Automotive World Magazine

Automotive World MAGAZINE Issue 9 | September 2020 New CEO to set faster pace for Ford’s transformation Voyage's CEO offers his view of a COVID-ready vehicle | China positions for robotaxi lead with 2022 Asia Games | Nio harnesses AI to create a step change in personal assistants | Apollo Tyres shares the secrets to its COVID survival | Easelink redefines EV charging for a world of shared and autonomous mobility

IN THIS ISSUE 04 16 28 New CEO to set faster pace 32 for Ford’s transformation 22 04 New CEO to set faster pace for Nio: ‘AI will become one of our 22 Ford’s transformation most intimate friends and companions’ 12 What’s the post-COVID commercial vehicle outlook? 28Voyage’s ‘COVID-ready’ vehicle 2022 Asian Games could to salvage shared mobility 16 confirm China’s autonomous Who will succeed in the 32 crowded LiDAR space? leadership Copyright statement © 2020 All content copyright Automotive World Ltd. All rights reserved. This publication - in whole or in part - may not be shared, copied, reproduced, stored in a retrieval system, or be transmitted in any form by any means electronic, mechanical, photocopying, recording or otherwise without the prior permission of Automotive World Ltd. 2 Automotive World Magazine September 2020

38 52 Published in September 2020 by: Automotive World est. 1992 46 64 Automotive World 1-3 Washington Buildings Stanwell Road, Penarth, CF64 2AD, UK 38 Mild hybrids—a multi-billion euro growth opportunity www.automotiveworld.com alongside e-mobility? T: +44 (0) 2920 707 021 46 How has COVID reshaped the US industry outlook? [email protected] 52 How to make cities ready for autonomous vehicles, Registered number: 04242884 and AVs ready for cities VAT number: GB 815 220 173 56 Interview: Paul Campion, Chief Executive, TRL CEO & Managing Director: 60 Apollo Tyres: COVID-19 response case study Gareth Davies 64 Autonomy and shared mobility prompt charging Editor: innovation Megan Lampinen 68 ADAS nomenclature standards pave way for Contributors: autonomous driving Freddie Holmes Jack Hunsley 72 Freight technology will help US trucking through the Xavier Boucherat capacity crunch and beyond Production: Anmol Mothy © Automotive World Ltd 2020 September 2020 Automotive World Magazine 3

New CEO to set faster pace for Ford’s transformation While Hackett was faced with arrival of COVID-19 and the immediate production impact, Farley is left to address the new normal it has created, writes Megan Lampinen There’s change afoot at relationship, the transition should Ford with the promise of go smoothly, but Farley faces a new Chief Executive. significantly more friction in other After three years in the upcoming challenges. top post Jim Hackett has decided to retire and hand over the reins Continuity to current Chief Operating Officer Jim Farley, effective 1 October. The Back in 2017 Hackett was two Jims have been working specifically tasked with closely together over the past few modernising the company. Like years as Hackett had him in mind Alan Mulally, a Boeing executive for a potential successor almost before leading Ford, Hackett came from the start. Given their close 4 Automotive World Magazine September 2020

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Hackett has revamped the model line-up, cutting out weaker performers and launching groundbreaking new models from outside the automotive sector, having “His stint leading the New spent 30 years at furniture company Businesses, Technology & Steelcase. At Ford, he quickly set about Strategy team has given applying the principles of design thinking—an him a good approach to product development that understanding of just centres on user experience and which became how profoundly new a key part of his strategy. Hackett also technology is shaping the revamped the model line-up, cutting out auto sector weaker performers and launching ground- breaking models like the Mustang Mach-E, the new F-150 and the upcoming Bronco. Under his leadership Ford established pivotal global partnerships with the likes of BMW, Volkswagen and Rivian. But after three years— the same length of time served by his predecessor Mark Fields— it’s now time to step down, and the board knew just where to look. Farley is an automotive industry veteran and spent 20 years at Toyota before he joined Ford in 2007, hired by Mulally to serve as Global Head of Marketing and Sales. He later led Lincoln, Ford South America, Ford of Europe and all Ford Global Markets. Last year he was put in charge of Ford’s New Businesses, Technology & Strategy team, tackling strategic decision making around artificial intelligence, automation, connectivity and new forms of propulsion. Earlier this year he was named 6 Automotive World Magazine September 2020

Chief Operating Officer, a position widely regarded as a precursor to a CEO appointment. “We really didn’t look outside for a candidate, though we talked about it,” Bill Ford, Ford’s Executive Chairman, told media. “Whenever we threw some names around, Jim’s rose to the top. Sometimes going outside is great, and Alan Mulally and Jim Hackett are proof of that. But there are also benefits to continuity, especially if you are on the right path. The projects Jim and Jim were working on together were exactly what was needed to propel us into the future.” Other management changes will be up to Farley down the line, but as he helped form the current management team, big surprises seem unlikely. Farley himself is regarded as a “car guy”, frequently spending weekends The new Bronco is one of several significant product Automotive World Magazine 7 launches intended to refresh Ford’s image September 2020

Mobility today entails much more than just car manufacturing “ racing vintage cars. His stint leading the New Jim is perhaps the Businesses, Technology & Strategy team has singular executive given him a good understanding of just how that understands the profoundly new technology is shaping the integration of auto sector. “Jim is perhaps the singular technology and auto executive that understands the integration of technology and auto,” observed Bill Ford. 8 Automotive World Magazine Farley’s long automotive industry experience and solid marketing background should also prove real assets. “Since Ford is about to enter a new execution phase, the company likely decided it was time for a more experienced auto executive who knows the ins and outs of the industry to lead the charge, as opposed to an outsider trying to create change,” observed Jessica Caldwell, Executive Director of Insights at Edmunds. “Farley’s specialty is marketing, which will play a critical role as Ford gears up for significant product launches that are intended to revive and refresh Ford’s image.” Lots of work ahead Ford has come a long way under Hackett, shifting assertively into new mobility and technology areas. The automaker has also done much to address the underlying fitness of the base business, reducing bureaucracy and restructuring operations in underperforming markets. But it’s far from done. “We have lots of work ahead of us to really complete our mission,” asserted Bill Ford. It now falls to Farley to execute Hackett’s US$11bn restructuring plan and oversee pivotal product launches. Some of these September 2020

Ford and Agility Robotics are exploring how robot, Digit, can help get packages to the door efficiently with the help of self-driving vehicles launches, notably the 2020 Ford Explorer, Automotive World Magazine 9 went dreadfully wrong and proved a real setback. “Farley is now set to replace Jim Hackett, whose efforts to turn around the company have been hindered by the botched Explorer SUV launch as well as by COVID-19,” said Ana Nicholls, Managing Editor for the Industry Briefing at the Economist Intelligence Unit (EIU). “While Hackett did manage to rein in Ford’s losses, Farley will find that he has a tough job turning that into a profit.” For the fourth quarter last year, well before the pandemic arrived, Ford reported losses of about US$1.7bn. Stock price will also September 2020

Mustang Mach E remain a thorn in Farley’s side, as it has Farley. “It’s Amazon, Baidu, Tesla, Apple, for all the company’s Chief Executives Toyota and others. They are well- over the past decade. During the media financed and voracious companies.” call Farley dodged questions about whether or not he would prioritise the But everyone, no matter how well stock issue, stating only that he was financed or voracious, is feeling the “optimistic as growth initiatives like impact from the novel coronavirus. electric commercial vehicles come into While Hackett was faced with arrival of focus.” Shareholders may demand COVID-19 and the immediate production greater clarity if things do not change impact, Farley is left to address the new quickly, particularly when some of the normal it has created. “Markets, though newer start-ups, some of which have yet rebounding slowly, are in meltdown to build a vehicle, have seen nearly worldwide, with only China astronomical valuations. offering some relief,” Nicholls pointed out. “Next year will bring a bigger The new normal rebound, but still not enough to make up for the lost ground. Much more Farley may not be willing to talk about restructuring will be needed if Ford is to the stock prices of these companies, but soldier through.” he clearly has them in his sights—along with some of the technology giants with Farley’s wealth of experience at Ford will aspirations to becoming mobility players. help in tackling this and other “We know our competition today,” said challenges, and should also go down well with colleagues and workers. That said, 10 Automotive World Magazine September 2020

