1. automotive and vehicles
2. electric vehicles

Automotive Insights from Clearwater International
Spring 2015
clearthought
Automotive Technologies
How new technologies are transforming the automotive sector
Introduction
Today, more money is being ploughed into R&D in the
automotive sector than ever before.
R&D spending by the industry has grown
at an annual rate of 8% since 2009, almost
three times the rate of increase seen
between 2001 and 20121.
In the EU market, the automobile sector
invests more than any other sector, making
up 25% of all R&D spend2.
However, it is little wonder that we are
seeing such frenetic R&D activity - given that
today’s car has the computing power of more
than 20 personal computers, approximately
100 million lines of programming code, and
processes up to 25 gigabytes of data an
hour. Indeed, industry analysts predict that
40% of the value of a car will soon be made
up of software components.
Against this data revolution, it should
come as little surprise that a sector
historically dominated by established OEM
manufacturers, such as Ford, Toyota, GM,
Volkswagen, Honda and BMW, is now
seeing the likes of Tesla and Google take the
stage and bring competition to the arena.
In short, we have entered a new stage in
the development of the automobile where
OEMs need to be fearful of innovative
technology companies that are progressively
shifting the balance of power. The car is
rapidly becoming a smartphone on wheels
and our relationship with the car is changing,
as semi-autonomous features are taking
away our need for input. The idea of a fully
autonomous vehicle is getting closer and
closer to reality.
There are now more than 830 million cars
on the road worldwide, forcing governments
to think carefully about pollution and to
implement measures to control emissions.
Meanwhile, various alternative fuel
options have also been introduced and are
constantly being developed.
1.Boston Consulting Group, Accelerating Innovation: New
Challenges for Automakers
2.European Commission. The 2014 EU Industrial R&D
Investment Scoreboard
M&A Overview
As the car becomes more
technologically advanced and
complex, the power is moving away
from the OEMs and towards the
software, electronics and technology
companies in the supply chain which
will undoubtedly lead to consolidation
within the market.
Suppliers need to commit significant R&D
expenditure into advancing technologies
which creates high barriers of entry for
smaller players, deterring them from
entering the market. Small players
with niche technologies are likely to be
swallowed up by mega-suppliers that
have the capacity and finance to push the
technology to market.
With regards to automotive technology,
we are seeing cross-sector acquisition
activity from both the automotive suppliers
and the technology companies - both using
acquisitions as a means to secure their
position in the automotive supply chain.
clearthought | Spring 2015
Automotive Insights from Clearwater International
Recent M&A activity
ZF Friedrichshafen (ZF), a global
leader in driveline and chassis technology
and top ten automotive supplier, has
agreed to acquire TRW Automotive Inc,
a US developer and producer of active
and passive safety systems, for ¤11bn.
ZF expects the combined company
sales of driver-assist safety systems
to grow by 15 - 25% per year. The
combined R&D budget will be ¤1.8bn,
in addition to TRW’s 13 test tracks and
22 technology centres worldwide and
ZF’s eight R&D hubs. ZF is also planning
to build a technical centre in Japan.
With this transaction, ZF-TRW will be
competing in the premier league with
Bosch, Continental and Denso.
Autoliv, the Swedish supplier of seat
belts and airbags, is restructuring to
focus more on its fast growing, highmargin active safety business, including
radar, night vision and front-view
cameras. Autoliv has spent ¤24m on
active safety-related acquisitions since
2010 and sales of its products have
quadrupled from ¤75m in 2010 to
¤303m in 2013.
Panasonic Corp has acquired a 49%
stake in Ficosa International, a Spanish
car parts manufacturer focused on rearview systems, command and control
systems, under-the-hood systems,
advanced communications, commercial
vehicles, and door & seat systems.
In a move to bolster its automotive
business and move away from consumer
electronics, Panasonic has paid ¤242m
for the stake and plans to jointly
develop self-driving car technology.
Panasonic, which supplies lithium ion
batteries for cars, has also signed an
agreement with Tesla Motors Inc for
the construction of a large-scale battery
manufacturing plant in the US, known as
the Gigafactory.
