Roland Berger´s

global automotive
supplier study
highlights
Presentation by Rodrigo
Custodio

Ílhavo, January 2019

We are one of the largest strategic consultancies, with a strong
expertise in the automotive area
Overview of Roland Berger
Our profile Our competence matrix
1967 1993 2009
Created in 1967 Munich
1987
Brussels | Kiev |
Prague | 2002
Doha

in Germany by 1969 Stuttgart Amsterdam 2010

1994 Stockholm | Goteborg |

Prof. Dr. Roland Berger

Milan
1989 Moscow 2003 Singapore

1976
Frankfurt | Vienna Zagreb
2011
1990 1995 Dubai | Kuala Lumpur |
50 offices in São Paulo
Berlin | Hamburg |
Beijing 2006
Manama
Lagos | Jakarta

36 countries with 1982

Düsseldorf
Lisbon | London |
Paris 1997
2007
2012
Seoul | New Delhi |
2,400 employees
Budapest | Zürich
1991 Chicago | Hong Kong |
Guangzhou |
Montreal | Boston
1986 Tokyo 1998 Beirut
Madrid 2013
Over 240 Partners
Detroit | Shanghai
1992 2008 Mumbai
Bucharest
2000 Casablanca |
Istanbul | Taipei 2014
~1,000 international clients
Warsaw Bangkok | Pune

Entrepreneurship
We follow an entrepreneurial approach and
provide creative and pragmatic solutions

Excellence
We achieve excellent results and develop global best practices to
ensure measurable and sustainable success

Empathy
We are insightful and responsible advisors and
we contribute to the greater good
Our automotive practice Our values
Source: Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 2
The global automotive industry has presented a growth of 3% in
recent years
Global light vehicle production volume1) by region, 2012-2017 [m units]
North America Europe3) China4)
CAGR2): 2.4% CAGR2): 2.9% CAGR2): 8.6%

-2% -1% -3%

15.4 16.2 17.0 17.5 17.8 17.4 17.0 19.3 19.5 20.1 21.0 21.5 22.2 22.0 18.6 21.3 23.0 24.0 27.4 28.0 27.3

2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018

South America World Japan/Korea

0%
CAGR2): -5.2% CAGR2): 3.1% CAGR2):-1.0%
93.1 95.1 94.7
81.5 84.7 87.4 88.8 0%
+5%

4.3 4.5 3.8 13.9 13.5 13.7 13.3 12.9 13.3 13.2
3.1 2.7 3.3 3.5
2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018

1) Incl. light commercial vehicles; 2) CAGR 2012-2017; 3) Excluding CIS and Turkey; 4) Greater China

Source: IHS, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 3
The stability of past industry years have yielded consecutive years
of good supplier performance have
Key supplier performance indicators, 2010-2017e (n=~650 suppliers)
Revenue growth EBIT1) margin [%]

Indexed [2010=100]
~147 7.3 ~7.3
138 142 7.1 7.1 7.0 7.2
131 6.8 6.8
124
118
113
100

YoY [%]

29
13
4 5 5 5 3 3

2010 2011 2012 2013 2014 2015 2016 2017e 2010 2011 2012 2013 2014 2015 2016 2017e

1) EBIT after restructuring items

Source: Company information, analyst forecasts, Lazard, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 4
Valuation of suppliers have increased, while of OEMs have
remained under pressure
Trend in the valuations of OEMs and suppliers
P/E NTM1) > In recent years, the valuation
29x figures for suppliers have
27x Under the influence been significantly higher than
25x of the economic crisis
those for OEMs
23x
21x > The valuation gap has hit an
19x all-time high – The valuations
17x
of suppliers are almost twice as
15x
13.3x high as those of OEMs
13x
10-y-avg. = 11.2x2)
11x > Risks arising from disruptive
9x 10-y-avg. = 9.0x2)
trends appear to have been
7x 8.0x
priced in to OEM valuations –
5x
That does not seem to be the
3x
case for supplier valuations
1x
nov-07

nov-08

nov-09

nov-10

nov-11

nov-12

nov-13

nov-14

nov-15

oct-16

nov-17
Selected automotive OEMs3) Selected automotive suppliers4)

1) NTM = next twelve months 2) Excluding the distortions triggered by the economic crisis (figures for Jan-Dec 2009) 3) BMW, Daimler, Ford, General Motors, Honda, Toyota and Volkswagen;
4) American Axle, Autoliv, BorgWarner, Brembo, Continental, Dana, Delphi, Faurecia, Hella, Johnson Controls, Magna, Norma and Valeo

Sources: Fact set, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 5
The industry is being looked by its own executives and by new
interested parties with different eyes…

The automotive industry

has reached a
dramatic turning
point Right now, we are exper-
with huge changes. iencing the second
invention of the
Tim Cook (CEO Apple, Inc.)
automobile.