Ford is investing heavily in autonomous driving technology Nicholls suggests that “he will also need The investment community has been to draw on his knowledge of the outside similarly bullish in their outlook on this world, particularly in interactions with new appointment, with Credit Suisse tech companies and with Volkswagen, Analyst Dan Levy writing that “Farley which has tech-sharing alliance with brings a greater sense of urgency and Ford. The company’s gains from its action.” In the same vein, RBC Capital investment in self-driving business Argo Markets analyst Joseph Spak suggested AI shows the potential of that alliance, that the move signals “Ford is ready to but Ford will need to make sure it is not take on a more aggressive, faster moving the troubled junior partner.” path forward.” Vishwas Shankar, Research Director at As for Farley, he has emphasised the Frost & Sullivan, believes Farley will keep continuity of his leadership plans more up the momentum that Ford has recently than anything else: “I don’t see any built up. “Farley will be looking at Ford’s daylight between Jim [Hackett] and internal strengths, its cash cows and myself. The areas in which I believe we crown jewels, and revisiting partnerships have huge growth opportunity are the and investments in key areas within same we have been working on together. CASE mobility,” he told Automotive Yes, I’m my own man but we have a World. “Like his predecessors, he will tremendous team at Ford. I’m optimistic continue to let go of non-productive about executing our base business and assets and focus operations in those these new areas to compete against new areas where Ford can be best-in-class, and existing competitors. I will share always with an eye on profitability.” specifics with the team at the right time.” September 2020 Automotive World Magazine 11

What’s the post- COVID commercial vehicle outlook? Roland Berger's Wilfried Aulbur shares his expectations for the CV sector in the wake of the novel coronavirus 12 Automotive World Magazine September 2020

The global commercial seen automakers re-evaluating vehicle (CV) sector is investment portfolios—what facing some serious activities make sense versus what headwinds. The novel can you do without? There has also coronavirus (COVID-19) and the been a re-evaluation of the core subsequent economic downturn are business—are there product impacting automaker strategies, segments that you shouldn’t be touching on everything from covering anymore? Look at the production planning and supply medium-duty space in Europe as an chain management to powertrain example. That’s a relatively small offerings and autonomous driving volume one. Do you really need to investments. Wilfried Aulbur, Senior be present in this market? If you still Partner at Roland Berger, has been want to be present in the market, do following developments closely. you really need to develop major components for this segment or can How big a hit has the CV you buy them instead? segment taken from COVID-19? Has there been any significant The volatility of this pandemic has dialling back on electrification been quite pronounced. Although investment? the CV industry knows how to handle volatility, this has been a From a CV player perspective, we significant shock. We have seen a have not seen a major retraction of dramatic reduction in North investment. The vehicle America coming from a high. The manufacturers that have exposure same thing is happening in Europe. to Europe know that the emissions China recorded a very sharp regulations will come and, as a contraction but currently sees lots consequence, they need of optimism. Our initial projection electrification. They also need for China was that the market would hydrogen as a medium- to long- be flat, but it seems to be growing term solution. We have seen players this year due to the kind of activities understanding that they will need that the government is putting in to work together to create the scale place in trying to prop up the and bring down cost to a level that overall economy. is feasible for the overall ecosystem. The joint venture between Daimler What does this mean for and Volvo is a good example of this. automakers? Do you see newcomers like This environment leads to a Nikola posing a serious threat to situation where all the major players the more established players on are, first and foremost, challenged to this front? conserve cash. We have seen this reaction across the board in terms of One has to wait and see. As a B2B everybody cutting non-essential business that’s very much around expenses, making sure they don’t understanding the business model spend marketing money that doesn’t of the end customer, the hurdles for really bring a return. Everybody is operating in this environment and going in for cost and headcount being successful here are high. reduction measures. We have also That’s because you need the September 2020 Automotive World Magazine 13

In June, Scania warned that it was conducting a broad review of the number of consultants and employees on its books, with an eye to reducing global headcount infrastructure. With a fuel cell or talent. They are trying to use this a consequence, the negative an electric truck, you need to crisis to their advantage. impact will also be there as far as think about the uptime, the the overall economic convenience in terms of getting Will the pandemic prove a performance. In that sense, repairs done and the training of short-term or long-term that’s a real cause for concern. a network. There are some real challenge? Having said that, the first green challenges to make these things shoots are visible. If we look at work and I think that’s one of the In some sense, the COVID the kilometres driven by trucks reasons potentially why Nikola situation is a short-term in the US or Europe, they are tied up with Iveco. This challenge. Even if we don’t get very much close to being back to partnership gives it access to the this under control quickly, I normal numbers. kind of ecosystem and would think that by 2021 we experience that it needs to really would have some solution in Which players are going to roll out its technology. terms of medication, which then emerge from this in the would lead to normalisation of strongest position? Autonomous driving has been the overall economy, albeit on a another major investment lower level. By that time, if it In transport there are some area for many CV companies. really takes that long, the sectors that are actually doing Has this been sidelined in the negative impact on employment quite well already. If you carry wake of COVID-19? will be quite significant. And, as groceries to supermarkets, you’re Here we have seen two approaches. Some players have decided to push back autonomous investments for the time being, while others see this as an opportunity. They may be thinking that in this environment it will be more difficult for start- ups to secure funding. That means they may be able to either gain a head start—or increase it— when it comes to acquiring 14 Automotive World Magazine September 2020

Many delivery applications have recorded a boost in activity following the pandemic probably not doing badly. If you that the worst is behind us and first order of business is clearly are exposed to some of the e- they can start buying again ensuring cashflow, being able commerce players or are taking rather than ageing their fleet. to defend market share as goods to shopping centres, you’re much as possible, and not not doing badly. It is a varied Given the current constraints jeopardising essential picture across the different end of the industry and lowered investments in the future. applications, but overall, traffic outlooks, what do you think has come back to normal levels would characterise a And when it comes to what or close to normal levels. successful 2020 for the CV constitutes essential industry? investment, is that going to Will that translate into service vary some degree by and parts revenue for OEMs? If you are able to manage your company? cash flows reasonably well in Definitely, so that’s positive for this year and you manage to Yes, exactly. It will vary on the the network and the OEMs. safeguard essential overall position of the company, Down the line, it will also lead to investments, I think then you’ve and how invested it is in certain order incomes that are closer to done a good job. We have an technologies already. It also what a normal year would look unprecedented challenge with depends on the strategic call like. In the US, the fleet both the supply side and the that a company takes on a customers have the confidence demand side disruption. The particular technology. September 2020 Automotive World Magazine 15

2022 Asian Games could confirm China’s autonomous leadership Large events like this have become popular stages on which to showcase self-driving capabilities, and the pressure is on to get it right. By Megan Lampinen The next Asian Games could (AVs) are set to play a key role, and if prove make or break for Hangzhou gets it right, China’s global China’s autonomous reputation as an AV pioneer could be mobility ambitions. Like the solidified. Olympics, this sporting event—held every four years—attracts floods of The country has been jockeying for a visitors, temporarily boosting the leadership position in self-driving number of people in the host city. For technology, and numerous 2022, the challenge of transporting development projects are currently those crowds falls to the city of underway. By 2025, the government Hangzhou, Zhejiang. Speaking at a aims to have large-scale production of recent logistics planning conference, self-driving cars, though admittedly Hangzhou 2022 Deputy Secretary operating in limited geographies. General and Deputy Mayor of the McKinsey believes China could Municipal Government, Chen potentially become the world’s largest Weiqiang, warned that transportation market for AVs and predicts that AVs and logistics for the Games would be could account for more than 40% of “complex.” Autonomous vehicles its new vehicle sales by 2040. What 16 Automotive World Magazine September 2020

