Automotive Industry Agenda

Automotive
Industry
Agenda
Special Edition 2019
B | Automotive Industry Agenda - Special Edition 2019
Index
Preamble
Executive summary 4
2018 YE AND 2019 Q1 evaluation 5
2018 YE Evaluation 6
2019 Q1 Evaluation 13
Global Automotive Industry vs Turkey 16

Investment incentives in automotive industry in 2018 28
Automotive industry research 31
Cavo Automotive 32
Kordsa 34
Digitalization in automotive industry 40

Global EV market anlaysis 68
Global EV market anlaysis March 2019 69
Market outlook 70
OEM go-to-market strategy 78
Implications for automotive suppliers 82
Automotive Industry Agenda - Special Edition 2019 | 1

Preamble
Dear Readers,
The automotive world is undergoing a significant transformation. Being one of

the central players in the value chain, Turkey is closely monitoring the ongoing
developments and is taking major steps to ensure its dominant position. As the
Turkish automotive industry is reinforcing its international standing every day, all
stakeholders in the ecosystem need significant resources to take advantage of emerging
opportunities. We believe that one of the prerequisites for capturing these opportunities
that are transforming the automotive industry, especially with regard to electric and
autonomous vehicles, is to have access to the right sources of information.
In the second issue of our “Turkish Automotive Industry Agenda” study, we, The
Arda Ermut
Presidency of The Republic of Turkey Investment Office and EY Turkey, have
President
curated another detailed and comprehensive report for the benefit of all stakeholders
The Presidency of the in the automotive industry. Following our first study, in which we outlined the
Republic of Turkey recent developments unfolding in the industry, we have emphasized the subjects
Investment Office
of digitalization and electric vehicles in this issue. On top of these issues deemed of
immediate relevance to the automotive ecosystem, we are offering incentive certificate
statistics, legislative changes, and success stories of leading companies in the industry
for our readers’ appreciation. Furthermore, in addition to the Turkish automotive
industry’s 2018 year-end and 2019 Q1 performance, we have also included in this
issue our analysis “Global Automotive Industry and Comparison of Turkey”, which we
believe is slated to reflect properly the competitive environment of Turkey.
While they have maintained a constant inflow since 2000, automotive investments
shifted into higher gear in 2018. The Ministry of Industry and Technology announced
that they issued approximately TRY 13 billion worth of incentive certificates for
investment projects throughout the year. Approximately TRY 9 billion of the disclosed
investments were received from foreign-capital companies. Local companies accounted
for as much as TRY 3 billion worth of investments. This data alone indicates that
Turkey’s appeal to automotive companies remains unwavering.
I would like to express my gratitude to all those who have contributed to the preparation
of this issue, especially EY Turkey, and all of relevant private sector representatives who
have not spared any effort to support our endeavor to bring Turkey to the position it
deserves in the international arena.
Arda Ermut
President
The Presidency of the Republic of Turkey Investment Office
2 | Automotive Industry Agenda - Special Edition 2019

Preamble
Distinguished stakeholders of the automotive industry and members of the sector,
As you may remember, "Automotive Industry Agenda / Special Edition 2018" has been
edited in cooperation with the Presidency of the Republic of Turkey Investment Office
and presented to the attention of our distinguished stakeholders a few months ago. We
feel so glad to share the second issue we prepared on the great interest and positive
feedback from all.
Concepts such as e-mobility, autonomous driving and connected vehicles have just
become concepts that the entire industry started to become much familiar. The
sharing economy is now reducing the importance of owning a vehicle and beginning to
change basic income models altogether. The world's leading OEMs (original equipment
Serdar Altay
manufacturer) and all stakeholders of this ecosystem are investing billions of dollars in
EY Turkey
this field so as to prepare themselves for the future, to get rid of the destructive effect
Automotive Industry Leader of digitalization and not to be deprived of the latest opportunities.
Electric vehicles have just started to surround our lives as well. The world’s major
economies are changing their legislation in this direction, automobile manufacturers
are making plans of the next 20-30 years and developing new models. During the
transition period from internal combustion engines to electric vehicles, the demand for
hybrid vehicles is increasing gradually. While this transition will eliminate many products
from the industry, it will also add many product manufacturers as new players.
Therefore, in this issue, we decided to focus on ‘digitalization and electric vehicle’ that
are at the top of the global and automotive sector agenda. We would like to share the
precious information gathered by EY Global including the current state of the world
market in terms of these elements and the direction it follows, predictions about the
future and market research.
This special edition provides context on the following:
• Evaluation of the end of 2018 and the first quarter of 2019

• Changes introduced on various tax laws in Turkey
• Comparison of the global automotive industry and Turkey
• Automotive investments with incentive certificate in 2018
• Research on the automotive sector
• Digitalization in the automotive sector
• Global electric vehicle market analysis
As the members of the EY Turkey Automotive Sector team and Presidency of the
Republic of Turkey Investment Office, let us thank you all for the interest and attention
to this edition which we think that it will be useful for all our readers interested in the
automotive industry.
Serdar Altay
EY Turkey Automotive Industry Leader

Executive summary
2018 year end and 2019 Q1 evaluation
• The auto market contracted at the close of 2018 after record sales figures in the previous 3 years.
• As the market narrowed throughout the year, local models reinforced their position in the passenger car market.
• In the commercial vehicle market, domestic models acquired 50% market share in 2018.
• Tendency to prefer premium brands (11%) did not show a notable change in 2018.
• The growth in the European vehicle market, the biggest market for Turkish automotive companies, was 0.4% throughout 2018. A drop of
200,0000 and 70,000 units was observed in the UK and Italy respectively, due to political and economic developments.
• The turmoil in key export markets and the developments in the domestic market have also affected the production figures.
• 5% shrinkage was noted last year in global commercial vehicle production, where Turkey has attained a strong position.
• The share of sales of Turkish domestically manufactured vehicles has significantly increased in terms of exports.
• Along with the dip on the production side, a drop of 5% was noted in passenger vehicle export.
• Due to the growth in the European auto market and the diversification of models, Turkish passenger vehicles increased their exports on a
value basis in 2018 and reached the level of 12.5 billion dollars.
• A record increase has been witnessed in commercial vehicle exports together with the development achieved by Ford and Mercedes-Benz.
• In 2018, in addition to quantities, the 7 billion dollar threshold was also surpassed with a 10% value increase in exports.
• Turkey again this year maintains the position of being the biggest vehicle manufacturer in its territory.
• The losses, which were more pronounced in the second half of 2018, have maintained their effect during the first quarter of 2019.
• The European auto market, which is among the key export markets of the Turkish automotive industry, narrowed by 2.1% in the first quarter
of 2019 compared to the same period of last year.
• According to the results of the first quarter in 2019, the production in the industry dropped by 16%.
• Ford, Mercedes, and other commercial vehicle manufacturers have maintained their levels of 2018 during the first quarter of this year.
• During the first 3 months of the year, passenger vehicle exports were realized as 210,000 units. Renault is leading this increase with 12%.
• A record increase has been witnessed in commercial vehicle exports together with the development achieved by Ford and Mercedes-Benz.
Automotive industry in a timeline perspective
• In the years after 2000, in line with the changes in supply and demand profiles of world markets, the automotive industry restructured its
production capacity and network worldwide. While the vehicle production increased from 56 million to 97 million units in less than 20 years,
the production network of international manufacturers have also diversified.
• In this period, the North America – Western Europe axis lost its dominance as a production location and the East emerged as the new
dominant region. Besides China, various regions have taken their position in the production network of global companies.
• Between 2000 and 2017 China, Turkey, Slovakia, Czech Republic, and Hungary are the first five countries having the highest export growth
rate. With CAGR of 20%, Turkey has the second highest growth rate.
• Capacity in Turkey has increased from 800k in 2000 to 1.9 million units in 2017. In line with this, production increased from 468k to 1.69
million vehicles.
• Following the new capacity set-ups of OEMs and the investment of the supplier industry triggered by these new capacities, the total revenue
of the automotive industry in Turkey increased from 17.6 Euro to 37.7 Euro from 2009 to 2017.
Digitalization
• This exponential growth has generated four forces of business disruption: de-materialization, decline of transaction costs, de-centralization
of decision-making, and information availability and accessibility.
• Digital is a fundamental part of the major drivers of change shaping the global automotive ecosystem over the next decade.
• Developing and owning an ongoing relationship with both customers as well as consumers and retaining loyalty are the biggest challenges.
• New business models require close integration of both manufacturing and supply chain operations.
• Today’s automotive innovation is pioneered by start-ups; ignoring them could be a loss of innovative and creative ideas.
• Collaboration in the ecosystem is the new normal and is replacing traditional automotive value chain dynamics.
• With digital leading to an exponential surge in the volume of data generated, analytics could transform how business decisions are made in
the automotive industry.
• Relevance of cybersecurity has increased with connected car initiatives that link vehicles with surrounding networks. Blockchain emerges as
a potential tool to improve transparency and provenance across the system.
Electric vehicles
• OEMs are showing a renewed interest in the EV market and have set steep targets for EV penetration. Despite the automaker interest, most
customers continue to avoid EVs.
• EVs are expected to witness rapid growth with BEVs (battery electric vehicles) and PHEVs (plug-in hybrid electric vehicle) gradually gaining
share from HEVs (hybrid electric vehicle).
• Emission standards, declining battery costs, and charging infrastructure remain the determining factors for EV adoption rates.
• Transition from internal combustion engines to EVs will have a significant impact on suppliers in terms of content loss, opportunities, and
technology shifts..

2018 YE and 2019 Q1 Evaluation
Global Automotive Industry vs Turkey
Investment incentives in automotive

industry in 2018
Automotive industry research
Digitalization in automotive sector
Global EV market analysis

800 -32%
Thousand Units
723
700
600
Automotive
486 industry trend analysis
Automotive industry trend analysis
500
• Market trend
400 Production performance
-41%
Export performance 264
300
1. Market trend Comparative analysis of production
200 155
The auto market contracted at the close of 2018 after

100
record sales figures in the previous 3 years.
As you may be aware, Turkish auto market recorded a 1m-unit-growth per 0 annum on average between 2015-2017. In 2018, a
significant shrinkage has been noted particularly due to the impact of the macroeconomic Passanger
developments
car in Q2 2018. The shrinkage
Commercialin
vehicle
the auto market was 32% for passenger vehicles and 41% for commercial vehicles. A downturn in the light commercial
2017 vehicles (LCV)
2018
market, once regarded as one of the strongest areas in Turkey, has been influential in this overall decline. Industrial specialists project
that the market will regain its previous levels with the rebound in economy in the long run.
800
Thousand Units
Market by vehicle type Commercial vehicle market on segment basis
700
800 -32% 260-36%
Thousand Units
723 233.4
Thousand Units
600 240
700 220
500 200
600 506
180
486 800
400
Thousand Units
500 160
135
140 323
700
400 300
120 -36%
-41%
264 600 100
300 200
80
200 500
155
100 217 60
506 163
40
100 400
0 20 4.4 2 1.9 1
2017 0 2018
0 323
300 LCV Truck Bus
Passanger car Commercial vehicle
Locally Produced Imported
2017 2018 2017 2018
200
Source: Automotive Industry Association (OSD)
As the market narrowed down throughout the year,
100 local models
217 have reinforced
163
their position
in the passenger car market. 120
Thousand Units
110
100 0
37
Compared to the same260 period of the previous year, Renault
90
80 maintained its lead in 2017
passenger cars in 2018 2018
despite the shrinkage in
233.4
Thousand Units
sales. Turkish-built models accounted for 73% of Renault’s

240 70
60
sales. The French2brand was followed by Volkswagen, Fiat, and Hyundai
90
respectively, thereby mirroring
220 the same order as last 50
year. Throughout
40
90 this period,27Toyota and Honda were seen rising in ranking as
76 7
sales of other imported brands plummeted – a trend which
200 30
20
further cements59the view that a45preference
42
for locally-produced
6
34 vehicles
33 32 30
reigns supreme. 180 10 22
6
0
160
Passenger car market135 Top 10 passenger car brands in 2017
N
T
T
T
120
RD
A
TA
DA
UL
PE
O
A
SA
GE
CI
E
FI
Thousand Units
140
FO
YO
110
N
O
A
DA
UG
A
IS
YU
N
SW
N
TO
RE
PE
100
H
LK
800 120 37
90
VO
Thousand Units
80
100 70 90
700 60 2
80 50
60-36%
90 27
40 76 7
30 59 6
600 45 42 34
40 20 33 32 30
10 22
20 0 6
4.4 2 1.9 1
500
0
N
T
T
T
RD
506
A
TA
DA
UL
PE
EO
A
SA
GE
CI
FI
FO
YO
N
O
A
DA
UG
A
IS
LCV Truck Bus

YU
N
SW
N
TO
RE
PE
H
400
LK
VO
2017 2018
300
323 90
Top 10 passenger car brands in 2018
Thousand Units
80
70
21
200 60
50
40
100 217
163 30 56 3 5
50 19
20 40
27 24 26 25 25 21
0 10
13
2017 2018 0 3
90
N
T
T
T
RD
A
TA
DA
DA
UL
EO
A
SA
GE
CI
FI
Thousand Units
FO
YO
N
N
A
DA
UG
A
IS
Locally Produced Imported 80

O
YU
N
SW
N
TO
H
RE
PE
H
LK
70
Source: Automotive Distributors Association (ODD) 21 Locally Produced Imported
VO
60
6 | Automotive Industry Agenda - Special Edition 2019 50
40
30 56 3
50 5
150
100 68
124
75 4
50
Thousand Units
65
55 7
67
45
35 67 0
52
In the commercial vehicle market, domestic models acquired 50%102017
market share in 2018.
2018 25
15 28
17 9 4
5 8 6 5
It is understood that the Special Consumption Tax discount
-5 and company campaigns in Q4 Locally
did not Produced Imported
bring about a rebound in the LCV
I
Z
N
T
T
RD
EN
H
TA
UL
N
EO
GE
market. Nevertheless, Ford and Fiat maintained their hegemony over the market, thanks mainly to domestic LCV models. German and
CI
IS
BE
FI
O
FO
YO
B
A
DA
UG
A
TR
SU
N
-
SW
TO
ES
RE
PE
CI
French automakers followed closely in 2018 with their imported models.
IT
LK
ED
M
VO
C
ER
M
LCV Market
75 4
250
Thousand Units
65
Thousand Units
55 7 Top 10 LCV brands in 2017

45
35 67
200 52
25
110 15 28 10
17 9 4
5 8 6 5
-5
150
I
Z
N
T
T
RD
EN
SH
TA
UL
N
EO
GE
A
CI
BE
FI
O
FO
BI
YO
A
DA
UG
A
TR
SU
N
-
SW
TO
ES
RE
PE
CI
IT
LK
ED
M
VO
C
ER
M
100 68
45
3
Thousand Units
124
35 Top 10 LCV brands in 2018
%15 %13.49 %13.50 %12.49
50 3 %11.15 %11.18
25
67 %10 39
15
25
%5 17
0 5 9
3 3
8 5 5
2017 2018 %0 4
-5 2014 2015 2016 2017 2018
I
N
T
T
EN
RD
SH
A
TA
UL
EO
N
A
GE
CI
BE
FI
BI
FO
YO
A
DA
UG
A
TR
SU
N
S-
SW
TO
RE
PE
CI
DE
IT
LK
M
CE
VO
Source: Automotive Distributors Association (ODD)

ER
M
45
-32% 100
Tendency to prefer premium brands (11%)35did 3not show a notable change in 2018.
Thousand Units
81
Thousand Units
80
Upon examining passenger car sales data in 2018, it is safe
25 to assume that marketed models of premium54
3
brands had a market share
60
7 of over 11%. Similar to previous years, German brands have15
maintained
39
their top place in this field. In total, a drop of 27,000 units
shows that 2018 was challenging for luxury vehicle sales. 40
25
17
5 3 3
9 8
52 20 5 5 4
28 10 -5
9
I
Market share of premium0brands

N
4
T
T
EN
17
RD
SH
A
TA
UL
EO
EN
A
GE
CI
8
%13.49 %13.50 6
FI
RO
BI
FO
5
YO
%12.49
A
DA
UG
A
-B
SU
N
SW
%11.15 %11.18
TO
ES
RE
PE
CI
IT
2017 2018
LK
D
I
M
Z
N
T
T
CE
EN
H
TA
UL
EN
EO
VO
GE
A
CI
IS
%13.49 %13.50
ER
FI
YO
UB
A
DA
-B
UG
A
%12.49
TR
%15
N
SW
M
TO
ES
%11.15 %11.18
S
RE
PE
CI
IT
LK

M
CE
VO
ER
%10
M
%5
2014 2015 2016 2017 2018
%0
2014 2015 2016 2017 2018
14 Performance of premium brands in 2018