Vodafone completed the ¤156m
acquisition of Cobra Automotive
Technologies SpA, an Italian specialist in
telematics software, to create a leading
connected car services provider. The
deal enables Vodafone to follow growth
outside of its traditional mobile markets.
Vodafone is trying to establish itself
as a key player in this space: last year,
the business announced agreements
with Audi and Volkswagen to provide
automotive connectivity. Given the
significant cost proportion of technology
in the modern car, expect to start seeing
more automotive businesses investing
in technology companies and vice versa
as the competition between the two
sectors heats up.
Autonomous Driving
The driverless technology industry is forecast to be worth c. ¤1,200bn globally by 2025 and is
currently growing at 16% a year. Consultancy firm IHS Automotive1 predicts that global sales of
autonomous vehicles will hit 21 million units a year by 2030.
Fully autonomous driving has the power to
completely change our lifestyles. Without
the need for a driver, there is potential
to increase our leisure time or, perhaps,
enable us to commute further distances to
work. It could open up a whole new world
to those presently unable to drive, such as
the elderly or the visually impaired, while it
could also significantly improve both traffic
and fuel efficiency.
some time, for instance: Audi claims its
next generation A8 - a fully autonomous,
self-driving vehicle - will be ready by
2017; JLR is predicting ten years for its
new XE Sedan; while Nissan claims it will
have autonomous vehicles ready by 2020.
However, despite these predictions, the
Insurance Information Institute estimates
that autonomous cars will not populate
roads until 2028 - 2032.
Technology is progressing at such a rate
that some car manufacturers are predicting
that fully autonomous vehicles will be
available within the next five to ten years.
However, the jury is still out on the precise
timeframe. Although the technology
is virtually here and now, there remain
significant regulatory and legislative issues
to overcome.
That all said, a consensus is emerging
that the journey to autonomy will be a
progressive one in which small steps are
made along the way and new features are
added to vehicles every six to nine months
or so.
That said, the long-term direction of travel
is clear. All the major OEMs have teams
of engineers working on autonomous
vehicle technologies and have done for
We are already seeing pre-collision braking
features and self-parking on many luxury
cars, with current versions of the Mercedes
S Class as well as models from Acura
displaying robust radar-based cruise control
and lane-keeping systems that take much of
the effort out of motorway driving.
1. IHS Automotive, Emerging Technologies: Autonomous Cars - Not If, But When
clearthought | Spring 2015
Automotive Insights from Clearwater International
The Connected Car
Case study: Google
In 2014, Google revealed the
first fully working prototype of its
electric driverless car which has
undergone testing at its private track
in California. This year, the model is
set to hit the public roads for testing
and among the named suppliers are
Continental, Bosch and LG.
Google plans to build around 100
to 200 of these prototype vehicles,
but they are not expected to be
commercially available until 2020.
The cars have radar, GPS and 3D
laser mapping and are currently
restricted to 40kph. To comply
with Californian law, the car has
manual controls so that a human can
override the software. If the tests
go well, Google will team up with an
automotive manufacturer to bring
the technology to market over the
next few years.
Toyota is also introducing a range of advanced
active safety systems across its mass market
line-up: pre-crash breaking packages, an
improved auto-parking feature, a next
generation auto-adjust headlamp, and a
vehicle-to-infrastructure communication
system. By 2035, it is predicted that 75%
of vehicles sold worldwide will have some
autonomous capabilities1.
Trials are being set up in different parts
of the world to test the feasibility of
autonomous driving. For instance, in the UK
trials have started in four locations and will
run for between 18 months and three years.
In two of the locations, engineers involved
in the Autodrive Programme (including Ford,
JLR, and ARUP) will develop infrastructure to
best work with autonomous cars navigating
real roads. Another location will test
automated electric shuttle buses and robotic
valet parking.
In the US, the states of Nevada, California
and Florida, and the city of Washington
DC, have already authorised trials of
autonomous vehicles. In Sweden, the city
of Gothenburg has given Volvo permission
to test 100 driverless cars, although trials
are not likely to begin before 2017.
1. Navigant Research, Autonomous Vehicle, 2014
Connectivity has become a huge part of our everyday lives,
with consumers demanding online access on the move.