Cao Cao’s fleet is powered by DeepRoute technology better opportunity to showcase the electric robotaxis during the event. latest capabilities and future promise Both visitors and participants will be than the upcoming Games. able to hail a ride using the Cao Cao app for travel within the city. “With Large events like this have become more than 40 venues being used popular stages on which to during the Games, the ability to demonstrate AV capabilities. Aptiv seamlessly hail a robotaxi will save and Lyft have been running self- attendees time on walking and allow driving taxi fleets at CES in Las Vegas. them to visit as many places as Yandex was supposed to run a fleet at possible during their time there,” the North American International pointed out Nianqiu Liu, Vice Auto Show this year, though the show President of DeepRoute. was cancelled in the wake of COVID- 19. Toyota planned to have a fleet It is DeepRoute that provides the shuttling visitors around the 2020 automated functionality to the fleet. Tokyo Olympics, though this too was Its comprehensive Sense II system hit by COVID and is now postponed includes sensing capabilities, high- until 2021. definition (HD) mapping, perception, planning and control, simulation and No emissions, no driver cloud technology. According to the company, DeepRoute-Vision and its Providing the Asian Games go ahead synchronisation controller for sensor as planned, Geely-backed ride-hailing data, DeepRoute-Syntric, can company Cao Cao Mobility will be accurately detect surrounding objects operating a fleet of autonomous, in real-time to deliver a safe and smooth driving experience. September 2020 Automotive World Magazine 17

Geely established Cao Cao as a strategic move into ride-hailing, and it is now present in more than 50 cities DeepRoute-Syntric is an advanced World. “As the system could be data synchronisation controller that deployed quickly and cost-efficiently, can synchronise information from it proved a real help in achieving Cao different types of sensors, enabling Cao’s robotaxi service objectives.” the perception algorithm to process sensor data aligned in the same However, considerable work was still standard. The data creates HD maps, needed to bring everything together, which allow the self-driving vehicle to and teams from DeepRoute, Cao Cao understand what’s on the road and and Geely worked closely on not only how to execute its trajectory. the integration of the self-driving system but also the backend “Since our computing platform within operations for dispatch and the user- the self-driving solution is small and based app experience. DeepRoute is our sensing solution is an all-in-one also working with Cao Cao to create product, Cao Cao found that it was testing and operation guidelines as easy to integrate,” Liu told Automotive well as standards for the robotaxis. 18 Automotive World Magazine September 2020

The AutoX and Amap partnership marked the first time that robotaxis were available on a major ride-hailing platform in China From pilots to mass designed to be cost-efficiently production manufactured at scale so it will be accessible to self-driving companies of While autonomous driving pilots like all sizes,” he added. “To keep costs to this one have become increasingly a minimum for our customers, we frequent, that doesn’t necessarily created our own inference engine so mean the technology is ready for that the system doesn’t require a large commercialisation. For DeepRoute, computing platform.” though, it’s not far off. “In terms of safety and cost, our technology is very DeepRoute also stands out from the close to being ready for mass competition in terms of the accuracy production,” Liu asserted. of its perception technology. Liu proudly points to test results from the The cost aspect could prove the real KIITI Vision Benchmark Suite, a ace up its sleeve. At mass production, project between the Karlsruhe he projects system costs at around Institute of Technology and Toyota US$20,000. “The system was Technological Institute at Chicago: September 2020 Automotive World Magazine 19

DeepRoute's advanced perception technology can detect objects around a vehicle up to 140 meters away “Our advanced perception technology testing in various cities as well as using has ranked highly on the KITTI and test courses and simulation. Semantic KITTI tests, showcasing how it can identify different types of A good fit for objects with a high level of accuracy.” automation The perception model and algorithm can detect objects around a vehicle up While cities around the world are to 140 meters, even in low-visibility interested in harnessing the potential weather conditions. benefits of autonomous driving, China could be a particularly good The next step in system development fit. A KPMG study from July 2020 is to gain exposure in a wider variety found China to be one of the top five of environments. As Liu elaborated: performing countries in terms of “While we have already made strong securing AV-related industry progress enabling vehicles to operate partnerships. At the same time, safely, with few driver engagements in numerous local companies are a variety of scenarios, our solution still transitioning to become suppliers of needs to be deployed in more cities to pivotal AV technologies including collect more data to train the system.” chipsets, LiDAR, AI algorithms and DeepRoute is conducting real-world 20 Automotive World Magazine September 2020

vehicle communications technologies. The a base for its autonomous mobility country’s extensive 5G network could also development, and opened a new research facilitate developments. hub there in April 2019. “China is leading the world, both on But it’s not all about robotaxis; trucks are technology and pace of adoption and another focus area for autonomous implementation, especially with its early developments, and earlier this year introduction of 5G networking,” said Philip DeepRoute partnered with Dongfeng Ng, Partner, Head of Technology, KPMG Commercial Vehicle Co to equip container China. “Along with work to develop trucks with its self-driving solutions to cooperative vehicle infrastructure system, automate operations in the Xiamen Ocean this will build strong foundations for the Gate Container Terminal, owned by Cosco introduction of AVs. The Chinese public also Shipping. “This industrial application appear receptive to using such vehicles, demanded a customised solution for its particularly younger generations.” unique requirements,” explained Liu. “Our DeepRoute’s Liu also noted the importance of perception model quickly learned how to positive consumer attitudes around this identify relevant objects such as shipping technology. “Studies have shown that people containers and cranes—things that aren’t in China are very open to self-driving generally seen during typical self-driving technologies,” he noted. tests—and navigate safely around them. This “People are culturally accepting of ride-sharing and they celebrate the idea of AVs Robotaxis in particular are a hot application streamlined their terminal loading and area for autonomous technology, not unloading process.” surprising given the low vehicle ownership ratio, so Cao Cao and DeepRoute have plenty With projects like these, China could well be of company in this space. “People are one of the first markets in the world to see AVs culturally accepting of ride-sharing and they go mainstream. Liu is certainly bullish in his celebrate the idea of AVs,” said Jewel Li, Chief outlook: “We believe autonomous mobility will Operating Officer at Chinese autonomous roll out across China in the next five years as tech developer AutoX. The company has there are already robotaxi services in several been working with China’s largest mobility Chinese cities. Our partnership with Cao Cao operator, Amap, on a robotaxi trial in pushes us one step closer to a future where Shanghai. Aptiv has also honed in on China as autonomous transportation will be the norm.” September 2020 Automotive World Magazine 21

Nio: ‘AI will become one of our most intimate friends and companions’ In-vehicle AI assistants could offer automakers daily access to a previously inaccessible market. By Jack Hunsley 22 Automotive World Magazine September 2020

