotiveindustry?

The opportunities provided by Big Data arenumerous, encompassing an array of serviceslike prognostics, vehicle relationshipmanagement (VRM), fleet managementsolutions, insurance, digital retailing, andlocation-based services like traffic informationand parking. The real deal for OEMs here isto have a Big Data framework; a clearconnectivity strategy with the ability to pulllarge volumes of data, and most importantly,partners to help them harness the truepower of this data. Some examples includeFord’s capability to collect 25 gigabytes of dataper hour and GM’s OnStar, which collectsreal-time data from the car, analyses it andgives the information to the user.

Although the opportunities are numerous,so too are the concerns; the debate overprivacy and connected cars is one of thekey challenges to the successful use of BigData, with growing unease amongconsumers about the collection and sharingof personal data.

Automated and connected: leveraginginformation overload

One of the prime reasons for the transitionto automated driving is driver distraction,which has risen with the growth ininformation and communicationtechnologies. In-vehicle connectivity will beone of the major game changers in theservices segment. In automated vehicles,OEMs would have the freedom to offermaximum services in the infotainmentdomain as distraction will no longer be arestraint on the content delivery. Serviceslike Internet browsing, gaming and videoplayback will be allowed and will open upmultiple business opportunities.

Safety and security features, like eCall andbCall, are referred to in the post-crashscenario, so telematics (V2V and V2X) willplay a significant role in communicating,sending and receiving data, as well asextending the reach of digitisation. The next

generation of content and apps will have toadd value to the customer based on valuablevehicle data that OEMs need to open up tothird party developers, such as the Ford BugLabs OpenXC project. Opening up vehicledata will also allow entrenched IT companiesto add valuable analytics on the data andprovide value to OEMs, drivers and dealersthrough dedicated portals that will go beyondstatic diagnostic emails and alerts.Autonomous vehicles will also aid theinsurance telematics market, with controlleddriving enabling users to be entitled toinsurance benefits and reduced premiums.

The car of the future

The connected car is the convergence ofmultiple industries, technologies, andecosystems with different business models.This is a potential revenue stream for OEMswho are offering more connected services.Amidst the challenges of keeping the HMIeasy, cost-effective, and reducing distraction,OEMs are focused on potential revenuestreams and brand differentiation.

Frost & Sullivan expects more than 90% ofthe vehicles in 2020 to be connected; therewill be a wide array of services irrespectiveof vehicle segment. The future systems willhave a specific set of standards to make itfuture proof, and the answer will be tocounter distraction with technology. OEMsare likewise taking different approaches; thedebate will be between tethered (brought-in)or embedded technology. Packagingtelematics services with connectivity willdominate: OEM strategies will involvepackaging solutions and data plans as a partof the vehicle offering. Clear strategiesimplementing data from all vehicle systemsand adhering to common standards will leadto a connected era.

Krishna Jayaraman is an Industry Analyst withFrost & Sullivan’s Automotive and TransportationTelematics and Infotainment Research Practice.


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EMOBILITY

Take a stroll along a random street incentral Copenhagen, Denmark on a

sunny afternoon you may be inclined to thinkof the growing adoption of electric vehicles(EVs) as well under way: there are designatedparking spaces, multiple EV charging points,and EVs on charge. However, this does nottell the whole story. There are many differentways in which the future of the electricvehicle may develop. One interesting aspect,which will be explored in this article, relatesto the role EVs will play in energy markets.

EV adoption requires additionalcharging points

According to an article in the Danishnewspaper, Berlingske Tidende, there wereover 2,000 EVs in Denmark in March 2014and sales are on an upward trend. However,this is nothing compared to Norway where3,000 EVs were sold in March 2014 alone,capturing a 6.1% share of the market, or theNetherlands where one in 20 cars sold is anEV. These two markets are the global leadersin EV adoption, whereas the case in Denmarkillustrates the more common trend.

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

Machina Research estimates that there were71,000 public EV charging points at the end

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

High costs hamper roll-out of EVcharge point infrastructure

The EV charging sector has proved volatile inrecent months. There were some negativeheadlines at the end of 2013 with names likeECOtality, Better Place, and FiskerAutomotive announcing bankruptcies.However, more positive news is emergingwith companies like ChargeMaster, Ecotricityand ChargePoint increasing infrastructuredeployment. ChargePoint, for instance, hasimplemented over 17,000 charging stationsworldwide and acquired new investment toexpand much further. Also, Elon Musk,founder of Tesla Motors, has announced hisintention to build super charging stationsacross Europe. In fact, to meet the

requirements of the forecast 20 million EVsby 2020, these infrastr ucture deploymentswill certainly need to start now.

Successful financing is critical to all of theseplans. Where hardware cost is the maincomponent in home charging points, keepingthe cost relatively low, public charging pointsinclude such additional costs as theconnection to breaker boxes or in the caseof fast charger installations, higher voltagetransformers. The costs of installing publiccharging points are significant, anywherebetween four and eight times higher thandomestic charging points, so early providershave needed to explore ways of limiting thecapital burden solely on their businesses.One model, as launched by a leading serviceprovider, involves handing over ownership ofthe charging point to their enterprisecustomers as a means of generating


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

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

Source: Machina Research

EMOBILITY

additional revenue through either direct orindirect revenue streams.

On a less cost demanding note, connectingEV charging points remains critical for billingand booking purposes, and to that end,cellular connections have provided flexibilityand lower installation costs than fixed lines.Quicker and cheaper deployment, combinedwith in-built power sources in the chargingpoints, underpin Machina Research estimatesthat by 2023, 87.9% of EV charging pointconnections will be connected throughcellular technologies.

EV charging points and virtual powerplants

The growth of electric vehicles together withthe associated installation of EV chargingpoints is picking up pace. This has significantimplications for energy markets, and inparticular the concept of ‘virtual powerplants’.

Electricity energy markets have started tosee significant changes. As more and morerenewable energy resources are connectedto the market, ‘greener’ and relatively costcompetitive energy resources areintroduced. This additional, yet intermittent(due to for example weather conditions)supply is managed through virtual powerplants enabled with intelligent and real-timesoftware solutions. A virtual power plantbalances the demand and supply of energy ata grid level, and ensures a continuous andbalanced supply not from one single energyproducing resource but virtually thousandsof resources and short term storage facilities.This has opened a substantial opportunity toexplore greater flexibilities in the demandand management of electricity, including thatenabled by EVs.

It goes without saying that EVs will create asignificant level of additional electricity

demand which needs to be addressed byenergy markets. However, the good news isthat this demand will have some flexibility interms of recharging times. Furthermore, andmore interestingly, when connected it willalso provide an impressive resource of short-term, quick burst energy when required bymarkets., i.e. energy stored in batteries whichcould be tapped into by power companies attimes of peak demand. This could secure netpositive commercial trading value if suitablemarket conditions were achieved. Naturally,there will always be a need to strike a balancebetween the requirements of the owner ofthe vehicle (i.e. to ensure the vehicle is

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

What is important to note in this greaterenergy scheme is that private EV chargingpoints become significantly more involved inthe wider energy market structure. To thebuyers of EVs and providers of EV chargingpoints, there is an additional revenueopportunity.

Emil Berthelsen is a Principal Analyst at MachinaResearch


Figure 2: Multiple roles of Electric Vehicles in Energy Markets

Source: Machina Research

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EMOBILITY

2014 looks set to be the year that fuel cellvehicles finally begin to make a

commercial impact on the industry.Whilethis will be in small numbers at first,Hyundai’s ix35 Fuel Cell, the firstcommercially-available production fuel cellvehicle (FCV) will be leased from selectCalifornia dealerships this year, before theHonda FCX Clarity and Toyota 2015 FClaunch in 2015. However, while this excitingtechnology which has always been “ten years

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

Many bodies, from OEMs, to suppliers, togovernments are in agreement thatinfrastructure is probably the single biggestbarrier to the effective deployment of FCVs.There are issues arising over location, cost,and the support required. Dr TimothyLipman, Co-Director, UC BerkeleyTransportation Sustainability Research

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

Dr Wolfgang Bernhart, Partner, RolandBerger Strategy Consultants agreed, “Theavailability of hydrogen infrastructure is a keyreason why FCVs haven’t yet made it to the

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

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


mainstream. Public funding is probablynecessary for the first couple of years, sinceinvestment cannot be justified by a properbusiness case. There are means to producehydrogen in a sustainable way, but the cost tobuild infrastructure is expensive.”

It seems almost impossible that a hydrogeninfrastructure could be rolled out without thesupport of governments, but, as with EVs, thissupport cannot last forever. Dr Lars-PeterThiesen, Manager of Advanced TechnologyStrategy at GM Europe said, “In the future itwill be important to receive funding in orderto offset the higher price of thesetechnologies and vehicles. However, oneshould be very clear that it won’t make sensefrom an economic point of view to haveincentive systems running over decades.”

Convenience

Consumers need convenience, and to bepersuaded to buy an expensive FCV, they willwant the same convenience that they havefrom a gasoline or diesel car. CatherineDunwoody, Executive Director, CaliforniaFuel Cell Partnership explained the situationin California: “The main challenge right now

is building up a sufficient network of stationsthat give customers the convenience to fuelwith hydrogen in the same way they fuel withgasoline today. In 2012 we published ourroadmap, which established the need for 68stations state-wide to provide thatconvenience. We partnered with one of ouruniversity partners who have a modellingtool they’ve developed to look at trafficpatterns and locations of existing stationsand travel times and demographics, andidentify how many stations are needed ineach of those early market regions. Then wealso worked with OEMs to determine wherethe connectors and destinations need to beso that those people who want to go awayfor a weekend have access to fuel.”

Some think this needs to go further though,and that being able to refuel at home, likewith an EV, would be more convenient. LisaJerram, Senior Consultant, Navigant Researchsaid, “The infrastructure is really the keything. If you can figure out somebreakthrough, if there’s some kind ofinnovative financing, or you could figure outa way to have more distributed refuelling orhome refuelling, that would make a hugedifference. The concern is that you have to

put stations in place, and you put in a majorinvestment and hope a sufficient number ofvehicles will use them. It has to grow overtime to match the demand, and that is amajor investment. That’s why you’re seeing allthese governments involved as well as puttingtogether a hydrogen roadmap and figuringout how to make it happen.”

Infrastructure is coming

However, despite the current severe lack ofinfrastructure, projects are being developedaround the world. In April 2014, a £31m(US$51m) deal was announced to makehydrogen vehicles a viable choice formotorists across Europe. The HyFIVE project(Hydrogen for Innovative Vehicles), with fiveOEMs – Honda, BMW, Toyota, Hyundai andDaimler – along with ITM Power, AirProducts and Fuel Cells and Hydrogen JointUndertaking, and co-ordinated by the officeof the UK’s Mayor of London, will see 110FCVs deployed in several European locations,and will also see the development ofhydrogen refuelling stations. Locations for thenew refuelling stations in London, Aarhus andOdense (Denmark), and Innsbruck (Austria),are being decided, and should be operationalby 2015. Chris O’Keefe, Senior Manager,External Affairs, Toyota Motor Europe, said,“We believe the HyFIVE programme willprovide practical insights into how best toencourage and benefit from hydrogen-powered transport. The HyFIVE projectprovides an excellent forum for this, ensuringthe benefits of fuel cell electric vehicles can

EMOBILITY

What next for the fuel cell car?

For decades, fuel cell vehicles (FCVs) havebeen ‘ten years away’, but key launches in2014 and 2015 could see these vehiclesbegin to make a commercial impact on inthe industry.

This Automotive Worldreport features exclusiveinsight from keyautomotive industrystakeholders, and considers the prospectsfor the fuel cell vehicle as those productsmake their way into the market.

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

http://goo.gl/sMm0mm

Automotive World BriefingWhat next for the fuel cell car?

California

Los AngelesLos Angeles

San DiegoSan Diego

San JoseSan Jose

SanSanFranciscoFrancisco

SacramentoSacramento

RenoReno

In DevelopmentIn Development

OpenOpen

BusBus

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


Megatrends | 53

be appreciated and realised throughcoordinated use and demonstration.”Alongside the 110 vehicles, six new refuellingstations will be built. But will six provesufficient?

Hydrogen highways

Europe is not the only market investing infuel cells. Other recent investments includea US$3m injection from the US EnergyDepartment for FuelCell Energy, to increasethe competitiveness of the fuel cell market inthe US, help cut costs, and improveperformance. There are also plans either inplace, or scheduled over the coming years tocreate ‘hydrogen highways’. In Japan, thegovernment plans to add up to 100 hydrogenstations by 2015, covering 50% of theinstallation costs, and other companies suchas JX Energy, Toho Gas and Iwatani Corp,Toyota Tsusho and Air Liquide also plan tocreate stations. There are similar hydrogenhighway initiatives in Germany, Italy,Scandinavia, the US, South Korea, and Canada.

A hydrogen fuelling station rollout is underway in California. According to Toyota and theUniversity of California-Irvine, 68 hydrogenfuelling stations across California would besufficient for a viable fuel cell vehicle launchsupporting at least 10,000 fuel-cell vehiclesin five major urban areas. Members of theCaFCP have recommended five geographicclusters where the first owners of FCVs

should live: Berkeley, South San Francisco BayArea, Santa Monica and West LA, Torranceand nearby coastal communities, and Irvineand southern Orange County. Around 34 ofthe 68 stations are now open, in the planningstages or have funding allocated, and anadditional US$65m is available to providesupport to build and operate stations untilthey become profitable.

Saehoon Kim, Team Leader, Kia MotorCorporation Fuel Cell Vehicle Team said, “Itis clear that hydrogen infrastructure shouldbe in place in order to operate FCVs.Opening an entirely new market thatrequires new infrastructure such as refuellingstations would not be easy if all burdens aregiven to the automotive industry alone. Closecollaboration between all stakeholders,OEMs, energy suppliers, and governmentsaround the world is mandatory to triggerestablishing necessary infrastructure,consequently increasing readiness of mass

production of FCVs.” Toyota has recentlyannounced it will not be renewing itscontract with Tesla Motors for its Rav4 EVcomponents, and will instead be focusing onits fuel cell efforts. The OEM also announcedit has given a loan of US$7m to FirstElementFuel, as part of a collaboration to help buildhydrogen fuel stations in California.

GM’s Thiesen, however, sees a combinationof affordability and infrastructure availabilityhelping with the deployment of FCVs: “If wewant to bring these cars to the market as anindustry, I guess the most important aspectis to make these cars affordable for morecustomers within an available infrastructureregion. This maximises the deployment andstrengthens the infrastructure in the sensethat the single refuelling stations will enjoyhigh volumes of traffic, which means that theinvestment pays off much more quickly.”

It is unlikely that by 2020, there will bewidespread deployment of FCVs, but in partsof the US, parts of Europe, Japan, and SouthKorea, volumes will grow. More OEMs arelikely to make vehicles available, and will beincreasing their production numbers.However, this will only happen with anappropriate infrastructure in place. At themoment, baby steps are being taken todevelop said infrastructure, but if OEMs,suppliers, and government bodies want FCVsto be a success, those baby steps quicklyneed to become major strides.


EMOBILITY

EMOBILITY

Despite early optimism in the mid-to-late2000s regarding the potential for a

future electric vehicle (EV) market, salescontinue to disappoint, with many OEM EVprogrammes continuing to operate wellshort of initial targets. Numbers are steadilyincreasing though, as new EV models begin toincrease consideration. In the past two years,global EV sales have quadrupled, from around45,000 vehicles in 2011, to more than200,000 in 2013.

However, looking at overall vehicle sales,consumer uptake of EVs has been limited toless than 1% in nearly every market. In certainmarkets, fiscal incentives are driving sales. InNorway, EV buyers are offered an incentiveof around €11,500 (US$15,600) per all-electric vehicle, about 55% of the vehicle’sbase price, and in the Netherlands, incentivesstand at around €38,000 for a plug-in hybridEV (PHEV), around 75% of the vehicle’s baseprice.

Despite these incentives, which are widelyagreed to be unsustainable over the longterm, range and charging infrastructure havecontinued to present bigger barriers to themainstream uptake of EVs. However,Qualcomm believes it has the answer. TheSan Diego-headquartered wireless chargingtechnology supplier believes wirelesscharging will turn the EV market around.

The limited range of EVs hasalways been an issue, butinstead of plugging in at amotorway point for 30minutes, or overnight at aconsumer’s house,

Qualcomm eventually seeslanes on highways where a car

can pick up power as it drives.Anthony Thomson, VP Business Developmentand Marketing at Qualcomm said, “This

would completely remove range anxiety andgive a car virtually unlimited range. Thenpotentially, battery size could come down.”However, to get to this point, there will needto be several steps in-between. There is thepossibility for slower dynamic or semi-dynamic charging first. This could take placeat long taxi ranks where vehicles arecontinually crawling forward, at traffic lightsor in congested city areas. Thomson said,“You could imagine the roll-out of chargingat traffic lights, or in cities where cars standstill for five or ten minutes.”

Static wireless charging

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

charging, which Qualcomm envisages couldbe commercially available in as little as threeyears. Thomson said, “Most of the top tierOEMs producing EVs have some level ofactivity, whether at R&D level or advancedengineering moving into series production.We’re confounded by the fact that EVs arebridging between series and advancedengineering, and quite a few parts haven’tmade it to series yet, so it’s notstraightforward. In the press, seniorexecutives from OEMs have said that in fiveyears’ time, there may not be a plug-in hybrid,and it will all be wireless charging. So theearliest production date is sometime in2017.” However, details about collaborationsare kept to a minimum. Qualcomm said it isworking with OEMs and suppliers, but only


How wireless chargingcould increase EV salesQualcomm’s Anthony Thomson tells Megatrends why he believes wireless charging will help boostthe EV market

By Rachael Hogg

EMOBILITY

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

Qualcomm believes that wireless EV chargingcould revolutionise the industry. The systemworks through inductive power transfer, withone pad on the ground, and one on thevehicle. Thomson explained, “You have apower supply and a pad, and create anoscillating current in them at a very highfrequency of 85kHz. You take the power outof the grid at 50/60Hz, and take it up to85,000Hz which creates a very densemagnetic field. You don’t want the fieldspraying everywhere, so it needs to becontrolled. When you put the coil into it thatis mounted on the vehicle, you induce acurrent in the coil at a high frequency, butneed to lower it to an appropriate frequency.Most battery chargers feed batteries withDC, and you convert the energy into DC andfeed it off the batteries.”

Having to precisely align the car would defeatthe purpose of wireless charging, saysThomson; in theory, providing a vehicle isparked within a defined area, it should charge.This is dependent on several things however,including the type of magnets used, and thesize of the pads. “We’ve got the systemoperating at around 150mm in the X and Ydirection,” said Thomson, “so it gives quite abig operational area where you can get fullpower and efficiency.”

The overall view is that wireless chargingwould be much easier for consumers, whowould generally be charging their vehiclesonce or twice a day. Thomson said, “It willmake the EV a better user experience.”

Money, money, money

The question of who will pay for theinstallation of charging infrastructure isalmost as much of an issue as the availability

of the infrastructure itself. There iscontinuing debate over whether the costshould be charged to the consumer, pickedup by the OEM, paid for by a chargingoperator, or be supported by governmentsand local authorities. Thomson said it woulddepend on the location of the charger: “Ourtheory is that the car would come with acharger to use at home, so the cost wouldbe on the consumer. At the work place, itwould be an employer or building owner, ata supermarket it will be the owner, but inpublic it is back to the charging operator.” Inother countries, Thomson envisages entirenetworks owned by the power generator.He said, “In Europe and the US, I think thecharging network operator would bepredominant, but it would be utilities inother markets.”

The current state of EVs

Although EV sales are starting to pick upnow, there is still a combination of factorswhich prevent this growth from beingsignificant. “It’s a combination of legislationand having governments accept we can’tcontinue with levels of pollution andemissions,” said Thomson. “The cars are tooexpensive, especially when you look at thelimited nature of features and performancewhen compared with a petrol or dieselvehicle. Cost needs to come down, andcharging infrastructure is lacking. There’s afalse impression from OEMs that chargingwill happen at home, but this is changing.”Although there is a need for EV charginginfrastructure, Thomson says that the plug-in bollards cause significant “visualpollution”, something else which couldeasily be overcome with the introduction ofwireless charging.

Efforts are being made to change theperception of EVs, through initiatives such asFormula E. These show that EVs can deliverhigh-performance, and be cool, rather thanodd and unsightly. “The media needs to

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

Although EVs are perfectly acceptable forcommuting distances, many people cannotafford a commuting car and a long-distancevehicle also. Thomson said, “There is a worrythat you spend the same amount of moneyas an ICE and end up with an inferiorproduct.” Purchasing a fuel cell vehicle wouldovercome the range anxiety, but Thomsonthinks there are even more concerns with anFCV: “There’s a joke that hydrogen is the fuelof tomorrow, and will always remain so. Intheory, hydrogen is good, but in practice itrequires huge infrastructure, andsophisticated and expensive systems. I can’thelp thinking that an EV is a betterproposition if you can have a big enoughbattery that you can move around off thegrid, and an infrastructure that allows alonger range.”

Realistic expectations for EV sales figures arequite good, and Thomson said that GermanOEMs are increasing EV production to keepup with demand. The technology is stillrelatively new, and according to Thomson,“you can’t expect everybody to leap at it, butan EV with a small battery, and an on-demandenergy supply is high-performing, cheap torun, and cheap to maintain.” While EV salesmay not have matched analyst predictions,Tesla, for example, has proven with its ModelS that by addressing the common concernsabout EVs, the car becomes “a phenomenalproposition, but at a cost.” Tesla hasovercome issues of styling, and crucially, ofrange. So perhaps that is the answer: removethe hassle of plugging in, and eventuallyremove the hassle of waiting to charge at allwith dynamic charging, and EVs could finallyhave their moment.


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

Tesla has been grabbing headlines andstirring up debate with its insistence on

a direct sales approach for its all-electricvehicles. In one of Chief Executive ElonMusk’s more recent blog postings on thesubject, he brought up a number of reasonswhy the traditional franchised dealerapproach did not make good business sensefor vehicle manufacturers of electricvehicles (EVs). Not surprisingly, thesearguments have proven as contentious withsome camps, as many of Tesla’s otherbusiness strategies have.

Conflict of interest

To begin with, Musk claims that automotivedealers “have a fundamental conflict ofinterest between promoting gasoline cars,which constitute virtually all of their revenue,and electric cars, which constitute virtuallynone.” Not only that, but it is simply “harderto sell a new technology car from a newcompany when people are so used to theold. Inevitably, they revert to selling what’seasy and it is game over for the newcompany.” The new company in this case isTesla or another EV start-up.

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

dealers are properly compensated andsupported for selling EVs.”

Russell Hensley, Associate Partner inMcKinsey’s Automotive Practice, believes EVscould prove useful in attracting new buyersto dealerships. He told Megatrends: “Certainlyshort term it [promoting EVs] could beadvantageous for dealers as it would diversifythe potential segments to which they wouldappeal. Customers for gasoline cars and EVswill, in the short to midterm, likely comefrom quite different customer segments.” Hewent on to add: “Net-net the selling price forEVs is greater than that of gasoline cars, sofewer would need to be sold for the samerevenue.”

Bernard Lycke, CECRA’s Director General,told Megatrends that he “strongly disagrees”with Musk’s comments. CECRA representsthe interests of automotive dealers andrepairers in Europe. “Dealers are selling whatis put on the market by the manufacturers.They receive (and have to pay) very extensiveand expensive training which allows them tobe able to sell (and to repair) the productsthat they are selling,” he explained. “Theirremuneration is based on the margin system;therefore if the margins that Tesla wouldpropose, would be in conformity with thenormal uses, there should not be anyproblem to motivate dealers to sell Teslaproducts which are in addition attractivecars.”

General Motors has also expressedsatisfaction with the current retail modelused for its own electrified vehicles. “We sellEVs successfully through our existing retailnetwork – Volts and Spark EVs throughChevrolet dealers and the new ELR throughCadillac dealers,” a spokesperson toldMegatrends. ”Our dealers have madesignificant investments in their facilities andin training their personnel to provide white-glove treatment to EV customers.”

Karl Brauer, Senior Analyst for Kelley BlueBook, had this to say: “Traditional car dealersare driven by the same motivation that drivesElon Musk – profit. If dealers see far moredemand for traditional cars priced betweenUS$15,000 and US$35,000 than they see forpure electric cars priced between US$35,000and US$110,000 it’s not Space X science toassume the US dealer body will build itsbusiness around traditional cars.”

Aftersales and service

Another key area of concern flagged by Muskinvolves aftersales and services. He notes thatEVs inherently require less service thantraditionally powered vehicles, meaningdealers stand to make less profit on that sideof the business: “An even bigger conflict ofinterest with automotive dealers is that theymake most of their profit from service, butelectric cars require much less service thangasoline cars. There are no oil, spark plug or


EV retail – what’sneeded for success?Elon Musk's direct sales approach for Tesla has raised numerous questions for the mainstreamOEMs, especially those selling EVs. By Megan Lampinen

EMOBILITY

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

Musk goes on to indicate that profiting fromthe provision of service could be unethical, andthat he has “made it a principle within Tesla thatwe should never attempt to make servicing aprofit centre”. This is followed by a commentthat “overcharging people for unneededservicing (often not even fixing the originalproblem) is rampant within the industry.”