By collecting and analysing vast amounts
of data from a huge array of sources,
the connected car is yet another means
of making our lives more efficient.
Through Vehicle-to-Vehicle
Communication (V2V), cars will be able
to talk to other cars and alert each other
to potential collisions. Through Vehicleto-Infrastructure Communication (V2I)
systems, cars will talk to sensors on
signs, stoplights and bus stops in order
to receive traffic updates and make
decisions on re-routing. Cars will also be
able to communicate with your house,
office and smart devices to ensure that
you know the plan for your day.
Access to the internet will facilitate
streaming of music and films, as well
as improve navigation. Technology will
also enable stolen vehicle tracking and
location-based recovery services. The
disappearance of the in-dash CD player
has already begun, making way for MP3
jacks, USB/iPod connectors and streaming
Bluetooth audio. For most new vehicles,
drivers can still opt for a CD player but will
often find it in the centre armrest or glove
compartment in order to make space for
large screen displays on the dash.
The connected car brings with it many
advantages from improved safety, to
assisting with traffic congestion and
increased security. For example, remote
access to vehicles via smartphones and
tablets will notify owners should a vehicle
move unexpectedly. Through vehicle
diagnostics, early warning systems alert
the driver to any potential problems with
the vehicle prior to a breakdown.
The European Union is calling for systems
that automatically call for assistance in
the event of a crash to be fitted to all new
vehicles by 2015. eCall systems that alert
the emergency services in the event of
an accident are to be the most common
services supported by connected cars and
are likely to be seen in 41.7m vehicles in
2018, up from 7m in 20122.
2. GSMA, Connected Car Forecast, Feb 2013
GSMA predicts that, by the end of this
year, 20% of global vehicle sales will
include embedded connectivity solutions
and 50% will be connected either by
embedded, tethered or smartphone
integration. GSMA also predicts that
every car will be connected in multiple
manners by 2025.
As connectivity becomes more and more
prevalent, the opportunity also becomes
greater for telecoms companies to make
their move in this market. In the US,
AT&T is already offering customers the
option to add their car to their mobile
data sharing plan. Carmakers now need
to work with mobile partners in order to
offer integrated products and solutions
to customers - and we have already seen
this happen, as Chrysler has partnered
with Sprint Nextel and GM with AT&T.
However, the question remains as to
who will pay for the services. Will it be
the customer paying direct to the mobile
phone company? Or will it form part of a
rolled-in payment to the car company?
All of this circulating data, which will be
stored in the Cloud, could then be used
by third parties. For instance, driver
behaviour data could be passed on to
insurance companies.
Case study: JLR
Recognising the importance
of consumer demand for
connectivity within the vehicle,
JLR is collaborating with Intel and
has opened a new Technology
R&D centre in Portland, Oregon,
with a specific focus on future
vehicle entertainment systems.
For many OEMs, having a base
close to the technology hubs
of Silicon Valley and Seattle
is now considered essential
as carmakers and technology
companies are increasingly
collaborating to build the car of
the future. The Portland facility
is JLR’s first dedicated software
R&D operation.
clearthought | Spring 2015
Automotive Insights from Clearwater International
Alternative Energy
Growing environmental concerns are leading to tighter
regulations on vehicle emissions.
Along with increasing environmental awareness from consumers, the volatility of gas
prices and the depletion of oil reserves, finding alternative forms of energy for fuelling
vehicles is becoming more urgent.
The most feasible alternative energy options present in today’s market are: Conventional
Hybrids, Plug-in Hybrids, Battery Electric Vehicles and Fuel Cell Electric Vehicles.
Alternative
Energy Type
Description
Examples of Models
Conventional
Hybrid
Combines a petrol engine with
an electric motor but cannot be
plugged in or recharged. Batteries
are charged from capturing energy
when braking.
Toyota Prius
Honda Accord
Plug-in
Hybrid
Electric
Vehicles
(PHEVs)
Similar to conventional hybrids in
that they have both an electric
motor and internal combustion
engine but they can be charged by
plugging into an outlet.
Ford Fusion Energi
Chevrolet Volt
Toyota Prius
Mitsubishi Outlander
Battery
Electric
Vehicles
(BEVs)
Run exclusively on electricity
via on-board batteries that are
charged by plugging into an outlet
or charging station.