“ In the future of 52 years on, Stanley Kubrick’s mobility, the key 2001: A Space Odyssey stands as differentiator in one of cinema’s greatest, if choosing to buy a car slightly more bizarre, pieces of from one brand over work. It also features one of cinema’s key another will no memorable moments when the longer be determined supercomputer HAL 9000 begs astronaut solely by driving Dave Bowman to spare it. As Bowman range, performance, chooses to ignore HAL’s pleas for mercy equipment and and begins an arduous shutdown features. It will be the procedure HAL delivers one of pop emotional value of culture’s most famous confessions: “I’m the product and the afraid, Dave… my mind is going. I can feel brand it.” Though 2001 split opinions at the time, the famous late film critic Roger September 2020 Ebert sang its praises, with one factor, in particular, resonating with him: how Kubrick had managed to make what was supposed to be the perfect computer instead the most human of all the characters. Though an extreme example, some similarities can be drawn from HAL to today’s automotive industry. No automotive developer is attempting to create a wholly sentient, and inevitably malevolent, artificial intelligence (AI), but the consensus is that AI can be used by the industry to nurture a brand identity through creating a tangible virtual persona. For instance, BMW’s intelligent personal assistant’s attention can be summoned by simply saying “Hey, BMW.” Customers that instead want to use their preferred home-based assistant in-vehicle can do so by calling for Alexa’s, Siri’s or Cortana’s help. It’s also a route on which Chinese start-up Nio is pinning its connected strategy. Nomi At Nio, unsurprisingly AI’s core value is found in enabling autonomy, given its long-term aim to build electric, autonomous vehicles (AVs). However, if and when these electric AVs make it to market, Nio is confident it can also create Automotive World Magazine 23

“Early on, people may say Nomi is just a little robot on top of the instrument panel. However, Nomi is designed to be far more just an ‘add-on’ to the standard infotainment system. It is the brain and centre of car’s AI an in-vehicle environment where user and the vehicle,” said Ted Li, driver and machine can converse and Associate Vice President, Product interact with one another seamlessly. Management Department & Senior To reach this future, Nio’s first Expert, Experience Manager at Nio. stepping stone can be seen through “Nomi can give the user a much more the development of its own bespoke engaging ownership experience, not in-vehicle virtual personal assistant, just through operating functions, but ‘Nomi’. also by offering a digital companionship which is not First unveiled alongside the launch of achievable through conventional the ES8 SUV in 2017, the automaker methods.” originally marketed Nomi as “the world’s first in-car AI system,” capable When Nio says ‘companionship’ it of interacting with passengers using quite literally means that. At the most its ‘emotion engine’. “The most basic level, Nio allows owners to obvious business area for AI is rename their Nomis to whatever autonomous driving, where Nio Pilot name they’d like. For US$700 users is already trying to become one of the can also upgrade to the ‘Nomi Mate’, market leaders. However, the other which contrary to the base model less obvious yet fundamental area is features two digital eyes which turn lifetime companionship, which to greet passengers as they enter the defines the relationship between the vehicle and can display a variety of 24 Automotive World Magazine September 2020

facial emotions. Regardless of Relationship which model buyers opt for, Nio places great significance on Today, however, Nio just fostering this human-machine scratches the surface of Nomi’s relationship. “Early on, people in-vehicle possibilities. Going may say Nomi is just a little forward the automaker is eager robot on top of the instrument to expand on Nomi’s current panel. However, Nomi is functionalities and bring more designed to be far more just an AI-enabled value to the customer ‘add-on’ to the standard experience. “In our next steps, infotainment system. It is the we will give Nomi further AI brain and centre of car’s AI,” said capabilities, including autonomy Li. “Each motion, open and and cabin perception. The entry- closure, adjustment and level Nomi will also be able to command are all neural operate a wide range of interior connected to Nomi’s emotion functions including media engine and conversation system.” players, opening windows and sunroofs as well as handling “Nomi can give the user a navigation,” said Li. Though a much more engaging common development route ownership experience, throughout the sector, Li is eager not just through to stress how important these operating functions, but seemingly minor features will be also by offering a digital in fostering a brand identity in a companionship which is connected, autonomous world. not achievable through conventional methods “In the future of mobility, the key differentiator in choosing to September 2020 buy a car from one brand over another will no longer be determined solely by driving Automotive World Magazine 25

range, performance, equipment and Privacy features. It will be the emotional value of the product and the brand,” If assistants such as Nomi do end up he said. Nio, in particular, sees as the main point of interaction, it current adoption rates on products could pose some practical problems. featuring Alexa and Siri functionality One example is the cultural consumer as a key indicator in how consumer differences when attempting to interests are changing in this develop such AI-enabled functionality connected space. “AI will become one for several markets. Western of the most intimate friends and consumers traditionally prefer their companions to our next generation, virtual assistants to remain strictly as well as ourselves,” he added. “In machine-like, whereas Asian the very distant future, when full customers tend to prefer a more autonomy is available and when the personified digital experience. steering wheel is no longer necessary, Nomi will become the primary “Asian culture tends to be more interface for user interaction. That is receptive to animated and virtual the end goal.” characters compared to the rest of the 26 Automotive World Magazine September 2020

world,” said Li. “However, most people handled in an encrypted way and will will gradually grow fond of Nomi once be erased from the cloud once all they start to experience it and get used voice and learning sessions are to it.” Though Nio is confident that all completed,” added Li. “Given that we markets will eventually warm to Nomi, are also planning our global entry anyone developing similar tools will strategy, our connected vehicle and need to think carefully about how best data services will be strictly following to develop that human-machine- GDPR and related privacy protocols.” interface (HMI) operability to cater for Nomi also runs proprietarily on Nio’s bespoke market demands. bespoke operating system which only “ AI will become one of the most intimate friends and companions to our next generation,as well as ourselves Another consideration is data privacy, operates software digitally certified by especially if the industry shifts to Nio itself. largely shared vehicles. Though a virtual human-like assistant would be Time will tell whether consumers will a hugely valuable tool in this truly warm to in-vehicle virtual theoretical market, in which vehicles assistants, as well as whether these are potentially more akin to assistants can display and invoke whitegoods, reassuring consumers emotion in a HAL-like manner. But what that their information remains private is clear is that through the use of AI and secure will be critical in there lies a previously largely unlocking this value. inaccessible opportunity for automakers to interact with customers in-vehicle on In the case of Nomi, Li reassures that a daily basis. Today, these players must all voice conversations and data place significant development focus on processing passes through a local making sure such assistants can offer embedded engine. From here, Nio users an enjoyable, and frustration-free then deploys a cyber security gateway experience. With that foundation built which handles all data and market interests weighed, communication between the car and automakers can then decide just how the cloud, with all data also being human they would like their future masked and anonymised. “All data is vehicles to appear. September 2020 Automotive World Magazine 27

Voyage’s ‘COVID- ready’ vehicle to salvage shared mobility Voyage’s third-generation robotaxi could become the model for creating COVID-ready shared vehicles. By Jack Hunsley The COVID-19 pandemic has D.C. is still down 56.9% compared to hit mobility hard. On one the 25.7% decrease currently seen hand, automakers and across Moovit’s native Israel, for suppliers have been forced example. to take stock and reprioritise development to keep afloat. On the These drops are perfectly other hand, on-road traffic initially understandable. Many nations have ground to a halt. Though lockdowns warned citizens to only use public have started to lift and commuters are transit if there is no alternative and if beginning to return to their daily their journey is absolutely essential. routines, transit levels are still However, another explanation could depressed. be heightened concerns over the Figures from Intel’s transit aggregator contagion and how easily it might Moovit paint this picture well. Taken spread within a confined area such as from daily data of public transit usage a bus or a taxi. For an automotive across 108 cities worldwide, not one industry building towards a shared, single city on Moovit’s books has seen mobility world, failure to address this transit usage return to pre-COVID anxiety could be catastrophic. But it is levels. Some are faring far worse than an anxiety which several players are others: transit usage in Washington, eager to overcome. 28 Automotive World Magazine September 2020