KBB’s Brauer told Megatrends “Servicerequirements are theoretically more expensivefor traditional cars versus electric cars, but notenough to make up the difference in up-frontpurchase price. And in reality electric carsaren’t always as low maintenance as they claimto be. Many of them have been recalled orsuffered unexpected failures. A sweepingstatement about rampant, unnecessary servicecharges on traditional cars is as accurate asmost sweeping statements.”

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

Hensley noted: “Some of the systems on EVswill likely require less service, e.g., electricmotor. Given the different economics interms of total cost of ownership, a differentvalue proposition will need to be conveyedby the dealer.”

EY’s Valsan believes dealers should look atother areas to compensate: “If they lose outon service they can offer other services tocompensate, such as diagnostics, chargingequipment, etc.”

Recalls

Another key area under dispute involvesrecalls. Tesla’s Musk, who squabbled with theNational Highway Traffic SafetyAdministration (NHTSA) last year over theuse of the word ‘recall’, prefers to fix faultswherever possible via over-the-air updates.“All Tesla Model S vehicles are capable of

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

Whether this is called a ‘remedy’, as Muskprefers, or a ‘recall’, NHTSA’s term of choice,the time will eventually come when a faultarises. National Automobile DealersAssociation (NADA) Chairman ForrestMcConnell recently highlighted theimportance of dealers when it comes torecalls. “When something goes wrong on theassembly line, vehicle manufacturers turn totheir franchised auto dealers and thedealerships’ service departments to makethings right – all at no cost to the customer.The franchise system is a network thatconsists of more than 17,700 new-cardealerships across the country which supporttheir customers beyond the point of sale.”

He goes on to note that effectiveness inhandling vehicle recalls was “one of theimportant reasons why state policymakersadopt the franchised dealer system for thedistribution, sale and service of new motorvehicles.” The wide distribution and servicechannels of franchised dealers can respondto recalls faster and more efficiently than asingle manufacturer or factory store, Forrestbelieves. “The franchised dealer network willalways be a model that benefits both ourcustomers and manufacturers alike. And it’s anetwork that is irreplaceable.”

Breaking the rules

Overall, dealers may need to adapt.McKinsey’s Senior Partner Hans-WernerKaas observed: “Dealers cannot opposefundamental forces of market trends longterm, and dealers will need to find a businessmodel which works including economics ifthe product mix shifts more to EVs.”

EY’s Valsan believes that changes are neededin today’s retail model to adjust for thespecial requirements that EVs pose: “Thecurrent sales model itself doesn’t necessarilywork. It requires a lot more hand-holdingwith the customer, less of a sales pitch and a

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

However that model evolves, Tesla wantspermission to do its own thing. It mostrecently attracted the support of topexecutives at the Federal TradeCommission. In a blog posting, three FTCexecutives backed Tesla’s retail strategy onthe grounds that consumers are shopping innew ways today and that varied approachesaid competition.

Some OEMs, GM included, say they supportmarket competition in general but want toensure that the regulations are appliedequally to all industry players. A spokesmanfor GM told Megatrends: “General Motorsbelieves that competition is healthy andwelcomes all competitors, including Tesla.However, we feel that all vehiclemanufacturer should be required to play bythe same rules in the marketplace.”

While Tesla’s dealer battle is centred on theUS, few other OEMs have chosen the directsales approach in Europe. “In Europe, thedistribution of cars is still made via thenetworks of the dealers. There are of coursealso manufacturer-owned dealerships butthey are still an exception (approximately 3%of all outlets) rather than the norm. Ingeneral, existing manufacturer-owneddealerships in Europe often serve as asolution for high-cost metropolitan areasand/or as marketing and retail laboratories,”observed Lycke.

The situation varies between Europeancountries, with domestic OEMs in France andGermany traditionally investing more heavilyin directly-owned dealerships. As a result theshare of manufacturer-owned dealershipsthere is relatively high – 18% in France and14.5 % in Germany. However, in Italy and theUK the share of manufacturer-owneddealerships is much lower at about 7%.

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


EMOBILITY

Araft of technologies, aimed at makingFormula One more efficient and more

relevant to road cars, arrived on track in2014. The changes brought significantchallenges that stretched the imagination ofengineers up and down the pit lane. As aresult, the niche supplier base that serves F1was called upon to provide knowledge andexpertise to overcome these challenges. Butthe question remains: can what goes on trackever be truly relevant to passenger vehicles?

As the first Formula One cars turned a wheelduring the 2014 test sessions at Jerez andBahrain, engineers, drivers and mechanicswere witnessing the outcome from thebiggest set of F1 rule changes in a generation.Gone were the high-revving 2.4-litrenaturally-aspirated V8s, replaced by smaller-capacity 1.6-litre turbocharged V6 engineswith a fuel limit of 100kg (around 135 litres),ushering in an era of efficiency that had beenyears in the planning.

Some ten years ago, Max Mosley, whilst headof the sport’s governing body the FIA,predicted that the OEMs participating in thesport were spending too much and wouldleave. Inevitably, he was right; BMW andToyota left, and Renault became solely anengine supplier. Honda also sold its F1 team,though it too is set rejoin as a pure enginesupplier next year. A series of consultationsensued on what the future of F1 should be,with input from manufacturers both in andoutside the sport.

Naturally, it wasn’t easy to get consensusamong vehicle manufacturers, but with an eyevery much on what was happening on theroad, the outcome was a small capacity four-cylinder turbocharged engine. Progress wasslow even after the decision was made, nothelped by Mosley’s infamous departure fromoffice, but eventually agreement was reached.

There was, however, one further change tothose plans: a switch to a V6, favoured byFerrari for relevance to its road car rangeand promoter Bernie Ecclestone, who feareda ‘four pot’ wouldn’t deliver the expectedaural spectacle.

The 2014 rules ushered in other changesthat would be of equal relevance to theirroad car powertrains’ brethren. Eight-speedtransmissions appeared, primarily to copewith the rises in torque from the hybridaspects of the ‘power unit’, no longer calledan engine thanks to its hybrid make up.KERS, the kinetic energy recovery systemused by F1 since 2009, underwent a rebirthand is called ERS-K (Energy RecoverySystem Kinetic).

Today’s systems now have twice the poweroutput and around five times the energystorage of the previous system. ERS-K wasjoined by a new energy recovery technologycalled ERS-H. Standing for Energy RecoverySystem – Heat, it is mounted on the engine'sturbocharger, providing the ability to spin theturbo up (to a maximum of100,000rpm) itself to reducelag or, deliverrecoveredenergy

back to the engine via the ERS-K. Braketechnology also advanced, with brake-by-wirebecoming popular due to the increasedperformance of the energy recovery system,which requires much greater variations in rearwheel braking torque than before.

The complexity of thepower units could not beunderestimated and,despite hours of dynorunning, only whenpackaged snugly in thetight confines of a carbonfibre F1 chassis did themagnitude of thechallenge becomeclear.Seeminglyperennial

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

The Renault Energy F1 V6 Power Unit

champions Red Bull endured some of thetoughest running problems during testing.Like many of the teams, it suffered reliabilityissues, such as heat from the exhaustdamaging the delicate carbon fibre that isalmost shrink-wrapped around the engine.

The gradual migration of F1 tech toroad cars

In an anonymous Oxfordshire industrialestate, a bright light shone and continued toshine for 24-hour periods in those earlymonths of 2014. Zircotec, a technologyspin-off from the UK’s nuclear industry, is a

specialist in plasma-spraying. This nicheprocess uses a gas torch to fire a range

of powdered ceramics or metals attwice the speed of sound.

Zircotec’s coating technologywas originally used in pipework

around nuclear reactors buttoday the automotive and

motorsport markets makeup around 70% of its

turnover. Theattraction for F1 is

Zircotec’sability to

preventheat

damage to composite materials, offering theability to lower surface carbontemperatures by over 125 degrees Celsius.Its ThermoHold coating is relied upon bythe F1 fraternity for body work, brake ductsand engine heat shields, enabling engineersto package composites close to heatsources such as turbos.

This was no more true than at the start ofthe 2014 F1 season. “The sheer complexityof the new power units and the heatmanagement has led to technologies likeZircotec’s becoming crucial to the reliabilityand to some extent the performance andreliability of the cars,” says the supplier’sManaging Director, Terry Graham. “We havebeen working with designers and engineersfor the past two years to design in ourtechnologies, optimising packaging andextending the life of composites. As atechnology that is just 300 microns thick, wecan usually offer an additional valuable air gapthat lagging or sheeting cannot.”

As with other aspects of motor racing, it isoften asked whether the sport truly

improves the breed; Zircotec believes itdoes. It cites the

migration of its ThermoHold for Compositesinto OEM manufacture, and explains thatAston Martin’s One-77 used the exact samecoating on its diffuser and under-hood airintakes to protect composites from damage.Graham also cites another of its products,ZircoFlex, a thin flexible aluminium/ceramicplatelet heatshield. Most F1 teams, he says,use it to solve problems in the field, and it isnow also making its OEM debut.

A Tier 1 supplier has found the 0.25mm thinself-adhesive material to be the idealmethod for solving a heat issue for a vehiclecurrently in mass production. “Despiterigorous testing and development, it ispossible for problems to occur in the field,often requiring complex tooling changes tosolve,” claims Graham. “Just like in F1, wehave been able to resolve this issue – it canbe a long- or short-term fix, but we haveenabled production to continue andminimise further failures in the field.”

Graham is keen to highlight that theintroduction of new powertrains is excitingthe motorsport engineers and whilstreliability is key, they are already looking atways to find performance in other areas thatcould equally have some relevance to roadvehicles. “There has been a rise inmotorsport in the use of carbon fibre inelectronics systems, notably for junctionboxes and supporting looms,” he says. “Thiscan be particularly useful when looking toimprove EMC performance. Zircotec hasbeen developing a highly conductive surfacecoating that can be applied to composites ormaterials. We sense that this may be ofinterest for EV and hybrid powertrains. Asmany look to increase the use of compositesto improve efficiency and range, our coatingcould be a good way to solve electricalinterference problems without a weightpenalty, something OEMs are increasinglykeen on.”



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Increasing demand for automated and semi-automated transmissions in developing

markets such as India presents newchallenges for local suppliers and OEMs.Having made the transition from supplying ona ‘make to print’ basis to full Tier 1 status,transmission suppliers must now master theissues surrounding control systemengineering, while local OEMs must competewith joint ventures supported by know-howfrom overseas partners.

The appetite for technologies such as AMTs(automated manual transmissions) is fuelledby a combination of factors. The convenienceof automatic shifting makes driving lesstiresome in crowded urban conditions, butthe high cost of fuel deters buyers fromchoosing a conventional torque converterautomatic. It is also in the manufacturers’interests to develop AMTs because itprovides an automatic option that can bedelivered using existing manual transmissionmanufacturing facilities.

The new Maruti Suzuki Celerio, with its AMTbranded as EZ Drive, is one of the first toreach the market; other OEMs includeMahindra, which has launched the Quanto

autoSHIFT, and Tata, which has announcedthat it will soon make AMT

available on all models. Allpromise the fuel economy ofa manual transmission withthe convenience of anautomatic.

One of the keys tomarket acceptance lies in

effective control of theAMT, including design of the

shift control algorithms andstrategy, implementation ofeach shift event and calibrationof the software to suit a rangeof different operatingconditions. Though the Indian

automotive industry hasconsiderable software

expertise, direct experience ofengine and transmission control

systems is scarce. Few engineers inthe region possess the practical calibrationexperience required to structure a suitable

development programme and deliver arobust and validated solution.

Local companies without the support ofexperienced partners are investing intechnology transfer from specialist engineeringconsultancies, in order to grow their capabilityin this area. Their initial goal is to secure marketshare within their domestic region but, in thelonger term, the expertise gained will supporta thrust into more mature export markets. Inthis respect, Indian manufacturers have muchin common with those from other developingmarkets, such as China.

AMTs also have great appeal to heavy vehicleoperators, where in Europe, USA and Japanit is now the norm to specify such atransmission in heavy trucks and buses. Thesystems are proven to save fuel and reducewhole life costs as they also help preventdriveline damage from driver abuse. TheIndian market is still focused on initialpurchase price, so AMT sales are limited tospecialist imported vehicles, but all Indiantruck makers have AMT developmentprogrammes in process. It’s only a matter oftime before AMT-equipped trucks will beseen on Indian roads.

Indian transmission manufacturersface control system challengesMike Savage, Chief Engineer at Drive System Design, works closely with a number of Indiancompanies and reflects on the challenges they face acquiring new skills to meet market demandfor increasingly sophisticated products

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Want to improve truck mileage andcut emissions? Just add water!Fierce Fuel Systems proposes mixing diesel with water to improve truck fuel consumption by20%, and reduce emissions by the same amount. Martin Kahl investigates




Thanks to advances in diesel enginetechnology, new medium and heavy duty

trucks have never been as clean as they aretoday. These developments, however, countfor nothing for the millions of older truckson the world’s roads. Over time, the oldervehicles will come out of circulation, but thatcould take decades; in the meantime, thosevehicles’ emissions and fuel consumptioncontinue to take their toll on theenvironment - and on fleet operators’bottom lines.

A small company headquartered in theshadow of the Chrysler Technical Centre inAuburn Hills, Michigan, may just have theanswer to this problem – and it’s anunexpected one.

Fierce Fuel Systems proposes mixing dieselwith water for increased fuel mileage of upto 20%, and a significant reduction inemissions.

“Diesel-water emulsion is not a secret - it'sbeen around since the 1930s,” explains FierceFuel’s President and Chief Executive, LouisConti, “but it's been plagued with a numberof operational issues. The main challenge iskeeping the fuel emulsified for an extendedperiod of time, which has always required arelatively high volume of surfactant to keepthe emulsion in suspension. Specifically, thevarying size of the fuel encapsulated waterbubbles has provided cause for concern.” Thetechnology may have been around since the1930s, but to date diesel-water emulsifiedfuel has been produced in large quantitiesusing land-based processing systems withthree-phase motors that burn energy quickly.Furthermore, adds Conti, the cost of creatingemulsified fuel was more expensive thanstraight run fuel.

Several factors enable Fierce to overcomethese challenges. Firstly, Fierce uses apatented vacuum-based production processthat reduces the fuel to vapour andreconstitutes it along with the entrainedwater and chemicals added by the refinery.Secondly, in order to reduce energy andtransportation costs, Fierce’s systems - theX1and X2O - use 12 volts DC, drawingpower from the battery bank. “We're able touse that energy from the alternator, which is

already being driven,” says Conti. Thirdly,Fierce produces its diesel-water emulsifiedfuel in micro batches. Historically, emulsifiedfuel has been produced in very large bulkbatches, and stored in underground tanks.Doing so causes numerous problems,including separation of the diesel and water;the natural occurrence of atmospheric waterentering the mix inside in the tank; and ofcourse, transporting the fuel from the tankto point of distribution.

“We've developed an on-board system, andwe meter the water and fuel in. We blend itin micro batches, using our technology, andinclude an emulsifier,” says Conti. “Wesequester the return fuel to prevent it gettingback into the truck’s tanks.”

Adding water to fuel seems counter-intuitive.Does this not dilute the fuel, effectivelyeliminating a similar percentage of the diesel’spotential?

Conti accepts the reasoning behind thequestion, and responds with confidence:“There is of course a loss of potential energywith higher water ratios. However, unitsnever use 100% of the power available.Losses are negligible. We've had customerswith brand new trucks driving six milesstraight up the side of a 6% grade mountain,on 30% water, without noticing much of adifference in performance while using lessfuel and cutting 20% in EGR temperatures.”

At this point, Fierce Fuel’s Chief OperatingOfficer, Calvin Visser, interjects: “Why mixdiesel and water? Easy: improved emissionsdue to lower combustion temperatures andbetter fuel mileage. And we can do that veryconsistently. Independent third party testingshows an almost linear impact: if we add 30%water, we're saving about 27% of fuel, andthat's on a chassis dynamometer.” The Fiercesystem uses precise ratios of water and fuel,along with a very small dose of emulsifierwhile processing.

Chassis dynamometers measure constantload, rather than real world performance.“We see that, when you begin to extrapolatethe data, actual fuel savings will be greaterbecause of the times when drivers coast asopposed to driving on constant throttle, aswould be tested on a chassis dynamometer.”In Conti’s view, testing on a chassisdynamometer is a worst case and non-biasedcontrolled scenario.

The process of emulsification takes place on-board the truck, requiring the fitment ofspecific equipment. The X1 and the imminentX2O, the two systems currently beingpromoted by Fierce, are intended for trucksalready on the road. The X1 can be used onall trucks, while the X2O is designed for non-high pressure common rail (HPCR) vehicles.

Conti explains why Fierce is targeting theaftermarket. “Newer engines use HPCRsystems. The X1 emulsifier unit has a logicalsolution that helps keep the paraffin andentrained water from condensation, andchemicals added by the refinery in the fuelare freshly blended into a homogeneous mixso that when it goes into the high pressurecommon rail, there's no risk of free water.”Free water in this sense means theuncontrolled quantities of water in the fuel;this is one of the causes of the complaintsabout fuel quality in the US and thus one ofthe greatest challenges to high-tech enginecomponent manufacturers; indeed, concernis such that the senior executives fromBosch, Continental, Delphi, Denso and


Why mix diesel andwater? Easy: improvedemissions and better

fuel mileage

“

- Calvin Visser, COO, Fierce Fuel Systems

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

Stanadyne signed the Common PositionStatement of the Joint (FIE) Manufacturers inMarch 2012 outlining their concerns, andstating that “minimum standards of fuelquality are essential to maintain durability andemission compliance over a longer duration.”

Boasting a 50,000sq-ft facility with alaboratory, assembly area and warehouse,Fierce differs from other small companieswith breakthrough technologies in that itdoes not license its technology – itmanufactures its own products.

Fitting the X2O the system takes threehours, with no modifications required to theengine, meaning that the engine can continueto operate with standard diesel fuel whendesired, and is the default condition when thesystem is off. “The whole point is that thediesel-water emulsified fuel only enters theengine when the truck has reached thecorrect operating temperature,” explainsVisser. “300 gallons of diesel would require50 to 60 gallons of water, and another smallertank of emulsifier. We run it all through anintegrated control system that we put behindthe cab.” Fuel delivery is controlled by aseries of valves, and significantly, thecontroller or driver can switch back to ‘pure’diesel automatically or with the press of abutton on the touch screen display in the cab.

“Fuel accounts for the largest part of anytrucking company's standard cost,” says thecompany’s COO. “Trucking companies in theUS operate on fairly thin margins, so a 20%saving means anywhere between US$800 andUS$1,200 a month per truck, depending ondriving conditions and loads, that can godirectly into that fleet’s bottom line, or bereinvested to improve profitability. We seethat as a compelling argument for oldertrucks, not to mention the fact that we'rereducing emissions as well.”

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

on miles driven. It's a very compellingbusiness case for a fleet owner orindependent operator.”

One of the concerns with any technologywhich requires a system to be added to avehicle is the weight of that system. “Bothunits weigh about 200-240lbs (90-110kg),”explains Conti. “Then you add the weightof the water, at 8lbs a gallon, and you couldbe looking at 500-600lbs including thewater unit.” However, the weight of thewater is equal to the diesel that has beensaved, so essentially the added weight isaround 240lbs.

“The weight makes less of an impact inperformance, but it’s a consideration forthose hauling close to their legal limit,” addsConti, “but when you're looking at a vehiclethat typically moves 80,000lbs, it's notsignificant.” And it’s for the heavy-weightlong-haul applications that this diesel-wateremulsion system is intended: although diesel-water fuel has been used for many years innumerous applications, including industrialand marine, Fierce Fuel is focusing on trucks.“The form factor for our design and thetechnology that we control lends itself tosmaller engines. The system is flexible andcan be used on anything under 30-litres,”says Conti.

This tees up our next question: can thistechnology be applied to light duty vehicles?“We can do it on a half-ton pickup. We cando it to a Volkswagen Passat. We can do it toany diesel engine, even a single cylindergenerator,” says Visser, “but we'd rather targetit at long haul, over-the-road applications atthis time with other units in development forsmaller commercial vehicles in the three to10-litre range.”

The fuel system must be purged of thediesel-water emulsified fuel before the engineis shut off, something that Conti suggestswould quickly become part of the driver’sroutine, or can be handled automatically bythe system controller. “It takes about threeto 15 minutes in most cases and is a function

of a vehicle’s specific engine and drivingconditions.”

So, how close is Fierce to putting this intoseries production? “We have trucks triallingthe technology. We're currently in the processof starting mass production, and we do havecommitments from a few fleets,” says Visser,adding that Fierce Fuel is poised to launch itsX1 and X2O products in the summer of 2014.

Fleet managers are faced every day with acatalogue of fuel saving, emissions-reducingtechnologies; why should they invest in FierceFuel technology?

Conti takes this question: “Aerodynamicsolutions, so far, have been the easiest plumto pick, but they offer diminishing returns. Youcan add aerodynamics to the truck for a smallgain, and then add skirts to the trailer andmaybe save a little more, but add the twotogether and you might still only see a smallcumulative value. We're offering a productionsystem that provides a fuel improvementstraight away of between 17% and 22% whileunder continuous load. Imagine what you canthen do when you begin to add all the otherthings, like technological and aerodynamicimprovements.”

Selling green technology is not as easy asselling technology that offers an immediatefinancial benefit, and Conti returns to thistheme as we wrap up. “It can cost US$30,000to upgrade an existing truck to newtechnology that meets today's emissionsstandards or go with an alternate fuel suchas CNG or LNG. For US$13,500, you can get80% of the way there and save money onfuel.” Furthermore, he adds, diesel-wateremulsions are well documented by a numberof universities, large corporations andgovernment agencies.

Installing an infrastructure for alternativefuels is a slow, costly undertaking, andconsiderably more complex than findingsomebody who sells diesel fuel and water,concludes Visser. After all, he adds, “cleanwater is commonly available.”




It is hard to imagine now, that only 21 yearsago, there was no European emissions

legislation. It was in 1993 that the Euro Ilevels were introduced, and these standardswere achieved with small incrementalchanges. Fast forward to 2014, and OEMs,Tier 1, and Tier 2 suppliers are continuallybattling with the ever tightening emissionslegislation. Between Euro I and Euro VI,particulate matter (PM) levels have fallen97%, and NOx has fallen 95%, but whatcomes next? Euro VI was tough, but will thenext round of CV emissions regulation –referred to for now as Euro VII – beimpossible?

In 1992, the industry was prepared with Euro0, before Euro I the year after, which dealtsolely with NOx, HC, and CO. In 1996, EuroII saw the first adoption of a PM limit and allengines were required to meet the same limitlevels. Euro III came in 2001, and engineswere now required to meet emissions levelson the road. In 2006, aftertreatment wasrequired for the first time, using eitherSelective Catalytic Reduction (SCR), orExhaust Gas Recirculation (EGR), and on-board diagnostics required to monitoremission control. Euro V came three years

after Euro IV, imposing further NOx, and PMreductions. Then in 2014, Euro VI came intoeffect, with the tightest emissions levels todate. To meet the regulations, OEMs haveresorted to both SCR, and EGR, with aDiesel Particulate Filter (DPF). How wellthese technologies are adopted andintegrated, will give some indication as towhether OEMs will have a chance in meetingEuro VII targets.

Gian Maria Olivetti, Chief Technology Officer,Federal-Mogul explained to Megatrends thatwhen Euro VII or similar does come into play,the emissions standards will not be muchlower than they currently are. He said, “EuroVI, and VIB has been a revolution for cars andtrucks, in terms of which kind ofaftertreatment should be applied. I think afterEuro VI, the focus will be on fuel economy –CO2 emissions, not pollutant emissions. Thebig challenge will not just be compliance with95g in Europe in 2020 for passenger caremissions, 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, “asusual, it will be politics and legislation, not justthe industry. Five to six years after, there will

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

There is a serious question over whetherOEMs and suppliers will be able to keepmaking reductions, in whatever shape orform they appear. Euro VI presented manychallenges, including a significant increase inthe cost of truck chassis, and extra weight.Olivetti said, “In future, the requirementsregarding CO2 reduction and fuel economywill be very challenging in Europe, so I seethat as a major problem to us as a supplier –to be able to provide a solution that shouldbe able to significantly help to achieve thetarget of CO2. The main problems will beCO2, global pollution, and fuel economy.”

Beyond Euro VI

Some OEMs and suppliers are alreadyplanning for life beyond Euro VI, and althoughthere will be difficulties, Olivetti believesengine efficiency still has a long way to go:“We still have a great margin to improve theefficiency of the engine, particularly gasoline.Over the last ten years, gasoline was close todiesel, but diesel is starting to maintain its gapagain. The same goes for heavy duty. Today,42% efficiency is targeted. We haveprogrammes targeting 45% efficiency –complete efficiency of the engine. There aremany things that could help efficiency, not justour components. For example, you could useexhaust energy recuperation. Work is goingon to recover all the losses in an engine,through the exhaust, or cooling, and to someextent that is easier in heavy duty engines. Inthe next two to four years, we will seeadditional devices for recovering energy, andI think there is a great margin forimprovement, much more than what we haveseen in the past decade, because the focusfor heavy duty has been on emissions.”