Dieter Zetsche (CEO Daimler AG)

Sources: Press; Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 6
 …and therefore is already going through significant changes

Diesel trends
Diesel engines as a proportion of Prices of used Time in stock with dealers for diesel
new registrations, 2015-1/2018 [%] diesel vehicles1) [%] vehicles, 2016-2018 [days]
Avg. relative residual price for 3-year-old vehicles
with mileage of 60,000 km

70 110
56 110

65
105
55 102
102
60 101 Diesel
Diesel 100
100 99 99
98
55 IT 0% 54 Gasoline 97
96 94 96
95 95
95 94 94 94 +25%
93
50 92
53
90
90 92
45 88 91 Gasoline
-15% 86
ES 89
52 88 88 89
40 FR -12% 85 87
83
87
86 86
8585 81 85 8585
UK -10% 80 83
35 51 80 82 82
DE -13% 81
80 80
79 79
30 78
50 75 77

0 0 0
01/15 07/15 01/16 07/16 01/17 07/17 01/18 2014 2015 2016 2017 2018 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1
2016 2017 2018

Sources: Schwacke, DAT, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 7
The speed is cacthing OEMs still unprepared: e.g. difficult adaptation
to the new WLTP regulation by OEMs impacted the value chain
Impact of WLTP on the automotive market
There have been several OEMs that have
delayed projects that were expected for 2018
(especially during the second half of the year)
due to their difficulties to cope with the WLTP1)
regulation
Tier 1 supplier (Spain)
The OEMs had some projects planned from
several years ago (e.g. some new models with
diesel engines or facelifts of their traditional
models) that could not be launched any
more. They are updating these projects or
questioning if some of them still make
sense. Most of those projects will be
launched in their new / electric versions
from 2020 onwards
Mold manufacturer (Portugal)
Source: Expert Interviews, Roland Berger
The situation in the market is not stable and OEMs
prefer to be conservative. I think that most of the
reasons are conjunctural. We are living an uncertainty
political situation and that is why the market is waiting,
but from my point of view automotive market will
change very fast and the growth is going to be
important.
Tier 1 supplier (Spain)
The automotive market has been very instable for
players across the value chain, with sales and
profitability lower than expected (proven by the profit
warnings issued by many companies in the industry) –
All the players are suffering due to the declines in
volumes produced and the delays in vehicle launches;
We don't expect this situation to last any longer
Tier 1 supplier (Spain)
RB - Global automotive supplier study highlights 23012019.pptx 8
 There are mainly for disruptive trends that are transforming the
automotive industry – MADE by Roland Berger
Mobility Automated
Geographic solutions driving Alternative
shift fuels
Low-cost
brands
1. New mobility 2. Autonomous ICE
advancement
Changing customer behavior Technology and
(sharing vs. owning) regulatory progress Non-traditional
entrants
Urbanization changing High customer value and
traditional mobility and logistics improved safety
concepts Consequences for current cars,
New mobility mix and new small vehicles, LCVs
business models/players After-sales/service
impact
Strategy Automotive Transformation
How to position? disruption How to transform?
4. Electrified 3. Digitization
Connectivity
Compliance with future AI
emissions regulations
Light-
Evolution of digital
Electrification landscape, technologies and culture
weighting including infrastructure Startup
Full integration of the OEMs
Profitability challenges connected vehicle in
Emissions Fuel China as a benchmark customers' everyday life New
regulations cells retail
Powertrain
electrification Connectivity

Source: Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 9

The automotive "end game" appears inevitable, yet the transition
period is marked by considerable uncertainty
Scenario development (applicable to light vehicles)
Degree of change 2030+
North America
> Deep penetration of ride hailing in major metropolitan
areas
> Technology leadership in highly automated driving
> Strong regulatory support