Premium brand sales 12.3
Thousand Units
12
9.7 9.4
100 -32% 10
81
Thousand Units
80 8
100 -32%
816
Thousand Units
60 54
80 4.2
4
40 60 54
1.5
2 0.9 0.8 0.5 0.14 0.13
20 40 0
3
P
0
R
Z
E
R
W
EO
O
I
I
E
20
UD
IN
A
CH
EN
VE
LV
JE
BM
GU
M
M
A
RS
B
RO
VO
RO
JA
S-
PO
2017 2018
DE
3
A
0
N
LF
CE
LA
A
ER
39
Source: Automotive Distributors Association (ODD)
M
2017 2018
25
17
3 3
9 8 Automotive Industry Agenda - Special Edition 2019 | 7
5 5 4
I
N
T
T
EN
D
SH
A
TA
UL
EO
N
A
GE
CI
BE
FI
RO
BI
YO
A
DA
UG
A
SU
EN
S-
W
IT
O
Th
18,000
17,800
17,600 17,541
17,400
The growth in the European vehicle market, the biggest market for Turkish automotive
companies, was 0.4% throughout 2018. A drop of 200,0000 and 70,000 units was observed in
17,200
the UK and Italy respectively, due to political and economic developments.
2016 2017 2018
Germany, the leading country among Turkey's vehicle importing destinations, registered a small growth of 12,000 units, whereas
France and Spain had 87,000 and 101,000 units growth respectively. The slump in the UK market is blamed on Brexit during the same
period. Italy's sluggish market is due to political, economic developments.
European auto market Status of the largest 5 auto markets

4,500
18,400
Thousand Units
Thousand Units
4,000 3,810 3,822
18,194
18,200 18,122 3,500
2,966
18,000 3,000 2,784
2,606 2,693
2,500
2,192 2,122
17,800
2,000
1,563
1,462
17,600 17,541 1,500
1,000
17,400 1,200 1,143
500
Thousand Units
1,026
17,200 0
1,000
Germany UK France Italy Spain
2016 2017 2018
2017 2018
Source: ACEA 800
600
Market trend
2. Production performance • Production performance
4,500 400
Export performance
Thousand Units
4,000 3,810 3,822

Comparative analysis of production
200
The turmoil in key export markets and the developments in the domestic market have also
3,500
2,966
affected the production
3,000 2,784 figures.
2,693
0
2,606
2017 2018
Throughout 2018, partial shrinkages have been
2,500
2,192noted in the production levels of 5 brands that manufacture passenger cars in Turkey.
2,122
However, Honda has achieved up to 34% growth, attributed for the most part to the manufacturing of its diesel Civic model during the
2,000
same period. Fiat’s production dropped by 20%, while the average
1,563slump of the overall industry was 10%.
1,462
1,500
Passenger car production Passenger car production on brand basis
1,200
1,000 1,143 400
365
Thousand Units
Thousand Units
500 1,026 337

350
1,000
0 300 280
257
800 2017 2018
250 227
216
203
600 200
168
150
400
100
200 38
50 29
0 0
Renault Toyota Hyundai Fiat Honda
2017 2018
2017 2018
400
365
600
Thousand Units
553
550
524
500
450
400
5% shrinkage was noted last year in global commercial vehicle production, where Turkey
350
attained a strong position.
300
A 29,000-unit drop was observed in the production quantities of commercial vehicle manufacturers in 2018. On looking at the
background of this statistic, it is possible to say that the production shrinkage experienced by Fiat could not be covered with the
250
increase on Ford’s and Mercedes-Benz’s side; furthermore, other commercial vehicle manufacturers have also had a negative effect on
2017 2018
this statistic..
Commercial vehicle production Commercial car production on brand basis
600
400
Thousand Units
553
351
Thousand Units
550 347
524 350
500 300
450 250
200
400 168
150 133
1,200 1,143
350
100
UnitsUnits
1,200 1,143 1,026

300 1,000
50 1,026
Thousand
17 21 21 19
1,000
Thousand
250 0
800
2017 2018 Ford Fiat Mercedes-Benz Others
800 2017 2018
Source: Automotive Industry Association (OSD) 553
600 524
600 553
524
The share of sales of Turkish domestically manufactured vehicles
400 has significantly increased in
terms of exports.
400 400
347 351 200
Thousand Units
350Throughout the years, OEM’s have positioned Turkey as an export center. This year, manufactured vehicles’ share in export to the target
markets has also increased and showed that the same trend has continued. At the200
same time, manufacturers’ export capability made it
300possible to mitigate the impact of negative developments in the domestic market. In02018, the industry’s export/production ratio was
Passanger Car Commercial Vehicle
noted as 85%. This ratio was 78% in 2017. 0
250
Passanger2017
Car 2018
Commercial Vehicle
200
Vehicle production Target markets for the passenger cars manufactured in Turkey
168 2017 2018
150 1,200 1,143 133

1,000 921 875
UnitsUnits
Thousand Units
100 1,026 800

1,000 921 875
1,000 600
Thousand
800
50
17 21 21 19 400
600 222
Thousand
151
0 800 200
400
Ford Fiat Mercedes-Benz Others 222
0 151
200
2017 2018 Export Domestic Market
600 553
524 0 2017 2018
Export Domestic Market
2017 2018
400
Target markets for commercial vehicles manufactured in Turkey
500 444
411
UnitsUnits
200 400 444

500 411
300
Thousand
400
200 141
0 300
Thousand
80
Passanger Car Commercial Vehicle 100
200 141
0 80
2017 2018 100
Export Domestic Market
0
Source: Automotive Industry Association (OSD) Export 2017 Domestic Market
2018
1,000 921 875 2017 2018

sand Units
800 Automotive Industry Agenda - Special Edition 2019 | 9

600
900 875
Thousand U
800
700
600

500
Market trend
• Export performance
3. Export performance 300
Comparative analysis of production
200
Along with the dip on the production side, a drop of 5% was noted
2017 in passenger
2018 vehicle export.
Passenger car exports slipped from approximately 921,000 units in 2017 to 875,000 units in 2018; with a 5% decrease. Main
manufacturers of the passenger car industry have been influenced by this decline in similar degrees. Honda, which has manufactured
Civic model’s diesel version, has recorded an export increase of 45% with the influence of this model and the production quantities.
Passenger car export Passenger car export on brand basis

1,000 300 288
921 280
Thousand Units
Thousand Units
900 875
246
250 237
800
204
200 190
700
153
12,442
600 150 12,500 +5% 133
Dollar
12,442
500
12,500 +5%
Dollar
100
Million
12,000
400 11,815
Million
12,000
50 11,815
300
9 14
11,500
200 0
11,500
2017 2018
11,000 2017 2018
11,000
Due to the growth in the European auto market and10,500

the diversification of models, Turkish
passenger vehicles increased their exports on value10,500
basis in 2018 and reached the level of 12.5
billion dollar.
300 288
280 10,000
The industry exported passenger cars north of $12.4 billion last year, particularly with a 2017
significant increase in value
2018for sales to the
Thousand Units
10,000
markets of France,246
Spain, the United Kingdom and Belgium. Turkey's passenger cars exports 2017to Italy, where the domestic
2018 market has
250 237
slowed down in terms of the number of units, maintained their previous level, and Turkish-origin vehicles reinforced their position in the
United Kingdom. 204
200 190
Total passenger car export revenue 10 countries
2,000
1,719 to which passenger vehicles were exported most in 2017
Dollar
1,800
153
12,442
+5% 2,000
1,600 1,473
12,500 1,719
150 133
Dollar
1,800
1,400
Million Dollar
1,473 1,150
Million
1,600
1,200 979 905
1,400
1,000 1,150 774
Million
1,200
800 979
100 1,000
600
905 504 478 443
12,000 774 347
11,815 800
400
504 478 443
600
200 347
400
0
50 Italy France Germany United Spain USA Polond Belgium Israel Slovenia
200
Kingdom
11,500 9 14
0
Italy France Germany United Spain USA Polond Belgium Israel Slovenia
Kingdom
0
10 countries to which passenger vehicles were exported most in 2018
11,000 2017 2018 1,708
1,800 1,620
Dollar
1,600
1,708
1,800
1,400 1,620
1,144
Dollar
1,600
1,200 1,056 1,044
10,500
Million
1,400
1,000 1,144
1,200 1,056 1,044
800
Million
595 531
1,000
600 470
380 335
800
400 595 531 470
10,000 600
200 380 335
2017 2018 400
0
200 Italy France United Germany Spain Belgium Polond Slovenia İsrael The
Source: Statistics Institution of Turkey (TUIK) 0 Kingdom Netherlands
Italy France United Germany Spain Belgium Polond Slovenia İsrael The
Kingdom Netherlands
2,000
1,719
1,800
430
Thousand Uni
411
410
390
370
350
330
310
A record increase has been witnessed in commercial

290 vehicle exports together with the
development achieved by Ford and Mercedes-Benz.270
Upon inspection of the data of 2018, commercial vehicle exports of 411,000
250 units in 2017 were surpassed by 444,000 unites in
2018, representing 8% growth. Ford Otosan’s impressive performance and Mercedes-Benz’s 2017 completed capacity investments
2018 at the
Aksaray truck facilities have been influential in this improvement. Following the developments experienced in the domestic market,
commercial vehicle manufacturers saw a rapid development in foreign markets.
Commercial vehicle export Commercial vehicle export on brand basis
450
+8% 444 350
309
Thousand Units
Thousand Units
430
300
411 277
410
250
390
370 200
350
150
330 +10%
117 110
7,102
+10% 7,102
310 100 7,000
7,000
Dollar
290
Dollar
50
270 16
Million
6,500 6,438 10 7 8
Million
250 0 6,500 6,438

Ford Fiat Mercedes-Benz Others
2017 2018
2017 2018
Source: Automotive Industry Association (OSD) 6,000
6,000
In 2018, in addition to quantities, the 7-billion-dollar threshold was also surpassed with a 10%
value increase in exports.
5,500
350 5,500
The 6.4-billion-dollar commercial vehicle export revenue in 2017 increased to 7.1-billion-dollar level in the end of 2018. A significant
309 not noted in the revenue from the United Kingdom; meanwhile, the income from the other 9 countries showed significant
Thousand Units
change was
300 increases, and the most noteworthy change in the list of 10 export countries was Romania, which entered the list at number 10. The
277 5,000
mass transportation tenders won by Turkish companies has been influential
5,000 in this increase
2017 noted in exports to Romania.
2018
250 2017 2018
Total commercial vehicle export revenues 10 countries to which commercial vehicles were exported most in 2017
1,275
200 1,350
+10% 7,102 1,350
1,150
1,275
Dollar
1,150
950
150 7,000 760
Dollar
675 660
950
750
117 760
110
Million Dollar
Million
675 660
750
550 424 373
295
Million
288 251
100 550
350 424 373
295 288 115
251
6,500 6,438 350
150
115
150
-50
50 United Italy France Germany Slovenia Belgium The Spain USA Poland
-50 Kingdom Netherlands
10 16 United Italy France Germany Slovenia Belgium The Spain USA Poland
7 8 Kingdom Netherlands
0
6,000
Ford Fiat Mercedes-Benz 10
Others countries to which commercial vehicles were exported most in 2018
2017 2018 1,350 1,246
1,350
1,150 1,246
Dollar
1,150
5,500 950 814
Dollar
740
950 814 689
750
740
Million
689 511
750
550 461
Million
511 324
550 461 289 256
350
5,000 324 289 147
350 256
150
2017 2018 147
150
-50
United Italy France Germany Slovenia Belgium The USD Spain Romania
Source: Turkish Statistical Institute (TurkStat) -50 Kingdom Netherlands
United Italy France Germany Slovenia Belgium The USD Spain Romania
Kingdom Netherlands
1,275
1,350
1,150 Automotive Industry Agenda - Special Edition 2019 | 11
n Dollar
950
760
675 660
750
Market trend
Production performance
Export performance
4. Comparative analysis of production • Comparative analysis of production
Turkey again this year maintains the position of being the biggest vehicle manufacturer
in its territory.
2018 was a year wherein a negative change was experienced in production statistics in countries such as Czech Republic and Poland
compared to the previous year. In this period, Turkey maintained its role of being the leading manufacturer in the region despite
the relative loss it has experienced. According to the statistics of the International Motor Vehicle Manufacturers Association (OICA),
1,550,000 units of vehicles were manufactured in Turkey last year, and this statistic puts Turkey in front of the other 8 countries that
have been manufacturing vehicles in the region.
Automotive production Commercial vehicle production Passenger car production
1,800 1,696 600 1,600

553
1,414
Thousand Units
Thousand Units
Thousand Units
1,550 524
1,600 1,400 1,345
1,420 500
1,400 1,345
1,200 1,143
1,026
1,200 400
1,000
1,000
300 800
800 690 660
208
600 515
600 200 175 452
400
400
100
200 200
6 0
0 0 0
Turkey Czechia Poland Turkey Poland Czechia Turkey Czechia Poland
2017 2018 2017 2018 2017 2018
Source: OICA

140 -44%
122
Thousand Units
120
100
Summary First Quarter Evaluation of 2019
Summary First Quarter Evaluation of 2019 80
• Market69trend
60 Production performance -48%
Export performance 43
1. Market trend 40
22
20
The losses, which were more pronounced in the second half of 2018, have maintained their
effect during the first quarter of 2019. 0
Passanger car Commercial vehicle
The market, which shrank significantly in 2018, with the influence of the macroeconomic developments particularly
January-March 2018 during the
January-March second
2019
half of the year also had losses during the first quarter of this year. The drop in the auto market was 44% for passenger vehicles, but
sales figures were 48% less for commercial vehicles. The effects of the intense loss in the automobile and LCV market have been
observed despite the special consumption tax discount and campaigns.
Market by vehicle type Commercial vehicle market on segment basis

140 -44% 40
36
122
Thousand Units
Thousand Units
120
100
80 19
69
20
60 -48% 5,000
-2.1%
4,925
43 4,882
Thousand Units
40 4,900
4,821
22 4,800 5.4
20
2
4,700 0.358 0.183
0 0
4,600
Passanger car Commercial vehicle LCV Truck Bus
January-March 2018 January-March 2019 4,500 January-March 2018 January-March 2019

Kaynak: Otomotiv Sanayi Derneği (OSD) 4,400
The European auto market, which is among the key export

4,300
markets of the Turkish automotive
industry, narrowed down by 2.1% in the first quarter 4,200
of 2019, compared to the same period of
last year. 40 4,100
36
In Germany and France, two of the five biggest auto markets of Europe and 4,000
which are the biggest export markets of the Turkish
Thousand Units
automotive industry, increases of 12,000 and 2,000 were experienced respectively. Meanwhile
January-March a shrinkage
2017 was2018
January-March registered in the Italian,
January-March 2019
British, and Spanish markets. Particularly, the 38,000 units shrinkage in the Italian market may be interpreted as an indicator of the
ongoing negative mood in the country throughout 2018.
European auto market
19 Status of the largest 5 auto markets
20
5,000
-2.1% 1,200
4,925
Thousand Units
4,882
Thousand Units
4,900 967 980

4,821 1,000
4,800
5.4 827 819
4,700 2 800
0.358 0.183 688 690
4,600 0 627
LCV Truck Bus 589
600
4,500
January-March 2018 January-March 2019
4,400 400 378
400
4,300
4,200
200
4,100
4,000 0
January-March 2017 January-March 2018 January-March 2019 January-March 2018 January-March 2019
Source: European Automobile Manufacturers Association (ACEA), Automotive Distributors Association (ODD)

1,200
ts
300 285
Thousand Units
250 239
200 Summary First Quarter Evaluation of 2019

Market trend
150 • Production performance
Export performance
2. Production performance 100
According to the results of the first quarter in 2019,

50 the production in the industry
dropped by 16%.
0
The losses of Hyundai and Fiat, exceeding 20%, is one of the key reasons of the drop in production figures during the first quarter
of 2019. Most passenger vehicle manufacturers observed negative changes in production figures
January-March 2018 and were influenced
January-March by the
2019
domestic market developments in 2018, as observed by Toyota maintaining its level with the influence of its export performance
while Renault and Honda also had losses.
Passenger car production Passenger car production on brand basis
300 285 99
100
Thousand Units
Thousand Units 90 87
250 239
80
67 67
200 70
60
51
150 48
50 140
140 39
40 34
123
Thousand Units
100
30
120
20
50 100 12
10 6
0 80
0
60
40
Ford, Mercedes, and other commercial vehicle manufacturers have maintained their levels of
201899during the first quarter of this year.
100
20
87 drop was observed in the production quantities of commercial

Thousand Units
A9017,000-unit 0 vehicle manufacturers in the first quarter of 2019.