The standards have affected engines in anumber of ways. Fuel injection systems havemoved from low-pressure systems, to


Life beyond Euro VIMeeting 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

66 | Megatrends

electronic, high-pressure systems reaching upto 2,700bar. Combustion pressure is up; tomore than 200bar, and turbochargers arenow variable-geometry models, which helpdriveability as well as meeting emissionsstandards. And there are the aforementionedcomplex aftertreatment systems.

What happens inside the engine presentseven more challenges. Olivetti said that oneway Federal-Mogul can help OEMs andsuppliers move beyond Euro VI is to directlycontribute to reducing fuel consumption andCO2 emissions by reducing the internalfriction of the engine. “We have components,like our new DuroGlide coating for pistonrings, IROX, or specific piston design andskirt coating that allows a direct reductionof friction. Friction in the engine still remainsone of the areas in which you can stillimprove a lot of engine efficiency.” Olivettisaid that in the future, there will be a needto provide a technology allowing customersto make the calibration required, which willoperate at a higher temperature, with higherpeaks in pressure, so the environmentaround the combustion chamber isbecoming much more challenging forcomponents in terms of functionalperformance and durability.

Federal-Mogul offers new materials and newsolutions for pistons, like DuraBowl, that re-melts in the bowl rim area. There is also asteam piston allowing higher temperature,higher pressure, and the same with thematerial and coating for the ring and bearing.Olivetti said, “We are developing solutionsthat allow our customers to increase thepressure, increase the temperature inside thecombustion chamber, and have morefreedom in their calibration to reducefriction. Higher pressure, higher temperature,and higher load are all going in the directionto allow for more aggressive combustioncalibration, and more aggressive downsizing

of the engine. All that will give our customerthe possibility to further reduce fueleconomy.”

Globalisation

Emissions standards have historically beendifferent globally, which has caused problemsfor OEMs and suppliers. However, Olivettisaid that one of the megatrends driving theindustry today is globalisation, with OEMsusing the same engine platforms around theworld. He said, “Many manufacturers arebecoming global, so you can find Daimlertrucks everywhere around the world,including China.” The World HarmonisedHeavy Duty Cycle also aims to balanceemissions legislation between Europe and theUS. Olivetti said, “It is not adopted by NorthAmerica, because the US still has someconcerns. They want to use their own way tomeasure the engine.

“Looking to the next step, there are manyengines common between Europe and theUS. Volvo engines are made for Europe andNorth America, and Daimler. Many heavyduty trucks in North America have Europeandesigned engines, so I think there will be a lotof pressure from OEMs to have the WorldHarmonised Cycle adopted in NorthAmerica too. This will maybe come into effectaround four years from now.”

There is currently still differentiation fromcountry to country in the heavy duty market.Some countries still operate on theequivalent of Euro IV, which Olivetti saidrequires completely different products toEuro VI: “For Euro VI there is a certainrefinement of the product and the challengefor the next engine is different. For countrieswhere it [Euro VI] will come in the next fewyears, like India and China, we start to applysome advanced technology.” This technologyis not the same as Europe and the UShowever, because their use of aftertreatmentis not so diffused. Olivetti envisages that infour years’ time, the technology will bebroadly aligned, more or less, everywhere, ascompanies in countries like China are alreadyasking for the next generation legislation thatwill be implemented in around four years,bringing them in line with Europe.

A date has not been set for Euro VII, or evena confirmation of name, but 2020 looks likelyfor the next round of emissions standards.Not much, if anything is known about thestandards, but industry experts arepredicting that the next round will focusmore heavily on CO2 emissions, rather thanpollutant emissions, which have beensignificantly cut by almost 100% since thefirst regulations in 1993. Euro VI was toughfor OEMs and suppliers, and Euro VII is setto be even tougher.




The term ‘supercharger’ may currently bedrawing media attention as Tesla rolls out

its electric vehicle (EV) charging network, butthose outside the EV world will have adifferent understanding of the term.

Eaton, a leading global supercharger supplier,describes a supercharger as “a device used toforce more air into an engine”. Force air intoan engine, and combine it with increased fueldelivery, and greater power can be derivedfrom the engine. The difference withturbocharging is key: while turbochargers aredriven by hot exhaust, superchargers aremechanically-driven.

Although it sounds like an advancedtechnology, supercharging is not restricted tosuper cars. Eaton offers a broad range ofsupercharger applications, from 1.2-litreengines and small vehicles through to 6.2-litreengine applications and performance vehicles,

explains Jeff Schick, Vice President and GeneralManager for Eaton's Supercharger Division,which sits within Eaton’s Vehicle Group. “Thedevice is used to improve transient responseand acceleration, especially in high powerdensity applications. High horsepower orkilowatt-per-litre engines require superchargerboosting technology. As the downsizing ofengines occurs and the average displacementof engines continues to be reduced, and thoseengines are still needed in heavier vehicles, theinitial transient response or acceleration isachieved through supercharging.”

Supercharging is not used exclusively – thereare numerous cases of supercharging andturbocharging being used in combination,usually where downsized engines requirehigher output, or when they are used acrossadditional vehicle platforms. “We're seeingcompound boosting as a trend in themarketplace, and here the supercharger

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

“In terms of fuel economy and downsizing,many engine manufacturers think aboutalternative combustion processes. They'rereverting to things like the Miller cycletechnology versus the auto cycle, and theMiller cycle uses late intake valve closing,which helps eliminate pumping losses in theengine. When you do that, you lose somepower performance. In order to overcomethat loss of power, boosting, specificallysupercharging, is very applicable.” Eaton hasrecently highlighted the Nissan Note as anapplication where Miller cycle technology,using its supercharger in a 1.2-litre engine,has enjoyed considerable success.


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Front cover

Bearing plate

Rotor housing

Inlet port

Bypass actuator

Integrated bypass valve

Outlet port

Four-lobed rotors with160-degree twist

Drive pully

Eaton’s superchargerrollout gathers paceEaton’s Jeff Schick talks to Megatrends about how superchargers can help meet performancecriteria whilst still enabling OEMs to achieve tightening fuel economy targets

By Martin Kahl


Most superchargers are used in vehicles with2.0-litre engines and above. Eaton’s firstsupercharger application was used in the1988 Ford Super Coupe, “and it has evolvedsignificantly since then,” says Schick. “We'renow on our TVS-style rotor technology,which has increased efficiency in our deviceto around 74% - 75%, enabling us to targetan increasing number of superchargingapplications.” Schick cites as an example the3.0-litre technology used by Audi, whichcame into production in 2008; that, he says,was used for both downsizing and fueleconomy. “The current trend is to reduceengine sizes, and to be able to use enginesacross a multitude of vehicle platforms. Thatrequires engine architectures that have awider range of horsepower and torquerequirements.”

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

installation and penetration is increasing. “Evenlast year, we saw 30% year-on-year growth interms of unit fitment of superchargers,” saysSchick, and that growth is being driven by theneed to downsize because of fuel economyand emissions regulations. “Generally speaking,all global vehicle regions are migrating towards95g CO2/km. In the US, the EPA is shootingfor 54.5 mpg by 2025. Regulations are drivingengine performance and design.”

With 2025 being such a significant year forpowertrain technology in the US, is Eatonexpecting an increase in penetrationspecifically in the US market to meet the 54.5mpg target?

“Yes,” says Schick. “Right now, the industry isreally searching for the right combination oftechnologies, from combustion techniques tovalve train technologies. Eaton has variablevalve train technology as well, which is rightin the sweet spot of engine air management,

along with boosting technology. The jury isstill out on which technologies will be themost widely adopted. I'm convinced it will bea variety of technologies tailored tocustomer applications and marketexpectations, for not only fuel economy andemissions reduction, but also driveability.”

However, Schick acknowledges the need tobalance great fuel economy and reducedemissions with performance. “If it takes 60seconds to accelerate from 0 to 60, that's notgoing to be accepted by most drivers in mostvehicles! Some form of boosting or boostingsystem is required to get that power backwhen it’s needed.”

Superchargers may have their benefits, butthey are up against a range of technologiesthat can also help increase performance,reduce fuel consumption and loweremissions. What are the main alternativetechnologies against which superchargerscompete? It depends on the application,explains Schick. “Turbocharger and twinturbocharging technology could be viabletechnologies. It depends on the engine and


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


the engine performance specification. Ifyou're looking at the fuel economy versionand the eco version of an engine and anengine family, you might pick a combustiontechnique like Miller cycle, for whichsupercharging is required to achieve the lowend torque factor that is lost in the Millercycle. But you still can achieve fuel economybenefits in the range of 3-5% or more.

“If that's what you're looking for in yourengine, supercharging is the answer. If you'relooking for a mid-specification, mid-powerengine in a mid to small vehicle, turbochargingmight be the appropriate boosting application.If you're looking for a high output version ofthat engine, then compound boosting is thetrend. A supercharger at the low end, plus aturbocharger at the high end, is a verypalatable boosting solution for engineperformance.”

As with any technology, cost is a majorconsideration. Schick explains the trade-offsto consider when deciding whethersuperchargers are viable: “It’s a case ofexamining the target vehicle, the required

engine specification, and how the mix ofengine combustion technology and boostingarchitecture can achieve thoserequirements.”

At present, the 1.2-litre engine application onthe Nissan Note is at the smaller end of thescale. Eaton shows 1.0-litre applications onits website, but below that, the technologyenters the realms of diminishing returns. “Itdepends what you want to do with yourengine,” says Schick. “The 1.2-litre engines aregoing down to 1.0-litre, and there are evenconsiderations for 0.8-litre engines.”

The adoption of superchargers to date hasbeen somewhat region-specific, withadoption in the BRIC markets slower than inother parts of the world. This Schickattributes to where most engine designdecisions are made, namely Japan, Europe, andthe US. As those countries prove the benefitsof superchargers, vehicle manufacturers inmarkets like China and India will examine theapplicability of those engines and enginearchitectures, to see how they can help themmeet fuel economy and emissions reductionrequirements in their countries. “They maybe a little further behind in terms of theemissions requirements, but we see aconvergence in the range 95g to 120gCO2/km across the globe, in the 2020 to2025 timeframe,” says Schick. “Thistechnology will also be applicable in thoseregions, where the drive cycles don’t involvemuch high speed, but here’s a lot of startingand stopping, or transient type responses. Inthose applications, the supercharger, along

with a Miller cycle or some more alternativecombustion process, is very applicable. Overthe next five to ten years, superchargingtechnology will also be required to meetemissions targets in those regions.”

Supercharger technology is adaptable, notjust for different geographic applications, butalso for different engine geographies. Thereis no engine layout for which they cannot beused, says Schick, when asked whether theycould be used in opposed cylinder engines,or the three and even two-cylinder engineswhich are gaining popularity Europe.“Superchargers are not exhaust gas driven,so they can be used on any enginearchitecture. There really isn't any [enginearchitecture] that I would classify as mostsuitable.” Indeed, in an application whereexhaust gas energy is lacking, like a 2-cylinderengine, a supercharger would have anadvantage over a turbocharger, he adds.

There’s considerable room for furtherdevelopment in supercharger technology,believes Schick, who says he expects furtherimprovements in performance and efficiency.“I also see the drive technology movingforward, with technologies like clutchdeactivation and boost on demand delightingengine designers, enabling them to reallytailor and tune an engine to the drive cycleand driving performance of any vehicle.” Acombination of how the supercharger isdriven, as well as improvements in the device,concludes Schick, will make superchargers“even more desirable” as engine technologiesevolve over the next decade.


- Jeff Schick, Vice President and General Manager for Eaton's Supercharger Division,

“The 1.2-litre engines are going down to1.0-litre, and there are even considerations

for 0.8-litre engines”

FREIGHT EFFICIENCY

The fuel costs faced by the tractor-trailerindustry have been swiftly and steadily

rising over the past decade (Figure 1). By2012, fuel costs had reached US$0.641 permile, as reported by the AmericanTransportation Research Institute, surpassingeven the costs for the driver (wages plusbenefits). These costs have driven all fleets toinclude fuel efficiency in their new equipmentspecifications and operational strategies, butmany do not know where to start.

In light of this trend, investment into proventechnologies and practices that allow a truckor fleet to increase fuel efficiency – meaningthat it can do the same amount of business

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

A compounding issue is the vast diversity ofneeds in the industry. These needs are drivenby multiple, and sometimes seemingly,incompatible demands. The equipment mustoperate in differing duty cycles, driven byvariations in operating locations (urban, rural,or a combination), geographies(mountainous/flat, hot/cold, etc.), access tocapital and strategy for risk and even thebusiness model of the fleet itself (lease vs buyequipment, use company drivers orindependent contractors, in-house orcontracted maintenance). These combine to

create a significant challenge for end-users todetermine what technologies to pursue andwhich companies to consider purchasingfrom.

The North American Council for FreightEfficiency (www.nacfe.org), an emerging non-profit dedicated to doubling the efficiency ofNorth American goods movement, isworking in the industry to better identify anddeliver the information needed for fleets tochoose the best strategies for each of them.NACFE takes a data-driven and industry-sharing approach to use prior experiencesand best practices of early adopters toaccelerate the overall adoption oftechnologies that eventually will bepurchased at high scale.

To better understand the history ofadoption, in 2010, the Council created a bestpractices sharing methodology to documentand learn from these early adopting fleets inorder to provide an early roadmap for theindustry on technologies to improve theefficiency of Class 8 tractor trailers. By thethird, annual fleet fuel study completed, inmid-2014, data has been accumulated on thepurchasing habits of 11 fleets, made up ofover 41,000 tractors and nearly 130,000trailers. Information gathered and sharedincludes the percentage of each year’spurchases that included 70 currently availabletechnologies for lowering fuel consumptionand the overall fuel efficiency of their fleets.With 70 technologies, 11 fleets and 11 yearsof data, this process provides nearly 8,500


North American fleetswage war on carbonNACFE’s Mike Roeth outlines the most promising opportunities for increasing fleet efficiency -and doing so profitably

Avg Annual US Diesel Price/Gallon

Source: US EIA - Feb 2014

FREIGHT EFFICIENCY

data points of purchasing behaviour on newfeatures with these end-users.

This information allows the organisation toshare 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 ofthe study in 2011.

Armed with this powerful dataset, much canbe learned about the past and inferred tohelp forecast the future of these features tosupport a significant improvement in tractortrailer fuel efficiency. The opportunity isenormous: there are about 1.5 milliontractor trailers operating in the US,consuming something like 26 billion gallonsof diesel fuel. For every 1% reduction in fueluse, 260 million gallons of fuel, or aboutUS$1bn per year are saved. A subset of thefindings is now shared here. This includes acomparison of how the 11 fleets vary, anexample of some adoption curves, theoverall adoption rate compared to fuelconsumption and finally the consistency ofhow the various technologies are adoptedby these different fleets.

Fleet adoption diversity

As with nearly all consumed products, frombusiness-to-consumer or business-to-business, end-users tend to fall in differentcategories when new offerings becomeavailable. Some adopt early while others waitfor them to experience the benefits andpotential risks of being on the leading edgeof new technologies. The 11 fleets in thisstudy are no different. Fleets B, D and J canbe considered as early adopters who havecontinued to expand their adoption, while E,I and K although later adopters have closedthe gap to their more innovativecounterparts. This may infer that as the fuelcosts continue to rise, some end-users aremore aggressively benchmarking and in somecases moving to adopt these new productsearlier in the overall adoption experience ofa given product.

Technology adoption curves

Given the data provided, 70 technologyadoption curves were created for theserecognised potential fuel saving devicescurrently available on today’s NA tractortrailers. It is important to keep in mind thatthese charts show the adoption practice ofonly 11 fleets; although large, they representabout 2.5% of the overall trucks in NA. It also

recognises each fleet as a single decision inthe adoption calculation rather than by totalvolume of tractors or trailers procured. Thisdoes, though, provide a good new insight intonot only the current level of adoption but inthe ramp over the last decade. For example,the ramp up of purchase of trailer skirts toover 70% is the quickest current rate of alltechnologies.

Fuel saved compared to technologyadoption

Now that we understand directionally theuptake over time of these varioustechnologies, many additional questionscome to mind. What impact do thesetechnologies have on the fuel efficiency of thetrucks in the fleet? What is the payback on


Tech Adoption Rate

Trailer Aerodynamics

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investment of each of these technologies?The list of questions goes on. The individualfuel efficiency of this fleet of tractors isshown below and is shaped rather like abathtub. In the first third of this time periodunder study, 2003-2006, the impact of theintroduction and purchase of EPA04 andEPA07 emissions level engines caused anoverall decrease in fuel efficiency. In thesecond third, 2007-2010, procurement ofnew fuel economy technologies began tostabilise and overcome the degrading effectof the emissions engines. Finally, in the years2011-2013, the fuel efficiency of this fleetimproved from 6.34 to 6.77 mpg, a nearly 7%improvement. The study team also created abusiness as usual prediction, one thatcompares these fleets with a baseline fleetwhich only procured a few of the highestadopted technologies. Given this, these fleets

are saving over US$7,200 per truck per yearin fuel related to a fleet which is not buyingthese technologies. A basic analysis wasconducted on the payback of thetechnologies that provide the majority of thesavings for these fleets. That reviewdetermined a paynack for these technologiesof about three years.

Fleet consistency of adoption

Finally, the consistency of adoption by thevarious fleets was evaluated. Here, each ofthe 70 technology decisions by each of the11 fleets is compared using a categorisationmethodology showing whether thetechnology is being purchased by the fleet,how quickly it increased to 100% of allpurchases or even if that fleet decided tostop buying them. When stacked by the

most popular, other fleets now have aroadmap of technologies that should beconsidered and ones that possibly should beanalysed more deeply. Also, they cancompare themselves to some of these fleetsto better understand which ones are mostapplicable to their needs.

In conclusion, new technologies arebecoming much more available to improvetractor trailer efficiency, but this poses bothopportunities and challenges. Each fleet mustdetermine the best set of solutions for itsindividual needs, and this study data can assistthem in doing so. Doing nothing and losingground in fuel cost competitiveness to otherfleets is not an option.

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

NACFE’s Fleet Fuel Studiesprovide useful insights intoadoption trends in theindustry as well as into thespecific practices of differentmajor fleets, and NACFE hopes that thisinformation could alone spur additionalinvestment, particularly by fleets that maybe lagging behind the overall industrywhen it comes to certain widely-adoptedtechnologies. However, in the course ofconducting the studies, it became clearthat some technologies are still only beingadopted by the most progressive orinnovative of fleets in spite of theirshowing strong potential for achievingcost-effective gains in fuel efficiency. Inorder to facilitate the wider industry’strust in and adoption of suchtechnologies, NACFE and the CarbonWar Room (CWR) formed OperationTrucking Efficiency, and began a series ofreports, called “Confidence Reports,”which will take an in-depth look at thosemost-promising but least-adoptedtechnologies one-by-one. Look for thesereports over the next few years.

Technology Adoption vs IFTA mpg


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FREIGHT EFFICIENCY

One of the key trends to have emergedfrom the North American truck market

in recent months is the apparent willingnessof a broadening scope of truck buyers toconsider down-speccing enginedisplacements in favour of a 13-litre asopposed to the more common – andtraditional – 15-litre driveline.

A number of factors are influencing thisshift. On the one hand, the additional weightof the post-EPA 10 SCR systems hasnecessitated something of a rethink interms of maintaining payload parity.Additionally, as length of haul has reduced– a trend likely to continue with thecombined impact of the driver shortage andthe opening of a widened Panama Canal –the days of the long distance journey, andsubsequently high horsepower vehicles,have diminished. But ultimately, this shiftseems to be driven by one key factor aboveall else. Fuel efficiency is now the key metric– when bundled with total cost ofownership (TCO) – by which a NorthAmerican truck is now judged. If a 13-litreoption allows for better fuel efficiency thanits 15-litre counterpart, its attractivenessgrows exponentially.

Topography and gross combination weight(GCW) appear equal as determining factorsif we take a read across from Scania’sexperience in Europe: “In Sweden and inNorway as well, about halfof the Scania truckssold are fitted withthe 16-litre engine.The figure for Italy iseven higher, so I wouldsay that topography is asimportant as highGCW when it comesto the use of largeengines,” says Scania’s Hans-AkeDanielsson. Italy, Sweden andNorway allow permissible GCW of50, 60 and 56 tons respectively (110.2lbs, 132.2 lbs and 123.5lbs) ascompared with the US Interstateweight limit of 80,000 lbs (36.2 tons).

“Historically, US 13-litre engines havehad poor durability relative to big boreengines,” says Steve Duley, VP Purchasing atSchneider National. Quite often, their life tooverhaul is 30-50% less than a 15-litre. Thereason for this, however, is not necessarilydue to the cubic dimension of the engine.

76 | Megatrends

North American HD buyers warmto 13-litre drivelinesTruck buyers are increasingly considering 13L engines instead of 15L options

By Oliver Dixon


“One of the best engines we everoperated was the Detroit DieselS60 11-litre,” says Duley. “Wehave used 15-litre DDC for bestdurability and best MPG, butthis is because of how DDChas focused and designed the15-litre versus the 13-litre.We use the 13-litre when weneed to reduce overallvehicle weight. We would usethe 13-litre if or when it hasthe right combination ofdurability and fuel efficiency.”

“We have made the transitionto 100% 13-litre and a lot offleets are starting to catch on,”says Bill Bliem, SVP Fleet Servicesat NFI. “The 15-litre is still thepredominant engine in most fleetsthough. We were able to make theswitch because of our governed speedsas well as the fact that we don’t run theRockies much. We have no power problemsand did it mainly for weight and fuel economywith our direct drive transmissions.”

“In general, the shift to 13-litre enginesbasically means a shift towards proprietaryengines,” comments Chris Visser, SeniorAnalyst at ATD / NADA. “At present, themajority of late-model used trucks stillfeature the ISX, with proprietary enginesprogressively more common in the newerthe trucks.

“In terms of residual values, the 13-litrePaccar MX seems to be doing the best in theused market, with buyers paying slightlyhigher prices for trucks so-equipped in mostcases – the exception being the T660, butonly by a slight amount. Volvo’s D13 brings

higherpricing when paired withthe iShift in most models,

but when paired with amanual, it generally trails theISX. International’s MaxxForce

suffered severely in the used market,while there isn’t enough informationsurrounding the Daimler DD13 to commentfairly.”

“Let’s not forget the secondary market’shistorical preference for 15-litre equipmentand the discounting of 13-litre equippedtrucks,” says ACT Research analyst Kenny

Vieth.“With 13-litresales starting inearnest in thesecond half of 2010,I think it will beinteresting in the nextseveral

years to see how used truckbuyers value 13-litre versus 15-litre

units. Right now, the paucity of latemodel equipment is probably mootingthat argument, but when we look a fewyears down the road, it would notsurprise me to see premium valuationsplaced on 15-litre equipped units.”

“We see an opportunity to lower weight andhence improve freight efficiency by usingsmaller engines, and even potential for betterfuel economy,” says Mike Roeth, of TruckingEfficiency, a joint collaboration between theNorth American Council for FreightEfficiency (NACFE) and the Carbon WarRoom.

“Also, as we see aerodynamic drag, on bothtractors and trailers, continue to be reducedas well as lower rolling resistance wheels, itsimply takes less power to haul the freight,”Roeth continues. “In the recent past andmaybe even currently, the truck and enginebuilders have focused on improving 15-litrepower plants and so these engines have

remainedvery good from a

fuel efficiency standpoint.We think, due to the

opportunities, that a trend will continueover the next years to lighter displacementengines.”

“Daimler Trucks North America is dedicatedto providing customers full vehicle solutionsthat pace the industry in terms of fuelefficiency and lowest real cost of

ownership,” says Rich Shearing,Vice President of

NationalAccounts,Daimler TrucksNorthAmerica.“Over40,000orders, in less

than one year, for the Freightliner CascadiaEvolution powered by the Detroit DD15 istangible evidence of this strategy paying offin the market place.

“Both the Detroit DD15 and Detroit DD13feature best-in-class fuel economy and low-cost maintenance and service. The DD15 isthe industry’s benchmark in overall fuelefficiency and is slightly ahead of the DD13.We do not foresee a market shift towards13-litre engines. However, we will continueto witness customers seeking the lowest realcost of ownership as exemplified by thesuccess of the Freightliner CascadiaEvolution.”

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


FREIGHT EFFICIENCY

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toward the ISX – I think closer to 60% – andthat’s primarily just based on the reputationof the ISX and its familiarity with thecustomers in the marketplace today. And, the13-litre with SCR is a new product. It’sperforming exceptionally well for thecustomers that have it. So over time we doexpect that ratio to normalise around 50/50.”

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

The OEM believes 13-litre engine use willcontinue to grow as motor carriers place apremium on fuel and weight savings, explainsJohn Moore, Volvo Trucks powertrain productmanager. “The average engine rating for anover-the-road truck is 450 horsepower and1,650 lb.-ft. of torque, regardless ofdisplacement. The Volvo D13 model is ourmost commonly spec’d engine in NorthAmerica and is available in ratings to 500horsepower and 1,850 lb.-ft. of torque.Power density and durability of today’s 13-litre engines rival 15-litre engines of just adecade ago. If you compare our productionin recent years, you’ll see that the averagehorsepower spec’d by 13-litre enginecustomers exceeds the horsepower of thetrucks spec’d by 15-litre engine customers.