Nissan Leaf
Fiat 500e
Tesla Model S
Ford Focus
Mitsubishi i-MiEV
Renault Twizy
Fuel Cell
Electric
Vehicles
(FCEVs)
Use an electric-only motor (like
BEVs) but store hydrogen gas
in a tank as energy. The fuel cell
combines hydrogen with oxygen
from the air to produce electricity
which then powers an electric motor.
Toyota Mirai
Hyundai ix35
The global light duty EV market is expected to grow from 2.7 million vehicle sales annually in
2014 to 6.4 million in 20231.
1. Navigant Research, Electric Vehicle Market Forecasts, 2014-2023
Hydrogen
Hydrogen technology
uses an electric motor
but the power comes
from hydrogen that is
processed in a chemical
reaction that takes place
inside a fuel cell.
The advantages of a fuel cell car
include quick refuelling (five minutes
or less) and a 480 kilometre range,
in addition to no carbon dioxide
emissions.
However, it will take many years to
build the necessary infrastructure and
the production of hydrogen is not a
straightforward process. Attempts to
replicate the process using renewable
sources have proven expensive.
In California, ¤176m has been
earmarked to build 20 filling stations
by the end of this year while the UK
has announced a scheme to expand
the hydrogen refuelling network.
Toyota’s first hydrogen fuel cell car,
the ‘Mirai’, is to go on sale in the
UK in 2015 and will compete with
Hyundai’s new ix35 model. In the
US, Toyota will be leasing the Mirai
for about ¤440 per month. In Japan,
the Mirai has secured 1,500 orders
so far and there are plans to triple
production in 2016. Other OEMs
such as Hyundai, BMW and Audi
are also developing solutions with
hydrogen-driven technology.
clearthought | Spring 2015
Automotive Insights from Clearwater International
Electric Vehicles
Much of the debate around alternative energy for vehicles
has been focused upon electric vehicles, especially given the
success of models such as Tesla’s Model S.
Electric vehicles and hybrid electric vehicles
produce less emissions and environmental
pollutants, but are still in need of significant
amounts of electricity to power them.
A typical Electric Vehicle (EV) will have
a range of 110-160 kilometres, though
some models can travel up to 426
kilometres on a single charge. Plug-in
Hybrid Electric Vehicles (PHEVs) are
powered by a combination of grid
electricity and liquid fuel. A PHEV runs on
battery power until the battery charge
is exhausted, then switches over to its
internal combustion engine.
Sales of the BMW i3 and Tesla Model S pure
electric cars are increasing, with US producer
Tesla holding back demand because it cannot
produce enough for at least a year.
However, the major problem with
mainstream pure EVs remains price. There
are signs that lower-priced EVs may not
be that far away in China, with electronics
contract manufacturer Foxconn partnering
with BAIC Motor to produce a sub ¤13,000
pure electric car.
The US is leading the way in sales of plug-in
EVs, with the market dominated by four
models which account for 81% of plug-in
vehicle sales: the Nissan LEAF (EV), the
Chevrolet Volt (PHEV), the Toyota Prius
Plug-in (PHEV), and the Tesla Model S (EV).
As of May 2014, approximately 50,000
LEAFs, 60,000 Volts, 30,000 Prius Plugins, and 26,000 Tesla Model S units had
been sold. Plug-in vehicle sales currently
account for less than 1% of all new vehicles,
however, this is the fastest-growing
segment of the automobile market.
In the meantime, the infrastructure required
to drive the market is growing. In the US,
there are currently around 9,000 public
charging stations - compared with 150,000
gasoline stations.
Plug-in vehicles can be recharged at home
in as little as 1.5 hours, depending on the
size of the battery pack. Indeed, the single
biggest expense in any plug-in vehicle is
the battery pack. The Nissan Leaf’s lithium
ion battery initially accounted for one-third
of the cost of the vehicle, though these
prices are now falling dramatically with the
average 24 kWh battery pack for a plug-in
vehicle costing ¤10,000 today. When the
new Tesla Gigafactory comes online in
2017, Tesla expects to achieve a minimum
of 30% reduction in production costs.
