Navigant Research Blog

Early Chevrolet Bolts in the Lyft Fleet Could Be Great Marketing Move

— August 16, 2016

Electric Vehicle 2For several months now, pre-production Chevrolet Bolt EVs have been rolling off General Motors’ (GM’s) Orion, Michigan assembly line, and the car is now only about 2 months from being ready for paying customers. However, many of the early Bolts won’t actually be going to retail customers. Instead, they will be offered up to Lyft drivers through the Express Drive rental program.

A Different Model

Given the way Tesla managed to rack up more than 373,000 pre-orders for its Model 3 at $1,000 each, one might wonder why GM isn’t taking a similar approach with the first affordable 200-mile electric car. Unlike the Silicon Valley upstart, GM cannot sell cars directly to consumers but must instead go through its franchised dealer network, so a similar pre-order process would be vastly more complicated, if not impossible.

Even if GM could execute such a program, it’s not at all clear it would work. Tesla and its CEO Elon Musk have built up a remarkable brand in less than a decade, and many of the pre-orders are coming from consumers that want to buy into that brand, just as they buy into Apple when they choose an iPhone over a comparable Android or Windows phone. For many very valid reasons, GM still isn’t taken seriously by many people when it comes to selling EVs, despite the positive reviews garnered by the Chevrolet Volt and Spark EVs.

GM does have a significant time advantage over Tesla and other automakers with the Bolt, and it appears to want to use that wisely with a different sort of marketing approach. Since modern plug-in EVs (PEVs) began hitting the streets 6 years ago, word of mouth and first-hand experience have proven to be very effective means of winning customers. When people actually experience a PEV, they are much more inclined to purchase one.

First-Hand Experience

Getting people to ride in Bolts with Lyft drivers has the potential to provide positive first-hand exposure without having to go to a dealer first. When a customer goes into a showroom having already decided they want to buy a Bolt, they are much more likely to get one. Unfortunately, up until now, many traditional car dealers have tended to steer customers away from EVs and toward more profitable vehicles that they understand better like utility vehicles and trucks. That’s exactly why Tesla insists on selling direct to consumers through company-owned stores, which is not an option for GM or other incumbent OEMs.

If GM can sell consumers on the Bolt before they ever get to the dealership, they may have a much better chance of early success. The mandates to sell zero-emissions vehicles in California and other states will start to ramp up significantly from 2018 onward and the competition will be getting much tougher with the debut of the Model 3; the next-generation Nissan LEAF; and 200-mile EVs from Ford, Hyundai, and others expected.

Navigant Research’s Electric Vehicle Market Forecasts projects global PEV sales of approximately 2.9 million in 2024 with 462,000 in the United States. Through the first 7 months of 2016, Americans have purchased almost 78,500 PEVs, an increase of 20% over the same period in 2015. While Tesla’s financial stability remains very much in question in the coming years as it rapidly scales its production volumes, the company has demonstrated that it is a force to be reckoned with among consumers. GM and the other incumbent OEMs will have to get creative with ideas like the Bolt/Lyft rental program if they are going to both comply with regulatory mandates and maintain or grow their overall sales.

 

Progress on Automotive Cyber Security, but Still Much to Do

— August 8, 2016

CarsharingWhen I joined Navigant Research two years ago, I sat down on my first day and wrote a post on this blog about automotive cyber security. At that point, most of the industry was still largely refusing to acknowledge that cyber security was even something to be concerned about. Things have changed quite dramatically since then, but there is still a long way to go, as recent news shows.

All of the major automakers except for Tesla have come together to establish the Automotive Information Sharing and Analysis Center (Auto-ISAC). Like ISACs in other industries, the Auto-ISAC provides a mechanism for manufacturers to share non-competitive information about security threats and collaborate on understanding and correcting these vulnerabilities. Since the Auto-ISAC started operations at the end of 2015, it has also begun to add suppliers to its member ranks.

Developing Best Practices

At the recent Billington Automotive Cybersecurity summit in Detroit, the Auto-ISAC announced the development of a set of cyber security best practices for the industry. Industry executives and regulators—including General Motors CEO Mary Barra, National Highway Traffic Safety Administration director Mark Rosekind, and Secretary of Transportation Anthony Foxx—discussed the importance of designing for cyber security and what is being done to address threats.