Europe
China > High population density in cities –
> Strong push and high maturity for electrification ideal for robocabs
> Deep penetration of ride hailing in major > Stringent emissions regulation
metropolitan areas driving electrification
> Strong players pushing for > Slow regulatory processes
autonomous driving
> Fast regulatory Emerging markets
decisions > Less stringent emissions regulations delaying
the spread of electric vehicles
> Growing adoption of ride hailing in major cities
> Autonomous driving limited by lacking
infrastructure and driving behavior
Today 2020 2025 2030 Time

Sources: Lazard, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 10
 Mobility

New business models focused on short-duration use cases are

carving out segments from traditional markets
Vehicle use cases by duration
Days Hours Minutes
> Business trips > Shopping excursions (long dist.) > Shopping excursions (short
> Car replacement during repairs > Day trips dist.)
> Vacations / Road trips > Back-up vehicle in emergencies > Rides to places with limited
parking
> Long distance moves > Short distance moves
> Trips home while intoxicated
> … > …
>…

New business models

Car sharing Ride sharing

Car rental
Taxi

Car ownership

Source: Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 11

 Mobility

In its home market of San Francisco, Uber's size relative to the taxi
industry is proof of its impact on car rental and ownership
SFO metro area – Revenues p.a. [USD]
> Only 50 m from
1 bn traditional taxi
business
> New market
200 created – at the
expense of all players
140 > Example Ownership:
- 30% of current
lease customers
in SFO will not
renew lease
50 – Direct from taxi business
- Shift towards
revenue
Taxi Taxi
generation for
pre-Uber post-Uber consumers
(renting garage)
Source: Press research, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 12
 Mobility

The ratio of vehicles used for "Mobility on demand" is already at

10% of the car park in Singapore and China
Share of vehicles used for "Mobility on demand" on car parc [in %, 2015]

10.9
9.9
0.0 0.3

6.6

8.8
0.0 3.9
1.6
2.5
2.7 0.0 0.1
1.4 1.2
2.7 0.1 2.4 <1.0 0.8 0.8
0.0 0.9
0.9 0.0 0.6 0.0 0.4 0.4 0.0
1.2 0.0 0.1 0.8 0.5 0.2 0.4 0.2
0.7 0.0 0.0
0.0 0.4 0.2 0.1 0.2 0.0 0.0 0.0 0.3 0.0 0.0
0.0 0.3 0.1

Singapore China South Korea India Netherlands UK USA France Germany Japan Italy

Car Rental Car sharing Ride sharing Taxi fleet

1) PMV: Purpose-built Mobility Vehicles

Source: Euromonitor, Desk Research, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 13
 Mobility

Vehicle sales for new mobility services are expected to exceed 10%
of new car sales by 2025 in the US and the EU
Share of vehicle sales for New Mobility1) [% passenger car sales]

United States EU-28 China > New mobility sales are expected
to grow through 2025 due to:
– Changes in car ownership
2% 8% 2% 3%
10% 9% 15% 9% patterns
35% – Growing urbanization
– Enhancements in technology &
mobility business models
> The disruption potential in China is
98% 92% 98% 97% higher due to its relatively lower
90% 91% 85% 91%
base of ownership levels today (1
65% car for 7 people vs. 1 for 2 in EU
and 1 for 1.25 in US)
> Post 2025, the introduction of
RoboCabs could drive a
2015 2020 2025 2015 2020 2025 2015 2020 2025
significantly larger share of sales
to new mobility
New mobility1) Other

1) Includes forecast for car sharing, ride hailing, ride sharing, and Robocabs. Does not include sales for conventional taxis or rental car fleets

Source: Global RB Mobility Revenue and Profit Pool Model, Lazard, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 14
 Mobility

From 2020 to 2025, the addressable market for purpose-built

vehicles for shared mobility is expected to grow by 21% a year

Source:Sascha Birt (Illustration); Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 15
 Autonomous driving

Driving automation follows an evolutionary path – High automation

will be available by 2020
SAE Levels of automated driving (AD)
Automated driving functions (SAE level) 5. Full automation
3. Conditional 4. High automation
2. Partly automation z..z..z

1. Driver automation
0. Warning assistance
information > Fully automated
> Fully automated driving (without
> Valet parking driving in some steering wheel)
> Traffic jam with remote driving modes
> Lane keeping assist control – Vehicle drives
> Blind spot assist > Emergency > Construction in traffic jam
detection > Adaptive cruise steering site assist automated
> Lane departure control assistant
warning