COVID-ready has announced its third generation robotaxi, the G3. Based on Chrylser’s One such player is robotaxi operator Pacifica Hybrid minivan, the G3 offers Voyage. To date, it has made its name Vovage around a 50% cost saving over largely by shunning the more popular its current G2 model. Spec-wise, it dense inner-city development comes equipped with Voyage’s programmes to instead trial its ‘Commander’ technology, which technology in retirement communities includes its “state-of-the-art in Florida and California. Though on perception, prediction, and paper it might not sound a wholly behavioural modules,” and well as its exciting testing ground, it is important collision mitigation system ‘Shield’ to bear in mind that The Villages and remote operations solution facility in Florida is home to more ‘Telessist’. Most intriguing in this than 120,000 people, technically COVID-hit market, however, is it’s making it one of the fastest-growing “ambulance-grade” automatic metropolitan areas in the entire disinfection system. country. For Voyage, it’s a location which sits perfectly in the ‘Goldilocks’ “It is ‘COVID-ready’, and I do not use complexity sweet spot: not too big, that term loosely,” Voyage’s Co- not too small, but just right. Its work Founder and Chief Executive, Oliver so far also has attracted the attention Cameron, told Automotive World. “As of FCA which partnered with the we’ve seen with Uber’s and Lyft’s operator in May 2020. results, the shared mobility industry is in the process of being decimated Though it has seen some initial early because not only do you have a contract workforce which is perhaps a success the time has come for the little inconsistent in the safety company to target scale, and standards across the fleet but there is to do that it September 2020 Automotive World Magazine 29

The Voyage G3 uses ultraviolet to deactivate pathogen DNA, halting reproduction cycles of viruses, fungi and bacteria also just the fact that you have a to enable a more hygienic shared human driver which is an inherent world. One benefit is that, contrary transmission risk. We saw this as a to its predecessor, the G3 is a technology challenge.” driverless car and so removes the chance of direct driver-to-rider Though the G3’s initial design transmission. To attempt to eliminate philosophy was not targeted solely at transmission risks entirely, however, countering COVID, the global Voyage opted for a more ambitious pandemic has encouraged Voyage to solution through the use of think how its vehicles could be used ultraviolet-C (UV-C) light. 30 Automotive World Magazine September 2020

“To tackle this issues we looked On paper, it is an attractive transmitted in shared vehicles towards ambulances as they offering for any shared vehicle with this solution. Hopefully, have already solved this operator, but for Voyage, in we’ll see more of these vehicles problem by installing UV-C particular, the solution is from ourselves and other lights,” said Cameron. “When extremely important. Given its companies which can start to these are triggered, with no one current core demographic of prevent several other viruses in the car as that would be very senior citizens, many of whom such as the seasonal flu.” dangerous, the lights can perhaps have underlying health eradicate infectious viruses that conditions or weaker immune The future might be lurking on surfaces or systems, finding a practical and in the air.” This process, which effective sanitation mechanism Looking forward, Voyage remains takes around three to four could quite literally be the wholly confident in its minutes, is operated using three difference between life and development roadmap. Currently, lights which can halt the death. Voyage’s first G3, referred to as pathogen reproductive cycle the ‘Alpha G3’, is already through inactivating DNA. “It is particularly important for operating in San Jose, California. Effective on a range of us to tackle COVID as it is very The first driverless ‘Beta G3’ will pathogens including viruses, dangerous for seniors,” said be on the road in a few months fungi and bacteria, the solution Cameron. “While COVID is the according to Cameron. Though a allegedly eradicates 99.9% of focus currently, there is going to few more G2 vehicles are still pathogens including the be a significant reduction of the expected to be added to the fleet, seasonal flu and COVID-19. most infectious viruses being Voyage anticipates that these vehicles will be fairly quickly “Effective on a range of cycled out for the new model. pathogens including Production for the G3 is currently viruses, fungi and scheduled for early 2021 for bacteria, the solution deployment in both its California allegedly eradicates and Florida operations. 99.9% of pathogens including the seasonal It will be interesting to follow flu and COVID-19 the impact that Voyage’s new scalable model could have on this currently struggling sector. Though the G3 could offer a total 50% cost reduction overall, more specifically it has been able to achieve a 65% cost reduction on its sensor costs and a 25% reduction on its computing costs. These savings combined with a theoretical COVID-ready vehicle offers a compelling example for the ride-hail players already operating in major towns and cities which are eager to ease rider concerns. September 2020 Automotive World Magazine 31

Who will succeed in the crowded LiDAR space? Affordable, scalable LiDAR remains an elusive piece of the self-driving puzzle. This is not for lack of effort, with numerous companies competing in the space. By Xavier Boucherat If the LiDAR segment looks LiDAR’s purported benefits, and the crowded, it is hardly surprising: race to bring down unit cost has the majority of automakers and intensified in recent years, self-driving technology particularly with the emergence of developers agree that LiDAR will be solid state technology as opposed to pivotal for realising safe autonomous mechanical scanning. This year at vehicles. That company which can CES, the same Velodyne claimed to provide scalable, affordable units have completed work on an stands to profit enormously. automotive LiDAR which, produced at volume, could go below US$100. The The US$75,000 price tag on early figure is an estimate, but one worth roof-mounted Velodyne models taking seriously, having come from a proved as big a talking point as market leader. 32 Automotive World Magazine September 2020

Velodyne isn’t the only company to marks the evolution of Luminar from have established a name for itself “tech development company working primarily on the basis of LiDAR with R&D programmes to the first development. Luminar has gone from company enabling autonomy in strength to strength in recent years, automotive series production,” Chief recently partnering with Volvo on its Executive Austin Russell said in a SPA2 modular vehicle architecture. statement. This will bring its LiDAR units to series production by 2022, enabling high- Then there are startups such as level autonomy functions such as Blickfeld and AEye. The former, based Highway Pilot. The recent addition of in Munich, has tasked itself with a goal five new executives, all with shared across the space: the considerable automotive experience, production of high performance, September 2020 Automotive World Magazine 33

Automotive LiDAR players Evolution of the industry Source: LiDAR for Automotive and Industrial Applications report, Yole Developpement Source: Yole Developpement The LiDAR space is increasingly crowded mass producible solid state LiDAR. Its to automakers today. But the 2019 recent Series A financing round shuttering of Oryx Vision, an Israel- attracted investment from based LiDAR start-up, has demonstrated Continental, Bayern Kapital and the difficulty of making a business out of Osram Ventures, among others. LiDAR. With the self-driving car widely Meanwhile, Dublin, California-based agreed to be more years out than AEye has dedicated its efforts to the previously predicted, and with the creation of intelligent perception drying up of investment interest in the technology, namely iDAR (Intelligent wake of the novel coronavirus disease Detection and Ranging). Smart (COVID-19), what will it take to survive in perception software will be key for the LiDAR space? helping LiDARs to operate in real time, as scanners will need to Grab your partner distinguish between those objects which are important, and those that “LiDAR companies that will survive are not. are those that are currently partnering with automakers and Tier As such, the space is attracting both 1s,” says Alexis Debray, Technology hardware and software talent with and Market Analyst at Yole different aims and ideas of how to run a Developpement, a technology company. Luminar’s Russell, for consultant with expertise in sensing. example, wants to run a perception-as- Luminar’s recent partnering with a-service business, with subscription Volvo is a key example, and the models that make its software available 34 Automotive World Magazine September 2020

Time-to-market: LiDAR for ADAS vehicles - Integration roadmap Source: LiDAR for Automotive and Industrial Applications report, Yole Developpement Source: Yole Developpement Series production of some LiDAR will begin soon company is also collaborating with Toyota and group was ongoing, and that together they are Audi. Meanwhile, Softbank-backed, Israel-based making “good progress,” but could not provide Innoviz, a solid-state LiDAR developer, has further details. partnered with BMW for its future models, with the Level 3 enabled iNext EV potentially arriving on In December 2019, Silicon Valley-based Quanergy roads as early as 2021. A spokesperson for BMW announced a partnership with with Geely that aims confirmed to Automotive World that work with the to develop and commercialise solutions for the broad development of both smart city and autonomous “The development of both LiDAR and vehicle systems: one will automated driving has proven to be not work without the other, much more complex than anticipated said Chief Executive Louay Eldada in a statement. “The development of both LiDAR and automated by OEMs… LiDAR companies that have driving has proven to be not been able to raise enough money much more complex than anticipated by OEMs,” said or generate enough cash will not Debray, “and will therefore survive for long still require a lot of time and R&D. LiDAR companies that have not been able to raise enough money or September 2020 Automotive World Magazine 35