In August of 2014, Tesla was taking the lead on hiring white hat hackers to work on security from inside, and other companies are now doing the same. Tesla, GM, and Fiat Chrysler Automobiles have all established responsible disclosure programs that provide a means for researchers to submit information about vulnerabilities they have discovered.

A pair of Silicon Valley startups, HackerOne and Bugcrowd, have developed platforms for submission and vetting of vulnerability disclosures that are used by these automakers as well as dozens of other technology companies. Bugcrowd has also developed a reputation system for researchers that submit vulnerability information and works with client companies to select groups of white hat hackers to conduct pre-release testing on new products.

Numerous startups including Karamba Security, Argus Cyber Security, and TowerSec have popped up in recent years to develop both hardware and software solutions to help detect and stop intrusions from malicious attackers. Since everyone familiar with cyber security acknowledges that no complex system can ever be guaranteed as secure, manufacturers are also working on resilience to keep vehicles safe in the event of an attack and be able to update them quickly after vulnerabilities are found.

Navigant Research’s Automotive Cyber Security report projects that by 2025, more than 45 million vehicles annually will have telematics capabilities that enable over-the-air software updates, just as Tesla does today on its vehicles.

Vulnerabilities Continue

Despite the progress, recent news shows that there is still much work to be done on existing vehicles. In Houston, Texas, a pair of car thieves have been arrested after stealing 30 Jeeps in 6 months by hacking the vehicles’ ignition systems with a computer. Charlie Miller and Chris Valasek have again hacked a vehicle, taking control of the steering and brakes. After FCA corrected the vulnerability that enabled last year’s remote hack, they connected a computer through the onboard diagnostic port this time.

Yet another group of researchers have even demonstrated how a signal generator could be used to provide false reflections and fool the radar sensor of a Tesla with its AutoPilot driver assist active.

There will be undoubtedly be many more such demonstrations in the coming years as vehicles get more sensors, more connectivity, and more automation. From here on out, the industry can no longer afford to relax and will have to remain vigilant and ready to respond quickly to threats. Fortunately, they seem to be doing just that.

 

With Investment from Ford, Civil Maps Hopes to Turn Every Car into Mapmaker

— July 21, 2016

Connected VehiclesIn general, an autonomous vehicle could drive itself around based only on its sensing systems without having any access to maps. Unfortunately, while such a vehicle might be able to avoid collisions, this would severely limit the overall capabilities possible with its autonomy. The type of detailed maps with constant updates required to create a robust autonomous mobility on-demand system require substantial resources. This is something that startup Civil Maps is trying to address through crowd-sourced data collection.

The Albany, California-based company recently announced a $6.6 million seed funding round led by Motus Ventures that also includes money from Ford. Civil Maps was founded in 2014 and began development of its crowd-sourced map-building platform in 2015.

Navigational Layers

“There are three layers to the navigational ecosystem for autonomous vehicles: strategic, tactical, and the decision engine,” said Civil Maps co-founder and CEO Sravan Puttagunta. “We are focused on the middle tactical layer that includes a more granular level of detail such as lane configuration, traffic signs, and signals.”

The strategic layer of mapping data includes the metadata about street names and directions of the type found in current navigation systems. This data can be used for overall routing to a destination; however, it is often inadequate for the low-level control that happens in the decision engine that sends commands to the vehicle actuators.

The tactical layer helps the decision engine determine which lane the vehicle should be in to make the turn that the strategic layer has asked for in 200 meters. This layer will know if the intersection has a traffic light, a four-way stop, or a roundabout. As a result of constant updates from vehicles in the field, it will also have awareness of lane closures and detours for construction—or just general road reconfiguration. While traditional mapmakers such as TomTom, Here, and Google (and now even Apple) have begun to collect this sort of data in specific areas, the update frequency is low.

Civil Maps has developed a software layer that automakers can integrate into vehicles that have depth perception sensors in order to turn them into real-time probes. To collect this type of data, a vehicle needs either a stereoscopic camera—like those used by Subaru and Daimler—or a lidar sensor. The company has also built a cloud platform that aggregates and validates the data by cross-checking it from multiple sources.