On
80
looking at the background of this statistic, it is possible to say that the production shrinkage
January-March experienced
2018 by Fiat was
January-March 2019influential;
meanwhile Ford, Mercedes-Benz, and other commercial vehicle manufacturers have mostly maintained their levels.
67 67
70
60
Commercial vehicle production Commercial car production on brand basis
51
140 48
50
140 100 93 92
39 123
Thousand Units
40
Thousand Units
34 90
120
30 80
100
20 70
12
10 6 60
80
0 50
60 Renault Toyota Hyundai Fiat Honda
40 37
30
40 23
20
20
10 5 5 5 3
0 0
| Automotive Industry Agenda - Special Edition 2019

14100
93 92
nits
90
250 235
Thousand Units
210
200
Summary First Quarter Evaluation of 2019
Market trend
• Export performance
3. Export performance
100
During the first 3 months of the year, passenger vehicle exports were realized as 210,000 units.
Renault is leading this increase with 12%. 50
Passenger car exports slipped from approximately 235,000 units in Q1 2018 to 210,000 units in the first quarter of 2018; a nearly
10% decrease. In passenger vehicle exports, Fiat had a drop beyond projections; meanwhile, the passenger car export champion of last
0
year, Renault, exported approximately 80,000 finished vehicles during the first quarter of the year, a 12% increase.
Passenger car export Passenger car export on brand basis

250 235
90
Thousand Units
210 Thousand Units 80

80
200 72
70
63
60
60
150
50 47
42
120 39
100 40 109 110
Thousand Units
30 100 24
50 20
80
10 4
2
0 0 60
January-March 2018 January-March 2019 Renault Toyota Hyundai Fiat Honda

Source: Automotive Industry Association (OSD) 40
90 A record increase has been witnessed in commercial

20 vehicle exports together with the
development achieved by Ford and Mercedes-Benz.
80
Thousand Units
80
72 0
70 Upon inspection of the data of 2018, commercial vehicle exports of 411,000 units in 2017 were surpassed by 444,000 unites in
63
2018, representing 8%60growth. Ford Otosan’s impressive performance and Mercedes-Benz’s completedJanuary-March
January-March 2018 capacity investments
2019 at the
60
Aksaray truck facilities have been influential in this improvement. Following the developments experienced in the domestic market,
50 commercial vehicle manufacturers47 saw a rapid development in foreign markets.
42
40 Commercial vehicle export39 Commercial vehicle export on brand basis
90
83
120
Thousand Units
30 109 110 24 80 76
Thousand Units
20
100 70
10 4
602
80
0
Renault Toyota Hyundai Fiat 50
Honda
60 January-March 2018 January-March 2019 40
28
40 30
20
20
20
10 5
3 1.8 2.1
0 0
January-March 2018 January-March 2019 January-March 2018 January-March 2019
90

industry in 2018

Changing production network of global players
In the years after 2000, in line with the changes in supply and demand profiles of world markets, automotive industry restructured its
production capacity and network worldwide. While the vehicle production increased from 56 million to 97 million units in less than 20
years, production network of the international manufacturers have also diversified.
• While share of developed

Vehicle production by economic zones
120 world in production has been
decreased from 83% to 46%,
Millions
100 • China’s share has increased to

30% between 1999 - 2017.
23.25
80
22.09 • Also remaining emerging
markets have emerged as
60 strong production hubs and
8.02 increased their share from
14% to 24%.
40
20
0
1999 2013 2017
Developed China Emerging
Source: International Organization of Motor Vehicle Manufacturers
In the period, the North America – Western Europe line has lost its dominance as production location and East emerged as the new
dominant region. Beside China various regions have taken their position in the production network of global companies.
• The share of North America

Vehicle Production by Region
and Western Europa
120 combined has decreased
from 61 % to 33%.
Millions
100
• On the other hand China
7.50 and Asia Pacific region share
80 7.01 increased from 29% to 53%.
60 • Eastern Europa has also

2.92 been a winner of this period
and thanks to expansion and
40 new capacity investment the
production increased by 2,5
20 folds.
0
1999 2013 2017
China Asia Pasiﬁc N. America W. Europa Central and Eastern Europe S. America Asia Africa

Evolving position of Turkey in the global automotive industry
Currently while the list of top manufacturers are still dominated by the brand owner countries, countries positioned as production hubs
in the value chain has been gaining ground.
• Thanks its local dynamics China

Top 15 Vehicle Manufacturer Countries
enjoyed the immense volume of
100% investment from the international
90% firms.
%0.53 %1.29 %1.75
80%
• Turkey as one of the emerging
70%
production hubs, has been able
60% to increase its share in vehicle
50% production from 0,53% to 1,75%
and is now among the top 15
40%
countries.
30%
20%
10%
0%
1999 2013 2017
China USA Japan Germany India

South Korea Mexico Spain Brazil France
Canada Thailand United Kingdom Turkey Russia
Dynamics like proximity to markets, cost optimization need has led the formation of new capacities in overseas rather than in brand
owner countries.
• Despite decreasing production

Top 10 production hub by 2017 numbers UK, Spain and Canada
20 are still protecting their strong
position as important production
Millions
hubs.
16
1.695 • Today however Mexico is leading

1.126 the list of largest production
12
hubs, and Thailand is the 4
0.298 largest hub in front of UK.
8
• With an investment of 13,3
billion USD (2003 – 16), global
4 OEMs made Turkey both a strong
part of their production network
and 6 largest production hub
0 worldwide.
1999 2013 2017
Mexico Spain Canada Thailand United Kingdom

Turkey Czech Republic Indonesia Slovakia Poland

Central and Eastern Europa has become a solid part of the global producers' production network. Although the production has been
decreasing in Western Europa, CEE has been able to production from continuously as region.
• In terms of production
Vehicle Production in CEE
volume Turkey, Russia
8 and Czech are the leading
countries in the region.
Millions
6 • With its market potential

Russia has been playing an
other role compared to other
countries in the region.
4
• With a production of 1,69
million vehicle in 2017
2 Turkey was the largest vehicle
manufacturer of vehicles of
1.696 CEE.
1.126
0 0.298
1999 2013 2017
Turkey Russia Czech Republic Slovakia Poland

Hungary Romania Slovenia Serbia
Between 2000 and 2017 China, Turkey, Slovakia, Czechia and Hungary are the first five countries having the highest export growth rate.
With CAGR of 20% Turkey second highest growth rate.
93% 86% 87%
Czechia Turkey China

Austria 1.57% Poland Slovakia
2.12%
Sweden Thailand Turkey
Netherlands Italy Czechia
Italy Czechia Italia
6.09% Rep. of Korea France France
6.65% United Kingtom 5.26% Belgium Belgium

5.75%
Belgium 5.70% United Kingdom Rep. of Korea
12.46% 7.72%
Spain 8.02% Spain Spain
Mexico Mexico 8.14% United Kingdom
17.61% France 15.57% Rep. of Korea Canada

12.17%
USA Canada Mexico
Canada USA USA
18.51% Japan 20.92% Japan 19.67% Japan

Germany Germany Germany
2000 2010 2010

Source: Comtrade

Capacity in Turkey has increased from 800k in 2000 to 1,9 million units in 2017. In line with this, production inceased from 468k to
1,69 million vehicles.
Capacity vs production of Turkish automotive industry
2,500,000
2,000,000 1,917,437
1,695,731
1,560,855
1,500,000
1,218,605 1,185,407
1,026,421
1,000,000
800,000
463,381
500,000
0
2000 2006 2011 2017
Capacity Production
Source: The Automotive Manufacturers Association
Companies & Capacities 2008 2012 2017
TOFAŞ Türk Otomobil Fabrikası A.Ş. 360,000 400,000 450,000
Ford Otomotiv Sanayi A.Ş. 315,000 330,000 415,000
Oyak-Renault Otomobil Fabrikaları A.Ş. 360,000 360,000 360,000
Toyota Otomotiv Sanayi Türkiye A.Ş. 150,000 150,000 280,000
Hyundai Assan Otomotiv San. ve Tic. A.Ş 125,000 125,000 245,000
Karsan Otomotiv San. ve Tic. A.Ş 28,000 75,300 52,225
Honda Türkiye A.Ş. 30,000 50,000 50,000
Mercedes-Benz Türk A.Ş. 13,200 18,500 22,000
Anadolu Isuzu Otomotiv San. ve Tic. A.Ş 13,155 13,155 19,012
Temsa Ulaşım Araçları San. ve Tic. A.Ş 10,500 10,750 11,500
Otokar Otomotiv ve Savunma Sanayi A.Ş. 7,550 8,800 10,300
MAN Türkiye A.Ş. 2,000 1,700 2,400

Renault worldwide production network
3,000,000
2,500,000
2,000,000
1,500,000
365,002
286,846
1,000,000
326,871
500,000
0
Sum of 2008 Sum of 2013 Sum of 2017
France Spain Turkey Brazil Iran Russia Slovenia India China Argentina Malaysia Indonesia UK Mexico
Source. Marklines
Toyota worldwide production network top 10

9,000,000
8,000,000
7,000,000 51,254 279,899

126,521
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
Japan USA China Indonesia Thailand Canada Turkey France Brazil UK
Source. Marklines

Ford worldwide production network top 10 countries
7,000,000
6,000,000
5,000,000
4,000,000 373,005
197,111
3,000,000
268,761
2,000,000
1,000,000
0
USA China Germany Turkey Spain Mexico India Brazil Canada Thailand
Source: Marklines
FCA worldwide production network top 10 countries

5,000,000
4,500,000
4,000,000 180,964
208,947 332,978
3,500,000
3,000,000
2,500,000 253,090
2,000,000
1,500,000
1,000,000
500,000
0
Sum of 2009 Sum of 2012 Sum of 2015 Sum of 2017
USA Italy Mexico Canada Brazil Turkey Poland China Serbia Argentina
Source: Marklines

Performance of Turkish automotive industry in the recent years
Following the new capacity set-ups of OEMs and investment of supplier industry triggered by these new capacities, total revenue of
automotive industry in Turkey increased from 17,6 Euro to 37,7 Euro from 2009 to 2017.
• Revenue wise Turkish

Total revenue of Turkish automotive industry
automotive industry grew by
a CAGR of 10% between 2009
40 € and 2017.
37.7 €
Billions
33.7 € 34.4 €
35 €
30 € 28.0 €
26.1 € 26.1 € 27.6 €
25 € 23.0 €
20 € 17.6 €
15 €
10 €
5€
0€
2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: Turkish statistical institution
Higher volumes in production has led to increase in employment both in vehicle as well parts manufacturing companies. This in return
increased total personnel cost burden of the industry.
• Personnel cost increased

Total personel cost of Turkish automotive industry
from 1,3 billion Euro to 2,6
3,000 € billion Euro between 2009
2,773.2
-17.
Millions
2,558.1 2,565.0
2,500 €
• This means a CAGR of 8% in
2,184.0 2,170.2
2,024.7 the given period.
2,000 €
1,726.5 1,746.1
1,389.3
1,500 €
1,000 €
500 €
0€
2009 2010 2011 2012 2013 2014 2015 2016 2017

Despite the increasing personnel cost, by having a stronger growth in revenue industry has been able to protect its competitiveness
in the recent years.
Total revenue vs personnel cost of Turkish automotive industry
40,000 € 37,628.43
Millions
33,619.30 34,361.29
35,000 €
30,000 € 27,499.24 27,933.41

25,991.10 25,937.84
25,000 € 22,876.25
20,000 € 17,543.67
15,000 €
10,000 €
5,000 € 2,025 2,184 2,558 2,773 2,565

1,389 1,726 1,746 2,170
0€
2009 2010 2011 2012 2013 2014 2015 2016 2017
Total revenue Total personel cost
The revenue of vehicle manufacturers grew by two fold and increased from 12,5 billion Euro to 20,05 billion Euro from 2009 to 2017.
In the same period personnel cost increased from 703 million to 1,03 billion Euro.
• The revenue of
29.10. Total revenue vs personnel cost of vehicle manufacturers manufacturers has a growth
rate of (CAGR) is around
10%.
30 € 1€
Billions
• In the same period personnel

Billions
1.15
25 € 1.09 1€
1.03 cost grew by a CAGR of 4,5%
0.93 0.95 in Euro terms.
0.90 1€
20 € 0.86 0.84
Personel cost
0.73 • With this performance, the

1€
Revenue
15 €
industry has been able to
increase its competitiveness
25.02 1€
21.84 22.50 overall.
10 €
16.06 17.90 17.15 18.10 17.80 0€
12.54
5€ 0€
0€ 0€
2009 2010 2011 2012 2013 2014 2015 2016 2017
Revenue Personel cost

29.10 Turnover vs personnel cost of per person employed
500 € 473.44
457.28
441.89
Thousands
450 €
403.96 409.09 412.63 407.34
400 € 386.63
350 €
312.25
300 €
250 €
200 €
150 €
100 €
50 € 22.83 22.65
18.19 21.58 19.22 21.07 21.68 20.66 19.51
0€
2009 2010 2011 2012 2013 2014 2015 2016 2017
Turnover per person employed İPersonnel cost per person rmployed
Supplier industry has been able increase its total revenue from 3,78 billion to 10,09 billion Euro. On the other hand the personel cost
industry does carry increased from 555 milyon in 2009 to 1,23 Euro in 2017.
• Revenue wise supplier has

29.32 Total revenue vs personnel cost of part producers growth rate (CAGR) of 13%
between 2009 – 2017.
12 € 1.30 1€
1.23 • On the other side personel
Billions
Billions
1.18
10 € 1€ cost grew by a CAGR of 12%
1.00 in Euro terms.
0.95
1€
8€ 0.85
Personnel cost
• With this results the industry

Revenue
0.70 1€
0.67 was successful in protecting
6€
its competitivness.
0.50 10.19 1€
9.18 9.46
4€ 7.73
6.63 7.10 0€
5.96
5.13
2€ 3.88 0€
0€ 0€
2009 2010 2011 2012 2013 2014 2015 2016 2017
Revenue Personnel cost

29.32 Turnover vs personnel cost of per person employed
120 €
Thousands
102.16 101.70
100.01
100 €
93.08 92.14 92.04
88.32
85.73
80 €
73.05
60 €
40 €
20 € 13.72
11.19 11.97 12.38 11.92 13.10 12.28
9.43 10.31
0€
2009 2010 2011 2012 2013 2014 2015 2016 2017
Turnover per person employed personnel cost per person employed
Number of ﬁrms and total employment in automotive industry

Total employment Number of companies
250,000 4,500
3,752 3,825 4,000

3,536 3,576
3,471
200,000 3,340
205,453 3,500
3,188 202,365
191,226
Number of companies
2,812
Employment
3,000
173,070
150,000 2,528
154,214 2,500
140,464
124,728 2,000
100,000
98,091 1,500
80,389
1,000
50,000
500
0 0
2010 2011 2012 2013 2014 2015 2016 2017 2018

R&D expenditures and personnel
10,000 2.50
9,321
Billions
9,000
8,000 7,696 7,594 2.00

7,101
6,874 2.00
7,000
6,293
1.79
R&D expenditures
R&D Personnel
6,000 1.67 1.50

5,366
1.54
5,000 4,423
4,000 1.00
3,104 0.97
3,000
0.79
2,000 0.65 0.50
0.59
0.45
1,000
0 0.00
2009 2010 2011 2012 2013 2014 2015 2016 2017
R&D personnel R&D expenditures
Productivity performance of global OEMs in Turkey
8€ 5.00 €
x100000
4.59
Millions
4.24 4.50 €
7€
4.05
3.77 3.81 4.00 €
3.56 3.51 3.59
6€
3.21 3.50 €
Revenue per employee
Revenue per vehicle
5€ 2.77
3.00 €
4€ 2.50 €
6.86
6.15 2.00 €
3€ 5.88 5.88
5.53 5.51 5.29
5.05 5.16
1.50 €
2€ 4.05
1.00 €
1€
5.50 €
0€ 0.00 €
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Sum of revenue per vehicle (Euro) Sum of revenue per employee (Euro)
Source: The Automotive Manufacturers Association


industry in 2018

Automotive Projects that are Granted Investment Incentive
Certificates in 2018
Based on origin of capital: Based on investment locations:
Type of capital # of investment projects Investment Location # of investment projects

Local 184 Bursa 63
Foreign 45 Kocaeli 30
Konya 28
Total 229
İzmir 19
Investment types: İstanbul 18
Ankara 16
Investment type # of investment projects
Tekirdağ 9
Expansion 163 Manisa 7
Brand new 47 Düzce 5
Modenization 19 Sakarya 4
Total 229 Samsun 3
Bilecik 2
Investment amount based on origin of capital: Elazığ 2
Type of capital Total investment (TRY) Eskişehir 2
Hatay 2
Foreign investment 9.624.244.271
Zonguldak 2
Local investment 3.032.665.856
Aksaray 2
Total 12.656.910.127 Şanlıurfa 2
Balıkesir 1
Total investment amount based on investment type:
Bolu 1
Investment type Total investment (TRY) Diyarbakır 1
Expansion 6.669.152.180 Edirne 1
Modenization 5.202.641.292 Erzurum 1
Brand new 785.116.655 Kırıkkale 1
Kütahya 1
Total 12.656.910.127
Mersin 1
Employment based on origin of capita: Osmaniye 1
Siirt 1
Type of capital Employment (person)
Sivas 1
Foreign investment 1.819
Şırnak 1
Local investment 4.155 Yalova 1
Total 5.974 Total 229
Top 10 Automotive Investments (2018)
Investment Type of Fixed Investment Estimated New