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

litre engines. By right-sizing their engines,motor carriers can shed hundreds of excesspounds that can be transferred into additionalpayload,” continues Moore. “On average, aVolvo 13-litre engine weighs more than 300lbs (136kg) less than competing big-blockengines and a Volvo 11-litre engine is nearly400 lbs less than our 13-litre engine. It’simportant to match engine displacement withthe operation. While a 13-litre engine providessufficient power to pull bigger grades, our 11-litre engine is also a very reliablecoast-to-coast engine. We still see a largenumber of motor carriers carrying aroundunneeded engine weight because they’reoperating under the old belief that lowerpower density engines are more reliable.

“With the push for increased fuel efficiencyand struggles recruiting and retaining goodprofessional drivers, we anticipate automatedmanual transmissions (AMTs) will also growin prominence. Our Volvo I-Shift AMT,introduced to North America in 2007,accounted for about 70% of all invoiced unitswith Volvo engines in 2013.”

Speaking during Paccar’s Q4 earnings call inJanuary, former Chief Executive Mark Pigottendorsed Allen’s comments. The OEM secureda share of the 13-litre segment towards theupper 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 yearfor 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 togrow…we’ve now manufactured over 50,000engines at our Mississippi factory, and it’s doingwell on the launch.”

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

used to decide the best engine for thedifferent applications. “These include GCWand topography which define the power andtorque needs; and the customer’s businessmodel which defines the cost per mile orcost per hour requirements.

“Inputs include fuel economy, maintenancecosts, weight and uptime. The requirementsfor transport efficiency (cycle times) can beanother factor here, and residual value andthe planned second life market also need tobe considered.

“With Mack’s 1860 lb.-ft. torque rating, weoffer an engine that can easily handle allClass 8 segments,” explains Horton. “Themuscle of the Mack MP8 has the brawnnecessary to manage the toughest loads,but is trim enough that it minimises weightand maximises fuel efficiency. The MackMP8’s regen system, which enables a driverto stay on the road while the systemregenerates, coupled with high-qualityperformance standards, increase vehicleuptime.”

While it’s very difficult to argue withDaimler’s position that the DD15 in theCascadia Evolution is now the benchmarkproduct in North America – a market sharein excess of 40% makes a very clear point –the gradual pick up in residual value, asevidenced by the Paccar MX, is noteworthy.While there will remain a proportion of theNorth American trucking industry that willstay wedded to 15-litre specifications for themedium term, there does now seem to be atleast a willingness to experiment with alower displacement approach.

A version of this article first appeared onAutomotiveWorld.com


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Global logistics specialist UPS has emergedas a leading proponent of natural gas –

both CNG and LNG – for its fleet of deliveryvehicles. It operates one of the largest privatefleets of CNG-powered vehicles in the US andits LNG fleet isn’t far behind. The company isadding 700 new LNG-powered tractors by theend of this year. Mike Casteel, Director ofFleet for UPS, is a strong supporter of the fuel,but most notably only within certaincircumstances. He spoke to Megatrends on

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

Ingredients for success

“Where we have been able to deploy naturalgas, we have had a combination ofcircumstances that are in place,” he explains.“The fleet profile has to be conducive tonatural gas deployment. We have to havesome economy of scale, large numbers of

vehicles that run relatively high miles. Theobjective here is to use a lot of fuel todisplace a lot of traditional fuel.”

The key is for natural gas use to save moremoney than the initial upfront investmentrequired. These initial costs include setting upa natural gas fuelling island on companyproperty - and the cost of setting up a naturalgas station is relatively high compared toestablishing a diesel island, he notes.

UPS shares itsrecipe for naturalgas success

FREIGHT EFFICIENCY

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

As for relying on a public natural gas fuellingnetwork instead, Casteel does not view thisas a viable option. “The only way to do this isto control our own fuel infrastructure. It’stime and access to the station,” he explains.The company can’t take a risk of somethingdelaying a journey that means it can’t getaccess to the fuel it needs. “Operationally it’snot practical,” he concludes.

UPS has made a significant investment in itsown fuelling network, and operates seven oreight CNG stations and a similar number ofLNG stations, with about five more LNGlocations to begin operation by September.

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

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

It is only when these factors all worktogether that Casteel sees natural gas as theright choice: “When those combinations ofthings come together, it will work. But aslarge as our fleet is, there is a limited numberof locations where we can make all of thatcome together and use enough or displaceenough fuel to save enough money to pay forthe upfront investment.”

Alternatives

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

biomethane diesel, propane, ethanol, batteryelectric and hydraulic hybrid in addition toCNG and LNG. But among all thesealternatives, Casteel concludes: “Very littletoday can compete with natural gas on a large-scale deployment.” For hybrid vehicles, henotes that these typically use some portion offossil fuel. For all-electric vehicles, “the batterytechnology in place today remainsprohibitively expensive in how it relates to ourduty cycle. We have a lot of stops and startsper day, and we carry a lot of weight, so fullelectric is difficult for us to deploy.” On top ofthat, the source of the energy used to powerthe EV is in many cases a fossil fuel. “Add thewhole thing together and today, large-scaledeployment of natural gas is the only thing wecan make work on that scale.”


FREIGHT EFFICIENCY

FREIGHT EFFICIENCY

While the notion of a single truckproduct appropriate for all global

markets remains firmly in the realm of thehypothetical, ongoing trade negotiationsbetween the United States and Europe haveushered in the possibility of a commonharmonised heavy duty truck emissionsstandard applicable to both markets.

Speaking earlier this year at the Mid-AmericaTrucking Show, Head of Daimler’s truckbusiness, Wolfgang Bernhard placed thecurrent emissions debate intoclear context: “We need tosweep away some of thenon-tariff barriers. Forexample, if I look at theemissions standards inthe US and in Europe,they are so similar,” hesaid. “Despite the fact thatthey are so similar, the industryhas to spend a lot of money to ensurecompliance with both in terms of differentparts, different testing and differentdevelopment. If we could agree thateveryone recognises each other’s standards,all the money that is being wasted right nowon two different standards could be put tofar better use.”

It’s not difficult to see where Bernhard’s logiccomes from. The impact on fixed costabsorption accruing from a harmonisedstandard would be significant, albeit not onewithout downside risk. In times of an upcycle, gross margin would improve markedlybut the opposite could apply in the downcycle. Bernhard’s thesis would thus seem tobe one that views the positive as outweighingthe negative once that amplitude averagesout through the entire cycle.

This is not a new argument. However, what isnew is the adoption of a regulatoryenvironment on both sides of the Atlantic thatviews greenhouse gas (GHG) as being the key

determinant of future emissions mandates.The previous regulatory environment – onethat concentrated upon the management andreduction of PM and N0x – was one thatdeveloped out of a regional focus. GHG – andthe reduction of C02 – is positioned as amore global imperative. Unsurprisingly so:what is C02 in London is also C02 inLexington, Kentucky. What has proved arestraint to a common goal previously is notthe goal in itself but the means by whichattaining - and more pertinently, measuring -success are facilitated.

“US, EU, and Japanese standards allprovide stringent emission controls,”comments Sean Waters, Director ofProduct Compliance and RegulatoryAffairs, Daimler Trucks North America.

“Recognising each other's standards asvalid would provide benefits for

manufacturers, fleets, and consumers.Certainly there is the benefit to manufacturersof reduced R&D costs and, in turn, cost ofvehicles - a benefit to fleets. Additionally,allowing manufacturers to focus moreengineers on different value-added tasks, asopposed to focusing effort on variations of thesame emission-reduction tasks, providesfurther benefits to the fleets, such as furtherimproved total cost of ownership.”

“Common standards would free upsignificant engineering and financial resourcesthat could be directed toward innovation ofnew technologies, rather than developingmultiple products to comply with multipleregulatory standards,” says Susan Alt, SVPPublic Affairs for Volvo Group NorthAmerica. “Harmonisation of emissionsstandards could enable Volvo Group to adjustwhere its conventional models are exportedthroughout the world, but emissionsstandards are just one of the elements thatmust be considered before adjusting whichbrands and models serve each market.Electrical systems, such as 24 volt versus 12

volt, or the FMVSS versus EU brakingstandards, and local parts and servicescapabilities must all be considered. Fuel is alsoa consideration. While ultra-low-sulphurdiesel is common in the US, Canada, Australiaand much of Europe, other global marketscontain a patchwork of standards.”

Whereas Waters and Alt both point to theupside benefits of an agreement, Waters alsopoints to the downside impact of continuedfragmentation. “By contrast to the savingsfrom harmonised standards or laws thatprovide for mutual recognition of othercountries' standards, divergent standardsincrease costs and create further issues,” heexplains. “With the EU focusing its efforts onfull-vehicle procedures for GHGminimisation, US laws that regulate the engineseparately from the vehicle miss potentialsystem-level improvements like theoptimised, fuel-saving powertrains in whichDaimler invested so much effort. Moreover,California's proposal to mandate NOxemissions an order of magnitude lower thantoday's near zero levels will deprive fleets inthe state of many of the fuel savings and GHGemission reductions that are developed forcustomers elsewhere in the country and the

82 | Megatrends

Truck industry calls for globalemissions harmonisation CO2 and greenhouse gas are global problems requiring global solutions. The truck industry wantsharmonisation - Daimler’s Wolfgang Bernhard calls it “an historic opportunity that we cannotafford to miss” - but regulators appear more cautious. By Oliver Dixon


FREIGHT EFFICIENCY

world. The cost required to develop suchunique engines, after-treatment, and the on-board diagnostics associated with them wouldsignificantly increase California vehicles' costs,and potentially disrupt the market.”

While much common ground exists betweenthe EU and the US in terms of the need tofocus upon GHG, enabling this in terms of afuture common mandate is a far from simpletask. Many within the industry on both sidesof the Atlantic see the Transatlantic Trade andInvestment Partnership (T-TIP) negotiationscurrently ongoing between the US andEurope as offering an environment suitablefor pursuing this aim. As such, the debatemoves away from one predicated uponindustry issues towards one more prone toa broader political influence.

The European Commission appears to be atleast in part supportive of an exploration ofa common standard: “The Commission iswell aware that there are the differencesbetween the European legislation onemissions from heavy-duty vehicles (Euro VI)and the corresponding US legislation,”commented a spokesperson. “Up to now,nobody has analysed whether thesedifferences also lead to differentenvironmental performances. At the sametime, the costs of these differences forindustry are considerable.

“Regarding technical aspects, thediscrepancies between both pieces oflegislation at the level of technicalprescriptions are important. Hence it wouldbe very difficult to set out a harmonisedstandard that is operative in the short term.However, the Commission considers that,even if the approaches used are different, thelevel of environmental protection providedcould well be similar, hence exploringequivalence of both rules in the frame of theT-TIP is worth considering, thus avoidingcosts of compliance for the industry.”

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

equivalence can be determined for certainsafety requirements are being proposed orstudies are being pursued. The discussions ofwhether some measures or standards can beconsidered collectively or whether suchmeasures are required to be examinedindividually for purposes of driver safety andto meet legal objectives is ongoing.”

But Ian Graig of Washington DC-based GlobalPolicy Group sounds a note of warning. WhileT-TIP negotiations are ongoing, the currentpolitical environment in the US may not beamenable to a successful resolution.

“Many members of Congress are eitheropposed to or only weak supporters of T-TIPand the Trans-Pacific Partnership (TPP) talks,with both liberal Democrats andconservative Republicans seeming especiallywary of any free-trade negotiations,” heexplains. “While most business groups aresupportive of T-TIP in particular, tradeliberalisation is not a top priority in Congressat this time.”

The role of Congress is particularlyimportant here; the Administration needsCongress to revive presidential ‘fast-track’trade negotiating authority, which is alsoknown as trade promotion authority (TPA).Fast-track authority would place a time limiton Congressional consideration of legislationto implement any trade agreement, andwould prevent Congress from amending suchimplementing legislation after it is introduced.This is, according to Graig, essential in thecase of complex trade negotiations like T-TIP.

“The T-TIP talks can continue without tradepromotion authority, but a revival of TPA isneeded before those talks are completed anda deal is signed and implemented,” he says.“Thus at some point the ObamaAdministration and Congress will need toreach a deal on trade promotion authority ifthe T-TIP talks are to succeed.”

While this could provide a significant – andarguably a growing – roadblock, the heavytruck industry could be aided in its aims bythe fact that it is not the only industry thatseeks commonality across both markets.Moreover, as Graig points out, theenvironmental lobby is likely to be lessalarmed by any move towards harmonisation.

“Environmental groups in the US have longbeen wary of free-trade agreements, andhave pushed US negotiators to includeenvironmental provisions in recent FTAs,” hecomments. “This is probably a bit less of aconcern with T-TIP, however, since the US andEU both have relatively stringentenvironmental laws. As a result, a T-TIP accordwould be unlikely to pose a threat to USenvironmental standards or to create asituation in which production was shiftedabroad to take advantage of weakerenvironmental rules.”

This is a high stakes game: the benefits ofharmonisation are, from an industrialperspective, plain to see. The downside –namely continued fragmentation ofregulations that seek the same result – aresimilarly clear. While the OEMs have a clearvested interest in the pursuit ofharmonisation, it is difficult to see quite howeither the environmental or the politicalstakeholders within this debate would bealarmed by a move towards such an end.

So will we see harmonisation?

“Yes, I think it is increasinglylikely that this will happen,”say Scania’s ChiefExecutive, MartinLundstedt. “Emissionsthat are local – NOxand particulate matter –were dealt with by EuroVI. Now we are talkingabout global emissions, CO2,and there I am pretty sure globalharmonisation will happen.

“However, it will be interesting to see howmuch this will be led by legislation. I believethe market economy will have a major roleto play. CO2 is fuel, and fuel is money. Therewe have a natural business logic that wedidn’t have for NOx and particulate matter,where there was a negative offset betweenfuel consumption and particulates. For NOxand particulates, it was more efficient andeffective to legislate than it is on CO2.”

“A common standard does not mean a lowerstandard, and it’s important for T-TIP to focusnot just on short term adjustments but uponlong term benefits,” says Wolfgang Bernhard.“It is an historic opportunity that we cannotafford to miss.”

Megatrends | 83

2020 Vision: a first look at GHG 20 forUS M/HD trucks

Based on discussionswith OEMs, suppliersand analysts, thisAutomotive World reportprovides an earlyindication of industry sentiment towardsthe potential scope of “GHG 20”.

For details on how to access the report,go to: http://goo.gl/DT5McC

Automotive World Briefing2020 Vision: a first look at GHG 20 for US M/HD trucks


At every single Automotive Megatrends Indiacommercial vehicle conference, one issue

has been raised over and over by industryleaders from truck manufacturers, suppliersand logistics providers: the need for GST.

Yet while GST in India has been most eagerlyawaited by the industry, it is no closer toimplementation now than in 2007, when acommittee was established to design a modeland to set up the back-end processesnecessary for GST implementation. With anew government, however, could things beabout to change?

The current situation

The Goods and Services Tax (GST) isessentially a tax which will replace all indirecttaxes levied on goods and services by thecentral and state governments in India, and isbeing seen as the next logical step towards acomprehensive indirect tax reform in thecountry. At present, the range of taxes inforce includes Central Sales Tax, State SalesTax, Octroi (at the city level), Entry Tax (forentering into states) – and the list goes on.

So how exactly will GST benefit India's CVand road freight segments, and more broadly,the country's economy itself? Taxation at a

national level, rather than byeach individual state, will

result in more efficientcross-statetransportation,

smoothing thepaperwork for road

freight companies, andbringing down logisticscosts.

At present, each ofIndia’s 28 states taxes

goods that move acrosstheir borders, at different

rates. As a result,freight that

moves acrossthe countrythrough

various states is taxed multiple times. Worse,there are long delays at interstatecheckpoints, as state authorities review andexamine freight, and apply the relevant taxesand fees.

According to EOS Intelligence, truck delayscurrently average five-to-seven hours atinterstate checkpoints. As a result, a 2,137kmtrip from Delhi in the north to Chennai inthe south typically takes seven days, implyingan un-inspiring speed of 12.7 kph. Owing tothese delays, and traffic jams, Indian trucksaverage 80,000 km per year, compared to400,000 km in the US.

Major reform

65% of India’s freight is moved by road, a factwhich leads EOS Intelligence to see GST ascritical for India. The planned GST systemseeks to replace around 15 state and federaltaxes/tariffs, for a single tax at the point ofsale. According to the firm, GST could be thesingle biggest reform since India's pro-marketreforms in 1991.

"At a macro-economic level, it is forecast thatimplementation of GST alone would add 1.5-2 percentage points to the GDP growth rate,and could lead to an economic gain of asmuch as US$517bn," says Manmeet Malhi,Senior Project Manager, EOS Intelligence.

Conversely, with close to 2.5 million trucksin India, the non-implementation of GST hasresulted in a significant portion of India'sGDP remaining on the country's roads, onaverage, for 15 days, unutilised. This makes itthe most expensive transportation in theworld. In fact, says Raghav Himatsingka,Director of Indian logistics provider, IdealMovers, the complicated tax structure inIndia means many logistics decisions aretaken based on the tax regime rather thanoperational efficiency.

According to Rakesh Batra, Partner andSector Leader Automotive at EY, "The freighttransport industry is highly fragmented, withoperators facing increased competition,

lower profitability despite an increase infreight rates, increased fuel costs and thecontinued heavy administrative burden dueto an array of indirect taxes. If we factor inthe proposed regulations like the end-of-lifevehicle policy being advocated, the impact onthe freight transport by road will be evenmore severe at least in the short run.”

New political regime, new tax regime?

Given that the concept of GST has beendiscussed for a good many years now, thereis renewed interest and hope that it will nowbe implemented thanks to the massiveupheaval in the country's political scenario inthe recent federal elections. The BharatiyaJanata Party (BJP) won with a clear majority,resulting in the charismatic and controversialNarendra Modi being appointed as the 15thPrime Minister of India.

Modi, previously the Chief Minister of thestate of Gujarat, is known, among otherthings, for a pro-development, pro-businessstance. The country now expects its newPrime Minister to deliver on his electionpromises. Among the various reformsexpected of the new government is GST.

"GST was first discussed in 2006 and a launchdate was tentatively set for 2010,” observesAbdul Majeed, a Partner atPricewaterhouseCoopers in India. “There hasbeen a delay of over four years now forseveral reasons. However, there is a need forconsensus both at central and stategovernment levels for this to beimplemented. Having won by a majority, theincoming government may take up this longpending tax reform."

According to Himatsingka, one of the hurdlesstanding in the way of GST implementationis a perception that this will cut individualstates’ tax revenues. If this issue is addressed,he believes there should be no problems inimplementation.

"There is a lot of optimism from the newgovernment because it's the first time in 30


It’s GST time, sayIndia’s business leadersWill India’s new government finally implement the long-awaited GST? By David Isaiah

FREIGHT EFFICIENCY

84 | Megatrends

years that we have a single party majority inthe parliament, so they are expected to takestrong decisions," says Himatsingka.

The strong central government is alsoinstilling optimism amongst CVmanufacturers, that the long-awaited GSTmay finally be implemented. Heavy-duty CVmanufacturer Asia Motor Works (AMW), anoutspoken advocate for GST, not only feelsthe industry needs it to be implemented thisyear, but that and there’s every hope it ofbecoming a reality.

When, not if?

"We are hopeful of some significant progressin GST implementation, especially with astrong central government. Reimbursementto states on any revenue loss would be abottleneck which will be overcome, resultingin some upward revision of overall rates,"says AMW's President – HCV, ARamasubramanian.

It’s more a matter of when, not if, says EOSIntelligence, with all major political partiesacknowledging the benefits of GST. Thequestion, then, is when it will beimplemented. The previous government wasnot decisive in this regard, and, as a result,was unable to push through the necessaryconstitutional changes.

"However, it is believed that contentiousissues such as revenue sharing with states hadalready been resolved,” explains Malhi. “Andgiven that the benefits accruing from GST arenow widely acknowledged across politicalparties, one has to believe that passing the billin the parliament and implementing it latestby 1 April 2015, will be the priority."

Modi's views on GST will be interesting toobserve. As Chief Minister of Gujarat, hisgovernment opposed attempts to pass the115th Constitution Amendment Bill, 2011 toenact GST. The reason: concern over loss oftax revenue to the tune of Rs140bn (June2014: US$2.35bn) per annum.

"Given the huge development wave the newgovernment has promised, GST will be anatural first step to create a unified regimeand to bring the various states together," saysEY’s Batra.

India stands to gain

In introducing GST, says the Confederationof Indian Industry (CII), from a generalperspective, India stands to gain from highereconomic growth, simplification ofadministration and improvement incompliance, a more secure and stable basefor centre and state revenues, more capitalinvestment through elimination of taxcascading, free flow of goods and serviceswithin the common market in India,promotion of manufacturing in India, and theremoval of trade biases against goodsmanufactured in India.

GST's benefits are expected to be felt byvarious sectors, from industry to central andstate governments, trade and consumers. AsGST is expected to reduce the overallproduction costs by 10-15%, this is expectedto have a favourable impact on the prices ofproducts; this will translate into increaseddemand for goods and benefits toconsumers.

"With a unified GST across India, logistics anddistribution costs could go down by almost atenth,” observes Batra. “This will be a directresult of consolidation of stockyards andcreation of hubs in arterial locations, ratherthan having to develop stockages in everystate due to differing tax regimes. Providedoctroi is subsumed under GST, the directresult will be administrative simplification. Key,however, will be deployment of systems andincremental changes that need to be broughtto accompany GST, such as, for example, theability to track the movement of goods.”

Road freight and truck manufacturing– two clear GST beneficiaries

Two segments that GST will impactsignificantly are road freight transportcompanies and CV manufacturers. AMW ishopeful that the implementation of GST willhelp progressively modernise trucking in India,bringing it a step closer to global standards.

"Progressively, the inventory on wheelsshould come down by four to seven days ina fairly short period,” says AMW'sRamasubramanian. “The need for largervehicles will go up and turnaround time willbe a premium factor. Over a period of time,

say 12 to 24 months, one should see animprovement in vehicle demand, especially inlong distance haulage. During this period, thetype of vehicles should shift to those capableof faster and safer travel."

This will raise efficiency, believesRamasubramanian. As a result, operatingeconomics will start to move towards overallvalue added beyond just fuel and initial costs.While the Indian CV industry will still beproducing cost effective vehicles,horsepower, turnaround times and on-roadreliability will compete with fuel and EMI(equated monthly instalment – the wayvehicle loans are spread across a loan period)as equally important operating factors. Bothfreight operators and manufacturers wouldhave to progressively adapt to these realities.

Ideal Movers’ Himatsingka feels two thingsare likely to happen with the introduction ofGST. "Firstly, since companies will not needwarehouses in every state, we can expectlarge regional logistics parks to develop.Perhaps the government - both central andstate - may also actively encourage logisticsproviders to invest in infrastructure todevelop these hubs. This will lead to overallefficiency and reduction in costs for the entiresystem. It should also lead to modernisationof logistics infrastructure and greatercollaboration for shared resources amongstnon-competing companies/industries."

Small fleets with fewer than five trucksconstitute nearly two-thirds of the Indiantruck market. If GST were to be introduced,says PwC's Majeed, it would enable fleetowners to save money and upgrade theirfleets, thereby increasing the efficiency oftheir delivery times across states.

"While the benefits of GST for freightcompanies and commercial vehicles areundeniable, it is tough to estimate how andto what extent it will translate into newvehicle registrations. Moreover, it is alsoplausible that demand might becomeconcentrated on particular segments,"states Malhi.

However GST manifests itself, its impact onthe economy as a whole is expected to bepositive, and these two particularstakeholders look set to benefit directly.

FREIGHT EFFICIENCY


MANUFACTURING & MATERIALS

Vehicle manufacturers worldwide areincreasingly facing the need to make their

vehicles lighter than ever, in order to meetstricter emissions standards. At the sametime, there is an increasing requirement todeliver vehicles with higher fuel mileage.

Such requirements have seen OEMs andsuppliers turn to newer materials, such asaluminium alloys and carbon fibre reinforcedplastics (CFRP), to achieve weightreductions. Each of these materials has itsown advantages and disadvantages, and inmost cases, a common disadvantage hasbeen that of cost.

Steel still holds an advantage when costscome into play, and while aluminium andcarbon fibre composites feature in premiumand sports cars, the mass market still relieson steel. However, with the emergence ofaluminium as a key lightweighting material inthe global automotive industry,manufacturers of conventional automotivesteel have had to up their ante.

Steel suppliers now contend that steelautomotive body structures can, in the nearfuture, be as light as today's aluminiumbodies. Advanced high-strength steels(AHSS) are a step in this direction, and theindustry has now seen several generationsof these steels.

Some OEMs, like Nissan, have turned toAHSS to reduce overall vehicle weight. TheOEM eventually wants AHSS to account forup to 25% of all of a vehicle's parts, byweight, for new production models. TheOEM will start working towards this in2017, and reaching this target will translate

into a 15% weight reduction inNissan's vehicles.

Steel manufacturer ArcelorMittal hasbeen working on, and investing in,AHSS. One of its key product lines forthe automotive sector is Usibor, a press-hardened boron steel, featuring analuminium-silicon coating. Usibor wasdeveloped specifically for the metal formingtechnique known as hot stamping, and it hasstrength of 1,500 MPa after being hotstamped. As a result, it is used mainly for theproduction of structural parts including A-pillars, B-pillars, frontal and rear bumpers,various types of rails, and the tunnel floor.