The raw sensor data would be processed locally in the vehicle and filtered into vector data for uploading to the Civil Maps platform. To make the amount of data processing and transmission manageable, the company has devised a task management system that would see different vehicles assigned to gather lane markings, traffic signals, and more.

Ford Fusion Autonomous Prototype Testing at Mcity

autonomous-fusion-mcity-39A0181_HR

 (Source: Ford Motor Company)

OEMs Key to Developing Revenue

Civil Maps is still working out the details of its revenue model, but Puttagunta acknowledged that it will likely have two components. In the future, when autonomous vehicles are deployed using Civil Maps data, OEMs may pay a license fee per vehicle for the base data set. But before that happens, there will be a credit system for data contributions and use. For every set of data uploaded from a vehicle, the OEM would earn credits that would be spent when updated data is withdrawn and sent to cars.

Navigant Research’s 2015 Autonomous Vehicles report projects that more than 4 million autonomous-capable vehicles could be sold by 2025, and these will all need detailed 3D maps. If automakers adopt the Civil Maps approach in the next few years, they could help build those maps without operating expensive fleets of street-view style vehicles.

 

The Challenge of Being Mazda in the Mobility Transformation

— July 14, 2016

Electric Vehicle 2As automakers go, Mazda makes a fascinating case study in the challenges of being in the car business in the 21st century. In many respects, the company seems to have all the right pieces to be successful, yet at the same time, the brand is struggling to find a path toward long-term success. Recently, Masahiro Moro, who took over as CEO of Mazda North America late last year, paid a visit to Detroit to chat with the local press corps about where Mazda has been and where it is going.

You might think that selling more than 1.5 million cars a year should be more than enough to build a sustainable business. However, in a world that is increasingly pushing for the adoption of expensive new technologies, even a company like Fiat Chrysler Automobiles with nearly twice as many sales is struggling to find a way. Funding the development of autonomous vehicles, mobility services, and electrification takes huge amounts of cash. Aside from stock market darling Tesla, which seems to be able to go back to the equity well at will to refill its coffers, this development usually requires strong profitability.

Revamping Strategy

Ever since Ford relinquished its equity holding in Mazda during the 2008 financial collapse, Mazda has been working to revamp its product strategy. The company developed a suite of technologies under the SkyActiv brand that included new engines, transmissions, and lightweighting that have enabled it to be the corporate average fuel economy leader for 3 years running without a single electric vehicle (EV) in its American lineup.

“Mazda’s product roadmap is set through 2021 and with our second-generation SkyActiv technologies, the company should be well positioned to meet fuel economy and greenhouse gas targets,” said Moro-san. “Meeting targets for 2025 will require further electrification.”

Unlike the Detroit-based automakers, Mazda is not a full-line manufacturer and doesn’t need to offset the fuel consumption of large trucks. Moro-san indicated that for the cars and utility vehicles that make up the Mazda lineup, mild hybridization using 48-volt electrification would probably be sufficient for fuel economy. However, that is only part of the puzzle that needs to be solved. An increasing number of regional markets such as California and Norway are mandating zero-emissions vehicles (ZEVs).

“When it comes to electrification, development is not the problem,” added Moro-san. “The question is how to sell it.”

Absent Profit Margins

While the lack of big trucks helps a brand like Mazda on the efficiency front, it also means that like Tesla, the high profit margins that can subsidize affordable EVs are also absent. Navigant Research’s Electric Vehicle Market Forecast projects global battery EV (BEV) sales of just 1.6 million in 2024.

Moro-san also serves as Mazda’s global chief marketing officer. During his remarks, he discussed Mazda’s shift in strategy from trying to grow volumes based on selling to a price to focusing on the customer experience. Rather than trying to build a brand image from the top down through advertising, Mazda is working with its retail network to build an image of more premium vehicles for those that actually like to drive through customer word of mouth. This is actually very similar to the strategy employed by Tesla. While the EV-exclusive maker has not yet been profitable, if Mazda can build the margins on its traditional vehicles, that would help to fund the sales of ZEVs needed to meet mandates.

Automakers of all sizes are trying to chart a course through the stormy seas that will be part of the mobility transition over the next several decades. Mazda is taking a different approach from some of its larger competitors, and it’s far too soon to know how the company will come out on the other side.

 

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