Company
Location Investment Amount (TRY) Employment
1 Oyak Renault Otomobil Fabrikaları A. Ş. Bursa Modernization 3.720.413.277 N/A
2 Hyundai-Assan Otomotiv Sanayi ve Ticaret A.Ş. Kocaeli Expansion 1.959.440.000 105
3 Tofaş Türk Otomobil Fabrikası A.Ş. Bursa Modernization 1.120.000.000 N/A
4 Ortadoğu Rulman San. ve Tic. A. Ş. Ankara Expansion 938.590.000 300
5 Prometeon Turkey Endüstriyel ve Ticari Lastikler A.Ş. Kocaeli Expansion 502.652.000 50
6 Valeo Otomotiv Sanayi ve Ticaret A.Ş. Bursa Expansion 409.000.000 140
7 Ataylar Makina Sanayi ve Ticaret Ltd.Şti. İstanbul Expansion 276.150.000 145
8 B-Plas Bursa Plastik San. ve Tic. A. Ş. Bursa Expansion 250.000.000 29
9 Sampa Otomotiv Sanayi ve Ticaret A.Ş. Samsun Expansion 190.000.000 200
10 Hema Otomotiv Sistemleri A.Ş. Tekirdağ Expansion 181.730.000 21
Source: Ministry of Industry and Technology
Automotive Companies Supported by Authorized Economic Operators Automotive Companies Supported
Turquality Programme (AEO) by Turquality Brand Support
17 companies (as of December 2018) Programme
10 companies (as of December 2018)
Erkunt Yiğit Akü AYD
Kırpart Pirelli Bantboru
Standart Profil Magnet Marelli Ditaş
Sampa Standart Profil Fompak
Petlas Tırsan Doğupres
BMC Yazakı EKU
Assanhanil Bosch Tırsan
Karsan Ford Platin Akü
Airtech Mercedes Benz Norm Cıvata
İnci Akü FIAT Katmerciler
Mutlu Akü Temsa
Teklas Alsin
Lassa Karsan
Hema Toyota
Temsa Renault
Otokar Isuzu
CMS Otokar
BMC
CMS
Honda
Bridgestone
Hyundai
Good Year
Hematrw
Norm Cıvata
ORS
Denso
Autoliv
ZF


industry in 2018

Automotive industry research Q&A
Cavo Automotiv Q&A
1) Turkey’s automotive supply industry has a history of at industry, the level that has been achieved over several years in
least 50 years. It has secured a strong foothold in the the fields of quality and logistics is sufficient and acceptable. In
global value chain, but nevertheless, changes are on the addition, engineering and R&D maintain their key positions.
horizon in the automotive industry. What do you single out
as the most significant asset for our supply industry as it As there is still a good distance to cover before we develop our
transitions from its half-century history to the new era? engineering and R&D skills to the desired advanced levels, we
must leverage the experience and knowledge acquired thus far
The most valuable asset of the Turkish automotive supply as a “stepping stone” for future advancement. Likewise, we must
industry is obviously its highly trained and qualified human set for ourselves a strategic goal to continue to make progress.
resources.
There is no better way to stress my point of view that skilled
Although one can easily get sidetracked in today's globalized talents are the most valuable asset on which we have to focus
professional world, it is still possible to mine the correct should we aspire to take on a better position in the global
information if you have the right knowledge and experience to automotive industry. It is a marketplace where we have to target
sort through the noise. development and progress as absolute must-haves in order to
survive. It is equally a must that we objectively evaluate our
Technology can be an asset provided that you have sufficient experience and knowledge.
financial funds on hand and provided that you have the capability
to determine which technology is the correct and most suitable 2) Considering your own assets at Cavo Otomotiv, which of
one to utilize. your competencies would lend you a competitive edge in
the automotive industry of the future? Which areas are
The ability to process acquired knowledge and turn it to your you strategically considering for investment in your future
benefit depends on your ability to avail of the technology in line plans?
with your objectives and your access to skilled labor.
At Cavo, we are a corporation which has been growing with
There exist talented individuals who have professional curiosity, continuous investment for 7 years. Therefore, we are “able” to
who think, correctly interpret, use and implement the current carry out our 10-year strategic plans by investing the required
technology in every sense, and who can do all that while efforts and time for 5 years and taking stock of them every year.
factoring in the rules, practices, requirements, and expectations
of the automotive industry. In this framework, with a view to becoming part of the global
industry, we have abandoned the generally-accepted practice
The point that our automotive supply industry has reached at in our industry of having a “resident engineer”. We created our
present makes access to such talent absolutely necessary. This R&D Center to be in the “kitchen” of the engineering, R&D, and
is certainly justified by the generally acknowledged ferocity of procurement departments of our customers. We completed this
global competition. process in 2016.
North Africa, Central and Eastern European Countries Shortly afterwards, we established our engineering offices
(CEECs), Mexico, and China, against whom we ran a high-stake in North America and Germany. And despite the economic
competition in terms of production in the automotive supplier imbalance in our country, we completed the process in
industry, are now turning up the heat on Turkey-based car approximately 2 years. We acquired a German company with two
manufacturers. Local manufacturers are now pitted against factories in early 2019. It was once our competitor.
competitors from North Africa and CEECs in particular and are
facing challenges in attracting new projects and vehicles to Our short- and medium-term plans for the future include organic
Turkey. growth by gaining new projects and customers in our portfolio at
our factories in Turkey and Slovakia.
The key to emerging victorious out of this tough competition
lies primarily in the level of quality that must be achieved in Again, our medium- and long-term plans include expanding
production, particularly in engineering and R&D, and the logistics our existing product mix and, equally important, advancing our
costs. engineering and R&D talent.
Given the fact that we mainly set our eyes on Europe as the
primary target export market for the supplier and automotive

3) The engineering capacity for product development for
companies in the automotive industry is set to assert
its importance further. We know that you are also
investing in this field. In which direction have these
investments changed the relations between you and
vehicle manufacturers? Would you please elaborate on
this point?
They key to your survival in the automotive industry lies in your

continued ability to respond to your customers’ needs.
At this point, it is important that you come up with solutions

drawn from your engineering talent, knowledge, and know-how.
But more importantly, the most striking point is that instead

of developing solutions to technical issues that may arise, you
should be able to go to your customer with well-researched
and verified recommendations on cost, process, weight, and
technical performance. This makes a big difference.
From our experiences in this area, we clearly saw that the

customer perceives you in a new light as long as you can make
this difference. You would then be considered a “partner”
beyond the conventional customer-supplier relation model.
This does not just create new business opportunities—It actually

gives rise to a sense of “gratification” that arises from your
boosted courage, your refreshed belief in your technical
competence, and the excitement and motivation that spread to
the entire team...
This is our dream that we have never stopped chasing as the

Cavo family.
This is the actual gain, which does not fit in any known
conventional measures.

EY and Investment Office - automotive industry research
Spokesman: Ali Çalışkan, Kordsa CEO
At our Izmit R&D center, we perform activities to increase
energy efficiency and reduce carbon dioxide emissions by taking
into account the environmental factors. The latest cutting-
edge technology that we developed there is a formula that
we developed in partnership with German tire manufacturer
Continental. We named this eco-friendly bonding technology
“CoKoon”. We are aiming to transform the industry with CoKoon,
which represents a change in the 80-year formula and is free
from resorcinol and formaldehyde.
We are involved in international projects with the participation

of stakeholders from various disciplines at the CTCE R&D Center.
These projects include production of composite materials with
3D printer technology under the scope of the Horizon 2020
program sponsored by the European Union. We are also involved
in the production for the aviation industry of composite repair
materials using nano-material additives. The new fast pre-
preg curing system named CM14 is the latest technology we
developed at CTCE. This new generation curing technology
completely eliminates water spot and white spot formation,
which has been one of the biggest challenges of the automotive
1. Is it possible to define Kordsa as an engineering and industry. Now composite materials are approaching the batch
technology company? We know that you have a very production speed of the automotive industry.
strong R&D structure. Could you please shed some light
on it? For instance, we know that you have made a very 2. The change of technology and its speed will have serious
significant investment in an R&D center. Could you also outcomes for all branches of industry soon. Studies and
tell us about this center? progress on materials also have a critical role in this
change. How do you comment on this change in general
R&D and innovation are an inseparable part of our corporate and specific terms for the materials? What are the critical
culture. We have been conducting our activities at two R&D headlines for Kordsa?
centers. In 2007, we founded our first R&D Center in Izmit.
This center serves as an innovation kitchen for both the global As Kordsa, we are involved in strategically important markets
market and the Turkish market in terms of tire and construction in all three of the business branches, and we are continuing our
reinforcement technologies. Our second R&D center specializes investments to support our constant growth. We are working
in composite reinforcement technologies. It is the one at the in construction reinforcement technologies to extend the life of
Composite Technologies Center of Excellence (CTCE), which we and strengthen concrete structures, while our innovations in the
realized in collaboration with Sabancı University. This center is a tire reinforcement technologies reduce tire friction resistance.
role model for both Turkey and the world, because Kordsa and We are a strategic partner of major tire manufacturers owing to
Sabancı University carry out the fundamental research, applied our innovations in tire reinforcement. We are continuing our R&D
research, technology development, product development, studies according to the changing requirements of the industry.
entrepreneurship, and production processes all under the In composite technologies, we enable vehicles to be lighter
same roof. Our center is the first textile and pre-preg ("pre- and more durable, thereby reducing fuel consumption. We are
impregnated" composite fibers) manufacturer in Turkey, which developing new and sustainable technologies for new-generation
provides support of fundamental research to prototype part transportation vehicles.
production. And it is one of the most select test centers in the
world. We acquired fabric development, textile products, and advanced
honeycomb technologies companies involved in composite
A team of approximately 100 people are working on developing technologies in Q2 2018. With these investments, we took
new technologies at our two R&D Centers. As of the end of March very important steps towards becoming a strong player in
2019, we patented as many as 182 inventions throughout the the composite market of the USA and the supply chain of
world. In addition, we filed applications for 770 more patents and the growing aviation industry. We decided to acquire Axiom
have been granted 178 patents. Materials, an approved company in the supply chain, to
eliminate long approval processes for aircraft components and

space vehicles. With this acquisition, we will lead the advanced same roof. Here, there are many studies that we have conducted
composite material technologies for both the aerospace industry with several project partners as I mentioned earlier. We have
and the new generation transportation vehicles. partnered with 2 universities and 5 industrial organizations in a
project supported by the European Union on the production of
Being the only world-leader and technology exporter in Turkey composite repair materials with nano material additives for the
in its industry, Kordsa is expanding its sphere of influence by aviation industry. The outputs of this project will start being used
merging the knowledge and skill in the areas that we invest today by the leading repair and maintenance company of the Turkish
with our innovative perspective. aviation industry after being tested and approved. The DiCoMi
project to develop a system of software and materials for the
3. You certainly benefit from the country’s innovation manufacture of composite materials with 3D printer technology
ecosystem as a technology company. Could you talk about is being carried out with the participation of 16 project partners
this ecosystem for us? Which elements of this ecosystem from 11 countries.
do you benefit from most in your activities?
The CoKoon bonding technology that we recently introduced
While focusing on innovation and R&D at Kordsa, we adopted at the Tire Technology fair in Germany is also an output of
a shared work culture and open innovation. In this sense, I can our open innovation culture. We are opening this eco-friendly
say that we benefit from both our country’s and the global formula, which we produced with Continental by combining our
innovation ecosystem. In order to develop new and sustainable forces and experience, for use by the entire industry with free
technologies as Kordsa, we are collaborating with many domestic of charge licensing now. Nevertheless, in order to enhance this
and international universities and institutions. We are finding and technology further, we are expecting the license holders to open
working with the best experts, companies, organizations in their their patents for use by other partners of the pool free of charge.
related subjects, regardless of wherever they are in the world, in Anyone interested may request a sample. In other words, at
order to conduct projects fast and efficiently and with a view to Kordsa we are both supporting open innovation and inviting all
acquiring knowledge. players of the industry to become involved in open innovation. As
a matter of fact, we believe that innovation is a long and tough
One of the most prominent reflections of this culture is our road to walk alone.
CTCE, which brings university and industry together under the


industry in 2018

Digitalization in the automotive sector
Digital, a defining megatrend, is transforming the automotive ecosystem.
• For years, automotive players had classic advantages that protected them — trusted brands, manufacturing excellence, protective
regulation and massive scale.
• But the advent of digitalization era — enabled by the combined effect of the four forces of business disruption: information
availability and accessibility; decline of transaction costs; decentralization of decisions; and dematerialization — has resulted in rapid
transformation of the automotive industry, thus creating new possibilities and challenges.
• The digital economy is bringing down barriers to entry in the automotive industry and this has paved the way for more entrants.
• Consequently, digital technologies necessitate companies across the ecosystem to transform core operations.
• This newly created digital economy is forcing players in the automotive ecosystem to leverage digital technologies in order to
transform their core operations while complying with regulations, ensure data privacy and simultaneously protect itself from
cyber-threats.
• This playbook will give readers a high-level view of how digital technologies are aiding in overcoming strategic challenges across the
automotive value chain.
Automotive drivers of change
Battling
to own
relationships
in a digital
Accelerating marketplace
pace of
“Digitalization”
disruptive
across the value
competition and
chain
innovation
Securing
Unprecedented
resources
scrutiny
for business
continuity
Diverse
sources of
unpredictability

Digital, as an enabling technology, can help the automotive ecosystem address strategic
challenges posed by the drivers of change.
• Develop digitally enabled new offerings (such as • Use advanced analytics for demand sensing, cloud-based
ride-sharing, mobility-as-a-service) for new mobility collaboration platforms and real-time financial analytics.
consumers.
• Use Robotic Process Automation (RPA) for shared services
• Ensure consistent customer experience throughout efficiency, cloud for improving internal and multi-enterprise
stationary, mobile and virtual communication collaboration to improve operating efficiency.
channels.
• Leverage electronic data capture of processes, smart shop
• Manage data privacy, cybersecurity, and leverage floor and intelligent asset management.
digital customer identity to provide personalized
experience and secure loyalty in a collaborative
economy.
Cybersecurity Vehicle�
+� development
Regulatory
Retail,
distribution
Manufacturing�
and aftersales
operations and�
supply chain
Business�model
• Leverage blockchain to develop • Leverage over-the-air (OTA) updates, • Use RPA to improve compliance and
decentralized mobility and use multiple advanced designing techniques and quality.
platforms (mobile apps, chatbots) community collaboration models.
• Deploy smart contracts on the
to establish a direct connect with
• Use predictive analytics and digital blockchain to ensure an autonomous
customers as well as consumers.
techniques such as Augmented data governance structure.
• Leverage cloud platforms for improved Reality (AR), Virtual Reality (VR) and
• Take advanced cybersecurity measures.
collaboration and develop close ties simulations.
(tokenization of data sharing)
with start-ups to focus on distributed
• Use innovation labs and real-time
innovation. • Use cloud platforms to ensure internal
analytics, increase visibility over key
and multi-enterprise collaboration and
• Utilize models from IT industry such processes and spot the trend through
visibility.
as two-speed IT and micro-services social listening to prepare for volatility.
architecture models for agile and fast-
paced innovation.

Digitalization in the Automotive Sector
Digital and its role in the evolving automotive sector
The initial waves have already transformed the world around us into a smart and connected
ecosystem in an unprecedented fashion, where customer is the new epicenter.
Private, public and hybrid cloud
Collaborative
Services
Services
Data
Data
ecosystem
Customers
In-store Self-scan
products
Wearable technology
Promotions Workforce Suppliers
Smart Omni-channel
through
Online
supply chain
i-beacons
shopping
Virtual change
rooms
Manufacturers
Products
Smart home Smart retailer
Source: EY analysis
This exponential growth has generated four forces of business disruption.
US$ 1
million
US$ 550
billion
Dematerialization Decline of transaction costs
• An average mobile phone today • Blockchain technology could save
houses over a million dollars’ worth of global businesses US$550 billion a
technologies from the 1980s. year.
Four forces
2 5
of business
disruption
UBER trillion searches / million years
Decentralization of decision-making Information availability and

• Through its intuitive platform, Uber ensured accessibility
that taxi drivers and customers retain Forces breaking • 2 trillion searches are made in google
control over the key terms of the interaction, down the silosof the each year.
which includes the ability to determine the pre-digital era
nature and quality of services offered. • It would take an individual over 5 million
years to watch the amount of videos
that will cross global IP networks each
Source: CoinDesk, Big Think, CISCO Visual Networking Index; Credit: Digital Advisory GSA CSO team
month in 2019.