Megatrends spoke with Dr. Blake Zuidema,Director of Automotive Product Applicationsat ArcelorMittal, about the supplier’sinvestments in automotive body structuredesign technology.

"This has allowed us to look at eachpart of the automobile bodystructure, both individually as wellas holistically,” explained Zuidema,“and helped us to understandwhat kinds of material propertiesare required to make each partas light and safe and fuel efficient,and as low cost, as possible."

Lessons learned

ArcelorMittal's involvementin internal body structuredesign programmes hasresulted in the companyturning this understandinginwards, into its ownproduct developmentsystem.

Steel to play a key role inmeeting 2025 mpg targetsDavid Isaiah talks to Dr. Blake Zuidema, Director of Automotive Product Applications at ArcelorMittal



"We've used what we've learned about theproperties that are needed to make eachpart as light and safe and low cost as possible,and have developed a whole new family ofproducts around that understanding,”explains Zuidema. “So, today you'll see anumber of advanced products, like theUsibor press hardened steel that was afeature in the Acura MDX door ring; you’llalso see things like higher strength dual-phasesteels, the new high formability steels, evensome higher strength exposed steels for usein other body panels."

The use of Usibor in the Acura MDX's doorring has been well received, says Zuidema,with numerous OEMs expressing interest inthe concept. This three-way collaborationbetween ArcelorMittal, Honda and Magna’sCosma International, involved replacing theAcura MDX door ring components with theUsibor-based lightweight laser-welded hot-stamped door ring. The result was a 14%weight reduction.

Global products, local markets

North America and Europe already havemore stringent fuel and emissions standardsin effect than many other markets, especiallyemerging markets. Megatrends askedZuidema whether ArcelorMittal developsautomotive products for North America andEurope, and then adapts them for emergingmarkets as necessary, or if emerging marketsrequired the development of specificproducts, for reasons of cost, for instance.

"While the regulations in North America andin Europe are particularly challenging today,we see a movement all around the world



towards ever-increasing fuel economy andCO2 tailpipe emissions standards,” saidZuidema. “Virtually all developed anddeveloping countries around the world areenacting some sort of CO2 and fueleconomy legislation. So, these lightweightingsolutions are going to become increasinglyimportant, not just in North America andEurope, but all over the world."

Another important trend shaping theindustry is that of vehicle manufacturers’rising use of global platforms. Fewerplatforms or architectures now underpinmore cars globally than ever before. “In termsof imports and exports, there are a numberof instances where an automaker may wishto produce vehicles in one region and shipthem to another, because of the economiesof scale.”

For those reasons, explains Zuidema, “it isextremely important that we have theseadvanced lightweight, cost effective, lowcarbon footprint steel solutions available inall of the markets that we participate inaround the world."

Other materials

There are, at present, many kinds of steelsbeing used by OEMs worldwide, with varyingdegrees of strength, stiffness and weight.However, there is also a growing enthusiasmfor aluminium, as demonstrated by Ford'slatest generation F-150 pick-up, whichfeatures significant quantities of aluminium.Other new materials, such as CFRP, are bothlight and strong.

According to Zuidema, the levels of weightreduction that are now possible withadvanced steels, combined with theadvancements made in powertraintechnologies, mean the fleet of vehicles inNorth America can reach future fuel

economy goals without going to otherlightweight materials.

"Aluminium is, obviously, much moreexpensive, so, if an OEM can get a vehicle toits prescribed fuel economy with steel, itwould be at a much lower cost. Carbon fibreis substantially more expensive. Obviously,we're continuing to watch developments, butwe're not seeing the advancement in cost insome of these carbon fibre materials to reallyallow them to break into the mainstream ofautomobiles that most of us buy and driveevery day.

"The other thing that we're watching verycarefully is the total lifecycle of carbonfootprint that is provided by each of thesevehicles,” adds Zuidema. “We've shown,through our CO2 emissions models, thatcars built of steel have a much lower totallifecycle carbon footprint than vehicles madewith aluminium or carbon fibre."

The reason for this is that while aluminium islight and is an advantage when it comes tovehicular emissions and fuel economy,production of a component out ofaluminium, or carbon fibre, results in moreCO2 emissions than if the part were madeof steel.

"The result is that the small differences in theuse phase of fuel economy between the twodo not make up for the difference in themanufacturing phase. And the steel cars,we've shown, provide a much lower overalllifecycle carbon footprint when all of thephases – manufacturing, use and recycling –are considered."

Looking to the future

Zuidema identifies two key megatrends drivingautomotive product development: fueleconomy and the need for global solutions.

Fuel economy is, in Zuidema’s view, the keyautomotive megatrend, but it needs to bedelivered in automotive products that are alsosafe and affordable. "One of the things wedon't want to do is to achieve lower tailpipeemissions and end up putting more carboninto the environment over the entire life ofthe vehicle,” he explains. “So these overallglobal challenges are driving the steel industryas much as anything right now. And, obviously,you can see that they're also having a profoundinfluence on the automotive industry.”

The growing importance of global solutionsis thanks to the rise of the aforementionedglobal platforms, off which OEMs are buildingan increasing number of global vehicles. As aresult, the need is also growing for solutions,support, and products in all regions of theworld.

To fulfil the demands of these automotivemegatrends, ArcelorMittal is developingMartensite 2,000 MPa strength products, anda next-generation version of Usibor, whichcould provide a minimum of 1,800 MPa.

The use of hot stamping is already increasingacross the automotive industry, but Zuidemasees further significant opportunities for thattechnology and for higher strength, higherformability grades of steel. “Usibor productsenable the carmaker to get the higheststrength possible into very complicatedgeometry parts, particularly within thepassenger compartment,” he explains. “Thegrowth of Usibor will increase over thattime frame.”

Zuidema says ArcelorMittal has looked at thelong-term trends in advanced steelapplications, and, both in terms of the currenttrajectory, as well as advanced solutions for54.5 mpg cars that will be required in the USby 2025. “We see the total advanced steelcontent in the body and structure rising tosomething in the 60% to 65% range, which is aconsiderable increase from where it is today.”

With BMW leading the field in terms of high-volume carbon fibre production, and Fordcommitting to aluminium for its best-sellingpick-up, the race is on for the strongest,lightest, cheapest and ‘greenest’ material forautomotive applications.


88 | Megatrends


On 11 March 2014, the governments ofCanada and South Korea concluded

negotiations on a free trade agreement,almost nine years after negotiations firststarted in 2005. Under the terms of theagreement, Canada will phase out the 6.1%tariff levied on cars manufactured in SouthKorea (mainly by Hyundai and Kia), over aperiod of three years. South Korea willreciprocate by eliminating the 9% tariff oncars manufactured in Canada, immediately.

Union leaders and OEMs in Canada areworried that this deal would prompt a floodof South Korean imports and will bedetrimental to the country’s domesticautomotive manufacturing industry. Unifor, aunion representing 39,000 workers in thecountry’s automotive sector, estimates that33,000 manufacturing jobs in Canada could belost due to the pact. There has been outcryover certain provisions (or lack of provisions)in the FTA as well, with the Canadiangovernment being accused of failing tonegotiate better terms for its domesticautomotive manufacturing industry. Forexample, Canada failed to include the ‘snap-

back provision’ included in the FTA betweenUS and South Korea. Such snap-backs allow aroll-back of tariff reductions, if South Korearesorts to non-tariff barriers, such as currencymanipulation, for example to subsidiseexports. Meanwhile, the Canadian governmentdefended the agreement, saying that such fearswere exaggerated; in 2012, a studyundertaken for the Department of ForeignAffairs, Trade and Development concludedthat the impact of elimination of import tariffsfrom South Korea would only have a modestimpact on domestic production, cutting outputby 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 SouthKorea, while exporting a paltry 3,000 vehicles(worth US$92m) in return, it is clear thatCanada does not manufacture the type ofvehicles that are in demand in South Korea; inthe immediate term, only one automotiveindustry will gain from this FTA: South Korea’s.

However, the trade agreement offersimproved access to the Korean market for

Canadian-made vehicles, where competitorsfrom the US and the EU have beenbenefitting from preferential access, as aresult of their respective FTAs with SouthKorea. And, more importantly, the agreementalso provides an opening to the vital andburgeoning wider Asian automotive market,which is currently one of the most excitingautomotive markets in the world. SouthKorea is the perfect choice to launchCanada’s move to deeper economicintegration with Asia.

It is quite ironic, that ever since Canadasigned the FTA with South Korea, all thediscussion has centered on South Koreanimports flooding the Canadian market;looking at the big picture, it’s not hard toascertain that the real problem for Canada isthe lack of geographic diversification of itsexport-oriented domestic automotivemanufacturing.

With nearly 90% of vehicles manufactured inCanada geared for export, the country hasone of the most export-oriented automotiveindustries in the world. And although Canadais the largest vehicle exporter to the US(followed by Japan), and remains a ‘global topten’ vehicle manufacturer, the country’sautomotive exports are limited to NorthAmerica; 97% of the deliveries are shipped toits NAFTA partners, mainly to the US. Notsurprisingly, Canada is the only country thatis so dependent on a single market for itsautomotive exports. So the obvious questionis, what’s wrong in concentrating on a singlemarket? And the answer is equally banal:nothing, as long as you hold on to yourmarket share.

It is interesting to note that despite theexclusive focus on the US, Canadianautomotive exports to the country lost asignificant market share in the world’s secondlargest automotive market. Canada’s share inoverall US automotive imports dropped to


Is Canada’s automotive manufacturinggoing down under?Canada must take urgent measures to prevent its vehicle manufacturing industry suffering asimilar fate to Australia’s, warns Manmeet Malhi


20% last year, from a peak of 31% in 2000 andan average of 25% since the mid-90s. And oneof the main reasons for the loss of marketshare is Mexico, which has made significantgains at the expense of Canada. Since NAFTAwas signed 20 years ago, automotiveproduction in Mexico has more than tripledand automotive exports have quadrupled.Moreover, Mexico is expected to overtakeJapan as the 2nd largest automotive exporterto the US in 2014 and eventually overtakeCanada as the largest automotive exporterto the world’s biggest economy in 2015.

Most major automotive manufacturingcountries, such as Japan, Germany, SouthKorea, the US and Mexico (Canada’s NAFTAtrading partners), have diversified theirautomotive export markets. While USexports outside of NAFTA now exceed 10%of overall US production (a fourfold increaseover the past decade), corresponding figuresare even stronger for Mexico, which nowexports almost 20% of its automotiveproduction beyond North America.

The recent FTA with the EU providesCanada with the opportunity to diversify itsautomotive export markets and reduce itsdependence on the US. This might be the lastopportunity to save Canada’s automotivemanufacturing industry from meeting thesame fate as Australia’s.

Although Canada produced 2.37 millionvehicles in 2013 and is still one of the top 10automotive manufacturers in the world, it is

easy to draw comparisons with theAustralian automotive manufacturing market:

• In the past, the local automotivemanufacturing industry in both countrieswas heavily protected by tariffs, which ledto a thriving domestic automotivemanufacturing industry;

• Neither country has a strong domesticbrand; for example, South Korea hasHyundai and Kia, Germany has VW,Daimler and BMW, while Japan hasToyota and Honda;

• Both countries have small populationsand high vehicle penetration rates,implying that they don’t have a voraciousappetite for purchasing new vehicles;

• Both countries have a rather strongcurrency, which has meant that they havefound it harder to compete withrelatively low-cost automotivemanufacturing destinations such asMexico and Thailand.

Consequently, the automotive manufacturingindustries in both countries have becomedependent on exports to support and sustainthe heavy investments made in developing arobust automotive cluster.

Moreover, both Australia and Canada are richin natural resources and not surprisinglyeconomies of both countries are driven by theprimary sector. To satiate the ambitions of

their respective domestic agri-food, farmproduct and mineral resource businesses, bothcountries have had to enter into FTAs to gainaccess to new and bigger markets. Naturally,some compromises have had to be made andunfortunately, in both countries, it has been atthe expense of the automotive sector.

In Australia, this culminated with Ford, Toyotaand GM’s Holden taking the drastic decisionto close their Australian manufacturingoperations; this has meant that come 2017,Australia will no longer be producing anypassenger cars.

The list of challenges facing the Canadianautomotive manufacturing industry is long, andthe future of an industry that employs 115,000highly skilled workers looks bleak. But theprecedent set by automotive OEMs in Australiashould serve as a wake-up call to automotivemanufacturing stakeholders in Canada –international automotive manufacturers owe noloyalty to Canada, and they will shift productionto countries, such as Mexico, which are morecompetitive and can deliver sustainable bottom-line growth. As Canadian automotive output wasmore than ten times that of Australia, it mightbe premature to think that a country with sucha huge automotive manufacturing infrastructureand legacy could go down; but unless steps aretaken to fix the structural problems in theindustry, there’s a very real chance that it coulddie a long, painful death.

Manmeet Malhi is a Senior Analyst at EOSIntelligence.


Toyota Manufacturing plant, Cambridge, Canada

Honda of Canada Manufacturing, Alliston

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Megatrends | 93

To meet demand in South America’s twolargest markets, OEMs have implemented

a manufacturing strategy which involvesassembling different vehicle models inArgentina and Brazil, and exchanging them inorder to benefit from the terms of theMercosur trade agreement.

The existing trade agreement between thetwo countries has been in effect for the last

14 years. Negotiations are under way towrite a new agreement covering imports andexports that is expected to guide futuretrade between Argentina and Brazil.

In June 2014, the two countries extended thecurrent agreement by another year, to 30June2015. Under the terms of the extension,for each US$1m of cars imported fromArgentina, Brazil can export US$1.5m to that

country. Previously, the agreement called forUS$1.95m exported by Brazil versus US$1mimported from Argentina.

The new vehicle markets in Argentina andBrazil are currently topped by fairly similarsegments, with the sub-compact B-segmentaccounting for more than 50% of sales.

Here we take a closer look at activity in thenew vehicle markets in Argentina and Brazil,and consider the longer-term impact of thesetrade negotiations.

Argentina in 2013: it was a very goodyear…

Full year vehicle sales in Argentina in 2013totalled 955,000 units, a 13.5% increase year-on-year. The growth was driven by the highrate of inflation - officially 10%; in reality, 30%- which made customers look on cars as asecure investment. There was also a highdiscrepancy between the official dollar and

All change for OEMmanufacturing strategiesin Argentina and Brazil?CARCON Automotive’s Julian Semple considers likely changes in import and exportagreements between Argentina and Brazil, and why South America’s two largest new vehiclemarkets need each other

93 | Megatrends



the black market dollar, which made vehiclepurchasing a good deal for those with foreigncurrency (historically, Argentineans havesaved US currency).

The number of vehicles imported intoArgentina rose by 18.5% in 2013, from488,864 units in 2012 to 579,060 units;meanwhile, exports grew by 4.8% in 2013,from 413,500 to 433,300 units. Brazil wasthe source of most imported vehicles, andthe destination for most of Argentina’svehicle exports.

…while Brazil’s 2013 disappointed

The decline in Brazil’s new vehicle marketin 2013 has been well documented; thetotal, of 3.76 million units, was down by0.91% on 2012’s figure of 3.8 million units.The decline was attributed to the bankstightening conditions for loan approvals, anda lower full year GDP, which ended at 2.3%compared to the 3.5% forecast at the startof 2013.

New vehicle imports fell by 10.8% in 2013from 784,100 units in 2012 to 699,600, dueto the higher IPI tax on imports. Exports,however, grew substantially in 2013. At563,300 units, the total was up by 26.5%(2012: 445,200), with the main destinationbeing Argentina.

2014 won’t be a great year for eithermarket

Argentina’s automotive market is showingsigns of slowing in 2014, and year-to-datesales in May were down by 22.7%, at 328,700vehicles, compared to 425,500 in the sameperiod last year.


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) andTrailBlazer (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


Brazil is again experiencing a marketslowdown; the YTD May sales total of 1.4million vehicles marks a 5.5% decline overthe equivalent period in 2013, when salesreached 1.48 million vehicles.

South America’s two largest vehiclemarkets need each other

The Argentinean automotive industry is highlydependent on exports to Brazil. Vehicleproduction was up 3.5% from 764,500 units in2012 to 791,000 in 2013. Argentina produceda total of 257,500 vehicles from January toMay 2014 and 137,000 were exported, mainlyto Brazil. Currently, exports account for 52%of Argentina’s vehicle production. The latestCARCON forecast for 2014 sees productionof 600,000 light vehicles in Argentina, a 23%drop from last year.

As illustrated by the accompanying chart,40% of light vehicle production in Argentinais made up of B-segment cars, followed bypickups at 25%.

Like Argentina, vehicle production was up in2013, rising by 9.9% from 3.4 million to 3.74

million units, with the increase attributed tohigher demand in Argentina.

In the period January to May 2014, Brazilproduced a total of 1.351 million vehicles,with 146,000 units exported, mainly toArgentina. Currently, exports account for10% of Brazil’s vehicle production. The latestCARCON Automotive forecast for 2014sees production of 3.3 million light vehiclesin Brazil, a 5% drop from 2013.

The accompanying chart shows that in Brazil,B-segment cars account for almost 70% of itslight vehicle production, followed by pickups,which account for 12%.

Foreign exchange

With a few exceptions, OEMs that haveplants in both countries produce differentvehicle models in each country and exchangethem, as detailed in the accompanying table.This strategy avoids duplication ofmanufacturing processes in the twocountries and provides higher volumes of agiven model at one plant only, whileoptimising investment in tooling and facilities.

What does this all mean for thefuture?

There are, of course, other OEMs producingin Brazil that don’t have plants in Argentina,such as Hyundai, Mahindra, Mitsubishi, Nissanand Suzuki. Over the next two years, thefollowing light vehicle brands will also beginproduction in Brazil: Audi, BMW, Chery, JACMotors, Jeep and Land Rover.

Since both countries levy high taxes onvehicles not produced in the Mercosurcountries or Mexico, which has a tradeagreement with Mercosur, OEMs that plan toenter or increase sales in either Argentina orBrazil will need to develop a manufacturingstrategy that also looks at the other country,and possibly also Mexico.

Vehicle trade between both countries is vital,but there’s an important additional step totake in order to conquer new exportmarkets: recent OEM strategies have seennew products launched in South America thatare of global standard, and could easily beexported providing the price and rate ofexchange are favourable. This scenario iscompletely different from the one we haveseen in the past, where vehicles built in theregion were outdated and had lowertechnological and safety content, and certainlycould not perform on the global stage.

Julian Semple is a Senior Consultant andManager at CARCON Automotive.



Making money from old rope – orindeed any waste product – has long

been something of a Holy Grail inmanufacturing. It’s a safe bet that futuregenerations will despair at how long it hastaken to come up with a means of usingrubbish as an energy source. There’s gold inthem thar hills of landfill waste – literally. Aswell as the gold, a considerable proportionof the electronics goods alone that arethrown away contain silver, precious metalsand rare earth.

Unfortunately, the quantities of thesematerials in any one device are very small, sothe trick lies in accessing them. The combinedworth in a landfill site may run into attractivemulti-digit dollar values in a single location,and into billions globally, but so too does thecost of developing and maintaining efficientmeans of extraction.

However, the unpleasant smell of a landfillsite indicates something much more easilyand immediately accessible: gas. Given therate at which landfill sites are being filled, thiscould reasonably be considered a renewableenergy source.

Toyota has recently announced that it isconverting landfill gas to manufacturingenergy at its Georgetown, Kentucky plant.Toyota’s largest plant outside Japan currentlybuilds the Toyota Camry and Avalon ranges,the Venza and engines. The Lexus ES 350 willbe added in 2015, when the landfill gassystem is also scheduled to becomeoperational. The OEM claims the powergenerated from landfill gas will be sufficientto build 10,000 cars annually.

Toyota is not the first OEM to use landfill gasin vehicle production. Together, GM’s Orion(Chevrolet Sonic, Buick Verano) and FortWayne (Chevrolet Silverado, GMC Sierra)plants use landfill gas power to save 89,000metric tons of CO2 manufacturing emissions,equivalent to the greenhouse gas output of18,542 cars. GM also saves US$10m inenergy costs across the two facilities. Sincethe early 2000s, BMW has been using landfillgas to power manufacturing at Spartanburg.The South Carolina plant is becoming thecentre of production for BMW’s SUV range,and current expansion plans will shortly seeit become the OEM’s largest plant globally,with output of over 400,000 upa. And in

Mexico, Nissan is working with ENER-G tosource gas from a landfill site close to itsAguascalientes plant (Nissan March, Versa,Note, Sentra and Frontier) to power itsmanufacturing there. 2.475 MW of cleanenergy are delivered to Nissan, which it saysis sufficient to produce 37,000 vehicles peryear.

Landfill site operators have for some timeused the waste gases to power on-siteoperations; piping it off-site to localmanufacturing facilities for commercial gainis a new, but growing business strategy.

At present, OEMs’ efforts focus onconverting gas to manufacturing energy. Thenext step could be to use it to power cars.Some landfill gas is already being used in theproduction of biomethane which, onceprocessed, can be used in CNG and LNG asa transport fuel.

That unpleasant landfill smell? That’s the smellof money and green energy.

This article was first published as a Comment onAutomotiveWorld.com


Landfill gas and the smellof green energyFuture generations will despair at how long it's taken to use rubbish as an energy source

By Martin Kahl

DSM, the inventor of Diablo technology, o� ers you a complete portfolio of high-performance plastics for every component in air induction systems, including ducts, resonators and end caps. If you are looking for solutions to replace metal or rubber, know that our portfolio provides suitable materials for virtually every temperature range. Our Stanyl® polyamide 46, Stanyl Diablo and Akulon Diablo thermoplastics o� er the ideal solution thanks to their ability to operate at up to 230°C. Visit our website to learn more about our solutions in air-management:WWW.DSM.COM/AIR-MANAGEMENT

For him, Bright Sciencemeans developing best in classheat performance.


Early this year, Nigerian President GoodluckJonathan voiced his government’s

commitment to implementing the country’snew national automotive policy. It is perceivedthat this new policy will encourageinvestments in the country’s automotiveindustry, and is expected to increase theinflow of technical expertise as well.

Nissan has a stake in the country’s developingautomotive industry and has set up its ownvehicle manufacturing plants in the country.On 25 April, Nissan rolled out its first locally-assembled vehicle, a Patrol SUV, at themanufacturing plant in Lagos. This follows a

signing of a Memorandum of Understanding in2013, between the Renault-Nissan Alliance andWest African conglomerate, Stallion Group.

“For Nissan, Africa is our strategic growthdriver. Demand for cars is growing quickly inAfrican markets as demonstrated by the firstmodel being produced a mere seven monthsafter the announcement of the newautomotive policy. By acting quickly to beginproduction in Nigeria, we are securing forourselves first-mover advantage,” saidTakashi Hata, Nissan Senior Vice Presidentand Chairman for the Africa, Middle East andIndia region.

Among the top-ten countries of the world,by population, Nigeria is one of only twocountries that do not have a developedautomotive industry. The country has a largepopulation and currently ranks seventh in theworld. What it also has is a growing middle-class segment of around 38 million. This risein the middle class, the government says,translates into a potential vehicle market ofaround one million vehicles annually.

Annual spending on vehicle import was morethan Nigerian naira 550bn (US$3.5bn),making this segment the second largest userof foreign exchange. Because of its large


In April, Nissan's Lagos plant rolled out its first locally-assembled vehicle, a Patrol SUV, giving theOEM first-mover advantage in Africa's most promising new market. By David Isaiah

Nissan takes early advantageof Nigeria’s new auto policy


population, the country also has a potentiallylarge workforce. Setting up manufacturingoperations in this country would also provideaccess to automotive markets in West andCentral Africa.

However, significant challenges persist.Nigeria’s sales have performed poorly, and theNational Automotive Council attributes thisto factors such as low patronage bygovernment and the general public; very lowcapacity utilization; poor perception of locallymade vehicles; high-cost operatingenvironment; insufficient governmentprotection policy; absence of low-cost long-term funds; weak and deterioratinginfrastructure, and inconsistency in tariff policy.

The new policy addresses factors of thecountry’s automotive industry such asindustrial infrastructure, skills development,standards, investment promotion and marketdevelopment.

The automotive sector is a key componentof the Nigerian Industrial Revolution Plan

(NIRP), a five-year programme developed bythe Federal Ministry of Industry, Trade andInvestments. The Automotive IndustryDevelopment Plan was formulated afterconsultations with existing local automotivemanufacturers and global vehiclemanufacturers. Some like the Renault-NissanAlliance and Toyota have indicated theirwillingness to invest in Nigeria, if there is acomprehensive automotive industrydevelopment plan in place.

“An automotive industry will createsignificant good quality employment and awide range of technologically advancedmanufacturing opportunities. This industrialbase can then form the foundation of othermodern advanced manufacturing activities.For example, commercial vehicleproduction will lead to the manufacture ofagricultural, mining and railway equipment,military hardware and transport,” thepolicy states.

Nissan says its growth strategy in Africagained momentum with the introduction of

Nigeria’s new automotive industry policy thisyear. In fact, the OEM claims to be the firstmajor vehicle manufacturer to build a car inNigeria, in response to the introduction ofthe new policy.

