1. © Accenture 2002 April, 2002 European Telematics Survey Automotive OEMs at a Crossroad ?

2. 2© 2002 European Telematics Survey Agenda Telematics status quo Results of European Telematics Survey Analysis of major challenges in telematics

3. 3© 2002 European Telematics Survey Technology drives Telematics Wireless Local Area Networks (e.g. Bluetooth, 802.11b, RFID) Wireless Internet Technology (e.g. UMTS, GPRS) Powerful User interfaces (e.g. voice, XML, multi device, miniaturization) Elements of our environment are becoming increasingly…  Connected  Interactive  Intelligent Mobile Computing Platforms (e.g. Win CE for Auto, LINUX, QNX)

4. 4© 2002 European Telematics Survey Telematics as Business Opportunity OEMs consider telematics as a chance for new streams of revenues  New Entrants in Value Chain  Aggressive Push to Innovation Competitors  Decreasing Customer Loyalty  Increasing Market Transparency Customers  Market Saturation  Decreasing Product Margins  Difficult Brand Differentiation Market  Liberalization of Distribution Channels Changing Legal Context

5. 5© 2002 European Telematics Survey  Subscription Fees  mCommerce  Insurance per mile  …  Quality Improvement  Customer Loyalty  Vehicle  Parts  Services  …  Hardware Sales  Cost Reduction  Process Alignment  Working Capital Reduction  … Telematics Benefits Core Business New Business Indirect Effects Direct Effects Telematics Benefits for OEMs

6. 6© 2002 European Telematics Survey  To get up to speed quickly, OEMs have been rushing to invest heavily in telematics 1  However, customers have demonstrated only moderate demand and willingness to pay for devices and services 2  As a consequence, today’s $1-5B market volume is 2-10 fold lower than numbers predicted in 2000 3 and forecasts are continuously scaled down further 4  Dealing with enormous sunk costs and lacking profitability, OEMs are concerned that due to competitive pressure telematics offerings may become another „cost- of-doing-business“ (such as airbags) Facing an increasingly uncertain market, OEMs are currently reassessing their telematics strategies Pay Back ? 1 GM OnStar: $1.2B, Ford WingCast $200-250M 3 compared to UBS Warburg estimates in 2000 2 Ducker Inc., Telematics Survey 2002 4 McKinsey Quarterly, “A road map for telematics”, 04/2002

7. 7© 2002 European Telematics Survey Key Messages Telematics Study (1/2) Telematics is of increasing importance Telematics is a competitive necessity Telematics will primarily be used to enhance the core business (CRM, Hw sales, brand differentiation, cost reduction) New streams of revenue are becoming more important (service revenue, mCommerce, usage based business) Vehicle-related services are the main focus, but non-vehicle related services are becoming more important

8. 8© 2002 European Telematics Survey Key Messages Telematics Study (2/2) OEMs dominate the telematics market by…  Control of business architecture and alliance partners  Control technology through the usage of proprietary infrastructure Premium customer will remain the most important customer segment Aftermarket providers don’t pose a significant threat The risk of liability charges will be significant Traffic safety / data protection legislation will impact telematics revenues

9. 9© 2002 European Telematics Survey OEM Systems Integration (CRM, RD, M&S, Production etc.) Remote Diagnostics Emergency & Road Side Services Location-Based Services Integration with Home and Office Usage-Based Services (e.g. insurance by the mile) Automatic Mobile Payments Infotainment Content Mobile Clients Integration OEMs´ Vision Fleet Systems Integration Customer facing capabilities Non- customer facing capabilities Remote Function Control Dynamic Navigation Vehicle Monitoring Fleet Management Dealer Systems Integration Driver Monitoring

10. 10© 2002 European Telematics Survey Customer Knowledge main Challenge Very High Importance Very Low Importance - Main Challenges Perceived by OEMs - Strategic Challenges Define Strategy Create Customer Demand Identify Customer Needs Attractive Business Case Internal Program Management External Program Management Front-End Technology Competition by other OEMs Building Technology Infrastructure Competition by non-OEM Providers

11. 11© 2002 European Telematics Survey Mismatch of OEMs’ Focus Potential benefits as seen by OEMs Today's OEM focus  Strategy, not technology should drive telematics  Balance customer facing to non-customer facing capabilities according to projected ROIs  Focus efforts according to most attractive capabilities (I.e. “pull” capabilities)

12. 12© 2002 European Telematics Survey Potential benefits as seen by OEMs Today's OEM focus Open Platforms  Focus on vehicle related services (safety/security, vehicle monitoring)  Provide open architecture with interfaces to personal, non-proprietary mobile devices  Avoid customer lock-in: leverage other services providers by allowing customer’s choice