What does this mean for the automotive industry?
Digital is a fundamental part of the major drivers of change shaping the global automotive
ecosystem over the next decade …
Battling
to own
relationships
in a digital
Accelerating marketplace
pace of “Digitalization”
disruptive across the value
competition and chain
innovation
Digital
four
forces
Securing
Unprecedented resources
scrutiny for business
continuity
Diverse
sources of
unpredictability
… we break the automotive ecosystem into five parts to analyze the consequent
disruption.
Cybersecurity
Vehicle� +�
development Regulatory
Retail,
distribution Manufacturing�
and aftersales operations and
supply chain
Business�model

Strategic implications of digital on the automotive sector
Developing and owning an ongoing relationship with both customers as well as consumers
and retaining loyalty are the biggest challenges.
Retail, distribution and aftersales
Strategic challenges Critical enablers Role of digital
Own the relationship with • Map new segmentation that distinguishes • Digitalize the customer journey, including the sales
traditional customers and customers (ranging from cities to ride-hailing process, and create packages that fit customers’
new mobility consumers companies) from consumers and even drivers changing needs.
based on ownership and access preferences. • Customer analytics (social media analytics,
• Understand the multi-generational consumer mystery shopping, survey, etc.) to have insight-led
preferences for ownership versus access across personalized interactions.
geographies. • Develop digitally enabled new offerings (such as
ride-sharing, mobility-as-a-service) for new mobility
consumers.
Own the relationship with • Develop a well-designed and understood • Coordinate big data management (CRM, social media
traditional customers and customer or consumer journey to create relevant analytics, connected car data, DMS, etc.) to fulfill
new mobility consumers touch points throughout their life cycle. customer expectations.
• Craft an omni-channel brand management • Ensure consistent customer experience throughout
strategy to give customers or consumers a stationary, mobile and virtual communication
seamless online and offline experience. channels.
• Facilitate digital customer engagement throughout
overall vehicle ownership experience. (even after the
vehicle is sold)
Secure loyalty in a • Shift focus from experience of driving the vehicle, • Manage data privacy issues and cybersecurity
collaborative economy to experiencing the brand. • Leverage digital customer identity and preferences
• Develop loyalty management programs. (in the shared mobility environment) to give a
• Upgrade distribution networks to improve consistent user experience (such as seat positioning
flexibility and increase relevant touch points both and infotainment) whenever an individual is in a
offline as well as online. vehicle by the brand.
Source/s: EY analysis

Building new business models with the aid of digital technologies will be the stepping stone
to sustainable growth.
Business Model
Offer a distinctive • Create value propositions that help customers • Leverage advanced analytics and IoT to segment customers
value proposition for and consumers tailor their mobility packages and consumers on the basis of their behavior patterns
customers. (owners — offering choices ranging from buying (social, driving) and also provide other over-the-top services
of assets) and vehicles to designing a package involving like predictive maintenance, in-vehicle content, royalty- or
consumers (users of access to multiple premium over the top loyalty-based services.
assets) services (music and video streaming). • Leverage multiple platforms (mobile apps, chatbots) to act
as direct touchpoints with customers and consumers for
sales and customization.
• Deploy blockchain to develop decentralized mobility.
Balance the pace • Redefine organization structure to balance • Leverage cloud platforms for improved collaboration and to
of progressive and the delivery of progressive and disruptive develop flat hierarchy.
disruptive business business models. • Develop close ties with start-ups to focus on distributed
model innovations. • Leverage technologies to enable multi- innovation.
enterprise collaboration.
• Tie up with start-ups.
Drive innovation. • Support the growth of new revenue streams • Allow asset monetization: “Car To Stay” — use vehicles for
as well as protect the existing revenue selling wifi, at resting places, entertainment places, power
streams grid, etc.
• Build a service-oriented company culture: • Utilize models from IT industry such as two-speed IT and
customization and adaptation to individual micro-services architecture models for agile and fast-paced
preferences innovations.
• Rethink metrics from volume-centric
measurement to asset utilization and miles
driven.
Keeping pace with technological changes, balancing progressive and disruptive innovation
and volatility are the biggest challenges from a “vehicle development” perspective.
Vehicle development
Enhance speed to • Shortening vehicle development cycles. • Leveraging software and V2X connectivity.
market. • Using over-the-air updates to keep vehicles • Usage of advanced designing techniques. (such as virtual
updated. prototyping)
• Standardizing processes to drive efficiency • Integrating community collaboration models in the product
while maintaining local flexibility. design and development stages.
Balance the pace • Using modular platforms that enable • Conducting predictive analytics aligned to key business
of progressive and customization. decisions.
disruptive innovation. • Developing vehicles that are web integrated, • Leveraging digital techniques such as AR, VR and
customizable, autonomous and green. simulations.
• Keeping up with technological changes: • Allowing digital “tagging” of all customer touch points and
increasing shelf life of hardware. content.
Prepare for market • Building understanding of evolving customer • Using state-of-the-art and real-time analytics capabilities
and demand volatility. needs and accordingly designing vehicles that to become a key differentiator to anticipate volatility and
allow for reconfiguration. accordingly redefine product attributes at the development
• Being quick in identifying the emerging trends stage
and change faster. • Spotting the trend through social listening and innovation
labs
• Obtaining increased visibility and control over key processes
and activity drivers.

New business models require close integration of both manufacturing and supply chain
operations.
Manufacturing, Supply Chain & Operations
Strategic implications Critical enablers Role of digital
Prepare for volatility • Improve supply chain visibility and resilience. • Implement advanced analytics for demand sensing,
and variables. • Facilitate supply chain synchronization to correlating market and planning data to predict
reduce bullwhip effects. demand.
• Develop pricing strategies to combat • Use cloud-based collaboration platforms and RPA to
competition. minimize lag time between demand identification and
production.
• Ensure effective collaborative planning.
• Leverage automated warehouse and picking process
• Apply real-time financial analytics to enable advanced
pricing strategies.
Improve operating • Enable broader and faster communications, • Implement predictive analytics to make faster decisions.
efficiency. allowing remote and flexible working. • Detect and prevent in-line failure using robotics and
• Capitalize and manage inventory costs and advanced analytics.
minimize line downtime. • Integrate RPA for shared services efficiency.
• Respond to competitive pressures with limited • Use cloud for improving internal and multi-enterprise
resources. collaboration.
• Ensure effective collaborative planning. • Enable a paperless office and digital records
• Coordinate modularization and reduction in management.
parts. • Demand sensing to avoid out-of-stock situations by
identifying “close-to-out-of-stock” situations.
Manufacturing • Apply key process analytics to flag anomalies • Capture electronically the data of processes driven by
and supply chain and discrepancies. IoT to improve logistics and operations.
re-invention. • Set up smart factories. • Enable intelligent asset management.
• Integrate mass customization. • Leverage smart shop floor.
• Manage logistics more efficiently. • Ensure digital replenishment.
• Optimize overall equipment effectiveness (OEE) • Enable intelligent tracking and last-mile delivery.
in manufacturing.
Evolving workplace • Increase workforce productivity and employee • Use visualization technologies like AR and VR to improve
models to leverage and engagement. picking process efficiency, prototype testing and
attract talent. • Adapt talent management structures training.
holistically, including talent attraction, • Enable gamification of knowledge sharing and KPI
development and retention. management.
• Align incentives and performance management. • Allow collaborative knowledge management suites to
optimize the training process.

Responding to heightened scrutiny and accountability, defining ownership of data and
managing supply chain risk are becoming strategic imperatives for trust building.
Regulatory and Cybersecurity
Responding to • Enabling regulatory radar and change • Leveraging digital for strengthening reporting
heightened scrutiny and management. processes to demonstrate the economic value added.
accountability. • Building in emission compliance, cybersecurity, • Enabling data privacy and cybersecurity.
etc. right from the product development stage. • Leveraging digital technology for transparency and to
• Collaborating with advocacy groups, regulators trace provenance effectively.
and government to develop regulatory agenda.
• Being accountable and transparent in the event
of recalls and failure.
Defining ownership of • Creating strong alliances and partnerships, and • Creating smart contracts on blockchain to ensure
data across the value clear agreements with partners. autonomous data governance structure
chain. • Breaking down organizational silos with data • Taking advanced cybersecurity measures. (tokenization
sharing and teaming. of data sharing)
• Enabling automotive data monetization — "Data as a
product“ — for example, data-sharing partnerships with
third-party insurance companies to device customized
insurance packages.
• Leveraging cloud platforms to ensure internal and
multi-enterprise collaboration.
Managing supply chain • Being flexible to adapt quickly in response to • Leveraging blockchain to improve transparency and
risk. recalls and quality issues without significantly provenance* across the system.
increasing operational costs. • Using cloud-based collaboration platforms.
• Protecting the supply chain network of networks
from data and cybersecurity breaches.
* Provenance: The place of origin or earliest known history of

something.

Appendix
Strategic Implications — Retail, distribution and aftersales
The industry needs to transition from a product-focused model to an experience model,
enabled by collaboration.
• Today, drivers and occupants are, at • Consequently, automakers risk losing • The industry needs to lay emphasis
best, peripherally served by product- relationship with consumers whose on delivering an integrated car-
oriented, traditional business models of needs are met by the variations of centric experience to the beat of new
the auto industry. shared mobility, ranging from peer- technologies, leveraging existing
to-peer car-sharing, ride-hailing and product design development and
ride-sharing, to integrated mobility delivery assets, and re-imagining the
providers. car to deliver exceptional experiences
and to remain at the core of personal
mobility.
Product-focused
OEM — technology providers/start-ups Experience model
model
Vehicle purchase OEM —

Connected loyalty
process industry Blockchain
partners
Visualization
Loyalty discounts and
Mobility enabler
Smart investments
promotions
RPA Al
Major part Increased
played by Voluntary service and participation
Lifestyle partner
maintenance
dealers Analytics of OEMs
OE in turn
Vehicle insurance M IoT
—o Omni-channel enhancing CX
services pe experience
nd
ev
elo
pe
Customer grievance rs
Provenance
handling
Customizable,
Collaboration driven transition subscription service

The automotive retail of the future will be a blend of “bricks” and “clicks”.
• Customers (at present) see multiple • Evolving customer expectations and • Therefore, it is critical to provide
touch points acting independently the advent of new mobility solutions customers with a personalized and
and retailers’ channel knowledge have transformed the manner in which consistent brand experience that blends
and operations exist in technical and customers interact with OEMs. The digital and physical channels throughout
functional silos. trend toward on-demand mobility has their life cycle.
placed customers’ loyalty at risk.
An omni-channel
strategy helps to:*
The salvation
Chatbots RPA Virtual showrooms Customers

experience
95%
Visualization a brand, not
technologies a channel
Mobility providers
3D within a
IoT Blockchain Strengthen
printing brand. consumer loyalty
Automakers and dealers
The aspiration
Customers
84%
see multiple
Digital lead Integrated CRM touch points
Targeted ad placements
management systems as part of the Improve consumer
same brand.
insight
76%
The reality
Customers
see multiple
Social Dealer/OEM Web Digital Blogs and touch points
media websites advertisement signage consumer forums acting Expand/differentiated
independently consumer base
79%
Increase sales
*Source: Reengineering the supply chain for the omni-channel of tomorrow, EY, 2015.

The automotive industry will need to rethink its value proposition and distribution network
to meet changing mobility preferences.
• Traditionally, decision-making for vehicle purchases has been • The automotive industry will need to rethink its value
driven by brand experience and cost of ownership. However, propositions to meet changing mobility preferences, especially
increasingly, consumers’ loyalty will no longer be tied down with as the world population migrates to megacities. The new
capital investments or contracts to a specific brand or service customer life cycle requires totally different touch points,
provider. channels and content, with an accent on new technologies and
new customer perspectives.
Access to multiple
Customers specifying Offering customized modes of transport for
mobility preferences mobility packages customers
Shift focus from selling cars to becoming Upgrade distribution network to improve
a mobility provider flexibility and increase relevant touch points
€358 month € 100 month

Personal vehicle Intracity mobility pack Use of online portals and Alternate retail formats Direct selling
• 24-month contract • Unlimited intracity marketplaces • Used car centers
• Maintenance journeys • Test drive centers
package • 2-day large vehicle • Experience centers
rental
An omni-channel strategy offers customers the ultimate freedom and flexibility of using and
shifting between channels.
• Omni-channel brand management is a powerful tool for • An omni-channel brand management strategy includes active
consistent brand and customer experience throughout all management of all communication channels, customization
possible channels. to customer preferences, and ability of customers to define
their own channel mix and path.
Role of a physical site in an omni-channel experience

automotive C-suite executives believe that
85%
New X45L model leveraging digital to manage trust and complexity
throughout the customer life cycle will support
Good morning, Scan barcodes their value proposition.
Mr. Jonson. Do and watch the
you remember X45L Launch on
the handover North American
day three years International Auto C-suite executives believe that an omni-channel
Schedule your test
ago?
drive here
Show
62% brand experience strategy will help enhance value
proposition.
Engaging customer
experience across multiple However, only 8% of
8%
digital touch points resonated respondents felt well
Experience terminal
as the most supportive value prepared to benefit
proposition driver across car from this.
Source/s: EY analysis, EY’s Changing Lanes 2016 survey manufacturers.

The industry needs to optimize customer experience and trust across the life cycle to build
customer loyalty.
• Managing customer experience across the life cycle is critical to building a trusted
relationship. 0rganizations believe that
an increasing emphasis
70%
• Consumer behavior has transformed radically, and OEMs and dealers must
on customer experience
undergo a similar transformation.
is driving business growth
• Ownership of cars is no longer a priority as millennials’ affinity to technology and strategies.
active lifestyle will shape the new economy.
Traditional “product centric” customer journey

Life cycle
1 2 3 4 5 6 7
Outcome
“I will buy back a
new vehicle and
First Vehicle Vehicle Vehicle Breakdown Complaints Replacement get it serviced
contact testing financing delivery warranty from the same
brand.”
Explore mobility Vehicle/mobility access and

options ownership experience
First
contact
Financingand offer
Reconsider mobility
customization
options
Consumer journey in a new mobility ecosystem

Digital opportunities
• Provide consistent • Conduct a mobility • Provide • Allow pay-per-use • Optimize mobility Outcome
experience through needs assessment customized of subscription plans based on
mobile and website through a blend of payment options of in-vehicle customer and
“I will consider
online surveys and based on infotainment and vehicle data using the brand
• Integrate social for my daily
social media customer’s risk location based
media to provide • Facilitate commute.”
profile services
personalized • Develop a mobility customer
experience (insight- plan based on real- • Allow online • Leverage digital to outreach through
led, tailored and time analysis of application design specialized email, mobile,
personalized vehicle inventory for credit and customer service etc.
interactions) online valuation for metrics
trade-in vehicle
• Allow online
booking of vehicle
test drive or
delivery
Source/s: EY analysis; The perfect landing: an engaging customer experience, EY’s TL report.

Strategic Implications — Business Model
In each era, digital had different roles …
Now the role of digital is to drive new business models.
Automation Digitalization Digitization

• Keyless vehicle
• Electronic fuel injection • Navigation systems
“Doing the same Doing new “Converting analog
• Electronic windows • New generation
thing more things with new to digital or physical
• Electronic transmission ticketing and booking
efficiently” technology to virtual using new system
controls
technologies”
• Fleet management
suites
Since the 70s Now Since the 90s
(New business models)
+
Shared mobility, autonomous Personalized Analytics-driven Smart
Zettabytes of data
driving models and relationship revenue models manufacturing
every year
decentralized transportation management
Credit: Digital advisory GSA CSO Team
The data generated across the auto industry ecosystem in this era could
open up new possibilities and revenue pools for the industry players.
Disruption scenario in automotive revenue pool,

• Bait and hook model
US$ billion
• Bundled subscription services like entertainment, security, home
4,000
Monetization of integration
connected car • Analytics monetization models
services • Insurance premium based on the behavioral aspects of the driver
2,750
• Context-based monetization model
• Time-sensitive data facilitating auxiliary revenue generation by
1,500 providing apt services like battery recharge, traffic assistance
1,200
720 • B2 model: Transaction between the mobility provider and other

businesses like messenger or delivery service
30
Shared • B2B model: Transaction between the mobility provider and the end
2015 2030
mobility customer like station-based, free-floating car-sharing
One-time
sales
After market Revenue from new
services* models • P2P model: Transaction between two private users with the mobility
service provider capturing a commission
• Open collaboration: Releasing API of the data from connected cars

Asset light to developers, resulting in better reach, lower development cost and
business new revenue streams (considering privacy and security options)
Source: McKinsey, 2016 • DAO model: Assigning projects to decentralized autonomous
*Shared mobility and data connectivity services
models
organizations (DAOs)

Blockchain is opening up new ways for developing decentralized shared mobility.
Advanced distributed ledger technologies are transforming multi-sided business models successfully orchestrated by Uber by bringing
in autonomous trust, tokenization and smart contracts. These three core elements bring transparency in the whole transaction, thus
handing over full autonomy to the user.
B2C P2P Decentralized P2P
Asset-centric and integrated platform of a Collaborative multi-sidedbusiness model Decentralized business models
traditional car rental UBER La'Zooz
Platform owner: Decentralized
Low asset-centric interfaces:
High asset centric Platform owner: Low asset-centric Mobile application
Platform owner:
interfaces: Uber interfaces:
Car Rental
own fleet of cars Mobile application Payment through Zooz, a crypto-currency
Traditional platform model Digital FIAT currency payments Ethereum Blockchain
Taxi driver Customer Taxi driver Customer

Customers
Value + Data exchange + Decentralized + Transparent + Smart
Feedback contracts + Value + Feedback
High control by platform Low control by the platform Full autonomy to the user
Source: EY analysis, Uber, Lazooz
Context-based monetization utilizing multiple platforms through bots are enabling

organizations to fulfill consumer demand at the right micro-moment.
Past Present Future
Uber allows users to hire

• Call center • Social media
cars from any messenger
conversation by tapping a car
• Mobile
icon. Users can also message
apps
Consumer directly with Uberbot to hire
• Direct a car.
• Call center • Platform
interactions
wechat, kik,skype, facebook
• Direct messenger, wds, amazon
Consumer interactions Consumer
echo
• Videos • Videos • Bots
Bots for Bots with

predefined machine
process and learning/
backed by deep learning
humans capabilities
Brands
Information Information
Source: EY analysis, Uber
flow flow

The growth of autonomous driving technology are forcing OEMs to re-imagine the most
important seat in the car to generatebundled subscription revenues through services like
entertainment.
Rolls Royce 10hp (1904): Designed for Rider Mercedes-Benz F-015, “Luxury in Motion” concept (2015)
25 Commute time: Significant engagement or entertainment opportunity?