2017 2020 >2025 Time

Execution of
"driving"
Monitoring
environment
Fallback
Driving
situations None Some Some Some Some All
mastered autonomously

Source: SAE; Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 16
 Autonomous driving

All OEMs and players form the tech and mobility sectors are in a
race to bring driverless mobility services on the road
Existing & planned L4/L5-test-fleets (in units, 2017 announcement until 2021)1)

~70,000 (has started a ride-hailing service in Arizona akin to Uber this year, but with driverless cars –
signed contract with JLR to deliver 20,000 Jaguar I-Pace and with FCA to deliver 50,000 Chrysler Pacifica for that)

2,000 (will deploy first commercial RoboCab fleet in San Francisco in 2019)

>100 >100 100 50 40 24 20 16 3 6

Com-
pany
countr
Test

Existing fleet (as of Q3/2017, 20 vehicles) Planned test fleet by 2021 (as published as of of Q3/2017, 20 vehicles) 600 Size of planned test fleet by 2021

1) Major companies; not exhaustive

Source: Press clippings; fka; Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 17
 Autonomous driving

Future penetration of highly automated vehicles will depend on

overcoming current hurdles and convergence on shared mobility
Autonomous driving – Penetration rate of highly automated cars (SAE Levels 4/5)1)

High scenario (autonomous mobility) 26%

Shared mobility > Sharing proliferates with high acceptance of car/ride sharing
services
> Autonomy achieves high penetration in shared fleets and
privately owned premium and volume vehicle segments

Low scenario (business as usual)

> Shared mobility confined to early adopters in dense urban
areas
Autonomy > Automated driving penetration primarily in flagship premium
8%
models
3%
2%
2015 2020 2025 2030
1) In % passenger car sales; includes RoboCabs and private autonomous cars

Source: Global RB Mobility Revenue and Profit Pool Model, Lazard, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 18
 Autonomous driving

The impact of the transition on global vehicle production lies

somewhere between steady growth and large declines after 2025
Global passenger car production [m vehicle], excl. LCV's

Business as usual Autonomous mobility

+2.3%
111
-3.5%
101
86 86 89
79 79

60

2015 2020 2025 2030 2015 2020 2025 2030

CAGR 2020-2030

Source: Roland Berger Profit Pools model RB - Global automotive supplier study highlights 23012019.pptx 19
 Electrification

Electrification in Japan and North America mainly achieved through

HEV technology so far, whereas China more focused on BEV/PHEV
Global light vehicles xEV1) sales volume by region, 2016 ['000 units]
Total USA Europe2) China3) Japan3)/South Korea RoW
2,475 526 416 370 1,154 10
4% 0%
284 15% (41) (6)
(76) 25% 27%
464 (104) (98)
17% 39%
(89) (455)

621 23%
(95)
25%
(132)
8%
(32) 65%
(239)
57%
1,104 43% 44% (652)
(228) (185)

9%
(32)

HEV Toyota only HEV excl. Toyota BEV PHEV

HEV – Mild and full hybrid electric vehicles; BEV – Battery electric vehicles; PHEV – Plug-in hybrid electric vehicles; xEV – Class of electrified vehicles from mild hybrids to battery electric;
1) Excludes fuel cell electric vehicles; 2) Including Russia and Turkey; 3) China/Japan sales data includes only domestically produced xEVs

Source: MarkLines, Press Research, RB xEV forecast model, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 20
 Electrification

Lower battery costs and potentially rising oil prices may drive
electrification penetration in the United States to ~ 20% by 2025
USA – New sales1) propulsion share [2016-2025; m units; % of sales]
High xEV scenario Mid xEV scenario Low xEV Scenario
Oil: 65 USD/barrel | Battery cost: low Oil: 55 USD/barrel | Battery cost: medium Oil: 45 USD/barrel | Battery cost: high

17.6 17.2 16.8 17.6 17.2 16.8 17.6 17.2 16.8

2% 0% 2%
7% 2% 0% 2%
3% 3% 2% 0% 2% 1% 2%
2%
3% 8%
6% 2% 7% 12% 3%
2% 20% 2%
11%
3%