36 Automotive World Magazine generate enough cash will not survive for long.” Computing and processing are also important aspects of automotive LiDAR, he added, and the system must be able to deliver useful data to the car. This potentially creates space for software and data specialists, but without solid partnerships, the cash-burn between now and the era of commercialised autonomy will surely be too much for many to handle. Focus on cost The main challenge for LiDAR, says Pierrick Boulay, also Market and Technology Analyst at Yole Developpement, remains clear: it must evolve from its high price, low volume model to a low price, high volume one. “This must be done while maintaining revenue streams, or at least while starting to generate revenue,” he says. “Velodyne, which invented the real-time 3D LiDAR 15 years ago, has started this transition. Moreover, the automotive market is especially difficult since it requires several years of qualification and cost pressure. The involvement of Tier 1s is key to bringing LiDAR to cars.” As things stand, he adds, LiDAR costs remain some ten times more expensive than cameras, and costs could rise further. This is despite the emergence of solid state LiDAR, which compared with its mechanical counterpart technology has helped realise some cost reductions whilst eliminating moving parts. “The first embedded LiDAR used by Audi used a mechanical scanning approach with an edge emitting laser at 905nm and avalanche photodiode arrays, but the cost was more than US$600,” he says. “The next LiDARs used by BMW and Volvo are expected to be even more expensive.” September 2020

Cruise acquired Strobe to help reduce the cost of LiDAR technology That said, Boulay believes that short- handle these tasks with a high degree range LiDARs with no mechanical of success, and have a distinct scanning could be cost effective and advantage in these situations. increase safety in harsh weather Meanwhile, radar can complement conditions within the next two to both technologies in adverse weather, three years. This will come at the as cameras can be impaired by snow cost of performance and complexity and fog, and LiDAR range can be when compared with long-range affected. Therefore, successful LiDAR LiDAR, but for the purposes of companies might aim to produce advanced driver assistance systems solutions that lend themselves to (ADAS), it could provide LiDAR holistic integration. companies with a much needed source of revenue, and a way to With such varied approaches in develop deeper relationships with business plans and some variations in automakers. technology, it is unclear who in the LiDAR segment will survive. Further Early LiDAR-enabled ADAS consolidation is likely, possibly applications could give a clearer among the self-driving developers picture of which sensors work best in not developing their systems in different situations. LeddarTech, a house: Argo, Cruise and Aurora have Quebec-based sensor developer, already snapped up Princeton argues It should not be assumed that Lightwave, Strobe and Blackmore LiDAR can handle every sensing respectively. Those remaining challenge: “LiDAR cannot detect companies that can establish big colours or interpret text,” wrote Preeti partnerships will benefit from some Prasher, ASIC Test Engineer, financial security and R&D funding at LeddarTech, in a blog post. a time when budgets are being “Consequently, it is extremely difficult, slashed. But with further innovation or even impossible, for LiDAR to clearly yet to be realised within the identify traffic lights or road signs.” space, one bright idea could yet put Conversely, camera-based systems can an unknown player on top. September 2020 Automotive World Magazine 37

Mild hybrids— a multi-billion euro growth opportunity alongside e-mobility? Experts from McKinsey & Company explore the technological and market opportunities within the rapidly changing powertrain landscape 38 Automotive World Magazine September 2020

The powertrain landscape is vehicles (MHEVs) represent a changing fundamentally technological leap in the other part across global automotive of the automotive market—that is, markets and vehicles solely based on a electrification—the transition from combustion engine. What combustion engine-powered technological and market powertrains to electric powertrains— opportunities can be expected from is at the heart of this development. this technology in the rapidly Optimistic forecasts expect between changing powertrain landscape? 30% and 50% electric powertrains by 2030 in most regions. This includes From today’s viewpoint, combustion battery-powered electric vehicles engine-based powertrains will (BEVs), plug-in hybrid electric remain dominant at least for the vehicles (PHEVs), fuel-cell electric coming decade—yet with significant vehicles (FCEVs), and hybrid electric differences across key markets as the vehicles (HEVs). Mild hybrid electric speed of electrification varies. In September 2020 Automotive World Magazine 39

Exhibit 1: MHEV propulsion system architectures MMHHEEVVpprorpouplsuiolsniosynstseymstaercmhiaterccthuriteesctures TM Transmission M Electric machine Eng. Internal combustion engine Differential and axis Potential MHEV architectures Most common MHEV architectures P0 P0 Belt P2 Engine Engine P1/P2 M Engine M/G Clutch TM P3 TM TM P4 The MHEV architecture (P0 – Px) is Electric machine linked to ICE through Electric machine connected directly with the characterized by the position of the accessory belt crankshaft electric machine in the powertrain ICE is supported by transmission of force ICE is supported by transmission of force onto directly onto the crankshaft Source: IHS the belt McKinsey & Company Europe and China, the share of ‘Mild hybrids’ typically refers to electric powertrains* could increase vehicles with at least one electric 48- to about 45 to 50% by 2030. In the volt (48V) motor that assists a classic US, electrification could take place at internal combustion engine (ICE) and an initially lower pace, with later a 48V battery that is charged by an acceleration to a share of about 35% electric generator recovering excess electric powertrains by 2030. The mechanical energy. Mild hybrid COVID-19 pandemic is accelerating technology can be combined with electrification in Europe and China both gasoline and diesel engines; due to additional government however, diesel mild hybrids only incentives, unchanged stringent play a role in Europe. regulation, and an increased appetite for sustainable mobility. In contrast, MHEV architectures COVID-19 is slowing down electrification in the US due to There are different powertrain system relaxed regulation, low oil prices architectures for mild hybrids, as having a significant impact on shown in Exhibit 1, but two gasoline prices, and several delayed architectures are most relevant. In or halted EV model launches by US- the P0 architecture—by far the most based OEMs. common architecture—the 48V motor is linked to the combustion engine Mild hybrid technology brings higher with an accessory belt. In the P2 efficiency and lower running costs to architecture, the 48V motor is combustion engines and could connected to the crankshaft. As therefore provide promising Exhibit 2 shows, current projects opportunities for OEMs, suppliers, reflect a much lower production and customers until electric volume of the P2 architecture in the powertrains become ubiquitous. 40 Automotive World Magazine September 2020

Exhibit 2: MHEV global production projection MHEV global production projection shows two dominant designs MHEV global production projection shows two dominant designs TToottaallgglolobablaplrpordoudctuiocntiboynpbroyppurlsoiopnuslsyisotenmsydsetseigmn,dinesmigillnio,ninunmitisllion units P0 P2 Other 28 24 21 16 71% 72% 72% 4 6 8 11 15% 72% 20% 23% 13% 8% 95% 91% 85% 76% 24 18% 26 6% 5% 0% 8% 0% 12% 3% 10% 2027 9% 25 2020 21 22 15% McKinsey & Company 23 Source: IHS near future, but its importance could MHEV advantages increase as batteries and engines become more powerful in the coming MHEV powertrains can deliver years. Other architectures, such as efficiency gains of up to 5-15% the P1 architecture—similar to the P2 compared to regular ICEs. This architecture but with the 48V motor efficiency gain results from the directly connected to the combustion recovery of energy during braking and engine—have not made their way into the electric efficiency gained from the mass market yet. having a 48V wiring system compared to a 12v wiring system. Connecting What all MHEV architectures have in peripherical components via the 48V common is that the ICE setup wiring system reduces the power loss remains mostly unchanged—hence, due to electric resistance—an advantage MHEVs require the same components of growing importance given the as existing ICE models, plus increasing connectivity in cars. additional 48V components. This includes the 48V motor and The efficiency advantage of MHEVs is generator, the inverter, the 48V relevant for both OEMs and consumers. battery (typically <1 kWh), and the For OEMs, ~5-15% higher efficiency DC-DC converter that connects the means lower CO2 emissions at 48V electric system to the manageable additional vehicle cost. conventional 12v electric system. The CO2 avoidance costs of MHEVs Altogether, typical MHEVs currently total around €70 per g CO2 per km cost about €700 to €1,100 per vehicle (Exhibit 3), landing in between those of on top of the ICE base. PHEVs and BEVs. Thereby, MHEVs offer September 2020 Automotive World Magazine 41