21 21
19
20
Hours/user/month,
various platforms
15 13 13
11 11
10
10
6
5
0
Facebook Spotify Commute Instagram Snapchat Pinterest Twitter Tinder Linkedin
time
Source: Cowen & Co. Research
But monetization of new business models require creation of anecosystem to drive multi-
enterprise collaboration.
Products Customers Orders Billing Finance
• Product • Customer • Order • Bill • Receivables

catalog Information capture and calculation/ and collection Service flow
management Management management invoicing/ management
formatting Revenue flow
Dealers Dealers
• Service roduct and • Service and
•P • Dispute
catalog service resource management
management inventory management Partners Partners Partners
management
• Analytics Integration platform operated by OEM

services
(Role: Aggregation and orchestration)
Platform and business management

• Partners/supplier management and sales channel Predictive Charging | Mobility | Parking
management maintenance Streaming | Navigation
• Multi-tenant management
Integration platform operated by OEM Own services APIs of external service providers
Multiple business models would require OEMs to operate a collaborative environment, wherein each OEM should act both as an
aggregator of external services as well as an orchestrator.
Source: EY analysis

Today’s automotive innovation is pioneered by start-ups; ignoring them could be a loss of
innovative and creative ideas.
• Traditional OEMs continue to accelerate the pace of their • The acceleration of activity seen in H1 2016 is immediately
engagement with ride-sharing companies and other tech obvious with the world's biggest oil nation Saudi Arabia,
start-ups. alongside OEMs have already announced investment worth
US$9 billion in ride-sharing apps.
Amount
Ride-sharing service Investor
(US$ billion)
Uber Saudi Arabia 3.3
Didi TBD* 3.5
Didi Apple 1.0
Lyft General Motors 0.5
Gett Volkswagen 0.3
Via Venture Capital 0.1
Scoop BMW 0.0051
Uber Toyota Undisclosed
Source: Bloomberg; *Didi’s US$3.5 billion not yet disclosed
Collaboration in the ecosystem is the new normal and is replacingtraditional automotive

value chain dynamics.
Traditional value chain Collaborative ecosystem
OEM
OEMs
Tier 1 — supplier Telecom Dealer
(system supplier)
si um
Tier 2 — supplier Collaborative

lo ips
Mobility
t
Tier 1
(module/component supplier) ecosystem players
do m
r
re
Lo
Tier 3 — supplier
(Raw materials, intermediate goods, Tech
Tier 2
component supplier) players
In the past, tier 1s only had to interact with their OEM customers ---
and tier-2 suppliers. OEMs interact with dealers and dealers with
customers.
In the collaborative ecosystem, there is intersection of
different stakeholders with consumer at the center.

Although the brunt of digital disruption will be felt by OEMs, these forces will drive a
bullwhip effect throughout the value chain .
New business models are

required when suppliers
come in direct contact with Adopting the new model enables suppliers to
the consumer. generate incremental revenue.
• Selling services rather than • Companies convert what has been a traditional product into a service by tying in a
products recurring pricing model for specific features. For example, automotive tier-I suppliers
could replicate Rolls-Royce’s Power by the Hour model wherein the company sells
• Selling directly to the consumer
uptime rather than engines.
• Utilizing data to generate business • For example, selling services directly to a used car consumer. Supplier directly
value contacts the used car owner and provides OTA updates for advanced cruise control
system, navigation system, security features, etc.
• Companies generate revenue from data gathered from sensors, e.g., providing
analytics enabled services.
• Bosch launching its own IoT cloud platform and Bosch connected powertrain
• Michelin Earthmover Management System (MEMS) Evolution3, an advanced
system for sensing and transmitting tire information
• Example from other industry: GE released the Predix software platform in 2015.
And to protect existing business operations and simultaneouslyimplement fast paced

disruptive business models demands IT towork at multiple speeds.
CIO
A Speed 1 B Speed 3 A Speed 4
Legacy systems Agile product andservice Manufacturing operations management

(ERP, SAP) development (MES/MOM/Dynamic scheduling)
Business IT R&D Line IT

B CDO
• Strategy: Stable core, long-run vision
A • Governance: Centralized
Speed 2 • Architecture: Standardized, XaaS
Analytics infrastructure, customer • Workforce: IT experts
engagement, Platform management
• Strategy: High risk, speed
Customer IT B • Governance: Flat hierarchy, decentralized
• Architecture: Advanced technologies,
external services
Credit: Digital Advisory GSA CSO team • Workforce: IT experts, innovators

Strategic Implications — Vehicle development
Digital is fundamental to the future of urban mobility as it would reshape the vehicle
characteristics and value proposition.
• Digital technologies are a critical enabler to develop vehicles • Digitization, mobile connectivity and social media are making
that are web-integrated, customizable, autonomous and green, “vehicle access without ownership” more attractive for
and also for designing the business models around these consumers.
vehicles.
Why this matters: Vehicle Digital Cross-sector
The road map to the
characteristics infrastructure stakeholders
urban mobility vision is Web-integrated Real-time travel information • Automotive
based on the growing manufacturers
• V2V and V2I (collectively • Optimized and personalized
collaborative economy and V2X) communication journey planning
• Infrastructure providers
the proliferation and success Customizable Connected transport Future
of shared mobility business
• Hardware and software infrastructure • Transport/travel providers of urban
models. As urbanization
reconfiguration • Traffic and virtual parking mobility
depletes natural resources • Research institutions/
Autonomous management
and digitization disrupts academia
• Control shifts from driver One-stop payment system
distribution channels,
technology and peer-to- to vehicle • Smart cards, e-wallets, online • Mobility sharing providers
peer sharing will take Green account management
center stage in designing a Omni-channel strategy • Connectivity providers
• Fuel-efficient/alternate
city’s intelligent transport power train • Seamless customer
infrastructure. experience through relevant
distribution networks
Digital can help the automotive industry reduce its product developmentcycle in order to
meet the rapidly growing customer expectations andavailable choices.
• Consumer electronics and technology players have taught • These challenges are complicated by the need to make the
consumers to expect a rapid pace of innovation. This transition from mechanical engineering processes to digital
expectation has made it increasingly difficult for automakers ones.
and suppliers to maintain the current three- to four-year
product development cycle.
Product development challenges for the automotive industry
Long time to market High cost Quality issues

• Poor speed to market, especially • Too many prototypes being • Huge recall costs as a result of
1 to 1.5
years vs.
since customers want latest developed design or development lapses
connectivity technology inside
3 to 4
• Designs often being inflexible • Customer feedback often years
the car and developed with a view of getting lost when designs are
current trends translated from functional to
Development cycle of a
technical specifications
smartphone vs. a car
Results
• Usage of digital simulations • Community collaboration • Borrowing techniques such • Leverage innovations in
that modelfull-vehicle models in the product design as agile development from additive manufacturing
functionality, reducing and development stages the software world and and other computer-aided
the need for the lengthy applying them to mechanical manufacturing methods to
construction of physical and electrical designs reduce time to create and
prototypes test prototypes
Digital is a key enabler to develop vehicles based on real-timeassessment of demand.
• Digital transformation enables the achievement of an • For “vehicle development,” digital could be leveraged for
intelligent and adaptive enterprise. product conceptualization and planning (through in-house
digital labs and consumer insights via digital), rapid
prototyping, use of cloud platforms to collaborate with
suppliers, etc.
• Order to delivery
How can value chains be disrupted to boost • Demand to design

revenue, improve responsiveness to demand
Based on inputs from external and internal
signals and reduce cost to serve while
data, how to design new products?
improving the experience for customers,
partners and employees? Internal data:
• Vehicle data • Social
• Design to produce • Location • Customer service
• Behavioral • Third party
How can operations across various
elements of the value chain be optimized for
Automatic ordering of parts, maximum productivity, uptime, throughput,
labor and equipment via a digital etc., and effective decision-making with
marketplace minimal human intervention? Data generated by assets and field force is
captured and analysed to drive insights for
asset management, value added insights
and effective real-time decision making
Source: EY analysis
The industry needs to build in modular platforms, customizable interiors and OTA updates
right from the vehicle development stage to improve flexibility and speed to market.
• Automakers should look to shorten product life cycles in order to respond to individualized and fast-changing consumer demands
with innovative products.
Modular platforms Customizable interiors OTA updates
Adoption of modular platforms flexible Dynamic interiors as per customer Build-in capabilities to introduce
enough to design vehicles (from hatchbacks preferences, driving preferences changes in hardware through OTA
to sedans to SUVs) as per changing (retractable center console and steering) updates
preferences
27.8 million US$ 4.5 billion US$ 35 billion
Estimated number of vehicles to be Forecast global market size for HMI Forecast cost savings to automakers by
produced on top-10 platforms, up systems by 2017 2022 as a result of OTA updates
from 19.2m in 2014
Source/s: EY analysis, IHS, MarketsandMarkets

The automotive industry is increasingly focusing on OTA updates tobring down the recall
costs and keep vehicles updated in terms oflatest features.
Drivers Technology Market indicators
~203
Rising vehicle • Software over-the-air (SOTA) updates: These are updates to improve or upgrade
recalls the existing application, maps, infotainment, etc. Ideally done over wifi or mobile
million
network, however, OEMs are exploring more radical option — sending an update
Rising connectivity to driver's smartphone and then having it transmitted to the car via Bluetooth — OTA enabled cars to be
allowing even older vehicle to receive updates. shipped by 2022
Need for
autonomous driving • Firmware over-the-air (FOTA) updates: These include updates to improve or
~180
upgrade the operating firmware of the vehicle ideally with respect to Electronic
Threats Control Unit (ECU) or Telematics Control Unit (TCU). In future, the OEMs will be to
update or replace only the code, rather than the entire file. Until now, Tesla is the million
• Secure environment:
Hacks will continue only company to have roll out FOTA update — autopilot driver-assist system in 2015. cars to support SOTA by
to pose a significant . 2022
safety risk; OEMs
will need to secure +
hardware, software
and cloud hacks.
• Connectivity issues:
Benefits
• OTA updates to save time: Offering new updates on the move and delivering new
features and applications wirelessly improves performance and fast fixes.
~23 million
cars to support FOTA by
OTA patches and • Reduced vehicle recalls and cost savings: Will help reduce recalls by offering ECU
updates require 2022
updates over the air and significant savings on maintenance and warranty costs.
uninterrupted Not all recalls can be fixed via an OTA update, however, one-third of recalls in 2015
connectivity; any Recall rates increased by
could been addressed over the air, with manufacturers saving as much as US$6 46% in 2015, with four
connectivity failure billion.
can disrupt the major OEMs setting aside a
update, resulting into • OTA updates could pave the way for V2X communication: OTA updates are combined
20
vehicle malfunction. the key to a truly connected car to pave the way for more advanced automotive
architecture, including V2X communication.
. US$ billion
in warranty reserves
In the short term, traditional automakers are likely to leverage SOTA updates as they are
still at a nascent stage in terms of FOTA updates.
• MAP SOTA • APPS SOTA • Infotainment SOTA • ECU and TCU FOTA
Projected to grow from about Projected to grow from about Projected to increase from About 25.7 million ECU update
1.2 million vehicles in 2015 to 3.0 million vehicles in 2015 to approximately 200,000 vehicles support vehicles by 2022
nearly 32 million vehicles by 53.8 million vehicles by 2022 in 2015 to about 96.4 million About 160 million vehicles with TCU
2022 vehicles enabled vehicles by 2022 OTA capabilities by 2022
Core focus area for the next four to five years, especially for the traditional OEMs — a significant Existing focus area for disruptors
impact on sales retention, customer satisfaction, brand equity and franchise dealer networks (such as Tesla) and future focus area
for traditional OEMs — largely to
counter recall-based fixes
• This is primarily done via • This is the easiest segment • It is more complex due to • ECU is a rare segment and only
telematics systems. to implement — small in program size. Tesla has announced updating core
• Examples: BMW, VW and total memory with limited • Such updates are expected to auto ECUs.
Tesla recently announced associated safety issues. occur over wifi, rather than • It is expected to occur over
OTA procedures for updating • This can be done via OTA through LTE4G service, due LTE4G and wifi both.
navigation maps while platforms. to mobile network limitations. • TCU is currently being
Hyundai and Ford are • All major OEMs are expected • It has expected to become implemented via telematics
expected to deploy systems in to introduce app OTA updates a growth segment and will systems.
future. by 2019. grow quickly over the next six • It is expected to happen over all
years. wireless connections, including
smartphones’ Bluetooth.
Source: IHS, ABI, news articles, EY analysis

New digital design processes and tools have revolutionized product development, with
technologies such as AR, VR and digital simulationleading to lower costs and time to market
and addressing rising complexities.
Drivers Technology (illustrative) Market indicators

• Intensifying • Cloud-based integrated PLM solutions such as Arena’s solution or Autodesk Digital prototyping: could
competition and rising coupled with 3D printing capabilities for rapid prototyping reduce development time for
new models
customer demands • Digital channels such as simulation centers, AR and VR labs, to infuse
• Increasing costs
associated with
customer expectations directly into the early stages of product design
• Advanced analytics for demand sensing, tagging and further integrating
~ 36
months
~ 24
months
production sourcing with prototyping and production Design freeze to Job 1
changeovers and
Reduced number of crash-
prototypes
Benefits test prototypes
• Rising complexities
• Reduced development cycle and costs, for example, crash tests through 30-50 cars 10-15 cars
through introduction digital prototypes and simulation, enable reduced number of physical crash-
of hybrid, plug-in and test prototypes per new model as well as the cost incurred per prototype Case example of JLR
electric cars
• Reduced product iteration cycle times — allows OEMs to address iterations Spare parts
such as aerodynamics, fuel economy and styling prior to the tooling phase,
40%
Reduction in costs thereby bringing the development time down by about 30%
reduction in
Faster time to market • Product experiences — through technologies such as AR and VR, OEMs are costs
90%
able to simulate or overlay reality with digital information to familiarize with
Rising model complexity product features faster
repairs
Source: IHS, ABI, Gartner and EY analysis
The automotive industry is leveraging digital to develop and modify products virtually
before physical production of prototypes.
JLR: Digital simulation, aerodynamic engineering process VW: Spatial augmented reality
• JLR produced Jaguar XE saloon model without using any • VW projected virtual data on to real vehicle design
prototypes during the aerodynamic engineering process. models, thus allowing the analyses of components.
• The company aims to eliminate all physical prototypes • This saved time and cost by accepting or rejecting
from the early development process by 2020. design without physical prototype.
Mercedes: Digital simulator for test driving BMW: Augmented reality projections
• This enabled Mercedes to evaluate the handling Digital • This enabled BMW technicians with step-by-step
simulation
characteristics of its vehicle digitally at an early stage. instructions on how to fix an engine and what tools to
Availability of real-time test drive and suspension data use.
offered significant flexibility. • Doing so saved time and brought precision while
JLR: Vehicle design through analytics working on more obscure, complicated or high-value
vehicles.
• JLR carried out extensive virtual prototyping and big data
comparison during the development of Evoque. Ford: VR to develop vehicle design
• This enabled design improvement and saved time. • Through Oculus Rift headset technology, the company
visualized cars’ designs and experience before the
Valeo: Manufacturing process improvement through PLM VR and AR actual production.
• The company leveraged Dassault Systèmes’ DELMIA • It also helps customers validate the quality of the
to extend its PLM deployment in order to optimize its vehicle.
manufacturing processes.
Robert Bosch: Internet of things
Harman: OTA capabilities • Bosch aims to connect everyday wares and devices
• Harman acquired Redbend to enhance capabilities for OTA over the internet, fuelling the rise of “smart” homes
updates. and car.
Cloud PLM
Source: IHS, ABI, news articles, EY analysis

With digital leading to an exponential surge in the volume of data generated, analytics could
transform how business decisions are made in the automotive industry.
• Digitization has led to data explosion; • The automotive industry is leveraging • The industry needs to have a defined
analytics could transform how business analytics to drive greater efficiency analytics or big data strategy, align
decisions are made across the across vehicle development as well the organization structure, invest in IT
automotive industry. as other parts of the automotive infrastructure and hire data scientists to
ecosystem. drive the uptake of analytics.
BMW Ford
Forecast function in navigation service Selection of vehicle features
BMW analyzed information on personal driving The R&D team wanted to determine if the Ford
behavior, traffic light phases, current accident Escape SUV should have a standard liftgate or a
incidence, etc., and also derived correlations power liftgate. Ford reached out to social media,
from various data sources to introduce forecast analyzed results along with other survey results
function in its navigation service for its and came up with a power liftgate, ultimately
telematics system. Automotive industry leading to high customer satisfaction.
Continental uses analytics to
Seamless connectivity inside the car improve efficiency Nissan
Partnering with IBM to develop fully connected Optimal sales and inventory management
mobile vehicle solutions, Continental is set to Nissan analyzes multiple data streams, including
leverage its automotive prowess while IBM uses cars sold, customer search preferences and
its big data and cloud computing expertise for broad economic data, such as employment and
the project. housing stats across the country, on a big data
platform to come up with optimal sales forecast
and inventory management.
Komatsu Toyota
Creation of new product offerings Cloud technology to make driving more personal
Komatsu analyzes the data collected by its Komtrax Toyota is leveraging Microsoft’s Azure cloud technology to
telematics system to spot new industry and market develop services in order to make driving more personal
trends and accordingly develop new products. (basis customers’ individual preferences), intuitive and
safe.