97% 97% 93% 97% 95%

90% 88% 92%
80%

2016 2020 2025 2016 2020 2025 2016 2020 2025

BEV PHEV FH ICE & MH
BEV – Battery electric vehicles; PHEV – Plug-in hybrid electric vehicles; FH – Full hybrid vehicles; ICE & MH – Internal combustion engine & mild hybrid vehicles;
xEV – Class of electrified vehicles from mild hybrids to battery electric
1) Passenger cars and light duty trucks
Source: US EPA, IHS, RB xEV forecast model, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 21
 Electrification

China NEV market with significant growth forecasted; neutral NEV

and CAFC balance with a 13% BEV and 4% PHEV share in 2025
China – New sales propulsion share [2016-2025; m units; % of sales]
High xEV scenario Mid xEV scenario Low xEV Scenario
Shares 25 % higher compared to mid xEV scenario Neutral CAFC and NEV balances; FH/MH target met1) Shares 25 % lower compared to mid xEV scenario

26.8 30.3 34.5 26.8 30.3 34.5 26.8 30.3 34.5

0% 1% 0% 1% 4% 0% 1% 3%
0% 3%
5% 0% 3% 0% 2% 11%
17% 13%
8% 6%
10% 3% 29%
4% 38%
6% 15%
47%
20%
25%

98% 98% 98%

85% 89%
82%
71%
62%
53%

2016 2020 2025 2016 2020 2025 2016 2020 2025

BEV PHEV FH/MH ICE
BEV – Battery electric vehicles; PHEV – Plug-in hybrid electric vehicles; FH/MH – Full and mild hybrid electric vehicles; ICE – Internal combustion engine vehicles;
xEV – Class of electrified vehicles from mild hybrids to battery electric; CAFC – Corporate average fuel consumption; NEV – New energy vehicle
1) Within FH/MH, a significantly higher share is expected for 48V mild-hybrids
Source: MIIT, IHS, RB xEV forecast model, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 22
 Electrification

Electrification in Europe varies depending on CO2 emission targets

– Share could reach between 20% a. 32% for 2025
EU281) – New sales2) propulsion share [2016-2025; m units; % of sales]
High xEV scenario Mid xEV scenario Low xEV Scenario
75 g CO2 /km in 2025 (100% target) 75 g CO2 /km in 2025 (95 % phase in)3) 75 g CO2 /km in 2025 (90 % phase in)3)

16.2 16.8 17.3 16.2 16.8 17.3 16.2 16.8 17.3

2% 2% 1% 4% 2% 2% 1% 4% 2% 2% 1% 4%
11%
6% 6% 15% 6%
2% 2% 18% 2% 2% 2% 2% 20%
26% 7%
5% 32% 5% 5%
9% 2% 2%
12%
44% 44% 2% 2% 44% 11%
2% 2% 10%
9%
47% 47% 47%

39%
35%
33%
4% 4% 4%
51% 51% 7% 51% 7%
6%
30% 30% 30%
18% 20% 21%

2016 2020 20253) 2016 2020 20253) 2016 2020 20253)

BEV PHEV FH CNG/LPG MH Gasoline Gasoline MH Diesel Diesel
BEV – Battery electric vehicles; PHEV – Plug-in hybrid electric vehicles; FH – Full hybrid vehicles; CNG/LPG – Compressed natural gas/liquefied petroleum gas vehicles;
MD – Mild hybrid vehicles; xEV – Class of electrified vehicles from mild hybrids to battery electric
1) Incl. UK; 2) Passenger cars and light commercial vehicles; 3) The top 95/90% of the fleet need to meet the target; 95 % ≈ 80 g CO2/km; 90 % ≈ 85 g CO2/km
Source: EEA, IHS, RB xEV forecast model, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 23
 Electrification

Investments in electrification have fueled the sales of Electric

vehicles since 2016 in Spain
Electrification in Spain at a glance
Charging points Car parc (2015): 5.8 M vehicles
Diesel
59,7%
CAGR 12-15

0,2%
4,573 4,573 Alternative fuels
+50% 4,525
40,1%

+49% Petrol
Drivetrain type (new car sales)
0,1% 0,1% 0,1% % Growth12-18
4,312 4,312 4,312 0,1%
0,0% 0,0% 0,0% 0,2%
0,1% 0,3%
0,4% +0.3%
1,520 0,1%

