Internet of Cars Presentation Delivered at ITS World Congress 2011

1. The Internet of Cars:
A Business Case
Intelligent Transportation Systems
World Congress 2011
Andreas Mai
Director Automotive North America
Internet Business Solutions Group
18 October 2011
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2. Transportation:
A Global Transformational Opportunity?
Accidents Congestion
 7.9 million accidents  90 billion hours delay
 7.4 million injured  230 million metric tons
 1.3 million fatalities of carbon-equivalent
 $0.6 trillion cost  $1 trillion waste
(2% of GDP)
Future of Mobility?
Auto Business Model Road/ Traffic System
 Oversized and  “Free” public service
underutilized vehicles  No/ low return on assets
 75% of automotive  Underfunded
value add post sale  Deficient
 8%-15% gross margins
Source: IRF World Road Statistics 2008, World Bank Global Road Safety Facility, Cisco IBSG Automotive 2011
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3. U.S. Roads and Highways Are Congested,
Deficient, Lack Desirable Safety Features
$270 B
Needed 4.2 T 2030
+38%
+41% 2010
25% 2.2 T 1990
Cost Budget:
+ 55% $90 B
Vehicle-Miles
Travelled (Trillions)
Source: America’s Top Five Transportation Headaches, AASHTO, Victoria Transportation Policy Institute, 2009
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4. Vicious Circle:
Pigouvian Tax for Personal Mobility
Real Cost
Supply Hidden Tax Demand
Available
Budget
Source: Cisco IBSG Automotive, 2011
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5. ―Real‖ Cost of Owned Vehicles in U.S. Is
$3 Trillion Per Year—50% Is Hidden Tax
―Visible‖ Annual U.S. Vehicle Cost ―Hidden‖/ Societal U.S. Traffic Tax
$9,460 / Vehicle $3 Trillion / Year $9,610 / Vehicle
5% License & registration Traffic services1 3%
6% Fuel tax Pollution/GHG 10%
8% Service & maintenance
Road facilities 11%
11% Insurance $1.5
Parking facilities 12%
13% Parking
> $100 B =
19% Fuel & oil (net of tax)
Congestion Travel Time 29%
$1.5
Depreciation
38% @ 15,000 miles/yr Crashes 35%
and financing
Source: Victoria Transport Policy Institute, AAA, DOT, Cisco IBSG Automotive 2011 1. Includes toll, law enforcement
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6. In Urban Traffic, Even the Most Fuel
Efficient Car Wastes Energy and Time
Urban Congestion: Parking Search: Traffic Light Stops:
11%-13% Time Wasted 7%-21% of Urban Traffic 10%-17% of Urban Fuel
1 Liter / 100 km Car
Source: VDA Annual Report, TTI, VTPI, Cisco IBSG 2011
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7. Evolution of Ground Transportation?
Personal Transportation
…But What is the Next Big Thing?
Mass Transportation
Source: christian-foerg.de ,Cisco IBSG Automotive 2011
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8. Reinventing Ground Transportation
Smart Intelligent Transportation
Networked Pervasive Computing
MobilityN
Electric Smart Grid
Source: Cisco IBSG Automotive 2011
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9. The Internet Takes to the Road…
Running Transportation on
Networked Information
Transportation Services Delivered by Technology
Safety and Operational Travel Revenue
Security Efficiency Experience Generation
Source: Cisco IBSG Automotive, 2011
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10. Road to More Safety & Less Congestion
Is Mainly Driven by Government Policy
Connected Cybernetic Traffic Management
Smart Connected Safety &
Congestion Management
V2I & Local Dynamic Traffic Management
Smart Road Pricing/ VMT Tax
V2V Safety & Driver Assist
Insurance Incentivized Driver Behavior (PHYD)
Eco-Drive and On-Board Safety & Driver Assist
2010 2025
Source: Cisco IBSG Automotive 2011
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11. THE ―Savior-App‖: Strategic Asset for
the Entire Car Insurance Value Chain
Usage &  PAYD, PHYD, MHYD 10% - 30%
Behavior Premiums
 Vehicle and driver health monitoring
 Safest-route
Crash  ADAS + V2V + V2I 20% - 35%
Prevention of Crashes
 eCall/ ACN
 Virtual Black Box
Fast & Correct  Driver vitals to first responders 5% -15%
Response  Investigation costs Savings
 Fraud prevention and reduction (~80%)
Claims & Cost  Stolen vehicle tracking / location 30% - 80%
Containment Savings
 Pay as you speed
 Virtual violation detection and notification
Connected Law  Automated payment 20% - 30%
Enforcement Savings per connected vehicle and year: Savings
$280 for insurance/ owner + $100 for society
Source: OctoTelematics, Cisco IBSG Automotive 2010
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12. Top Auto Profit Pools Are Connected
Vehicle Care and B2B/G Services
Dollars per Vehicle per Year1
Connected Vehicle Care 110 $340
B2B/G Service Platform 30 $110
3rd-Gen Navi/LBS/ Auto-Pilot 25 $85
Total
Safety & Security/ITS & ADAS 25 $85
Revenue $680
COGS $470
Infotainment & Productivity 15 $50
Gross Margin $210
Mobility Cost Optimizer 5 $10
1 Includes
one-time effects spread over assumed 5-year first ownership cycle
Source: Cisco IBSG Automotive, 2011
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13. Advent of New Business Models?