Strategic Implications —
Manufacturing, Supply Chain & Operations
Variables faced by the automotive industry have resulted in low supply
chain synchronization …
Production
scheduling
Low supply chain

visibility
Challenges arising due to variables
• Ineffective collaborative planning
Economic • High risk of out-of-stock situations

scenarios • Difficulties in managing inventory costs
Variables acrossthe End result:
automotive • Inability to integrate mass customization Low supply chain
ecosystem • Low OEE in manufacturing synchronization
Volatile • Bullwhip effect “noise” adding cost and

costs complexity to operations
• Lag in responding to competitive pressures
withlimited resources
Demand
forecasting
Supplier
management
Source: EY analysis
… thus requiring a high degree of integration of both internal and

external processes.
1
• Synchronize planning across different nodes
Internal function to reduce work-in-process inventory Internal function
• Use sophisticated models and analytics to
optimize demand forecasting
External function
External function
• Streamline the supply
2
• OEMs collaborate to chain by reducing the
3
optimize supply chain Improve number of suppliers for
transparency and each part
reduce risks supply chain
• Reorganize supply chain
• Enable supplier efficiency network consolidation
management centers
• Localize production
External function

Digital technologies will thus be integral for a high degree of integration of the
core processes.
• Multi enterprise and predictive analytics would aid in an improved demand Supply chain
Advanced analytics sensing, thus resulting in the reduction of bullwhip effects and an efficient
synchronization
production scheduling.
• Customized and complex products can be manufactured to meet changing

3D printing customer preferences.
• Blockchain improves provenance in supply chain, reducing counterfeiting Integrated supply

issues. chain operating
Blockchain model
• Blockchain will empower organizations to successfully sync “supply chain
management, supply chain finance and audit” boosting efficiency and agility of
the value chain.
• Automation technologies would aid in reducing manufacturing cost and also

improve throughput speeds.
• Software bots would auto-check shipment documents ensuring up-to-date Supply chain
Robotic automation information. network and
• AI technologies are evolving, thereby enhancing productivity, consistency and flow optimization
accuracy, resulting in better compliance across the system.
• AR and VR technologies would enable enhanced visual picking of products as well

AR/VR as reduce errors in picking.
• IoT aids in developing a fully connected and monitored supply chain to improve Supply chain
IoT cloud efficiency and agility, along with improving interoperability between entities. resilience
Source: EY analysis
One such classic example is how digital transformed the linear supply chain of the
automotive industry to a distributed ecosystem.
Potential Supply ecosystem

Organic ecosystems drivenby
information flows focused on cost and
benefit optimization
Digitalized
Supply networks Local Motors' Rally Fighter,

Cost reduction, efficiency global sourcing the first car openly
adding real-time transparency (IoT, big developed and built using
data and analytics) crowd-sourcing
Digitized
Transactional costs
Supply chains marginal if not zero
Linear vertical integrated (classical)
Analog
Information flow
Transaction costs high Physical flow
Time
Today
Credit: Digital advisory GSA CSO Team

Automotive OEMs are also currently streamlining their manufacturing operations …
End-to-end digitization of Mass customization Modularization and

production processes — reductionin parts
Industry 4.0
Mercedes-Benz (MB) plant in Ford’s production line for its F-150 • Daimler adopts modular strategy to
Tuscaloosa, US, assembles next SUV pickup trucks: satisfy regional customer needs and
1
generations (including hybrid). varying emissions and size regulations
across MB in Europe; Freightliner and
Digitization to enable flexible Up to million
Western Star in North America; Fuso
production variations without adding costs for in Southeast Asia; and BharatBenz in
retooling and re-equipping lines.1 India.
• Tuscaloosa is connected to all MB
Cars locations, allowing location- Scania’s mass customization of its • Easier customization with Scania's
independent access to data and trucks:
1.2
modular system: Scania uses shared
process management. components in trucks, buses and
• All installations and robots are only coaches, as well as industrial and
controlled centrally and updated. trucks have same configuration — marine engines.
• Big data applications are to be used for allows many variations in how a truck is
intelligent analysis and improvement configured.2
of production processes.
Source: 1- www.bizjournals.com; 2- www.engineering.com
… while also leveraging digital and analytics in logistics and supply chain.
• Digital and analytics are allowing automakers have greater visibility and control over the complete supply chain, thus reducing
risk. Analytics will aid in transforming information into action through agile decision making across the automotive industry
value chain
• Digital would be a critical enabler towards having better component traceability, optimal inventory management, reduced
warranty/recall costs, etc.
Freightverify Ford
Transportation visibility using telematics Ford’s Smart Inventory Management System
FreightVerify helps automakers gain real-time transportation Ford uses Smart Inventory Management
visibility using truck telematics data. The company also System (SIMS). The company analyses multiple
leverages a “sharing-economy” like model in the trucking data streams, including cars sold, customer
industry and also uses the cloud to speed operations through Automotive industry search preferences, economic data, etc. to
increased and secure connectivity. gaining greater manage vehicle complexity and delivering right
visibility and control cars to dealerships.
across the value chain
Surgere through the use of GM
Improved tracking of containers digital Reduction in vehicle recall costs
Surgere leverages software, bi-directional RFID to achieve The components used at GM’s assembly lines
transportation visibility, global location and sensor-based are linked to the identification number of the
monitoring. The company provides a view of supply chain vehicle in which it is installed. If a defect is
that helps automotive industry increase efficiency, gain found, the automaker and its suppliers trace
control and greater visibility over packaging, and in turn the defective part or assembly problem to
reduce costs. the VINs of all other affected cars, thereby
reducing the warranty costs.

However, supply chain transformation should be backed by digitally optimized supporting
processes …
Key business challenges Digital technologies that can improve operational efficiency in the automotive industry
Digital technologies
1. Difficulty in information sharing People Process

Data
• Cognitive technologies • Advanced visual • RPA
2. Error-prone processes • Advanced search engines technologies • Blockchain
• Mobile • Advanced analytics • IoT
3. Ineffective reactive approach • Cloud • Self-learning systems
Business benefits Business benefits Business benefits
• Ubiquitous availability of • Centralized data • Highly scalable and
4. Uninformed decision-making
expertise repository flexible
• Incessantly connected • Easy and efficient • Highly efficient and
5. Disconnected data sources resources information sharing automated
• Productivity increase • Effective monitoring
through augmenting systems
6. Time-consuming processes humans
Source: EY analysis
… and a workforce strategy to make work in this industry attractive for the digital
generation.
Digital technologies Few automotive players have already

started using digital technologies to
enhance workforce productivity.
AR and VR
BMW introduced a slow-moving
RPA
collaborative robot in its factory
in Spartanburg, South Carolina,
IoT and cloud
whichcooperates with a human worker to
insulate and water-seal vehicle doors.
Cognitive intelligence
Empowering Blockchain
Need to Ford motivated dealership employees
the existing integrate to make more use of the courses and
workforce Advanced analytics new digital resources available to them through
workforce into gamification within a collaborative online
Cobotics community.
• Agile workforce the system
• Real-time implementation • Technological
Mercedes-AMG piloted a real-time quality
• Skill upgradation savviness
Emerging • Cognitive flexibility
assurance platform that harnessed
• Improved collaboration the IoT and predictive analytics to
outcome • Emotional optimize engine-testing processes when
intelligence manufacturing its vehicles. This leads to
lowered internal cost and faster resolution
without losing time.
Source: EY analysis, Ford, BMW and Faraday future

Case study: Local Motors
Local Motors is circumventing the incumbent players and building an ecosystem of passionate
co-creators to design new products and new processes to deliver innovative product.
• Local Motors has built a community • The company is a great example of • Local Motors is also innovating in
of co-creators by recruiting industrial a customer ecosystem—a business customer experience—what it means
designers, automotive engineers, and network that is aligned to help to own a car that customers built
potential customers who are passionate customers meet their goals: in this themselves. Local Motors is also
about cars. case, design and produce great cars (3D redefining how cars are manufactured,
printing used for manufacturing). sold, and serviced by substituting
local micro factories for traditional
dealerships.
• Low inventory, high cash conversion, low capital

• Create an aspirational experience intensity assembly facilities, using technology such
enabling people experience and watch as 3D printed cars
their car being "born" (through 3D • A national network of local units with each capable
printing) Mi of manufacturing, sales, and service.
cr
ng
o
fac
i
ail
• Enable direct retailing of

tory
• The individual units are supplied by a

y - ret
innovative vehicle products global "value network" of integrated

through micro factory’s
– auto
suppliers (parts and sub-assemblies)

retail
ctor
fa
• Collectively, the units are linked to

bi
ak
Mo ng a small headquarters, providing

i
• Offer customers an support for process migration,

experience of loyal, design commonality and purchasing
uncompromising, personal functions
service
• Styling and features to match customer

• Engage with the community to facilitate
requirements are done through virtual/web 2.0
innovation and empower the maker
community, enabling full retaining licensing rights
community

Strategic Implications — Regulatory and Cybersecurity
Relevance of cybersecurity has increased with connected car initiatives that link vehicles
with surrounding networks.
• Telematics units are attractive entry points for cyber attackers • Vulnerability in any one link of the automotive supply chain can
as they communicate both with the outside environment and the impact many others.
car's internal network.
Internet web
Power grid Mobile devices services Home network
Road toll Technical services
Vehicle to vehicle Traffic controls Network Automo-tive Local government

services makers
Sources: Information-technology Promotion Agency Japan, EY analysis
Impact of cybersecurity on the automobile industry: Asset-light business models and operations
Connected car ecosystem is a “network of networks,” a full-blown internet of

people and things, with the following challenges: Open collaboration
• Risk of open collaboration programs: Mobility service provider must Third party
API development Sensitive data Competitors
understand the risks involved in open collaboration programs and should
unit
operate appropriate mitigation policies. Advanced analytics engines can
derive sensitive information from the data shared by the mobility service Data network of mobility
provider with a third party. service provider
• Legal challenges with DAO model: Operations of DAOs dictated and DAO model
governed by open computer programs are visible to all, making it an easy
Uses, charges for
DAO
Orders products
target for intruders. Also, responsibility and legal liability of each participant DAOs are
is also not clearly defined in its framework. Contractor not legally
recognized
Boundaries of mobility service providers are disappearing; the risk landscape Build
Products
also becomes unbounded with extended business operations
Agreed security limit Variable factors Uncontrollable factors Mobility service providers are less
likely to detect a sophisticated
Key suppliers Software developers Climatic disruptions
attack. Outdated information
Distributors Secondary distributor Economy security controls or architecture
networks Government regulations
Automobile Manufacturers increases risk exposure.
Online prospects World events
company Data hosting providers Lack of a well-defined and
Employee agency automated GRC system or an
Contractors and support
services Advertising agency inefficient identity and access
Clients Packaging management software increases
risks of cyber attacks.
Social media
Sources: News releases
Cyber attacks on connected cars and latest security software systems
Security threat OEM’s response Latest car security software systems in the market:
Fiat Chrysler recalled 1.4 OEM has insulated connected vehicle • Symantec
million vehicles due to systems from the network and also Symantec introduces an anomaly detection software for
cybersecurity threat. provided software upgrades to automobiles and IoT systems. The software is capable of identifying
improve internal safety features. issues in the early stages using machine learning technology
and helps to initiate remediation to lessen impact. This solution
Cybersecurity researchers OEM addressed this security threat by is platform-independent and can fit in any make and model with
identified six significant flaws. distributing OTA upgrades to its users.. minimum installation procedure.
• Savari
provides an entire set of vehicle safety communication technologies
Cases of creating agility and resiliency in automobile sector that enables the vehicles to communicate with other vehicles,
roadside infrastructure, smart phones and pedestrians.
Tesla GM Daimler
• Karamba Security
Remediates Publicly announces Endorses bug bounty
Karamba Security introduces Carwall Software to secure connected
cybersecurity the appointment programs for risk
cars from cyber attacks. Carwall does not allow any malicious code
vulnerabilities of a chief product identification and
to run on the car’s electronic control units (ECUs) prevents even
remotely via OTA security officer mitigation
in-memory attacks.
updates
Sources: Various industrial sources
Hackable units of a connected car and security concerns
Attacks on connected cars’ security and manoeuvring systems
Manoeuvring Mobile device Attack on telematics Case details:

• Advanced Driver • Mobile applications system:
A team from the Defense
Assistance Systems
Attackers can Advanced Research Projects GM is developing
• Tire pressure intrude into a car’s Agency (DARPA) wirelessly a fix for its OnStar
monitoring system computer system and hacked into the computer telematics system
take control of its system of Chevrolet Impala. in light of the
Most exposed
movement and data. The team could take over cyber attack.
units of a
several functions, including
connected car the brakes of this vehicle in
a controlled situation.
Attack on body Case details: BMW sent

control unit: software
ADAC, a German motoring
Attackers can take association, could lock patches to the
Communication Body control 2.2 million cars
control of cars and unlock car doors
• V2X communications • Remote key or keyless security systems. by mimicking mobile equipped with
communications and ConnectedDrive
• Bluetooth • Lighting systems
sending signals to a SIM to prevent similar
• OTA updates • ECU card installed in the affected breakages in
vehicles. future.
• GPS

Simultaneously keeping constant vigilance toward data privacy and customer sentiments is
critical to maintaining trust and loyalty of customers.
Alliance of Automobile Manufacturers and Association of Global Automakers have started to draft data privacy standards
across the industry.
Alliance of Automobile Manufacturers draft privacy fundamentals
Fundamentals Description
Participating members commit to providing owners and registered users with a ready access to clear,
Transparency
meaningful notices about the member’s collection, use, and sharing of covered information.
Participating members commit to offering owners and registered users with certain choices regarding
Choice
the collection, use, and sharing of covered information.
Participating members commit to using and sharing covered information in ways that are consistent
Respect for context with the context in which the information was collected, taking account of the likely impact on the
owners and registered users.
Data minimization, Participating members commit to collecting covered information only as needed for legitimate
de-identification and business purposes. Participating members commit to retaining covered information no longer than
retention they determine necessary for legitimate business purposes.
Participating members commit to implementing reasonable measures to protect covered information
Data security
against loss and unauthorized access or use.
Participating members commit to implementing reasonable measures to maintain the accuracy of
Integrity and access covered information and commit to giving owners and registered users reasonable means to review
and correct personal subscription information.
Participating members commit to taking reasonable steps to ensure that they and other entities that
Accountability
receive covered information adhere to the principles.
Source: Alliance of Automotive Manufacturers
Blockchain to improve transparency and provenance across the system
Is this really the car that

Sebastian Vettel drove? Who else Is this bottle of motor Revealing the provenance of a
has owned it? oil counterfeit? Or is product to everyone involved, from
it endorsed by Audi? originator to end user
Are there any

hazardous materials
in this car?
Now Blockchain era

Lack of visibility of the product origin — Is it counterfeit or stolen? Breaking supply chain data out of silos
Source: EY analysis

Automakers should make sure that they have the flexibility to act upon any unexpected
business setbacks.
Companies, to sustain their Product malfunctioning causing the vendor to be called off
product quality in case of
Tesla
unexpected setbacks, such as
recalls, need an agile strategy Tesla‘s semiautonomous car, which used Mobileye's chips for autopilot
to ensure business continuum vision, failed to detect a laterally moved truck trailer, resulting in a fatal
and to contain risk. accident.
Mobileye
Tesla claims that an autopilot sensor should be able to recognize “any
interruption of the ground plane in the path of the vehicle”. However,
Mobileye stated that the current generation AEB systems are not designed
to actuate upon laterally crossing vehicles.
Organizations should develop and deploy control mechanisms that draws a clear accountability and ownership supported by
technology and analytics which are critical to sustaining a resilient supply chain.


industry in 2018

Global EV market analysis March 2019
Key questions regarding future of the EV market …
100
Will EVs always continue • After a few unsuccessful attempts, we believe that the
EV market, this time around, is likely to witness success
to be niche products? If
no, when will the sales
in terms of achieving mass penetration US$
… driven by tightening emission norms, steep reduction
hit an inflection point? in battery costs, charging infrastructure development /KWh
& availability of compelling models
Battery cost expected by
• The gradual uptake of EVs in the medium term will hit an
inflection point around 2023 / 24, beyond which mass 2022 / 23, tipping point
penetration is likely to start taking place for EVs
Which EV technology • Hybrids (particularly mild hybrids) are likely to drive EV
(BEVs, hybrids, FCEVs) sales during transition period
and geographies would • However, beyond 2025, BEVs are likely to be the only
218%
option to meet the emission norms
dominate the global EV
… growing car sharing and AVs to also fuel the BEV
sales? demand
• China, Europe, US* and Japan to be the key geographies
Forecast CAGR for 48V
driving EV sales
mild hybrid sales during
2017-27
*Subject to the outcome on the review of US fuel efficiency standards
OEMs are showing a renewed interest in the EV market and have set steep targets for EV penetration.
Despite the automaker interest, most customers continue to avoid EVs.
… Does this require a rethink regarding the type of customers and the business model used?
Implications for automakers
New business models Subsidiaries dedicated for Educating customers EVs are inevitable, focus
EVs now to get a head-start
• Focus on car / battery • Set up electric-only • Increase advertising • Ignoring EVs could
leasing models subsidiaries, at least in budgets for EVs, focus on prove to be detrimental,
the transition period, to educating customers the inflection point for
• Focus on new customer insulate EV efforts from the EV sales is less than a
types such as ride-hailing gasoline-car collapse • Focus on attributes such decade away
and car-sharing companies as instant torque (which is
• Direct sales or alternate fun and also cuts the stress • Build out portfolio of
• Collaborate with other dealer network for EVs of driving) and convenient electric car models —
automakers, battery home charging one compact electric
producers and charging car model will not be
infrastructure providers sufficient going forward
Automakers have a tight rope walk in front of them i.e. the need to strike the right balance between selling enough
EVs to meet ever tightening regulations, while also preventing the incremental cost of adding battery packs from
cannibalizing corporate profits. Further, automakers cannot afford to lose focus on ICE models, which are more
profitable, (at least) right now.