0,3%
891 909 99,9% 99,9% 99,9% 99,8% 0,4% +0.4%
1,378 99,7%
400 800 800 99,4%
400 91 109 142 213 261 261 +153% 99,2% -0.7%
2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018
Normal charge (>22 kW) Fast charge (>22 kW) BEV PHEV Rest1)

BEV = Battery Electric Vehicle; PHEV = Plug-in Hybrid Electric Vehicle; ICE = Internal Combustion Engine
1) ICE (Internal Combustion Engine), CNG (Compressed Natural Gas), LNG (Liquified Natural Gas) have been included
Source: ACEA, EAFO, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 24
 Electrification

Subsidies given by the Goverment in Portugal have boosted the

share of EV in new car sales since 2017 – 2250 € per EV
Electrification in Portugal at a glance
Charging points Car parc (2015): 5.8 M vehicles
Diesel
46,6%
+4% 1,422 CAGR 12-15
1,401 1,404
1,5% Alternative fuels
1,189 1,209
1,135 1,171
51,8%

+3% Petrol
Drivetrain type (new car sales)
1,322 1,322 1,340
0,1% 0,2% 0,1% % Growth12-18
1,154 1,172 1,192 0,0% 0,0% 0,1% 0,4% 0,4%
1,128 0,3% 0,5%
0,8%
1,9% +1.8%
1,1%

99,9% 99,8% 99,8%

99,3% 99,1% 1,6% +1.6%
98,1%

17 17 17 79 82 82 +51% 96,5% -3.4%

7
2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018
Normal charge (>22 kW) Fast charge (>22 kW) BEV PHEV Rest1)

BEV = Battery Electric Vehicle; PHEV = Plug-in Hybrid Electric Vehicle; ICE = Internal Combustion Engine
1) ) ICE (Internal Combustion Engine), CNG (Compressed Natural Gas), LNG (Liquified Natural Gas) have been included
Source: ACEA, EAFO, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 25
 Electrification

There have been some bold claims made by OEMs promising to

deliver more EV options – Far faster than IHS predictions
Number of xEV models offered in NA and Europe

+49% Major xEV product announcements

470
431 30 new BEVs by 2025
ICE
24%
Only
26 xEVs by 2020
315 42%
13 xEVs by 2021
Other
56%
74% xEVs
10 BEVs by 2022; Smart all-electric in NA starting 2018
42%
All new Volvo platforms to be xEVs by 2019
10%
16% 20% BEVs
16% All JLR products to have xEV option by 2020
2016 2020 2024

1) Within North America and Europe; Considers FH, MH, PHEV and BEV

Source: Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 26

 Electrification

Electrification is changing the composition of the vehicle, giving rise

to new components relating to technology, increasing wiring needs
Influence of electrification on vehicle components (excerpt)

Obsolete Heavily modified New Resultant challenges

components components components
> Combustion engine > Gearbox > Electric motor and > New components are being developed and produced by
(engine block, > Wheel suspension other drive incumbent and new suppliers
valves, camshaft, components
sump, oil filter etc.) > Transmission
> Power electronics
> Fuel systems > Air-conditioning,
heating > Battery system
> Injection systems (rechargeable
> Cooling water battery, battery
> Clutch system management,
> Exhaust system > Heat insulation battery system)
> Auxiliary power units > Noise reduction > Battery casing
(oil pump,
turbocharger etc.) > Vehicle floor > Fuel cell system

> and so on… > Structural elements > and so on…

Supplier Supplier Supplier
> and so on…
OEM OEM OEM
Competition is forcing OEMs and suppliers to adopt
new positions

Source: Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 27

Automotive suppliers will need to prepare for five distinct changes
that will emerge on the road to the "end game"
Emerging changes impacting automotive suppliers
Automotive Vanishing growth
End game
zone
1 > Stagnation in mature markets
> Increased usage of shared mobility solutions

Accelerated change of technologies in focus

2 > Increasing proliferation of electrified powertrains
> Strong industry push for ADAS and connectivity solutions

Emergence of software as a key differentiating factor

3 > Digital features determine value to the end-customer
> Digitization offers new monetization options

OEMs encounter increasing investment needs and margin pressure

4 > New technologies require substantial investments
> OEMs challenged by new competitors

Valuation levels of commoditized suppliers might come under pressure

5 > Outperformance of OEM valuation multiples might come to an end
> Outlook of commoditized supplier sub-sectors might be seen more critical
by equity investors as well as creditors