A report by IDTechEx1 predicts that sales
of all hybrid and pure electric vehicles could
exceed ¤470bn, but not until 2025. Most
EVs are higher-cost premium cars and are
likely to remain so for some time.
1.IDTechEx, Electric Vehicle Forecasts, Trends and Opportunities
2015-2035, 2014
Case study: Tesla
Tesla was formed in 2003 by five
Silicon Valley entrepreneurs and in
2009 secured ¤410m in low-interest
loans from the US government. The
following year, the company filed for
a ¤88m IPO as it started to design
and manufacture EV parts for other
companies. Today, Daimler uses
Tesla’s battery packs, Mercedez-Benz
uses a Tesla Powertrain, and Toyota
uses a Tesla motor.
Tesla trades at much higher multiples
than its luxury car peers and has a
current market cap of more than
¤22bn. It recently announced that it
will soon offer a suite of four safety
systems that together offer a semiautonomous driving experience. This
includes a forward-looking radar;
a camera with image recognition
that can read stop signs and identify
objects before impact; a 360 degree
long-range sonar; and a system
to integrate those features with
navigation, GPS and real-time data traffic.
Conclusion
These are exciting
times in the global
automotive industry,
as technological
breakthroughs take the
concepts of automation
and connected cars
from dreams to reality
and transform the
driving experience.
However, as OEMs clamber for
a space aboard this fast-moving
train, it is worth remembering
that cars take much longer to
develop than products such as
smartphones (typically operating
on a three- to five-year cycle)
so one needs to feed in these
timescales in terms of immediate
expectations. In addition, there
are plenty of risks for regulatory
authorities to consider such
as hacking, digital safety,
privacy concerns and computer
malfunctions.
In the medium to long term, it
is clear that the trends we have
highlighted in this report not only
have the potential to transform
the driving experience, but
could also bring about significant
environmental and social benefits.
Connected cars will in all likelihood
become shared cars, as consumers
move away from sole car
ownership and tap into emerging
sharing economy trends. Given
that 70% of the world’s population
is expected to be living in cities
by 2050, the enormous potential
benefits of more automated
transport systems are clear.
clearthought | Spring 2015
Automotive Insights from Clearwater International
Deal highlights
Some of our Automotive deals
Meet the team
Jon Hustler
Partner, UK
KLOKKERHOLM KAROSSERIDELE
ANTOLIN GROUP AUTOMOTIVE
+44 845 052 0364
[email protected]
Leading distributor of auto
body parts to the independent
aftermarket
Largest Spanish manufacturer
of vehicle interior components
Francisco Gómez
Clearwater International advised the
shareholders on the sale to Danish PE
fund Capidea
Clearwater International advised on
the acquisition of shares in Gong Zhu
Lin Automotive Components
Partner, Spain
+34 699 446 314
francisco.gomez@
cwicf.com
Constantine Biller
Partner, UK
INFUN GROUP
MANN+HUMMEL GROUP
Leading producer of metal
parts and components for the
automotive sector
Development partner and
original equipment supplier Clearwater International advised on the corporate restructuring of
the company
Clearwater International advised the
company on the acquisition of Bengby
Haoye Filter
+44 845 052 0353
constantine.biller @cwicf.com
Søren Nørbjerg
Partner, Denmark
+45 40 21 45 19
soren.norbjerg@
cwicf.com
Olivia Prew
Deal Origination, UK
+44 845 052 0375
[email protected]
Group DRT
mi TECHNOLOGY
Recognised manufacturer of
moulds for the automobile
industry
Provider of testing and
development equipment for
the automotive industry
Clearwater International advised the
shareholders of Group DRT on the sale
of a minority stake in the company to
OxyCapital
Clearwater International advised on
the sale of mi Technology to CSA
Lars Rau Jacobsen
Director, Denmark
+45 25 39 45 71
lars.rau.jacobsen@
cwicf.com
Carlos Morgado
Director, Portugal
+351 918 213 379
carlos.morgado@
cwicf.com
Mark Gillingham
Associate, UK
+44 845 052 0368
mark.gillingham
@cwicf.com
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