“We are grateful to the Nigerian governmentfor implementing automotive legislation thatis conducive to investment and that wasinstrumental in our decision to open anassembly plant in partnership with theStallion Group, already our exclusivedistributor in Nigeria,” Nissan South AfricaManaging Director Mike Whitfield has said.Whitfield also heads Nissan’s Sub SaharaAfrica region.

In addition to the Patrol, Nissan's productionplans include the Almera and NP300. Sincethe announcement of the policy, the NationalAutomotive Council says it has been receivinginquiries from OEMs such as Volkswagen,Honda, Kia and Tata Motors as well.



Nissan’s Nigerian assembly has started with the Patrol SUV


From lightweight aluminium bodies toultra-high strength steels via hemp, wood

and other natural fibres, a variety of newmaterials and manufacturing techniques areenabling the automotive industry to replacetraditional parts with lighter alternatives.

One of the most significant materialsdevelopments is the arrival of carbon fibrereinforced plastic (CFRP) in mainstream cars.The recent launch of the BMW i3 markedthe first large-scale series production run ofthe material, bringing it out of the realms ofthe supercar and within reach of the carbuying public.

Paying LIPA-service to CFRP

CFRP is of huge interest to stakeholders atevery stage of the automotive supply chain,from vehicle manufacturers down to thematerials suppliers. One such materialssupplier is DSM, the Heerlen, Netherlandsheadquartered global diversified group whichdelivers materials to the health, nutrition andmaterials sectors. DSM’s interest in CFRP ledto the company becoming the plasticsmaterials supplier for LIPA, a Europeanconsortium of industry and academia formedto develop and validate mass-productionprocess technology for plastics composites.

LIPA – “Lightweight Integrated ProcessApplication” – has resulted in the developmentof an automated manufacturing process forautomotive thermoplastic composites. Thisinvolves preheating a preform of thermoplasticimpregnated continuous fibres, known as anorganic sheet, transporting it robotically to aninjection mould, and overmoulding it withthermoplastic to create the final part.

However, despite the use of CFRP in a €35,000(US$49,000) BMW, it is essential that projectslike LIPA continue to research ways of reducing

CFRP’s high manufacturing costs to make it atruly viable consideration. Although CFRPoffers several advantages, such as high stiffness-to-weight and strength-to-weight ratios, its usein the automotive industry will remain limiteduntil manufacturing costs can be reduced,believes Keith Siopes, Automotive OEMManager at DSM.

“CFRP composites will likely have limitedmainstream usage until the price of carbonfibres, and the manufacturing costs, comedown to a level that make them commerciallyviable versus alternatives, or until all otheralternatives to achieving regulatory mandateshave been exhausted,” Siopes tellsMegatrends. “Until then, there will likely beseveral niche opportunities for highperformance platform derivatives and specialcases.” DSM, he says, is evaluating a variety ofcombinations of alternative base resin, filler,design and processing to optimiseperformance, weight and costs.

Efficiencies in cost and manufacturing

DSM is primarily a plastics supplier; while itsparticipation in LIPA is for a future role inautomotive CFRP, the company already offersa wide variety of products for the automotiveindustry, the three key ranges being Stanyl,Akulon and EcoPaXX.

Almost all OEMs use Stanyl resin in timingchain systems, says Siopes. “In somesystems, it has shown fuel economyimprovements of 1% and CO2 emissionsreductions of 2-3g/km.”

The second key product range for DSM isAkulon polyamide 6, which is used to helpreduce the weight and cost of oil sumps. “Thenew Mercedes S-Class features abreakthrough oil sump made from ourunique Akulon Ultraflow polyamide 6, whichweighs 50% less than its metal equivalent,while meeting every performance criteria.”


Lightweighting drives materialsinnovation, inside and outMaterials suppliers play a key role in automotive product innovation, from unseen under-the-hoodapplications to Class A surfacing. Megatrends talks to DSM about lighting and lightweighting

By Martin Kahl


Another resin, used as an alternative to metalfor weight reduction purposes, is EcoPaXX.Siopes explains: “This high performance, bio-based polyamide 410 resin is made principallyfrom castor beans. It’s the material of choiceto replace metal for weight reduction inmany demanding automotive applications.”These include high temperature applicationssuch as engine and crankshaft covers.

Exterior parts and lighting

A glance at DSM’s product range suggeststhat much of what it offers is targeted atimproving the vehicle's efficiency throughunder-the-hood products, but Siopes is keento emphasise that DSM also offers productsfor visible areas of the vehicle. “We currentlysupply Akulon resin for many exterior trimapplications, including roof racks, doorhandles, grille opening reinforcements,exterior mirrors and cowl vent grilles. Inmany of these applications, Akulon UV hashelped reduce costs by eliminating the needfor painting.”

Lighting is another area with potential forinnovation in thermoplastics. “It is one ofthe most demanding automotive areaswhen it comes to thermoplastics, but alsoone of the most potentially rewarding,” saysSiopes. “There is huge potential for next-generation plastics that combat outgassingand encourage miniaturisation. Thanks totheir ability to operate at very hightemperatures, they can also contribute toincreasingly bold new designs. We offermaterials that address these complexdemands in a wide range of applications.”Siopes lists a number of lighting productlines, including front light frames, bezels,lens holders, daytime running lights and

park and turn lights, lamp holders andsockets, and thermal conductive plasticsolutions for new LED systems.

Agility to satisfy emergingrequirements

With a range of products reducing weight,cost and manufacturing complexity, the roleof a materials supplier like DSM is dictatedby the needs of each customer. “Our valuepropositions vary, depending on the needs orissues to be addressed by customers atdifferent stages of the value chain,” saysSiopes. “For example, Akulon Ultraflow is arobust technology that we developed andapplied to our Akulon PA6 product lineseveral years ago. It offers the superior flow,good aesthetics and fast injection mouldingprocess cycles versus alternatives. Forinjection moulders, Akulon Ultraflow enableshigher manufacturing throughput, and insome cases, it has helped streamline themanufacturing process by eliminating theneed for post-moulding shrink fixtures toattain flat parts.”

This, Siopes explains, enables OEMs andsuppliers to expand the design pallet for‘difficult to mould’ designs, and enables costand weight reduction. He adds that it mayalso lower tooling investment because fastercycles translate to fewer tools required forhigh volume programmes.

“As the technology in vehicles becomesmore complex, there’s an alphabet soup ofneeds and developments stewing,” grinsSiopes. These needs require numerouscombinations of thermo-electro-mechanicalperformance, coupled with long-termresistance to various oils and chemicals. Thetrick, he says, is to be adept at anticipatingthese emerging needs. “Companies thatdevelop and commercialise products,processes and designs, to meet one or moreof these needs, at the right time and at theright price, will earn preferred supplier statuswith the OEMs,” Siopes summarises. “AtDSM, we’re committed to earning andmaintaining preferred supplier status throughongoing partnering, needs assessment andcustomer-focused solutions development.”


The global automotive retail industry isbecoming unrecognisable from what it

was 20 years ago, and the pace of change isonly picking up. Digitisation is reshaping thetraditional sales and service formats, andcustomers themselves are changing theirinteraction and communication patterns inresponse to the rise in mobile technologiesand social media. McKinsey's 2013 RetailInnovation Consumer Survey takes a closerlook at the changes taking place in automotiveretail and the various strategies currently

being adopted. McKinsey’s senior partnerHans-Werner Kaas spoke to Megatrendsabout the latest research findings and possiblefuture directions for the industry.

Dealership numbers

McKinsey's analysis takes into accountresponses from around 4,500 customersacross the US, Europe, and China - regionswith a marked difference in the dealerlandscape. In the former two regions, the

number of new-car dealerships has fallen by15% since 2008. Kaas explains: "The reductionof dealerships in the US and Europe wasdriven by the necessity of economic pressureduring the recession of 2008-09. That was anatural consolidation, so remaining dealerscan become more profitable."

In 2009, both General Motors and Chryslermade headlines with their drastic dealerreduction programmes, implemented as partof their bankruptcy restructurings. GM


RETAIL (R)EVOLUTION

Retail challenges demand moreintegrated approach, and soonThe car retail industry needs to get ahead of the game, or risk getting left behind, as McKinsey’sHans-Werner Kaas explains to Megatrends

By Megan Lampinen

slashed its US dealer count by 42% to 3,605by the end of 2010. Chrysler shut down 789US dealerships, representing 14% of its salesvolume. At the time, Chrysler's then ViceChairman and President Jim Presscommented: “The unprecedented decline inthe industry has had a significant impact onour sales and forced us to reduce productionlevels to better match the needs of themarket. With the downsizing of operationsafter the sale and reduction of plants andproduction, similar reductions must be madeto the size of the dealer body.”

In China, meanwhile the number of dealershas more than doubled since 2008. "Whenyou look at China, it is a completely differentsituation and has seen a dramatic growthmarket over the last ten years," says Kaas."Although China's economic growth rate hassoftened a little recently, it is still growingsubstantially on a very high basis now. Youneed to provide access to the increasingnumber of car buyers, including the first timecar buyers."

As a result, dealerships are not just growingin number but are also expanding to newregions around the country. "They havemoved beyond the Tier 1 and 2 cities, intoTier 3 and 4 cities," notes Kaas. This could gotoo far, though, and Kaas cautions that

"economic health is required for any dealer.Each OEM needs to make sure that it doesnot lead to an unhealthy, economicallyunviable dealer body by increasing thenumbers in too strong a manner."

In fact, a 2013 report from Sanford CBernstein warned that an increase in thenumber of car dealership in China would belikely to result in declining profits for

dealers. It warned that “a crunch in returnsis inevitable.”

China's dealer network growth comesdespite the new car registration restrictionsin place in several big cities. Implemented asa means of curbing high pollution levels,these caps limit the number of individualsthat can purchase a new car at a given time."I'm sure that the Chinese policy makers will


RETAIL (R)EVOLUTION

RETAIL (R)EVOLUTION

weigh carefully the requirements from anenvironmental standpoint, fighting pollution,against the further economic developmentof society," observed Kaas. "You certainlymight see a thoughtful selection of a dealernetwork of where the locations are for anOEM and the minimum size of a dealer.Those decisions will absolutely becomemore critical."

Shrink the dealer network - it’s timefor virtual reality

McKinsey believes that globally, the dealernetwork needs to shrink. With nearly 50%of dealer networks underperforming,additional closures would effectively reduceperformance spread. This alone, though, willnot be enough: "While reducingperformance spread is a prerequisite forimproving current retail networkperformance, it will, on its own, neitherensure future success nor transform today’sdealer network into a modern, multi-format,innovative sales and service experience forthe customer."

In general, it wants to see more fullyintegrated customer relationshipmanagement and dealer performancemanagement systems. McKinsey believes thisallows both dealers and OEMs to better usecustomer data and provide real-timetransparency and insights into retailperformance.

Audi has emerged as one of the leaders inthis approach. The German OEM has beensupporting its dealerships' digital marketingby offering dealers a standardised set ofdigital tools (search engine optimisation andbanner advertisements) to help themgenerate more qualified leads. At GM, morethan one-third of the OEM's dealers havestarted offering the OEM's new onlineshopping tool ‘Shop-Click-Drive’. Thesoftware 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 vehicledelivery. Kurt McNeil, GM's US Vice Presidentof US Sales Operations, told us the toolmakes "it easier for the dealer to build apersonal relationship with the customer.”Others, including Mercedes-Benz, BMW, andFord are providing iPads to their dealers forsales staff to use with customers.

The technology goes far beyond this,however, as some showrooms do away withphysical cars altogether. Jaguar Land Rover'sVirtual Experience is a portable system thatallows customers to engage and interact withan almost life-size high-resolution image ofany model. That's a digital image, not aphysical model. The portable system can beset up almost anywhere – showrooms orpublic spaces – to provide virtual ‘hands-on’access to the range.

Audi is also an early mover in the digitalretail sphere. It now operates three‘Cyberstores’ - located in Beijing, Londonand Berlin – and it plans to open 20worldwide by 2015. These virtual brandcentres are located in the heart of thrivingurban centres, where space is at a premium.With no room to display a full range ofvehicles, these locations instead displayAudi's entire model range completely indigital and “almost true-to-life” form,projected on floor-to-ceiling projectionsurfaces. Prospective customers can usemedia technology to configure a customisedAudi, book a test drive or directly order theproduction of their car.

Other brands are dropping the reference tovehicles altogether, as seen with the likes ofLexus' Intersect brand experience space inTokyo. Opened last August, the location isdescribed as “unique-luxury spaces wherepeople can experience Lexus without gettingbehind a steering wheel. Neither a dealership,nor a traditional retail space, guests are ableto engage with Lexus through design, art,

fashion, culture, film, music and technology.”Instead of seeing physical Lexus cars, visitorscan buy a coffee and view a lifestyle andculture exhibition. Moving on to the secondfloor they can purchase various luxury itemsand snack at a café.

Mark Templin, Executive Vice President ofLexus International, explained that thelocations are meant to serve as a“comfortable and inspiring space forinteraction among people and betweenpeople and cars.”

New strategies build brandperception – but do they sell cars?

McKinsey is optimistic on the impact of thesevarious alternative approaches, but so farthere is little data to indicate theireffectiveness in generating car sales. "The juryis still out in terms of actual conversion ofsales leads. Nevertheless, what those newformats do is certainly help to reinforce andbuild brand perception," says Kaas. "As acaveat comment, such a new format alonecannot be the ultimate and only driver ofsales conversion. What we emphasise andwhat we have empirically proven in ourresearch is that you need an integratedapproach of all the touch points of aconsumer and you need to know for aconsumer or segment what the preferredtouchpoints are - whether it's word of mouthreferral to friends or online forums in thedecision phase. However, the decision phasestill happens in a dealership. That informationand the relevance of touchpoints isabsolutely critical. I think all OEMs will stepup their efforts in understanding theircustomers there.

Transformation is vital...and inevitable

McKinsey believes dealerships will remain acrucial touch point for consumers, but thevariety and number of touchpoints isgrowing. "In understanding touch pointpreferences it's more important to look atthe demographics and preferences of aconsumer that characterises his attitudinalcharacteristics but also purchase and usagepreference. And different consumer segmentswill have different types of touch pointjourneys," says Kaas.

The end message from Kaas is thattransformation is inevitable if dealerships areto meet the coming market challenges. Thereis no 'one size fits all' approach for alldealerships, but a general integration oftraditional techniques with new formatsoffers the most promising strategy, and onthat will both keep customers happy andimprove dealer profitability. The importantthing now is to start acting or risk getting leftbehind: "Those that do not move ahead couldfind themselves driven out of business in themid to long run.... So there is no time to lose– the time to act is now."


RETAIL (R)EVOLUTION

OEMs

First Tiers

OSV, Middleware, Hardware, and Services Suppliers

Silicon

www.genivi.org

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 market-ing 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 integrat-ed 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.

How the GENIVI Alliance Works

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.

Customer care is becoming increasinglyimportant for automotive

manufacturers, and as a result, they arestarting to become more involved in theafter-sales and service sector. Not only doesthis make for better customer relationshipswith dealers and improve brand loyalty, butit provides a lucrative and steady source ofrevenue to balance the cyclicality of the newcar market. Megatrends spoke with three topFord executives about the company's ownefforts in the service segment and itsambitions for the future.

Quick and easy... and lucrative

"We see service becoming more and morecritical in the whole ownership experience,"explained Frederiek Toney, Vice President ofGlobal Ford Customer Service.

Ford started to make significant moves intothe service sector about 20 years ago, said

Toney, with a focus on quick and easymaintenance and repair. "We wanted toimprove the overall ownership experience byproviding our customers with a fast andefficient maintenance service at dealershipsacross the world. It helps us connect with thecustomers in a way that fits in with their fast-paced lifestyle," said Toney.

The first store, called Rapid Fit, emerged inthe UK in 1993 and was the inspiration forthe now expansive Quick Lane Tire andAuto Center network in the US, whichlaunched in 1997. Quick Lane centres offerroutine vehicle maintenance like oil andfilter changes, brake repair, tyrereplacement and general light repairservices - no appointment necessary. Aservice takes between 30 and 45 minutes -any jobs requiring more intensive work arerelocated to a different service shop. Allvehicle makes and models are serviced, notjust Ford.

The business has benefited from the trend oflonger ownership - drivers are now keepingtheir cars for longer, giving service providersan even more important role. "We are seeingten-plus years for cars on the road in bothEurope and the US," said Toney. This has beendriven both by recession concerns by buyers,hesitant to make big purchases in abackground of economic uncertainty, and byimprovements in technology. "Cars can runbetter for longer. With people taking goodcare of their cars, there's no reason for themnot to be durable and lasting.”

Conquest customers

Notably, the Quick Lane service has proveneffective in not only retaining Fordcustomers, but bringing in new ones. DonCape, Global Quick Lane Business Manager,noted: "Our Quick Lane dealers continue toretain and capture conquest owners at ahigher rate than our non-Quick Lane dealers.


OEMs are looking beyond sales as the ever more lucrative service sector promises steadypayback

By Megan Lampinen

Ford enjoys life in the Quick Lane

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If you give customers the service the waythey want it and they have a goodexperience, they will come back. We've seenyear over year, our Quick Lane dealerscontinue to perform better. That's one of thereasons we at Ford are so bullish in supportof Quick Lane."

As a network, non-Ford vehicles account forabout 25% of the services carried out atQuick Lane centres. However, at somedealers this can reach up to 80%. Thepotential for conquest sales in such aninstance is huge: "That Quick Lane dealer hasthose customers coming in that he canmarket a new car to. That's a big advantageto our dealer network," said Cape.

Involvement in the service side of things alsoprovides a constant revenue streamcompared to the more cyclical car market. Arecent study from McKinsey, 'Innovating AutoRetail', found that less than 20% of dealermargin in the US came from new car sales -the remaining margin came from services andparts and used car sales.

Cape explained: "It's very similar to ourdealership fixed operations business, which isvery stable. It's a great revenue source for thatdealership and Quick Lane is no different. Ourdealer operators say it gives them anotherrevenue stream so they can manage their cashflow. Every day they have couple thousanddollars of revenue that they're taking in. It's avery stable business, unlike maybe the new carmarket that can be cyclical."

Expansion

In early February, Ford opened its 700thQuick Lane centre in the US, located in Texas.Last year, the business reported record salesof nearly US$800m. Expansion is also underway in Europe, where there are three

facilities in operation in the UK, with twomore coming up. By the end of the year, Fordplans to add 25 more sites to the UK. Unlikethe US facilities, these UK locations and anyfuture European ones will also offer officialannual vehicle check services.

Elsewhere, centres are also operated in theMiddle East, Central American/Caribbean,Asia Pacific, Canada and South America. Inthe next three years, Ford is aiming for a totalof 1,000 locations globally. "That's our goal,"confirmed Massimo Pasanisi, ExecutiveDirector, Operations for Customer Service,Ford of Europe. "We're adding 50 to 75 peryear globally."

That's a substantial growth outlook for acompany previously heavily focussed on thesales end of the business. "It's just a successfulcontext that works in every market," saidToney. "The whole 'easy in, easy out' for serviceis in demand. And we're meeting that demand."

While the company is optimistic of theopportunities that lie ahead, Toney admitsthere are certain challenges to future growthand profitability: "The challenges will be thesame we always face - making sure there's aright 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 withlimited space, then the cost of acquiringproperty is always a consideration. One ofthe things we're doing as a global team is tohave a flexible approach to facilitate a QuickLane outlet," explained Toney.

There is also the likelihood of new playersappearing on the scene. Where Ford has hadsuch success, others may wish to try theirhand as well. "There's intense competition

presently," said Toney. "We expect otherOEMs will try to do the same thing that we'redoing. Frankly, that's the way of the world. Weembrace competition. It's all about how youtreat your customer that's important."

Both product and service provider

Gradually, Ford as a brand is developing asboth a service and a product provider. "Wesee the brand developing very nicely wherewe're going to be providing a full family ofvehicles, smart sales and service programmesand investing in the communities that weserve all across the world," said Toney. "Wesee everything coming together very nicelyin terms of retention and development ofthose customers."

The McKinsey retail study also highlights theimportance of a strong synergy betweenOEMs and their dealer network. The study'sauthors note: "OEMs will continue to requirea strong dealer network – to serve as localbrand ambassadors and provide cus¬tomerswith high-quality vehicle maintenance andservice in a convenient location."

As the market evolves, Toney remains opento evolving with it. So far, the focus at theQuick Lane locations has been on areas liketyres and brakes, but this could change asvehicles take on increasing levels ofelectronics. In the future, Toney concededthat an expansion into new areas waspossible, provided it was kept to a basic level.

Overall, Toney remains optimistic on Ford'sinvestment in the service side. "Selling the caris just the beginning. Retaining customers isabout how well we take care of them in theservice side," said Toney. "It allows us tocompete with our competition, who actuallydo this quite well. We're trying to outperformthem, and we're doing a nice job of it."


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Even in a traditional industry, like theautomotive industry, the prevalence of

digital marketing is increasing rapidly. Manyvehicle manufacturers are working to try tounderstand the impact a generational shift ishaving on their marketing, and userexperience as well. With regard toautomotive marketing, there’s an importantshift from monologue to dialogue.

Consumers no longer want to be told, forinstance, about what car to buy and why;rather, they want to experience it on theirown, and to have a say in that experience.This is something that has been tougher forOEMs to come round to. OEMs were, in fact,among the first to realise the importance ofa digital presence, setting up websites andonline tools to configure cars.

When it comes to marketing, vehiclemanufacturers have historically focused all oftheir attention, money, investments andresources on the retail experience, with theonline experience remaining more of anafterthought. Now, however, there is agrowing realisation that the onlineexperience needs to be the primary thought.This is primarily because consumersincreasingly don't want to experiencedealerships the way OEMs tell them to, inorder to buy a car.

One company that has been makingsignificant advances in this area is Google.According to the company, technology anddigital advancement are having atransformative effect on the vehicle shoppingand purchase experience. This has resulted ina highly informed and empowered buyer.

Digital marketing

The shift towards digital media hastransformed how people shop for vehicles,says Meredith Guerriero, Google’s GlobalHead of Automotive. As potential consumers

spend increasing periods of time researching,and a significant portion of that online, brandshave the opportunity to reach and influencepotential buyers.

In general, the perception has been thatvehicle manufacturers have fallen behindwhen it comes to digital marketing ofautomotive brands, owing to the emphasis on

offline marketing efforts. Guerriero, however,feels that the situation is, in fact, the oppositefor most automotive brands. According toGoogle, automotive marketers continue toevolve and innovate their approach toengaging with consumers online.

"It's no secret that several brands nowidentify the digital platform as a core pillar to


Digital marketing is the new normal for car manufacturersCar brands are increasingly identifying digital platforms as core pillars of their marketing strategy,says Google’s Global Head of Automotive

By David Isaiah


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their marketing strategy. As an example, aspart of a multi-country European launch ofthe Captiva, Chevrolet wanted a centralisedonline destination to promote the vehicle,and used high profile YouTube celebrities toproduce a collection of short filmsdemonstrating the vehicle's features," saidGuerriero during her keynote address atAutomotive World’s Megatrends USA 2014conference, held earlier this year.

Technology

Technology has well and truly started drivingchanges within the digital space, wherevehicles are concerned. For instance, futuregenerations are likely to never ask for, or evenwrite down directions. Technology is makinga mark on how automotive marketers cansolve problems for consumers, and also startto integrate technology into what consumersare asking for.

"What if we used Google Maps to bring theminto the dealership and they could start toexperience this online without even havingto get into their current car or publictransportation to go check out a vehicle?What if we're able to bring them into thevehicle? We can actually do this now andsome of the OEMs are testing this out and Ithink this is the perfect showcasing of whereyou can also extend and take advantage ofthese trends," said Guerriero.

Purchasing process

There is also a change with regard to thepurchasing process. The abundance ofinformation within the digital space isshowing consumers a different way to shopfor 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 theautomotive industry. Earlier, there was amuch larger quality gap within differentmodels and brands. As a result, it was easierfor buyers to say they would buy aparticular brand, as they feel it would deliver

much better quality than others. However,the quality paradigm is diminishing.

Secondly, there is unlimited access toinformation, empowering potential buyers.This access to information allows consumersto carry out all of their research online,whenever it is required. There is anotherfactor with regard to the media factor, andthat is social interactions – the online wordof mouth.

According to Guerriero, this is almost likecrowd sourcing, with consumers seeking outthe wisdom of the crowds, and trying tounderstand everything that is available aboutthe vehicle, as well as the dealerships.

The consumer is therefore more open-minded, and this brings us to the third keyarea driving this new paradigm shift. For themost part, consumers are no longer loyal toa brand. Google says it has begun to see amajor shift in recent years; according to thecompany's figures, three in four consumerssay they are likely to switch to a new brand,while less than one in two purchased thebrand that they initially considered.

Thus, the traditional sales funnel no longerapplies in the era of digital marketing. As aresult, vehicle manufacturers need to bemore nimble, both from a technologystandpoint, and within their marketingcampaigns.

"If we watch a user search for Toyota, theymight end up with a General Motors brand.We're also seeing that even if they aresearching for fuel economy, or pricing, theymight almost get down to a purchase of avehicle, and then start the process all overagain. And also, the purchasing process andthe research have shrunk down to threemonths. This is very fast," said Guerriero.