Source: Lazard, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 28
 2 Technology shifts

Almost all vehicle domains will see a shift in growth focus over the
next years – Disruption impact particularly high in powertrain
Impact of technology shifts by domain
Next generation vehicle concept
Disruption impact on current business
Powertrain > E-motors and power electronics
Supplier domain Low High > Battery systems
> Simple 1-2 step reduction gears

Powertrain Chassis > Advanced driver assistance systems and

autonomous features
> Adaptive suspensions
> Active steering and braking systems
Chassis
Exterior > Shifting material focus and growing importance
of multi-material applications
> Growth of non-structural composites

Exterior
Interior > New HMI / display technologies
> Extended Infotainment solutions
> Increased interior insulation (NVH)
> Integration of electronics and surfaces
Interior
Substantial new requirements for the
supply base
Source: Lazard, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 29
 2 Technology shifts
Electric powertrain components to experience high growth rates at
the expense of many traditional ICE components
Technology shifts – Powertrain
Background
> Increasing cost of
ICE/exhaust treatment
> Mild and full hybrids aid in
emissions improvement
and enable ICEs with
downgraded requirements
> BEV penetration rates
increase driven by
regulation, incentives and
consumer demand
Source: Lazard, Roland Berger
Technology trends – Winners Implications for suppliers
> Future powertrain architectures are electrified > ICE hardware
resulting in several fast growing domains: commoditization
– E-motors > Battery systems and
– Inverters/power electronics electronics provide
– Battery differentiation opportunities
– Battery cooling > Limited potential in e-
– 1-2 step reduction gears motors in part due to lower
complexity vs. ICE
– Charging components
Technology trends – Losers
> Consequently, traditional ICE components and
systems to experience below average growth rates:
– Engine, camshafts, crankshafts, valves, lubricants
– Exhaust, oil filters, alternators, ignition
– Transmission, clutch gearbox, propeller shaft
RB - Global automotive supplier study highlights 23012019.pptx 30
 2 Technology shifts
The ADAS and AD component market will strongly grow providing
an increasing revenue pool mainly for software focused suppliers
Technology shifts – Chassis
Background
> ADAS offers several
benefits to society
and industry,
including accident
mitigation, congestion
reduction, increased
driving comfort and
fuel efficiency gains
Source: Lazard, Roland Berger
Technology trends – Winners Implications for suppliers
> Advanced vehicle control and sensor systems are the > Hardware standardization /
main benefactors of the shift to greater advanced commoditization of
driver assistance systems: traditional chassis
– Advanced driver assistance systems and components and systems
autonomous features > Intelligent systems
– Adaptive suspensions integrated with ADAS are
– Active steering + braking actuators expected to offer growth
– E-Axles (as part of electrified powertrain) potential within respective
– Vision sensors (LiDAR, cameras) domains (e.g., steering,
suspension, vision systems,
passenger safety systems)
Technology trends – Losers
> Meanwhile, traditional vehicle control systems are at
risk for reduced market share:
– Hydraulic steering systems
– Traditional axles
– Conventional suspensions
RB - Global automotive supplier study highlights 23012019.pptx 31
 2 Technology shifts
Emissions regulations push OEMs for increased lightweighting of
body structures while ADAS and connectivity create new use cases
Technology shifts – Exterior
Background
> Shifting material
focus and growing
importance of multi-
material applications
> New technology
integration potential
for enhanced safety
> New design
possibilities due to
missing ICE
powertrain
Source: Lazard, Roland Berger
Technology trends – Winners Implications for suppliers
> Advanced material components and advanced safety > Shifting materials
features offer potential in exterior components: competencies for non-
– Non-structural composites structural components
– Increased usage of plastics suppliers
– Side and rear view cameras and screens > New use cases for
– Driving mode indication (autonomous vs. human intelligent exterior systems
driver) may offer differentiation
– Lock systems using cell phones potential particularly when
paired with ADAS solutions
Technology trends – Losers
> Traditional materials and exterior components most at
risk for lost share include:
– Cast parts
– Non-structural steel parts
– Traditional side and rear view mirrors
RB - Global automotive supplier study highlights 23012019.pptx 32
 2 Technology shifts

Autonomous driving will drastically change interior designs and

provide innovation and growth potentials
Technology shifts – Interior
Background Technology trends – Winners Key success factors