From Building Cars to Selling Travel Time Well Spent
Extended Design
Connecting Marketing,
and Supply Chain the Value Chain Advertising, CRM
CONNECTED CONNECTED CONNECTED CONNECTED
within the car to personal devices around the car to the cloud
Travel Experience & Distribution and
Location-Based Services Service Network
Source: Cisco IBSG Automotive, 2011
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14. Connecting the Mobility Value Chain:
New Business Model Opportunities
Connect… Transform… Develop Source Make Sell Deliver Service
CONNECTED CONNECTED CONNECTED CONNECTED
Vehicle within the car to personal devices around the car to the cloud
Energy
Carriers
Infrastructure
ITS
New Services …
Source: Cisco IBSG Automotive 2011
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15. Internet of Cars = Better Experience =
Key Growth Market for Service Providers
Pervasive Computing
Users
Grow the number of mobile
revenue-generating subscriptions
Ubiquitous Connectivity Artificial Intelligence
Uses M2M Network Usage
Find more things users can do Drive the frequency with which
with their mobile devices people use mobile data services
Source: Cisco IBSG 2010
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16. Nearly 300 Million Connected Vehicles =
More Than 400 Million Gigabytes / Month
Global Passenger Vehicle Population & Share of 407 Peta-1
Connected Vehicles (Millions) bytes/
Month
Total 841 870 901 932 963 995 1,027 1,059 1,092 1,126
325
174 226 283 CV
17 55 87 127 250
3 8 33
182
125
79
861 883 899 909 908 900 886 866 843
839 47
25
4 12
Connected 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Vehicle 0.3% 1% 2% 4% 6% 9% 12% 16% 21% 25%
Share
1
Average of 1.5 GB/month/vehicle, 1 Petabyte = 1,048,576 GB
Source: Cisco IBSG estimate 2011, based on data from US-DOT, iSupply, McKinsey
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17. Off-Loading Data and Switching Is Key
to Improve Experience and Contain Cost
HOME ROAD OFFICE
Home
Security &
Automation 3G/LTE WLAN
Media DSRC City Mesh Hotspot
Cable / DSL “Switching” Ethernet / LAN
Source: Cisco IBSG Automotive 2011
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18. The Connectivity Infrastructure Could be
a Profitable Business at 1/10th ¢ / VMT
U.S. Roadside Equipment (RSE)
PPP Revenue Model [US$ Million] 1/10th
CapEx P&L ~3,000,000,000,000
Initial Total 5 Year RSE
6,261 626
Investment (10 Depr.)
=
Repair/ Replacement 616 62
Operating Expenses 440
Subtotal RSE Cost 1,128
Hypothetical Margin 100% 1,128
Per Month
Revenue Required to
2,256
Fund ―RSE Business‖
Source: Vehicle-Infrastructure Integration (VII) Initiative, Benefit-Cost Analysis, Version 2.3, US-DOT, 2008
Cisco IBSG Automotive, 2011
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19. THE Future ―Finance-Application‖:
Connecting for Smart Road Pricing
Smart Road Pricing / Vehicle-Miles-Traveled Tax
Time of Day Occupancy Congestion Speed
Weight Road Type Fuel Economy Emissions
CO2
Source: Cisco IBSG Automotive 2011
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20. Infrastructure Investment:
Resolving the ―Chicken & Egg‖ Dilemma
~$60B $6-8B ~$110B+
Investment
CV SPs
15-20% RSE
Auto
OEM
40 OBU 1/10th
Society
1.3T 20%
VMT
Vehicle
User
20
Incubate New Industries
Fuel Tax Share 33% of Cars
Bottom
Line
$20-30B
$1.3T 150,000 Jobs 550,000 Jobs 400,000 Jobs
Budget Source: Cisco IBSG Automotive 2011
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21. Internet of Cars = $110–280 Billion Value
in the U.S. = $1,400 Per Vehicle Per Year
Benefits of Connecting U.S. Vehicles by Penetration ($B per Year)
$282 Internet of Cars
32 Service Providers
Society  Traffic guidance, navigation,
64  Fewer crashes emergency services
 Lower traffic/road/toll  “Google on wheels,”
operation costs PAYD insurance, LBS
$117 85  CO2 reduction
13 Auto OEM/OES
27
Vehicle User  Lower service/
$35 35
101  Lower operation cost warranty costs
 Less time stuck in  New profit pools
42
traffic, more productivity  Architectural savings
10% 33% 80%
10% 33% 80%  Lower cell phone cost
Note: Core Regions NA, EU, AP, Excl. 22% RoW
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22. Making the Internet of Cars a Business
No One Can Do It Alone
Source: Cisco IBSG Automotive 2011
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23. More Food for Thought on the
―Internet of Cars‖
 Executive Summary: A Business Case For Connecting Vehicles
 Government: A Catalyst to Unlock Societal Benefits of Transportation
 Carriers: Service Providers at a Crossroads
 Automotive: From Building Cars to Selling Travel Time Well-Spent
 Insurance: The Business of Preventing Crashes
Andreas Mai: andmai@cisco.com
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