Exhibit 3: CO2 avoidance costs of hybrid and electric powertrains CCOO22avaoviodaidnacencoesctsoosfthsyobfrihdyabnrdidelaecntdricepleocwterritcrapinoswertrains Power- CO2-avoidance costs1, Example Costs2 CO2-efficiency3 train type specifications in EUR/g/km in EUR in percent 48 V MHEV ~70 ~ 10 kW engine ~ 10% < 1 kWh battery ~ 700 ~ 20% HEV ~75 to 1,100 ~ 50% ~ 35 kW engine 100% PHEV ~60 ~ 1-3 kWh battery ~ 1.500 to 2.500 McKinsey & Company BEV ~75 ~ 60 kW engine ~ 10 kWh battery ~ 4.000 ~ 100 kW engine ~ 10,000 ~ 60 kWh battery 95 EUR/g CO2 punishment 1. Specific avoidance costs on 130g/km ICE emissions; 2. Additional costs on ICE powertrain costs due to hybrid components; 3. Compared to ICE basis (130 g/km) Source: McKinsey, expert interviews, web and press search an attractive way to reduce the average decade. In Europe, MHEVs are CO2 emissions of OEMs’ product expected to almost completely replace portfolios. pure ICE vehicles by 2030 and see their market share increase to more than For consumers, this efficiency 45% of the total light vehicle market. In advantage pays off in the total cost of China, MHEV market share could rise ownership (TCO). Although the at a similar pace, reaching about 40% additional costs for MHEV technology of the total light vehicle market by result in a slightly higher purchase 2030. And in the US, where the price, the running costs are lower due transition from pure ICE to MHEV to less fuel consumption. Equipped technology is going to occur later, the with MHEV technology, gasoline MHEV market share could still reach powertrains become an interesting levels of more than 45% by 2030 in a alternative to diesel powertrains for market where the share of combustion consumers with a high annual driving engines is still higher than in Europe mileage since they provide similar and China. advantages (lower running costs for fuel that offset a higher engine cost at a Of course, MHEVs are more relevant in certain mileage). Europe and China than in the US since CO2 regulation is much stricter in these MHEV market share regions than in the US. In addition, development diesel vehicles are becoming increasingly expensive, given The 48V MHEV market share is clearly tightening emissions regulation (e.g., increasing and expected to provide the upcoming Euro 7 norm) that significant growth over the next requires extensive after-treatment systems. Gasoline-powered 48V MHEVs 42 Automotive World Magazine September 2020

Exhibit 4: Outlook for MHEVs in the light vehicle market 2020-2030 under different electrification scenarios MMHHEEVVmmarakrekt eotutolouotklo2o0k202-03200-30 Shhaarreeoof flilgighthvtevheichleicslealsesalbeyspboywpeortrwaienr,tirnapine,rcinenptercent MHEV Pure ICE HEV PHEV BEV/FCEV Europe China US 13% 3% 2% 9% 46% 46% 56% 39% 41% Base Case1 80% 91% 39% 18% 89% 78% 6% 2% 4% 3% 2% 31% < 5% 6% 1% 1% 2% 3% 5% 31% 2% 10% 3% 14% 9% 4% 3% 5% 6% 6% 8% 4% 25 28% 2020 11% 23% 2020 2020 25 11% 49% 2030 2% 2030 25 2030 21% 39% 89% 47% 13% 3% 8% 3% 5% 4% 16% 3% 11% 54% 46% 20% 13% 3% 3% 6% 25 13% Aggressive 80% 14% 6% < 3% 91% 39% 2020 63% 23% Case1 3% 5% 12% 1% 2% 2% 3% 1% 2030 4% 2030 11% 33% 8% 17% 9% 25 2020 25 2030 2020 1. For consistency the ICE numbers are adapted +-1% such that the sum adds up to 100% due to rounding inaccuracy Source: McKinsey Reboost! report, McKinsey & Company xEV scenario model, IHS, expert interviews McKinsey & Company could step in here since they provide underline the potential of this similar fuel efficiency advantages at technology. manageable additional cost (the cost for 48V MHEV technology is typically When looking at announced upcoming lower than the price difference model launches, one can observe two between a gasoline and a diesel different MHEV footprints in the engine). production portfolio of European auto brands (Exhibit 5). Manufacturers of Future opportunities for some brands—especially those with OEMs premium brands—count on large-scale MHEV introduction during this decade. For many OEMs, the higher fuel Given that the upcoming ICE engine efficiency is a critical lever they can launches are likely to be the “last pull in order to comply with decreasing generation” and many will be equipped CO2 fleet emissions targets (e.g., 95g to with 48V technology, these engines are 59g CO2 from 2021 to 2030 in the likely to remain in the market for a long European Union). Recent moves OEMs time. have made to introduce 48V mild hybrid technology into existing ICE In contrast, manufacturers of another vehicle portfolios (e.g., VW Golf, Audi set of brands plan to introduce MHEV A4, BMW 3 Series, Mercedes-Benz C- on a much lesser scale and still heavily Class, Fiat 500, Volvo 60-/90 Series, Kia rely on pure diesel and gasoline Ceed, Ford Kuga) on a large scale engines. While manufactures may initially focus their introduction of September 2020 Automotive World Magazine 43

Exhibit 5: Announced EU model launches with SOP in second half of the decade MHEV (Gasoline) Pure ICE (Gasoline) HEV BEV/FCEV MHEV (Diesel) Pure ICE (Diesel) PHEV Announced model launches (SOP 2026-27), selected European brands Brands with large-scale MHEV introduction Brands with lower-scale MHEV introduction 45 61 32 7 34 25 22 12 41% 29% 24% 9% 8% 44% 41% 26% 8% 9% 8% 13% 14% 3% 32% 24% 26% 16% 14% 24% 41% 42% 18% 3% 31% 14% 3% 12% 13% 20% Audi 12% 24% 9% 25% BMW 10% 29% 9% Peugeot 9% Mercedes-Benz Opel 9% 17% 24% 14% Citroen Renault VW Source: IHS McKinsey & Company MHEVs on Europe in order to comply competitive as the high-voltage (HV) with tightening CO2 emissions limits, components market (i.e., for BEV and over time, the same MHEV vehicles will PHEV components). The HV market also be sold to other markets in which shows a high competitive density with MHEVs are not yet highly present. typically more than 15 suppliers of typical HV components battling Since MHEVs require 48V components aggressively for market share in a in addition to ICE vehicle growing market (yet with growth rates components, the MHEV market offers of only 20-25% compared to 80% for enormous growth potential to MHEV). In contrast, there is typically suppliers. Given the increasing only a handful of suppliers in the 48V number of MHEV models launched components market, which for many and expected growth of global MHEV product categories offers high double- production (Exhibit 2), the demand digit growth. To profit from this for MHEV components is increasing opportunity, suppliers should work to rapidly as well. Overall, revenue from leverage their system competence in components for MHEV powertrains is ICE powertrains to design innovative expected to grow by about 80% from MHEV components. 2018 to 2025 (Exhibit 6), which represents the fastest growing Outlook powertrain component market. Market opportunities From McKinsey’s perspective, MHEVs for suppliers will play a major role in a balanced powertrain portfolio for the next Moreover, the market for 48V decade. While electric zero-emission components is not as fragmented or powertrains will dominate in the long run, there is a long transition period 44 Automotive World Magazine September 2020