> Growing importance of > New possibilities to design the interior of a vehicle by > Successful translation of
non-driving-related electric powertrain, connectivity and automated driving customer needs in product
activities, such as – New HMIs1) (Augmented reality head up displays, innovation
infotainment, completing gesture recognition, haptic feedback) and > Product differentiation
tasks while driving integration of electronics and surfaces (OLED2) > Integration of E/E to ensure
automated, eating and panels, curved screens) value creation
drinking – Extended infotainment solutions
> Interior provides huge – New design possibilities/requirements, e.g. luxury
potential for innovation lounge seating or increased interior insulation
and continued growth (NVH3))
Technology trends – Losers
> Traditional interior components that might face lower
demand
– Analog instrument clusters
– Buttons and switches
– Conventional valves, pumps and compressors
1) Human-machine interfaces; 2) Organic light emitting diode; 3) Noise, vibration and harshness

Source: Lazard, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 33
Automotive suppliers can consider 8 key elements in order to
transform their business model
Automotive supplier transformation toolbox

1 Strategy and portfolio

2 Product and technology

Enablers

3 4 5 6 7
Operating cost Capital/ Competencies Organization Partnerships
base Financing & capabilities & governance

8 Cultural mindset

Source: Lazard, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 34
 1 Strategy & Portfolio

Active consolidation and harvesting are often financially viable

strategies – Future sources for growth have to be identified
Strategic decision matrix and portfolio growth options
1. Strategic responses to declining segments 2. New sources for growth

Diversify into other

Strong

Maintain industries
Competitive Position

Consolidate New technology

leadership
segment
New applications
New geographies Step-out
Harvest Adjacent
Weak

Exit/Divest Ramp-down business Incremental New value-

model innovation Adjoining chain position
value-chain
New go- position
Core to-market
High Low
Competitive Intensity
> Suppliers can expand into new offerings and end
> Before the industry disruption reaches a tipping markets to provide outlets for growth
point, suppliers should consider end-game
> Diversification into other industries leveraging
strategies for their declining business areas
current core competencies as an alternative

Source: Lazard, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 35
 8 Cultural mindset

The cultural mindset has to be rethought along with the

transformation of the business model
Cultural mindset transformation Illustrative

Status Quo Transformation

Focus on methods, Addressing existing mindsets and beliefs
processes and tools Motivation as driver
Problem orientation Solution-driven

Tactics and pressure as drivers Strategy-driven

Change of working style Change of framework

Future
Limited initiatives
Past Flat hierarchy,
agile decisions
Top-down decisions Many connected
Incremental initiatives
processes Result of many
changes Reconfiguration and
Implementation of defined changes
reinvention
Project orientation Influence on the whole
organization
Source: Lazard, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 36
Suppliers need to rethink their business model in order to be
successful in the future
Summary: Key actions for automotive suppliers
Suppliers need to rethink their strategy and product portfolio in order to capture

1 growth opportunities or consolidate the market around their existing portfolio

New business model

2
Suppliers need to define a long term technology roadmap as well as their strategic
positioning in the value chain regarding their product and service offering

3
Suppliers need to implement a new and lower operating cost base and at the same
time ensure sufficient financing for the upcoming transition

4
Suppliers need to build up new competencies and capabilities and adapt their
organizational structure & governance as well as cultural mindset to compete in the
new technology areas

5
Suppliers need to build up new partnerships and leverage this ecosystem to find
new ways to innovate

Source: Lazard, Roland Berger RB - Global automotive supplier study highlights 23012019.pptx 37
But: The one thing we have learned is that even the best predictions
cannot say what will really happen with disruptive technology

"I think there is a world market for maybe five

computers"
THOMAS WATSON, PRESIDENT OF IBM, 1943

"Nuclear-powered vacuum cleaners will probably

be a reality within ten years"
ALEX LEWYT, PRESIDENT OF LEWYT VACUUM COMPANY, 1955

"Two years from now, spam will be solved"

BILL GATES, FOUNDER OF MICROSOFT, 2004

RB - Global automotive supplier study highlights 23012019.pptx 38

Your discussion partner today:

Rodrigo
Custodio
Director Stay tuned with our Automotive publications:
Roland Berger

Rodrigo.Custodio@rolandberger.com
https://www.rolandberger.com/en/Dossiers/MADE.html

RB - Global automotive supplier study highlights 23012019.pptx 39