Opportunities

According to the 2013 Netpop Global AutoStudy, 81% of potential buyers use onlinesources to learn about cars. Of this, 50% usetheir smartphones at various stages of theprocess. For instance, 68% use theirsmartphones to decide on the make orbrand of a car; 68% use smartphones forpurchase decisions on the type or model;46% use this for features; 60% for price and

Megatrends | 109

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financing; and 53% to decide on thedealer/seller.

The smartphone, therefore, is turning into animportant component in the car purchasingprocess. As a result, when an OEM or dealeris thinking of providing potential buyers aseamless experience, the smartphone needsto be top of mind. While this brings newopportunity, it also brings a wealth of newchallenges and new thinking for the OEMs.

"A lot of people think that if their website isgood, then it’s good; but really, all of thesedifferent areas are taking place on thesmartphone - the make, the brand, the type,the model, the features, even financing andpricing and obviously dealer and seller. Theyare trying to find all and any info on theirsmartphones," Guerriero says.

OEMs online

To illustrate frictionless customerexperiences and the blurring of offline andonline boundaries, Guerriero mentioned theexample of Audi Cam, a service whichenables customers to see and hear aboutnecessary repair work, and to authorise itthrough a mobile phone or personalcomputer. A handheld camera producesnarrated film clips that are embedded in acustomer-specific, PIN-protected web pagethat is emailed to the customer. This pageincludes video and audio commentary, VAT-inclusive pricing for each job, personaltechnician and service team profiles andaction buttons for automatic authorisationof work.

Toyota, meanwhile, has been innovating withthe shopping experience. Its Collaborator,which the company launched late last year, isa social car shopping platform geared tobringing in participation and conversation.

This is an example of an OEM working tounderstand the generational shift, and usingit for its digital marketing initiative.

Mercedes-Benz's advertisement for MagicBody Control, a sensor-based system whichscans the road ahead and adjusts the car'ssuspension accordingly, also gained mentionat the Megatrends conference. "With this,they've entered the content game, which iswhat the users are asking them to do. Itgrabbed attention and definitely gainedconsideration and that's ultimately whatwe're trying to do, to follow what the usersand consumers want us to do," saidGuerriero.

Digital platforms to lead new car salesleads

Analysis published by Frost & Sullivan earlyin 2014 suggested that global passenger car

companies are desperate to innovate andadopt a new retail model to the nextgeneration of car buyers. This shift has beenfurther driven by high real-estate costs,expensive resources, and the need forinnovation to stay afloat.

According to the study, such factors haveresulted in many automotive dealershipsresorting to shrinking their store spaces byaround 20%, and instead opting fordigitisation as a mode of interacting withprospective customers. While EuropeanOEMs are pushing for standalone digitalformats, North American OEMs appear toprefer digitisation within existing franchisemodels.

By 2020, 60-70% of new car sales leads willbe generated by a digital platform, says Frost& Sullivan, be it via websites, mobile sites,social media or apps.


Ain't nobody here but us chickens: Mercedes-Benz made the bold move of running a TV commercial featuring no cars

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

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At Automotive World’s Megatrends India2014 conference, one overriding

message from automotive industry leadersstruggling with a stagnant domestic marketwas that the 2014 parliamentary electionwould effectively split the year in two, withstrategic decisions and any recovery on holduntil after the result had been declared.

Following strong growth in India’s newvehicle market over the last decade, saleshad widely been expected to mirror inperformance the growth of China’s newvehicle market in the early 2000s – if notin volume, then at least in percentageterms. However, weak and even negativesales in the last two years have left thecountry’s new vehicle market well short ofearlier expectations.

Passenger vehicle sales in calendar 2013declined for the first time since 2002, falling

11% to 1,807,011 units. The health of theIndian medium and heavy commercial vehiclesector is much more troubling; in 2013, saleswere down 29% to just 215,000 units.

Comments made by various key players inthe Indian market in several recentAutomotive World interviews suggest that, interms of vehicle sales, 2014 will be anunremarkable year – “a year to forget”, in thewords of Piyush Minot, India ManagingDirector, ZF India. There is, however,optimism that the passenger and commercialvehicle sectors can recover over the mediumand long term to levels that would put Indiaup alongside some of the world’s largestvehicle markets.

A structural crisis

Rakesh Batra, Partner and National LeaderAutomotive Sector at EY, said he believes

the current crisis isstructural, rather thancyclical, “largely drivenby macro-economicconditions and theslowdown of theeconomy where wewent from 8% growthrate to under 5%. That hasreally impacted consumerconfidence.” Furthermore, he said, risinginflation – already over 8% – has resulted inhigher fuel prices and higher interest costs.

2014 will be “another write-off year,” withlittle to indicate an uplift in sales, said Batra.“Recognising the difficult conditions, thegovernment has recently reduced exciseduties on most vehicles, but it’s a very short-term measure. Is that going to result in areinvention of sales and growth back todouble digits? Probably not.”


Forget 2014 – India’s OEMsfocus on the long termIndia’s auto industry sees 2014 as a year to forget, but the market has serious long-termpotential

By Martin Kahl

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

PCs UVs Vans

CY12

CY13

-400

400

1,200

2,000

2,800

3,600

Production Domestic sales Exports

CY12

CY13

Passenger Vehicle production, domestic sales and exports Passenger Vehicle domestic sales by segment

Source: SIAM, EY analysis

112 | Megatrends

Unsurprisingly, Batra sees the 2014parliamentary election as pivotal in 2014,with the country’s economic recoverydependent on the outcome of the election.“If a stable government comes in, if consumersentiment returns, if interest rates get undercontrol, then the macro-economic situationgets better.”

Although Batra expects 2014 to be a slowyear, with flat to negative growth, he believesthere could be an improvement towards theend of the year. “Providing we do have macro-economic growth coming back, and a stablegovernment being able to form at the centre,then I expect by the end of the year, whenwe come around to the next festival season,which is around September, October, then weshould start seeing some lift in saleshappening, and hopefully a better 2015.”

2014 – a year to forget…

From a supplier perspective, ZF India’sPiyush Minot is more optimistic about theIndian market in 2014. Minot told AutomotiveWorld at Megatrends India 2014 that the highnumber of Indian and global vehicle launchesat the 2014 Delhi Auto Show in Februarywill act as a stimulus for new car buyers; this,coupled with the government’s recentreduction in taxes, will inspire buyers. “2014for the passenger car industry should befairly good,” said Minot. “It won’t be at thelevels of previous years, but it will not benegative.”

The commercial vehicle industry, however,has a flat year ahead of it – “a year to forget”,says Minot. The CV industry depends on the

industrial manufacturing index andinfrastructure projects “which are not beingimplemented due to various policy reasons,as well as government regulations.”

…but longer-term, the outlook ispositive

Over the medium and longer term, theoutlook for the automotive industry in Indiais still positive, believes EY’s Batra. “As longas we have macro-economic growth, back tolevels of 7% or 8%, that’s going to drive anincrease in per-capita income, and given ourlow penetration rates, and no alternativeoptions for personal mobility, it’s going toresult in higher sales of vehicles.”

Looking out five to ten years, Batra expects tosee a return to growth. “There is a lot of pent-up demand. A vehicle is an aspirationalproduct, and consumers will want to fulfil theiraspirations.” At Megatrends India 2014, therewas talk of India being a market of 8 millionunits by 2020, but Batra is more cautious. “Willit be 8 million? Probably not, because we’velost two years of 15-16% growth, but we’llprobably be around 6 to 6.5 million units ofdomestic sales, and then a couple of millionunits export, which will still, from amanufacturing perspective, make this an 8 to9 million unit market for passenger vehicles.”

“By 2020,” says ZF’s Minot, “it is said thatwe should be reaching a number ofaround 9 million passenger cars. Due tothe slowdown in the last two years, wemight be on a growth path…whether itwill be 9 million units will be seen in thecoming years.”

A market with potential

According to Stefan Jacoby,Executive Vice PresidentConsolidated InternationalOperations, GM, “Ourlong-term outlook onIndia is positive, but theshort-term expectation israther flat or negative.”Jacoby, who has responsibilityfor over 100 countries andterritories in Africa, Asia Pacific, Europe andthe Middle East, told Automotive World thatin terms of growth rate, “it will be similarto China. It may not be as dramatic asChina, but there are areas in India which arepretty much under-developed, and thesecould create greater demand.”

Ford, too, is positive about the longer-termprospects for India’s new vehicle market.“We believe in the future of India,” said JimFarley, the OEM’s Executive VP, GlobalMarketing, Sales and Service, during aninterview with Automotive World at the 2014Delhi Auto Show. “By 2020, we expect thatthe industry size could be in the order of 7million units, up from 3.2 to 3.3 millionunits this year. The energy is fantastic.Despite the challenges in the Indian auto

market, the opportunity is still soeasy to understand.” Farley’s

forecast was echoed byFord India’s ExecutiveDirector ofManufacturing, TomChackalackal, in hispresentation atMegatrends India 2014.


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Global Medium-Heavy Vehicles Production Outlook (000’s units)

Source: OE LinkTM 2014


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Market leader Maruti Suzuki – which has amarket share of around 43% – is embarkingon a new model offensive to attract newcustomers through the launch of innovativeproducts like the Celerio with AutomaticGear Shift (AGS). Kenichi Ayukawa, theManaging Director of Maruti, Suzuki’s largestsubsidiary, said “As far as sales are concerned,we expect the domestic market [for Maruti]to grow from 1.1 million units annually to 1.5million, while exports may increase from120,000 units to 200,000 or 300,000 units.”Maruti sold 1.064 million units in the 2013calendar year.

Honda’s commitment to India is absolute, andthe OEM is in the process of a majorexpansion of its Indian manufacturingfootprint. “India is one of the most importantmarkets for Global Honda,” said TakanobuIto, President and Chief Executive of HondaMotor Co., speaking to Automotive Worldrecently. “We will increase our sales target to300,000 units annually by the end of March2017. This is three times more than the salesachieved last year.”

India’s truck market could “easily”reach 500,000 units

In a panel discussion on the commercialvehicle day of Megatrends India 2014, it wasagreed that India’s truck market has thepotential to reach volumes of up to 500,000units within ten years.

Marc Llistosella, Chief Executive of DaimlerIndia Commercial Vehicles and ChiefOperating Officer of Daimler Trucks Asia,said the Indian truck market is “on its knees”,using the word “shattered” to describe themarket’s prospects in 2014. “If weexceed 210,000 units above 6t, itwill be a good surprise.”However, Llistosellaexpressed full confidence inthe market’s potential: “wehave easily the potential for500,000 units, making it thesecond biggest truck market inthe world.” A market of 450-500,000 units could be achieved by 2018, hesaid, but getting there requires progress and

change both politically and in terms ofbusiness culture.

Ravi Pisharody, President –Commercial Vehicles businessunit at Tata Motors, said hebelieves the Indian CVmarket could reach thehalf-a-million-unit mark. ARamasubramanian, AMWMotors’ President, expectsthe market to reach a slightlylower level of 400,000-450,000units in ten years’ time.

At Scania Commercial Vehicles India,Managing Director AndersGrundstromer’s confidence in theIndian market is based onexpectations that goods volumestransported 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 onIndia’s longer-term CV outlook: “We at ZFbelieve the commercial vehicle industry willnot only bounce back, it will reach new all-timehighs. By 2020, we expect the 6t and abovesegment to be at roughly 500,000 units.”

Mid-May, and the outcome of the election,could not have come soon enough. Theelection result itself is unlikely to have anyimmediate impact on India’s new vehiclemarket, but a significant milestone wasreached, enabling political and businesscommunities to begin building the country’seconomic recovery – and economic growthtranslates very quickly into rising vehicle sales.


114 | Megatrends

- Marc Llistosella

We have easily the potentialfor 500,000 units, making it

the second biggest truckmarket in the world

“

The way people browse and buy cars haschanged. In just a single generation, the

rise of omnichannel – shopping acrossmultiple sales channels and devices – and thedevelopment of mobile technology havecreated an increasingly fragmented andcomplex shopping journey that resemblesmore a complicated tube map than thetraditional linear ‘funnel’ of moving fromawareness to consideration to transaction.The automotive sector is no exception.

A recent report by eBay and Deloitte intoThe Omnichannel Opportunity found thatalmost two thirds (63%) of consumerssurveyed in selected European markets usemultiple shopping channels when spendingover £100 (US$170) – a feat easily achievedwhen cars are involved. This means thatOEMs need to be present at every ‘stop’along the way in order to engage prospectivecustomers however and wherever they arenow shopping.

But this involves more than having anoptimised homepage for the smaller screen;to be successful within this environment, carbrands need to take advantage of the rangeof opportunities available online to inspire,inform and reassure consumers at every stepin the purchase journey, and throughout theentire lifecycle of their car.

Using insights to inspire

Having a presence across multiple channelsis half the battle won, but that alone won’tbring in the sales. Car brands need to be ableto target the right consumers with the rightmessages at the right time to guide themtowards, or indeed inspire, a purchase.

Fortunately, with the wealth of data insightsavailable online, this has never been easier. Bycombining observed insights, such as searchand purchase history, with demographics andreal-time targeting, OEMs can now segmenttheir audiences much more effectively and

identify where consumers are in theirshopping journey to create relevant andtargeted campaigns based on facts ratherthan assumptions. For example, instead ofimmediately targeting young men with sportscars, behavioural insights might reveal thatolder women are a lucrative group ofautomotive enthusiasts.

Car brands can even spot external factorsthat may impact a motorist’s choice ofvehicle. For example, if someone were tosearch for pushchairs and a new carsimultaneously, a brand could infer there hadbeen a change to their family status and usecreative messaging to inspire the shopperwith a ‘safe’ and ‘family-friendly’ car whilethey’re in a researching frame of mind.

Aligning messages across all channels

It’s important that car brands don’t think oftheir various sales channels in silos – in theeyes of the consumer, whether on or offline,it’s all shopping. If communications areinconsistent or disjointed, they risk confusingand ultimately losing customers along the way.

This means they need to take an integrated,almost channel agnostic, approach tocampaigns, where messages are echoedacross the board to ensure customersremain informed.

That doesn’t mean replacing in-store saleswith online though. The OmnichannelOpportunity research found that increasingawareness of products through websites, appsand online marketplaces has a positive effectacross all sales channels – not just online.

When BMW, for example, launched a ValueService page on eBay to promote its fixed-price servicing programme for selectedBMW models, it used targeted advertisingcampaigns to not only drive customers to itspage online, but to also increase footfall to itsdealership network.

Goingbeyond thepurchase

Contrary topopular belief,the purchasejourney doesn’t endonce a decision hasbeen made. Studies show thatthousands of shoppers continue researchingan item even after they’ve made the purchaseas they look for confirmation that they havemade the right choice. And when the decisioninvolves as high-ticket an item as a car, thedoubts are likely to increase.

It is therefore vital that car brandscontinue developing their relationship withthe consumer – online and on theforecourt – beyond the sale, offeringmessages of reassurance and support toencourage trust.

If nurtured well, and with the extendedlifecycle of a car, the relationship can also helpto build loyalty and lead to futureopportunities to grow sales in parts,accessories and services after the initialpurchase. By keeping a record of when a carwas bought, consumers can then be targetedat key milestones with replacement tyres,serpentine belts or brake pads, for example.To maximise sales in the long run, it’s worththe investment.

There are many OEMs now harnessingtheir online presence effectively, but astechnology evolves, so does the purchasejourney. Car brands cannot afford tobecome complacent, and must continue toleverage their online capabilities to keeppace with the increasingly omnichannelconsumer; fail to do so, and they riskwatching their customers switch over tobrands ready to accompany themthroughout the entire purchase journey andbeyond.

Car brands must harnessthe online experience todrive forecourt saleseBay Advertising’s Phuong Nguyen looks at how car brands can capitalise on the increasinglyblurred lines between on- and offline channels to boost sales across the board

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In recent years, the importance ofcommercial vehicle aftersales business has

grown strongly, and with it the need forexcellence to unleash its full potential.Margins in new truck sales are eroding,hence the growing significance of aftersalesfor profits. At the same time, competitionhas become fiercer, with new players suchas Original Equipment Suppliers (OES) andindependent retailers entering the market.In response, Original Equipment

Manufacturers (OEMs) require three pillarsof excellence in aftersales: know yourcustomer, unleash your current potential,and exploit new potential.

A. TRENDS IN THE COMMERCIALVEHICLE AFTERSALES BUSINESS

The truck aftersales business is subject to anumber of influences. These can be broadlyseparated into product and market factors on

the one side, and changes in the value chain andcompetitive landscape on the other. Withinthis, eight key trends can be identified (fig. 1).

With regard to products and markets,demand-driving factors for truck aftersalesservices are:

• Goods transportation is growing globally(1% p.a. in Europe, 4% p.a. in China in themedium term);

Truck aftersales: Roadmapto excellence Roland Berger Strategy Consultants presents an overview of findings from its work with a varietyof clients in the field of commercial vehicle aftersales

Figure 1: Overview of key trends in the commercial vehicle industry

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• The truck vehicle parc is expanding andshifting from medium/heavy trucks tolight 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 chainand competitive landscape, the factorsare:

• New intermediaries such as insurancecompanies and service providers areentering the market. At the same time,chains and specialists are puttingpressure on prices and margins, andmore and more customers have servicecontracts;

• Share of large fleets is increasing, givingthem larger potential to put pressure onmarket prices;

• Requirements for vehicle uptime andefficiency are growing, also in emergingmarkets.

B. EXCELLENCE IN AFTERSALES

To face the challenges mentioned above,excellence in aftersales is essential and is builtupon three pillars: know your customer,unleash your current potential, andexploit new potential. These can bebroken down into 11 key topics (fig. 2).

Know your customer

1. A holistic customer needsmanagement system tackles the challengeof insufficient customer knowledge. OEMsshould employ a centrally coordinatedmarketing approach for aftersales, basedaround the following steps:

• Identify customer needs and definehomogenous customer segments;

• Define a product management servicestrategy;

• Design and plan a marketing campaign.

These steps lay the foundation for a serviceand parts strategy. They have a direct impacton the OEM's market awareness, marketshare and sales volume.

2. Achieving a sound price/strategydifferentiation requires three steps:

• Review current pricing methodologiesand systems and establish a stableprocess for managing spare parts;

• Replace inconsistent discount structures(e.g. for NSC, importers and dealers)with a central discount managementsystem (involving modifying discountsand consolidating discount groups);

• Develop a fixed price and lifecycle pricingstrategy for maintenance and repairs, andimplement it globally.

In parallel, OEMs should develop promotionalmaterials that effectively communicate theirpricing strategy.

3. OEMs should integrate all customer-related information and data into acomprehensive customer relationshipmanagement (CRM) system foraftersales. This should at least include thefollowing data:

• Organisational information (e.g. the nameof the key account manager);

• Relevant workshop data (e.g. preferredworkshop timeslots);

• All vehicle-related information.

A robust CRM system can contributesignificantly to customer acquisition,customer relations and customer retention.The company should also draw up customerKPIs and sales projections on different levels(by product, product group, region, etc.). A

data warehouse can provide relevantinformation in real time to support centraland local sales activities.

Unleash your current potential

4. OEMs should look at how they canmanage and improve repair times.Consistent standard repair times support thesales organisation and meet customerrequirements. If standard repair times arelacking, 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 costmanagement system createstransparency about potential financial risks inthe short to medium term. OEMs shouldfollow two steps:

• Implement and interlink properprocesses and systems;

• Develop and safeguard the effectivemanagement of accumulated data, whichwill involve consistent data screening,thorough data analysis and implementingan effective early warning system.

Most organisations have substantial potentialto integrate existing data (e.g. "Big Data" fromdata warehouses) and increase the accuracyof existing data (e.g. sales forecasts). This canform the basis for more accurate planning.

6. Service processes should beprofessionalised. This requires defining andimplementing proper KPIs andcorresponding systems for managing theaftersales business. Using "as-is" analysis as astarting point, OEMs should define, plan andimplement any required actions, employing arobust rollout planning process and effectivesteering mechanisms.

Figure 2: Key topics in aftersales excellence

RETAIL (R)EVOLUTION


7. Professionalising branding and labellingconcepts is key. This usually comprises threeelements:

• Packaging;• Identification labeling;• Product labeling.

Employing company-wide standards forpackaging prevents damage duringtransportation and increases brandidentification. Identification labelling includesthe labelling of parts with the brand nameand an identification number to increase theidentification of genuine parts and improvebrand recognition. Labelling defined partsemphasises the brand and increasesidentification.

Exploit new potential

8. OEMs should identify additional saleschannels. Relevant steps are as follows:

• Establish a key account managementsystem for aftersales to realise the fullpotential of the spare parts business;

• Create a direct connection betweencompany headquarters and key accountsto ensure active steering;

• Set up a dedicated sales team thatactively sells spare parts to endcustomers (e.g. in independentworkshops) to boost aftersales revenues.

Ideally, companies should follow the abovesteps in specific regions and then roll out theconcept internationally.

9. Market management is an importantadditional element in exploiting new potentialin aftersales. OEMs should follow these steps:

• Set up and roll out a consolidated margin

steering system, employing a "closed loopprocess" for managing focus markets;

• Introduce a bonus system withquarterly/monthly status reviews;

• Draw up and implement guidelines forsteering countries and regions in aprofessional manner, including escalationprocesses;

• Design and implement active sales-forcetraining.

10. Portfolio innovation/extensionsenable companies to offer new products withclear added value for customers. Besidespartnerships (e.g. for roadside assistance,service contracts, financial insurance), themost important growth areas areremanufactured parts and connectivity. As thetruck parc ages, demand for fair value repairsand remanufacturing is steadily increasing.Truck connectivity gives rise to a multitudeof solutions, setting the scene for enhancedservices and new business models such asvehicle management, load monitoring,driver/time/legal management andoperations/logistics management. Thesedevelopments enable OEMs to meetcustomers' requirements for solutions thatreduce total cost of ownership (TCO).

11. To ensure continuous improvement,operational excellence within theaftersales organisation is a prerequisite. Thisincludes optimising the availability of parts atthe point of sale (POS), which in turn reducesdelivery time and contributes directly toincreased customer satisfaction. OEMsshould analyse and where necessary adjusttheir parts availability, overall logisticsconcept (local warehouse vs. regional hub,consignment stock vs. vendor managedinventory, etc.) and warehouse densities. Thiswill create a basis for effectively handlingspare parts. Managing customers using key

indicators such as the volume of parts salesand margin contribution helps to createtransparency. Fully-automated analyses formthe basis for deriving appropriate actions,such as developing a multi-brand strategy toserve different customer groups and offeringtailored solutions.

C. ROADMAP TO AFTERSALESEXCELLENCE

Detailed fields of action for OEMs withregard to how they organise their aftersalesand their service portfolio can be definedwithin an "aftersales excellence cube" (fig. 3).

Even though all three pillars need to beaddressed, OEMs cannot implement theseactions in a generalised manner. They need tobe adapted to specific markets, brands andproducts. For example, they shoulddistinguish between Triad, emerging and low-budget markets, each of which requiresappropriate strategies. They must also adjusttheir strategy in line with their differentbrands (in the case of multi-brand OEMs) andvehicle segments. For example, premiumheavy-duty trucks offer very differentopportunities from entry-level LCVs in termsof the aftersales product portfolio, pricingstrategy and margin potential.

With the aftermarket business offering hugepotential on both the revenue and marginsides, OEMs require comprehensive guidelinesto conquer the multidimensional challengesand create a sound business concept. Byfollowing the steps outlined above, they caneffectively achieve aftersales excellence.

Norbert Dressler and Philipp Grosse-Kleimannare Senior Partners at Roland Berger StrategyConsultants. Sebastian Gundermann is aPrincipal at Roland Berger Strategy Consultants

Repair Time Mgmt./Improvement > Time reduction per working step > Red. parts procurement time > Red. of voluntarily set working times > …

Warranty Cost Management > Process/system implementation > Screening, analysis, monitoring: early warning > Auditing > …

Service Process Professionalization > Service KPIs > Gap closed by measure definition > Rollout planning and steering process > …

Branding/Labeling > Packaging processes > Identification labeling > Product labeling > …

Sales Channel > Key Account Management > Spare Parts Salesman > …

Market Management > Margin steering > Bonus system > Steering regions/

countries

> AS penetrat. rating > Sales force training > …

Portfolio Innovation/Extension > Remanufacture parts > Telematics > Connected services > Service contracts

> Fin. insurances > Partnerships > …

Operational Execellence > Parts availability at POS

(customer satisfaction) > Logistic organization

(density of warehouses) Brand & product specifics Know your

customer Unleash your

potential Growth

Aftersales Excellence pillars and topics

Market needs

Customer Needs Management > Customer needs/segments > Service strategy > Campaign processes/-planning > …

Price Strategy/Differentiation > (Re-)positioning > Discount structure > Fixed price offers > Sales promotion

> Lifecycle pricing > …

AS Customer Relationship Mgmt. > Integr. syst. (organiz.,

workshop, customer/ vehicle)

> Networked data flows > Customer acquisition

> Customer retention > Relationship mgmt. > Sales promotion > Data WH/KPI > …

Triad markets Emerging markets Low-budget markets

Exploit new potential

> …

4

5

6

7

8

9

10

11

1

2

3

Figure 3: Aftersales excellence cube

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An essential component of many a classicsci-fi movie, there has nonetheless been

a great deal of real world experimentationwith autonomous vehicles for almost acentury now. Similarly, discussions onautomated highways began in the 1939 NewYork World’s Fair as part of ‘The World ofTomorrow’. However, it is only recently thatthese experiments have reached anywherenear fruition.

