Autonomous Driving: A Report By Roland Berger

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According to a recent study conducted by Ronald Berger, a global consultancy about Autonomous driving, Automatic driving has the potential to fundamentally transform the automotive industry in the coming years - be it through innovative software technologies and vehicle models or new ways of using cars, such as "mobility on demand".The expectation is that cars will be able to drive completely autonomously from 2030 onward,without the driver taking an active role. The market potential for the automotive industry is huge.

In their new study"Autonomous driving", the Roland Berger experts expect sales of components like cameras, sensors and communication systems to add some 30 to 40 billion dollars to the size of the global market. Further revenues worth 10 to 20 billion dollars could then be generated from the sale of advanced software and related services.

"Automatic driving will initially become established in a gradual process, but after 2030 it will bring a real revolution to the auto industry,"explain Wolfgang Bernhart and Marc Winterhoff, Senior Partners at Roland Berger Strategy Consultants. "So OEMs and suppliers should already be thinking about the role they want to occupy in this market of the future, and design their business model around that."

New software solutions demand considerable investments
Distance sensors, parking assistance or cruise controlsystems are already taking much of the burden off drivers and are supplied as standard, at least in the premiumsegment.An unstoppable trend:the first highly automatedvehicles are expected to be driving on the highwayby 2020,in the city by 2025, and "door to door" without a driver by 2030.

Though many of the technical requirements have already been met, automakers still have certain barriers to overcome.Automated vehicles of course need the right sensors, cameras and radar systems. Such components are manufactured by large suppliers or the OEMs themselves. But it's a much more complex task to develop new software solutions for completely self-driving vehicles. These are algorithms, for example, that detect what other road users are doing. The car is therefore for example able to decide autonomously whether it should brake or accelerate.

"In this complex field, both the OEMs and the suppliers are entering unknown territory," explains Wolfgang Bernhart. "So they need to decide whether they can develop the software themselves or whether they need to cooperate with or acquire technology corporations that possess the respective skills." Only if automotive companies stay in the driver's seat will they be able to maintain their share of the global mobility profit pool.

"However, developing these systems is going to necessitate particularly large investments as well as expertise from the field of machine learning, an artificial intelligence specialty that the Internet giants in particular are increasingly focusing on," says Bernhart.

A variety of business models for suppliers
The functions of assistance systems are currently mostly separated, and highly automated vehicles have them combined in a central computer.But this new electronic architecture is displacing the volumes previously shipped by individual suppliers; so they need to determine as soon as possible the right business model for them in this market. The Roland Berger experts have identified various possibilities depending on the size and specialization of the company concerned:

Big system suppliers:They should either develop their own software solutions or acquire the necessary expertise through targeted corporate acquisitions.The sizeable investment requirements in this segment will cause the market to consolidate, though, leaving only three to four large suppliers who can break into the global market.

Small suppliers that are already developing assistance systems:As assistance functions grow increasingly centralized, suppliers are compelled to refocus- for instance on low-cost assistance systems for the growing emerging economies.

Suppliers with a focus on technological innovation:These suppliers should expand their technological leadership in areas such as cameras - toward image recognition solutions based on advanced artificial neural networks -so as to be able to supply OEMs globally with better functionality at lower costs.

Mobility on demand is transforming business models
"Another trend set to influence the automotive market strongly is the mobility on demand that will come with self-driving systems", says Marc Winterhoff. It's conceivable, for example, that fully automated taxis rather than taxi drivers will be picking up passengers in the future; rental cars could drive to their customers direct and wouldn't need to be collected. This new type of mobility is going to radically change not only the functionality but also the design of the vehicles and the competitive situation among auto manufacturers and suppliers. The Roland Berger experts believe that four scenarios are possible:

Scenario one:Traditional automakers and suppliers work together to develop the crucial technology elements; OEMs offer proprietary mobility solutions. There is no great change in the traditional business models.

Scenario two:New providers of mobility solutions dominate this market. Some large automobile manufacturers and suppliers deliver the software solutions needed for the complex decision-making processes involved in automated driving. Economies of scale serve to improve the market position of these providers in the B-to-B sphere in particular-smaller suppliers are crowded out of the market.

Scenario three:Automakers dominate the market for mobility solutions and leave the big technology corporations to handle the specialized software development. As such, few software providers are able to set the market prices; OEM margins come increasingly under pressure and their competitive strength diminishes.

Scenario four:Suppliers of innovative mobility solutions determine the product spectrum;technology companies supply the corresponding software. OEMs' and suppliers' shares of the global mobility market profit pool shrink substantially.

"This scenario analysis highlights the opportunities and risks for the industry. Automobile manufacturers and suppliers should use scenarios and potential end games to consider in good time the role they want to play in this promising market - only with a suitable strategy and a well-chosen business model will they succeed in exploiting the exciting opportunities of automatic driving for their own benefit,"summarize Roland Berger Partners Wolfgang Bernhart and Marc Winterhoff.

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