Exhibit 6: Expected compound annual growth rate (CAGR) for number of produced vehicles and vehicle component revenue by powertrain Dynamic growth industry - global powertrain revenue exceeds global vehicle units with very different dynamics for different powertrain technologies McKinsey & Company during which combustion engine-based emission vehicles or to bring advanced powertrains still hold tremendous 48V combustion engine-based opportunities. No matter whether the powertrains in addition to electric upcoming combustion engine-based powertrains into the market. Managing powertrain generation is a pure ICE or the complexity of the powertrain MHEV powertrain, it is likely to be the portfolio should therefore be a key last one and could live longer than priority of OEMs. previous generations. *Powertrains that enable driving a OEMs will have to make a strategic significant distance electrically, i.e., choice to either focus solely on zero- without a combustion engine. About the authors: Representing McKinsey & Company, Andreas Tschiesner is Senior Partner, Patrick Hertzke is Partner, Patrick Schaufuss is Expert Associate Partner and Thomas Gersdorf is Consultant September 2020 Automotive World Magazine 45

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How has COVID reshaped the US industry outlook? Dykema shares insights from its survey into the US economy and automotive market outlook for the remainder of 2020 and into 2021. By Megan Lampinen September 2020 Automotive World Magazine 47

The novel coronavirus (COVID- respondents had a negative outlook, 19) pandemic has dominated 28% were neutral and just 18% were automotive industry decision positive. The longer-term forecast for making and performance for 24 months out is more positive, with the past six months as players across the just 13% of automotive respondents value chain scramble to adjust to a predicting a negative outlook for that rapidly changing environment. Much of time period and a notable 46% the US industry came to an abrupt predicting a positive. standstill in March, suspending production operations in response to Compared to other sectors, automotive stay-at-home orders, health concerns or players are more cautious. A separate supply chain disruptions. Business has Dykema survey of merger and slowly been gaining lost ground as social acquisition industry participants distancing replaces full lockdown, but conducted in June 2020 asked the same just how long will it take to return to question to players across various pre-pandemic levels of activity? industries. The respondents were “ The consensus is that we will not return to 2018/19 levels for at least two and a half to three years from today Dykema, MICHauto and The Right Place significantly more bullish on the US recently surveyed automotive economy over the next 12 months, with businesses and professionals, along with sentiment evenly split between positive other industries, across the US to gauge (34%), neutral (36%) and negative their current challenges and outlook. (30%). The 24-month outlook was much The feedback from automotive players more positive (76%). “The difference in will help to better understand the full perspective among respondents in the impact of the pandemic and explore two studies is down to an expectation how COVID-19 will shape the future of that it will take the automotive industry the automotive industry. a bit longer to recover from the COVID than other sectors of economy,” Economic outlook explained Thomas Vaughn, Member at Dykema. “It is consistent with what I’m The survey uncovered a decidedly seeing with predictions for negative outlook among automotive production volumes over the next companies for the US economy over three to four years, all of which are the next 12 months. While 54% of pointing to a slow growth and recovery for the auto industry.” 48 Automotive World Magazine September 2020

COVID-19 AUTOMOTIVE OUTLOOK FLASH SURVEY U.S. Economic Outlook COVID-19 Impact on Automotive Operations 46% of total respondents have a 84% negative outlook of the U.S. economy over of automotive industry respondents the next year, dropping to only 13% over were required to suspend or curtail operations the next 24 months. in the U.S. due to a government-ordered shutdown, along with nearly 50% shutting 56% down operations in Mexico. of total respondents believe U.S. light vehicle production will strengthen 20% in 2021 compared to 2020. of automotive industry respondents were required to suspend or 25% curtail operations in the U.S. due to COVID-19 of automotive industry respondents related issues after reopening, compared to believe U.S. light vehicle production will only 5% in Mexico and 5% in Europe. weaken in 2021 compared to 2020. Revenue Impacts 50% 16% 44% 54% of total respondents have of total respondents have of total respondents believe of automotive industry respondents accessed the Paycheck accessed the Employee company revenues will decline believe revenues will decline more Retention Credit Program. more than 20% over the next year, than 20% over the next year, and Protection Program. and another 44% expect declines another 43% expect decline Forecast for the between 1% and 20%. between 1% and 20%. Automotive Industry In what ways have you seen or expect to see the COVID-19 pandemic 45% impact automotive businesses during the next 12 months? of automotive industry respondents foresee decreases in supply chain orders over the 54% material increase in expenditures for increased next six months. Automotive industry respondents are more optimistic concerning the rate of new health and safety measures. supply chain orders for 2021 and beyond. 50% suspensions of existing orders. 45% elimination or consolidation of suppliers. MoreAthan half the survey respondents were automotive industry participants, including OEMs, Tier 1 and 2 suppliers, technology and services vendors, or other automotive product suppliers 1 4 S5 2 2 each issuing different orders, tihings decentralised very1 3 1 quickly,” he added. Production impact1 resulting in considerable Once companies received variations. “There was a lot of permission to restart production, 2 uncertainty when this first they still faced obstacles due to happened,” observed Glenn the varied return to work Going into 2020, the Stevens, Executive Director, policies. A manufacturer in Ohio automotive industry was MICHauto and Vice President, may be allowed to open but its already bracing for a Automotive and Mobility raw material suppliers in Arizona contraction in light vehicle sales Initiatives, Detroit Regional or California were not. “We saw a following years of record Chamber. The first issue to arise disruption along the general growth. When COVID hit, 84% was who constituted ‘an of automotive survey essential company’, and hence respondents suspended or was authorised to continue shutdown operations. Notably, production. “With 50 states the US COVID policy was set at state level, not national, September 2020 Automotive World Magazine 49

supply chain around getting emerged as pioneers in this least two and a half to three materials and components,” aspect, sharing their blueprints years from today.” However, 15% noted Vaughn. “Even if you were with the industry. GM, for of respondents believe 2021 will able to go online, you may not instance, has developed an be flat, while 29% expect have the inventory to go back automated kiosk for temperature further decline. “That 29% online with.” scanning, software for contact stood out for me,” said Vaughn. tracing and a mobile app for “It suggests that a substantial However, most companies that touchless printing. “We proportion of players are did reopen, stayed open. developed an extensive playbook concerned about what’s coming Dykema found that just 20% of for a safe return to work for our in 2021. There are quite a few automotive industry respondents employees, and we’re seeing naysayers out there.” reported that they were required very good success,” said Jeffery to suspend or curtail operations Hess, GM Medical Director. Revenue decline in the US due to COVID-19 Stevens is optimistic on the related issues after reopening. impact of steps like these: “These The near-term outlook for The figure was even lower at 5% protocols are still working. There revenue is decidedly more in both Mexico and Europe. have been issues but a lot less pessimistic: 54% of automotive Stevens believes this is because than expected because of them.” industry respondents expect the re-openings were organised their company’s revenue to and thoughtful. As for the production outlook, decline more than 20% over the 56% of respondents believe light next year, with another 43% Importantly, companies realised vehicle output will improve next expecting declines of between they needed to devise safety year compared to 2020 levels. 1% and 20%. Less than 4% expect protocols to adjust operational “For the most part, volumes are an increase in revenue. “There is procedures to social distancing expected to strengthen,” said a definite sentiment about and continued health concerns. Stevens. “That said, the revenues being down, with very The likes of Ford, General consensus is that we will not little about them being up,” Motors, Magna and Lear return to 2018/19 levels for at General Motors developed new September 2020 workplace safety technology 50 Automotive World Magazine