The progress made by Google in its self-driving technology has been the most widelyreported, and the company announced in

May that it had begun assembling prototypesof its own self-driving car. However, Googleis far from the only player in this field. OEMsand Tier 1 suppliers worldwide are carryingout extensive work that will enable them toput semi-autonomous, and then fully-autonomous vehicles on the roads.

The impact of autonomous vehicles

The biggest advantage of semi-autonomousand fully-autonomous vehicle control will bea significant increase in road safety. Everyyear, 1.24 million people in the world die due

to car crashes. Vehicle crashes remain one ofthe largest causes of deaths worldwide andcause an even greater number of car-relatedinjuries. According to a recent UN RoadSafety Collaboration study, 90% of trafficincidents are caused by human error. Thus,the safety aspects of automated cars movequickly to the fore.

Vehicles that use advanced electronic sensingand processing will also deliver additionaltangible benefits, including fuel savings,mobility and convenience, reduced traveltime, and more efficient use of roadways.

Safety benefits

Since 2005, the adoption of active safetytechnologies such as anti-lock braking systems(ABS) and electronic braking systems (EBS)have contributed to the steady decrease in thenumber of automobile crashes. For example,in the US, the total number of fatalities causedthrough car crashes peaked in 2005 and hasdeclined rapidly since. The steady declinecoincides with OEMs adopting electronicstability control (ESC) as a standard feature inthe US, and the federal mandate in 2007, whichrequired OEMs to install electronic stabilitysystems on all passenger vehiclesmanufactured on or after 1 September 2011.

Autonomous cars, driven by safetyMarkus Pfefferer, of Ducker India, looks at how the latest developments in car safetytechnology are bringing the autonomous car closer to reality

Fatality vs. Total Miles Travelled: 1998 - 2012

Source: NHTSA, Ducker Analysis

SAFETY


In a three-year study conducted by theNational Highway Traffic SafetyAdministration (NHTSA) between 2008 and2010, ESC saved more than 2,200 lives in theUS. NHTSA research has consistently shownthat active safety systems, such as ESC, areeffective in helping a driver avoid dangerouscrashes. NHTSA also estimates that adoptionof ESC alone could save as many as 10,000lives a year and eliminate approximately200,000 injuries.

In fact, research by the Insurance Institute forHighway Safety (IIHS) in the US revealed that,if every vehicle on the road were equippedwith technology such as forward collisionand lane departure, blind spot detection andadaptive headlights, then nearly one-third ofall crashes could potentially be avoided.

Active safety technology

Advanced driver assistance systems (ADAS)is the term used to describe a set ofelectronics-based technologies that aredesigned to aid in safe vehicle operation, helpprevent crashes by keeping cars at safedistances from each other, alerting drivers todangerous conditions and protecting those inthe car and on the street from crashes thatmay occur. ADAS also provides functions that

will serve as important elements ofcomputer-controlled autonomous operationin the future.

Almost all new vehicles have stability control,anti-lock braking, airbags, occupant detectionand various kinds of alarms. Building on thesetraditional capabilities, active safetytechnology is evolving through four stages, asoutlined below.

The first stage includes passive warning andconvenience systems, such as:

• Rear-view cameras• Radar for blind spot detection,• Cross-traffic warnings that help with

reversing out of parking spaces betweenlarger vehicles.

Slightly more advanced versions may includecamera image processing for traffic signrecognition, 360 degree views of the car onthe road, in-cabin monitors to alertdistracted, inattentive or sleepy drivers andother advanced features.

Second stage

In the second stage of development, thesesystems can briefly take active control of the

car to assist in parking, prevent backing overunseen objects and avoid collisions bybraking or swerving. Sometimes the systemactively controls an individual car function,such as adaptive headlamps that automaticallyadjust to bends in the road ahead.

Third stage

The third stage involves semi-autonomousoperation, when the car takes over driving incertain circumstances; someone must be inthe driver’s seat ready to resume control.One example is traffic assistance or highwaylane self-driving, including adaptive cruisecontrol, which changes speeds automaticallyto keep pace with traffic on expressways.Both adaptive cruise control and lane keepassist will be required for expressway drivingto keep the car centred in the lane and at asafe distance from other drivers. Lane keepassist is another example of the use of a frontor rear camera to guide the car along themiddle of the lane. Park assist will take fullcontrol during parking in crowded parkinglots and garages. Additionally, in-cabin drivermonitoring, when detecting an incapacitateddriver, may initiate a fully automatic stoppingmanoeuvre to pull a car to the side of theroad and stop it safely.

Fourth stage

When cars move to fully autonomousoperation, the driver seat may be unoccupied.This will herald the onset of ‘ghost cars’ thatcould be used by a child, a disabled or elderlyperson who is unable to drive.

The evolution of autonomous vehicles

The evolution to driverless vehicles willinvolve merging existing safety systems withnew ones. Today, most new cars appear withpassive and even some active ADAS safetyfeatures, and availability is increasing rapidly.

CASE STUDY: Adoption in the US

• Lane departure warning (LDW)systems were available in 51 vehicles inmodel year 2011 and 69 vehicles inmodel year 2012; in model year 2013,LDW was offered in 124 vehicles;

• Forward collision warning systemswere available in 50 vehicles in MY2011; this rose to 79 vehicles in MY2012 and 167 vehicles in MY 2013.

Electronic Safety Technologies

122 | Megatrends

SAFETY

For instance, according to latest OICAstatistics, it can be estimated that:

• Adaptive cruise control is available inalmost 25% of new cars worldwide

• Side object detection or blind spotdetection: more than 20%

• Lane departure warning or lane keepassist: nearly 20%

• Autonomous park assist: 10%

Adoption rate of autonomous vehicles

As with almost all innovations, ADAS featurestend to be introduced in high-end productsfirst, where cost is less-closely scrutinised bythe end-user, before migrating down tomedium-priced vehicles. There are someexamples of ADAS technology beingpioneered in commercial vehicles becausethese are features especially valuable for safeoperation, such as rear-view cameras.

Reverse assist cameras and sensorsnotwithstanding, the systems with the highestrate of adoption globally currently are blindspot detection, forward collision warning andlane departure warning. But even for thesethree systems, the global penetration rates in2012 were merely 2.1%, 2.3% and 2.6%respectively, which much of the input comingfrom European OEMs.

Challenges

While ADAS features are steadily findingacceptance today, moving to semi-automatedand fully automated operation faces social,legal and technological challenges. The issuesof potential car crashes will have to beaddressed by state laws and insurancecompanies. Who will be at fault - theconsumer or the manufacturer? Add to thisa period of adjustment, as drivers becomeaccustomed to the changing roads. There willbe a large gap between cars equipped withthe new systems and older cars that are stillon the road. Currently, in the US, the averageage of vehicles has reached an all-time highof more than 11 years, and in 2013, it’sestimated that the US car parc was around

250 million. By 2020, the forecast is for 275million cars and the vast majority of vehicleswithin the parc are unlikely to have any ADASinstalled. If these legal and social issuesrequire time to resolve, so do the challengesfacing technology.

Cars require electronic safety systems to besmall, light-weight, inexpensive and offer highperformance. The trunks of many of thecurrent self-driving prototype cars are packedwith advanced electronics that are worthmuch more than the host vehicles. To changethese experimental cars into production unitswill require reliable and powerful electronicsthat are much smaller in size.

Equally important are system safety andreliability – not only for the benefits of safedriving, but also because crashes that arecaused by electronic failure can delayinnovation and the acceptance of newtechnologies. Reliability is especially critical in

an automobile, where high temperatures,large voltage swings and vibrations canunduly stress electronic components.Systems will need to have a failure recoverymode that remains safe to persons in andaround the vehicle if something goes wrong.

These design challenges will take time toaddress and further advancements intechnology are required in order to make avehicle road-ready. Realistically, fully-autonomous vehicles that are ready for salewill not make an appearance for the next tenyears or so. However, we can expect to seea steadily increasing number of vehiclesoffering some level of assisted driving to helpmake them safer while reducing fuelconsumption and adding convenience fordrivers.

Markus Pfefferer is the Managing Director ofDucker India, a division of consulting andresearch firm Ducker Worldwide.


Safety Technology Penetration (Penetration %)

Source: Wards Auto, RBC, Ducker Analysis

3%

50%

2% 1% 3% 2% 3% 7%

70%

5% 4% 10%

5%

30%

Blind Spot Detection Reverse Assist Automatic Parking Sorround View Sys. Lane Dep Warning Adaptive Cruise Ctl. Forward Collission Warning

2013 2020

SAFETY

Communicationstechnology challengessafety regulatorsIan Graig looks at the impact of communications technology in three high-profile areas ofautomotive product development: driver distraction, vehicle-to-vehicle communications, andautonomous vehicles

Vehicle safety regulation in the UnitedStates is increasingly concerned with the

impact of emerging communicationstechnologies on active vehicle safety andcrash avoidance.

That is not to say that passive safety issuesare being ignored, as regulators continue tolook at ways to improve the performanceof vehicles in protecting occupants in theevent of a crash. But the agenda ofregulators and OEMs alike is increasinglyfocused on the impact of advancedcommunications technologies on vehiclesafety – both the positive but also thepotentially negative impact.

For example, regulators want to ensure thatever-more ubiquitous “infotainment” devicesdo not distract drivers and thus raise the riskof crashes. At the same time, however,regulators are working with industry andresearch institutes to harness emergingcommunications and vehicle automationtechnologies that can sense and respond tohazards, calculate risks, warn drivers, orpotentially take preemptive actions to reduce

the number of crashes. This focus on theimpact of communications technology isparticularly evident in three related high-profile issue areas: driver distraction,vehicle-to-vehicle communications, andautonomous vehicles.

Driver distraction

For years, the National Highway Traffic SafetyAdministration (NHTSA) of the Departmentof Transportation has focused on ways toreduce driver distraction resulting from thegrowing availability of in-vehicle and hand-held infotainment devices, including cellphones. Indeed, the issue of driver distractionwas a top priority of Ray LaHood during hisfour-and-a-half years as President Obama’stransportation secretary.

After years of study, often involvingcollaboration with leading universities andthe automotive industry, NHTSA hasadopted a three-step approach to reducingdriver distraction through a series ofvoluntary guidelines. In April 2013, NHTSAreleased the first of these guidelines, in this

case aimed at limiting driver distractionresulting from the use of communications,entertainment, and navigation devicesinstalled in new passenger vehicles. Theguidelines cover original equipment in-vehicleelectronic devices that a driver operatesthrough “visual-manual means”. Theguidelines recommend a limit on the time adriver must look away from the road toperform any task, and also recommend thatOEMs disable many functions unless a vehicleis stopped and in park. The guidelines areexpected to lead to increased use of voicecommands, which the guidelines do notrestrict. Some studies have found voice-activated commands can also be distracting,however, and NHTSA will turn to that issuein a later set of guidelines.

NHTSA opted to write non-bindingguidelines rather than a mandatory FederalMotor Vehicle Safety Standard, and drewheavily on voluntary automotive industrystandards that have been followed for severalyears. As a result, OEMs are expected tocomply with the new guidelines. Theautomotive industry has acknowledged therisk of distracted driving but warned thatoverly restrictive limits on built-in devicescould lead drivers to use more distractingmobile devices for the same functions.

NHTSA is now addressing the secondphase of its driver distraction efforts, in thiscase looking at visual-manual interfaces ofportable and aftermarket devices, with agoal of publishing guidelines by the end ofthis year. The third phase will addressauditory/voice interfaces. NHTSA mayconsider the distraction guidelines inreshaping its New Car Assessment Program(NCAP), which is used for thegovernment's five-star safety ratings systemfor light vehicles.


V2V technologies

NHTSA has also aimed to ensure that theNCAP ratings take into account the newestcrash-avoidance technologies, including lanedeparture warning and forward collisionwarning. These technologies, which dependon advanced sensors and radar systems, havebeen appearing in growing numbers ofpassenger cars. The next step in developingsuch active-safety technologies, however, lieswith the ongoing development of advancedvehicle-to-vehicle (V2V) communicationsthat allow vehicles to exchange informationabout their speed, location, direction oftravel, braking, etc.

In early February, NHTSA announced plans tomove forward with developing a proposed rulethat would require V2V communicationstechnology in new vehicles. The long-anticipated announcement was based on astudy of over 3,000 vehicles conducted byNHTSA and the University of MichiganTransportation Research Institute in AnnArbor, Michigan. NHTSA is expected torequire new vehicles to be equipped withwireless dedicated short-rangecommunications chips that would enablevehicles to communicate with one another,opening the door to many active safetytechnologies. NHTSA reportedly could alsoconsider rules related to on-board sensors orpotentially automatic braking systems. On-roadpilot studies of V2V technologies also continue.

V2V and related vehicle-to-infrastructure(V2I) technologies are viewed as having greatpotential in reducing crashes, but myriadchallenges related to issues such as privacy,data ownership, and technology standardsstill need to be overcome. Another keychallenge is the availability of wirelessspectrum, with Internet service and contentproviders lobbying for access to spectrumthat to date has been devoted solely toautomotive safety applications. The expansionof V2V and V2I technologies is nonethelessseen as a potentially significant advance incrash avoidance that could also reduce

vehicle emissions by boosting moreenvironmentally sound driving practices,improving traffic flow, reducing starts andstops, and providing better real-time trafficinformation.

Autonomous vehicles

The next step beyond V2V and V2Itechnologies is one that has captured theimagination of even Washington policymakerswho rarely deal with vehicle safety:autonomous or self-driving vehicles. In 2012,Nevada became the first US state to approvethe testing of autonomous vehicles on publicroads, and Google, Audi, and Continental areconducting tests in the state. California hasapproved legislation that would allow testingof autonomous vehicles on its roads as well,and other states may do so. Google hasannounced plans to produce autonomousvehicles in the Detroit area for use in on-roadtesting. Congress has held hearings on theissue, and lawmakers at times seem enthralledby the possibilities of autonomous vehicles.

NHTSA envisions a five-step evolutiontoward fully autonomous vehicles, startingwith vehicles that have no automation butfeature some V2V warning technology (like

forward-collision warning). Subsequent stepswould find the driver yielding more controlto automated systems, such as adaptivecruise control and lane-keeping assistance,and eventually ceding steering, braking, andthrottle control to a truly self-driving vehicle.NHTSA is undertaking research onautonomous vehicles, including technologiesto allow “platooning” of connected-automated commercial vehicles.

The near-term introduction of such“automated driving” features as self-parkingand adaptive cruise control may help pave theway to truly autonomous vehicles, but a hostof legal and regulatory questions will need tobe addressed before truly autonomousvehicles are widely used on US highways. Keychallenges include liability, price, and dataprotection. In fact, commercially viableautonomous vehicles are not expected to beon US highways until the mid-2020s. Thepotential for a dramatic reduction in vehiclecrashes ensures that autonomous vehicletechnology will remain a “Holy Grail” forregulators, OEMs and safety advocates foryears to come.

Ian C. Graig is the Chief Executive ofWashington, D.C. - based Global Policy Group.


SAFETY

SAFETY


We can expect 2014 to be a busy yearfor NHTSA rulemaking and

enforcement activity. The agency is set topush forward with research and possiblerulemaking on advanced crash avoidancetechnologies, driver distraction, andautonomous vehicles, and with implementingenhancements to its recall processes. It isalso likely to continue its aggressiveenforcement, buoyed by the recent doublingof the statutory civil penalty maximum andthe threat of criminal penalties. To reducetheir compliance risks, and to preparethemselves and their products to meet thesenew regulatory developments, manufacturersare urged to update their safety compliancepolicies and to implement regulatorymonitoring programmes.

NHTSA recall label

In terms of crash avoidance technologies andautonomous vehicles, NHTSA has beencarefully studying the safety benefits ofvarious warning technologies. These includeblind spot detection and advanced lighting;intervention technologies, such as lanedeparture prevention, crash imminent braking(CIB), and dynamic brake support (DBS); andautomatic pedestrian detection and braking.It has also been studying vehicle-to-vehicle(V2V) and vehicle-to-infrastructure (V2I)communications as a way to improve theeffectiveness of these systems.

The agency has indicated that it will decidenext steps after analysing research data, and

if the safety benefits outweigh the costs, itcould propose requiring these systems invehicles. NHTSA has also been activelyresearching autonomous vehicles to positionitself to regulate them should they becomecommercially available, and we expect it tocontinue devoting substantial resources inthis area.

Driver distraction is another area of focusfor NHTSA. Last year, NHTSA adopted thefirst of its three-phase federal guidelines toaddress driver distraction from in-vehicleelectronics. That phase applies to originalequipment in-vehicle electronic devicesused by the driver to perform secondarytasks, such as communications,entertainment, and navigation, through tovisual-manual means. The agency isproceeding this year with subsequentphases, which will cover portable andaftermarket devices and auditory-vocalinterfaces. Although these guidelines are‘voluntary’, they are expected to significantlyinfluence the design and performance ofsuch devices in future model years.

In response to Congressional mandates andthe agency’s own internal review, NHTSA isrolling out significant enhancements to itsrecall processes this year. These enhancements– which include a new recall lookup system toenable consumers to search recalls by VIN,new requirements governing ownercommunications, and required electronicsubmission of defect correspondence – areintended to streamline the recall process and

increase recall completion rates, which haveaveraged 70% recently.

Significantly, we expect NHTSA to continuethe aggressive enforcement approachwitnessed in recent years, with a particularemphasis on recall timeliness. Manufacturersshould take note that NHTSA asserted themaximum penalty against manufacturers atleast five times since 2010. Last year, the civilpenalty maximum doubled to US$35m, sowe will not be surprised to see penalties inthat range soon. A significant new concernfor manufacturers is the potential forcriminal liability, as recently seen in therecent Toyota deferred prosecutionagreement, which included a US$1.2bnpenalty. And the industry may face newenforcement regulations and even higherpenalties as a result of Congressionalresponse to the GM ignition switchinvestigation and hearings.

In light of these risks, it is critical thatmanufacturers adopt compliance policies thatprovide the necessary internal guidance foridentifying, investigating and reporting safetydefects.

Christopher Grigorian is a partner at Foley &Lardner LLP in the Washington, DC office. Hispractice focuses on federal motor vehicle safetylaw, antitrust, trade regulation and relatedlitigation.

This article first appeared as a Comment onAutomotiveWorld.com

Expect a busy year for NHTSA rulemakingand enforcement2014 is set to bring strict enforcement of distraction, crash avoidance and recall policy

By Chris Grigorian

SAFETY

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Only buy cars awarded ‘five stars’ inconsumer crash tests. That is the core

recommendation of the Global New CarAssessment Programme’s (Global NCAP)new guidelines for organisations operatingvehicle fleets. Launched at Global NCAP’s2014 Forum in Melbourne, Australia, the newguidelines provide new ‘best practice’ forglobal companies seeking to meet corporatesocial responsibility goals and their duty ofcare to employees.

Our new guidelines are consistent with theUnited Nation’s Global Plan for Decade ofAction for Road Safety 2011-2020 whichrecommends that fleet managers “purchase,operate and maintain vehicles that offeradvanced safety technologies and high levelsof occupant protection”.

The challenge is how to do this when all toooften cars are sold in emerging markets thatmay look similar to five-star Europeanmodels, but which do not offer the samelevels of safety. Of the record level of 65million new passenger cars built last year, asmany as a third would fail to pass the UN’sfront and side crash tests, and do not haveair bags, anti-lock brake systems (ABS) orelectronic stability control (ESC).

To overcome this lack of regulation orharmonisation with global standards, our newguidelines advise fleet purchasers to onlyselect vehicles that have been awarded byNew Car Assessment Programmes (NCAPs)with a ‘five star’ safety rating. There are nownine NCAPs or similar consumer testprogrammes around the world. However, not

all markets are covered by NCAPs and so wealso recommend that, before purchase, fleetmanagers ask the manufacturers to confirmthat the selected model will meet the mostimportant minimum United Nations vehiclesafety standards. The combination ofdemanding ‘five stars’ and a minimum safetyguarantee will ensure that companies can beconfident that they are meeting best practicein fleet safety.

It also makes good business sense. Equipping avehicle with ABS and ESC helps avoid crashesfrom happening at all, so investment in thesecrash avoidance technologies reduces all thecosts of crashes, including injury, propertydamage and loss of business use of the vehicle.That is why Global NCAP now also highlyrecommends Autonomous Emergency Braking(AEB), which is a new safety system that is justbeginning to be included in the most advancedconsumer rating programmes.

Making the ‘five star’ commitment is rapidlybecoming a bench mark for responsible fleetmanagement. Organisations that have alreadydone so include BHP Billiton, the world’slargest resource extraction company, and theGovernments of Australia and Sweden. Thesafety leadership shown by BHP Billiton wasrecognised in Melbourne by HRH PrinceMichael of Kent, who presented the companywith Global NCAP’s 2014 Innovation Award.This ‘five star’ action has given a strong signalto the marketplace by insisting on vehicleswith good levels of safety, and manufacturershave responded by changing the safetyspecification to ensure that they can securevaluable orders.

As part of the UN Decade, more and moreorganisations will be adopting Global NCAP’srecommendations for fleet safety. Ourguidelines also help companies to implementthe new road traffic safety standard ISO39001. This important ISO initiative identifiesvehicle safety as a significant factor for fleetoperators seeking to reduce death and injuryin road crashes.

And that task is becoming harder each yearas the world’s vehicle fleet is set to doublefrom one to two billion in little more thanten years. Already 1.3 million people arekilled and up to 50 million injured annually inroad crashes worldwide. By 2030, the WorldHealth Organization forecasts that roadcrashes will become the fifth leading cause ofdeath, rising to 2.4 million fatalities per year.To prevent this avoidable carnage on ourroads, the UN Decade of Action supportspolicies to cut by 50% the level of fatalitiesforecast in 2020. This would save five millionlives, 50 million injuries and avoid US$3trn insocial costs.

By adopting Global NCAP’s guidelines, fleetmanagers can play their part in achieving theUN Decade’s ambitious but realistic life-saving goal. Their global purchasing power isenormous. By rolling out ‘five star’ fleetpolicies, they will be ensuring that theirpurchase decisions meet best practice insafety management. And by providing ‘fivestar’ safety, vehicle manufacturers will gainthe most lucrative deals in the automotivebusiness. This is how the power of themarketplace can be harnessed to make carssafer across the world.

Fleets adopting five-star safety policies will incentivise manufacturers to phase out modelswithout safety features such as the Nissan Tsur

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

Cellphone network unreliability issomething 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, butwe’ve come to accept the occasional weak,patchy or absent signal, the likelihood ofwhich increases as we venture “off thebeaten track”. And it’s for those off thebeaten track locations – rural roads, highmountain passes – that European regulatorswant to implement what’s become knownas eCall.

In the event of a critical collision, this pan-European SIM card-based emergency callsystem sends a message to Public ServiceAnswering Points, or PSAPs; the 112 message– voice or text, depending on the severity ofthe incident – informs emergency services ofa vehicle’s location and status, and dispatchesappropriate assistance.

For so long, eCall was expected to come intoeffect at some time in 2014 or 2015; then it

was definitely going to be some time in 2015,and then really definitely at some time inOctober 2015. Now, following one of severalindustry-shaking European Parliamentaryvotes last week, we have an exact date:member states must have the appropriateinfrastructure in place by 1 October 2017.

While it looks like the confirmation of a date,it’s just as much as the confirmation of adelay. Make no mistake – like the new EUtruck cab rule, there’s no disputing thesentiments behind eCall, or its potential tosave thousands of lives. But it raises somechallenging questions.

It’s taken since 2004 to get this in place, andthe push for it has come from the OEMs.Whilst the regulators worked on fixing adate, the OEMs and suppliers went ahead anddeveloped the technology anyway. Much ofwhat’s required for eCall is already in place,and in use, with numerous OEMs offeringbroader telematics services that includeeCall capability.

But at least there’s a date in place, providingclarity to all parties concerned. OEMs andsuppliers now know when their new cars willneed to be equipped with SIM cards andeCall technology; emergency services canensure their PSAPs will be ready, andtelecoms companies will need to develop theinfrastructure to enable an accuratelytransmitted emergency call from anywherein Europe, no matter how deep in thecountryside or high on the mountain passthat vehicle might be.

More difficult to comprehend than theequipping of cars with the appropriatetechnology, and the way the resultant costswill be absorbed and distributed, is theenforcement of this mandate. Thetechnology will need to be certified; not justnew technology for sale from October 2017onwards, but existing solutions whichinclude eCall capability as part of a wideroffering. And the legal framework must berock solid: who will be liable when a calltransmission fails?

We now have a date. We now also have manyquestions. But at least we have two moreyears to come up with some answers.

This article first appeared as a Comment onAutomotiveWorld.com

European Parliamentdelays eCall…againeCall 2015 has become eCall 2017. By Martin Kahl

SAFETY


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