Market Outlook
EVs are expected to witness rapid growth with BEVs and PHEVs gradually gaining
share from HEVs.
Global EV sales are expected However, PHEVs and
to double by 2023, although BEVs are expected to
ICEs are expected to hold a increase their share by
majority share A steady growth in HEVs 2023 across majority of Huge EV growth is
is expected as a result the markets expected to result
of lower marginal costs in a multitude of
compared with BEVs during opportunities in the
the next few years electric vehicle battery
market
~6%
Geographical spread
16 countries During 2015, Japan China is expected

holding around and the US accounted to become the EV (including HEVs)
95% of the total for 72% of the global biggest alternate
penetration in new
EV stock during sales volume (BEV, fuel market with a
2014 PHEV and HEV) focus on BEVs vehicle sales by
2024
Sources: EY analysis
The tightening emission norms coupled with reduction in battery costs is likely to drive EV
sales, growing car sharing to also fuel EV demand.
Global EV sales volumes and growth Industry trends to further augment EV growth
55 48% • Growing demand for SUVs is making emission

reduction (using conventional ICEs) even more
50 challenging
45 • EVs likely to be the powertrain of choice for
40 AVs and car sharing vehicles
35
EV sales (m)
Key statistics
30%
30
25 US$ 75-100/Kwh
20 Battery cost tipping point for EVs’ to
achieve mass penetration
15 12%
10
5
4% ~40%
Share of EVs in Norway in 2017,
0 primarily on the back of high incentives
2017 2020f 2025f 2030f
7.3b barrels
EV Share in overall sales Mild hybrids Battery EVs
Fuel cell EVs Plug-in hybrid EVs Full hybrids
Note: Both BEVs and hybrids included

Daily fuel saving in 2040
Sources: Analyst reports, LMC Automotive, EY analysis due to EV

Emission standards, declining battery costs and charging infrastructure remain the
determining factors for EV adoption rate.
Key factors determining EV sales growth in the long term
Declining
Stricter CO2
High
costs of
emission
battery
standards
packs
Probability of occurrence or
Use of Charging Increased

Fuel price EV range/
renewables infrastructure
volatility
development
Increased in electricity growth and fast charging

environmental generation standardization time
awareness of
Non-cash consumers
Government Increased
incentives adoption of
cash
incentives on smart grids
purchase
Political Economical Technical

Low
Low Impact on EV growth High

Sources: Ey Analysis
Various technological and socio-political developments are expected to impact mass

adoption of EVs.
• Reduction in battery Illustrators
• High upfront cost and targeted R&D
US$ 150/Kwh
vehicle costs to increase range and
reduction in total EV
prices
Expected cost of battery packs
G • Stricter CO2 by 2025 making EV prices
emission standards comparable to ICEs
ro
s
• Real & perceived

n g fa c t o r
and fuel efficiency

wth
range anxiety
requirements
50-60%
driv
• Oil price volatility

iti
Reduction in incremental cost of

er
m
• Lack of interoperability Li EVs as compared to ICEs by 2025

s
and standardization of • Emergence of car

charging infrastructure sharing, mobility-as-a-
service and autonomous
technologies
~90%
• High dependency • Rapid development of Reduction in CO2 emissions from
on government public and private charging EVs using renewable sources of
subsidies infrastructure and increasing electricity for charging
usage of renewable sources
Sources: Ey Analysis for electricity generation

The demand for electric vehicles is likely to be driven by China, in particular, as well as select
countries in Europe.
2017 vol: 0.6m | CAGR 2017-30f: 18%
Global EV sales volume (in mn) Rapid penetration expected in states with zero
by key regions North emission plans (e.g. California), uptake remains
America contingent on Trump administration’s policy on
40 38 emission norms
35
+25%
30 2017 vol: 0.7m | CAGR 2017-30f: 26%
25 Tightening emission standards (many
25
Europe nations considering ICE bans) and high
20 fuel taxes will boost the EV market going
15 forward
10 9
2017 vol: 0.8m | CAGR 2017-30f: 27%
5 2
China China is expected to retain its position as the
0 biggest market for EVs in coming years on
2017 2020f 2025f 2030f
back of credits and subsidies, which are driving
investments from global EV manufacturers
North America China Europe
Note: Both BEVs and hybrids included; In 2017, Japan contributed 1.1m sales
(primarily hybrids, included in Asia Pacific )
Sources: Analyst reports, LMC Automotive, EY analysis
The inflection point for BEVs is likely to be around 2023/24, hybrids (particularly 48V mild
hybrids) set to become very popular during the transition period.
Growth Drivers
Sales in million units
BEV PHEV
• BEVs: Ever stricter
emission norms and
8 3 improving battery
+35% 7 +30% 3 technology
6 3
5 2
2 • PHEVs: Consumer
4 1
3 1 range anxiety and
1 2 1 lack of charging
1 0
infrastructure along
2017 2018f 2019f 2020f 2021f 2022f 2023f 2024f 2025f 2017 2018f 2019f 2020f 2021f 2022f 2023f 2024f 2025f longer route
• MHEVs: Better
Sales in million units fuel economy at
MHEV FHEV lower cost will
attract automaker
investments in 48V
14
+9% systems
+70% 11 4 4 4
9 3 4 • FHEVs: Growth
8 3 3
2 2 expected to slow
6
4 down with new 48V
2 mild hybrids taking
0 0
over the market
2017 2018f 2019f 2020f 2021f 2022f 2023f 2024f 2025f 2017 2018f 2019f 2020f 2021f 2022f 2023f 2024f 2025f
Sources: LMC Automotive, EY analysis

BEVs PHEVs Hybrids
Chinese manufacturers have grabbed majority share of the BEV market
on the back of strong volume sales in China. (more than half of global sales in 2017)
BEV market share by brand in 2017 Market share outlook for BEVs
Sales Market share Change in market share
BAIC 13% Group/brand (2017) (2017 vs 2025)
Tesla 12% BAIC 13% -8%

Geely 10% Tesla 12% -7%
Geely 12% -4%
BYD 6%
BYD 6% -4%
Nissan 6% Nissan 6% -2%
Renault 4% Renault 4% -2%
Chery Group 4% Going forward, established OEMs are expected to gain share of the
JAC 4% BEV market on the back of new model launches having higher range
Changan Automobile 4% Sales Market share Change in market share
Group
Group/brand (2017) (2017 vs 2025)
Other Chinese manuf. 12%
Volkswagen 2% 11%
Others 25%
SAIC 3% 4%
Hyundai 3% 2%
Chinese manufacturers accounted for ~48% of the global
BEV sales in 2017 Toyota 0% 5%
BYD 16%Mercedes-benz 1% 2%
BMW 14%
Toyota 12%
BEVs are expected to witness adoption across bigger segments as range anxiety
of buyers reduces.
Volkswagen %11
SAIC 8%
Segment wise BEV sales (in ‘000 units) Global BEV models outlook by segment
Mercedes-benz 8%
Basic 25
46
Geely 5%
2017 Sub-compact 32
80
GM 5% 2025 27
+1.038% Compact 81
Mitsubishi 5% Midsize 4
22
2.251
Large 1
+401% Ford 4% 4
Large + 0
12% 10
+211% Others
1.225 +1.337%
SUV 1
56
594 553 Pickup 0 5
245 298
191 198
51 82 Sporty 2
4 0 15 39 0 66 0 51 1 35 19
Toyota
Basic Sub-compact Compact Midsize Large Large + SUV Pickup59%Sporty Van VAN 4
12
Size segment Body style segment

Honda 11%
Growth in compacts and SUVs is expected to outpace the growth in basic and sub-compact BEVs
Nissan
• Improvement 8%and availability of charging stations on highways will increase consumer confidence in BEVs for long
in vehicle range
distance trips
Hyundai
• SUVs and large 7%
segment vehicles are usually the preferred choice for long distance travels as they provide better comfort and more
boot space
Ford 3%
Suzuki 3%
GM 1%
Geely 10%
BYD 6%
Nissan 6%
Renault 4%
Chery Group 4%
JAC 4%
Changan Automobile 4%
Group BEVs PHEVs Hybrids
PHEVsmanuf.
Other Chinese are expected
to 12%
be the new growth area to sustain the EV market,
as they have less dependence on infrastructure.
Others 25%
PHEV Market share by brand in 2017 Market share outlook for PHEVs
Group/brand (2017) (2017 vs 2025)
BYD 16%
BYD 16% -10%
BMW 14%
BMW 14% -7%
Toyota 12% Toyota 12% -8%
Volkswagen %11 SAIC 8% -4%
Mercedes-benz 8% -4%
SAIC 8%
Mitsubishi 5% -3%
Mercedes-benz 8%
New players are expected to enter the PHEV market to grab share in
Geely 5% this high growth segment
GM 5% Sales Market share Change in market share
Group/brand (2017) (2017 vs 2025)
Mitsubishi 5%
Ford 4% VW 11% 8%
Geely 5% 0%
Others 12%
GM 5% 1%
Hyundai 3% 2%
Fiat 1% 3%
Honda 0% 3%
Toyota 59%
Nissan 0% 3%
Psa 0% 3%
Honda 11% Tata 0% 2%
Kaynak: LMC Automotive, EY analysis
Nissan 8%
Contrary to the BEVs, plug-in hybrid systems are being used in bigger segment vehicles mainly
to justify the high
Hyundai 7% cost.
Segment wise PHEV sales (in ‘000 units) Global PHEV models outlook by segment
Ford 3%
Basic 0
2017 2
2025 Sub-compact 1
Suzuki 3% 11
Compact 25
+537% 108
GM 1% Midsize 12
30
1,432 7
Large
+685% 11
Others 6%
+357% Large+ 2
5
536 SUV 11
65
225 303
114 Pickup 0
0 8 0 85 66 16 5 12 68 0 8 6 60 0 11 2
Basic Sub-compact Compact Midsize Large Large+ SUV Pickup Sporty Van Sporty 3 26
VAN 01
Size segment Body style segment
• PHEVs can provide the necessary switch from gasoline vehicles until a robust charging infrastructure is available for pure electric
vehicles
• Automakers will also rely on PHEV sales for meeting the ever-strict emission targets and upcoming credit based subsidy programmes
in EU and China
Kaynak: LMC Automotive, EY analysis

Volkswagen %11
SAIC 8%
Mercedes-benz 8%
Geely 5%
GM 5%
Mitsubishi 5%
Ford 4% BEVs PHEVs Hybrids

The hybrid vehicle market currently dominated by Toyota’s full hybrids is
Others 12%
likely to see new entrants as the 48V mild hybrid systems gain popularity.
Hybrid vehicles* market share by brand in 2017 Market share outlook for hybrids
Toyota 59% Group/brand (2017) (2017 vs 2025)
Honda 11% Toyota 59% -49%

Honda 11% -7%
Nissan 8% Nissan 8% -8%
Hyundai 7% -3%
Hyundai 7% Ford 3% 0%
Suzuki 3% -3%
Ford 3% Recent • VW introduces 48V system to the Golf
developments • Kia Motors will introduce 48V diesel mild-hybrid
Suzuki 3% powertrain in second half of 2018
GM 1% Group/brand (2017) (2017 vs 2025)
GM %1 3%
Others 6% Mercedes %0 7%
BMW %0 5%
VW %0 16%
Gleey %0 6%
*Includes mild hybrids and full hybrid vehicles
Fiat %0 6%
Sources: LMC Automotive, EY analysis SAIC %0 4%
Lower development cost compared to BEVs and PHEVs, and independence from charging
infrastructure requirements will continue to drive adoption of hybrids across all segments.
Segment wise hybrids sales (in ‘000 units) Global hybrid models outlook by segment
Basic 2
5
2017 Sub-compact 13
43
2025 30
+531% Compact
115
Midsize 19
33
5.239 13
+1,322% Large
+134% +2,838% 16
+392% Large+ 5
6
2,090 SUV 14
1,739 77
1,254
743 830 731 Pickup 2
255 350
43 120 51 7 100 71 4 200 5 69 71 7
Basic Sub-compact Compact Midsize Large Large+ SUV Pickup Sporty Van Sporty 9
40
VAN 1
Size segment Body style segment 2
• Hybrid systems (specially the 48V mild hybrids) is likely to be the powertrain of choice for vehicle segments such as large and
midsize sedans, SUVs, pickups and sports cars until the pure battery versions becomes feasible
• The new 48V mild hybrid systems are expected to revolutionize the hybrid vehicle market as they provide up to 70% benefit of full
hybrids at 30% of the total cost

BEVs PHEVs Hybrids
The 48V hybrid systems are getting popular primarily to meet the fuel
economy targets and CO2 regulations in the EU and China.
Global hybrid vehicle sales outlook 48V mild hybrid sales outlook
30,000 MHEV (12V) In ‘000 units 18,000

North America In ‘000 units
16,000
25,000 MHEV (48V) China
14,000
FHEV Europe
20,000 12,000
10,000
15,000 +1,031% 8,000
10,000 6,000
4,000
5,000
2,000
0 0
2017 2018 2019 2020 2021 2022 2023 2024 2025 2030 2017 2018 2019 2020 2021 2022 2023 2024 2025 2030
Why are the 48V mild hybrid systems getting popular?

• The 48V design complements the existing electrical architecture, making it a relatively cheap, easy and lightweight way to get fuel
economy benefits at lower cost. The system can help automakers in meeting the ever-stricter emission regulations at a reduced cost
• Need for more on-board power in cars with addition of new infotainment options and other driver-assist safety features can be
effectively met
Tightening emission norms are the key drivers of automakers’ alternate

powertrain strategy.
Historical emission levels and future targets (in gCO2/km) for key markets Implications for automakers
• Achieve an optimal fleet
2012 2014 2015 2020 2021 2024 2025 2030 powertrain mix with a focus on
increasing contribution of low/no
emission vehicles such as PHEVs
-15% by 2025 | versus 2021
EU 140g/km 130g/km 95g/km
-20% by 2030 | baseline
and BEVs
• Explore partnerships and JV
opportunities to share the
USA 180g/km 160g/km 103g/km Not finalized development costs of advanced
alternate powertrains
Japan 110g/km 130g/km 106g/km Not finalized • Devise a customized marketing
and distribution strategy to
China 180g/km 130g/km 117g/km Not finalized increase customer awareness and
acceptance
Sources: EY analysis, News articles, Navigant Research, Canalys Increasing BEV sales
penetrations will help OEMs to
achieve the overall CO2 fleet
averages

The regulatory support provided by governments to EVs in many countries is likely to fuel
EV growth.
Area Action China France Germany India Netherlands Norway UK USA
Rebates at registration/sale
Sales tax exemptions (excl. VAT)

EV purchase
incentives
VAT exemptions
Tax credits
Circulation tax exemptions
Waivers on fees (tolls, parking)

EV use and
circulation
incentives Electricity supply reductions/ exemptions
Tax credits (company cars)
Access to bus lanes

EV use and
circulation Access to HOV lanes
incentives
Access to restricted traffic zones*
Fuel economy standards

Tailpipe
emission
standards Road vehicles tailpipe pollutant emissions
China 5 Euro 6 Euro 6 Bharat 4 Euro 6 Euro 6 Euro 6 Tier 2
standards
No policy Targeted policy* Widespread policy**
Nationwide policy*** General fuel economy standard Pollutant emission standard (2015)
*such as environmental/ law emission zones **policy affecting less than 50% inhabitants ***policy affecting more than 50% inhabitants
Sources: IEA Publication, news articles, EY analysis

OEM go-to-market Strategy
Automakers are looking to drive EV sales through a differentiated customer experience, robust
product portfolio and charging infrastructure development.
Customer engagement Product portfolio development Charging infrastructure
Differentiated customer experience for • Aggressive new launches in pipeline • Charging infrastructure development
potential / existing EV buyers: through collaborations with other
• A few automakers developing EVs on
automakers and P&U companies
• Launching EV specific brands existing platforms, while others develop
new ones • Developing batteries in-house as well
• EV specific distribution network / stores,
as acquiring energy related startups
sales personnel • Collaborations with tech players
• Working on new technologies such as
• Access to complementary EV charging • Investments in R&D for EV performance
wireless charging
facilities improvement
• Tie-ups with malls, hotels, city
• EV specific apps • Plans to launch EVs in SUV / crossover
authorities, etc. to set-up charging
segment
• Specialized finance / lease options, infrastructure
referral programs, etc. • Lightweight vehicles for a greater
range (200 miles - 300 miles)
Automakers’ EV strategy
Sources: Company websites, news, EY analysis
OEMs need to consider the regulatory changes happening around the world as they plan to shift
from ICEs to EVs.
Ban on ICEs
• The UK government has proposed full
phasing out of ICE powertrain production
by 2040
Necessary quotas for EVs
• France has proposed phase out of ICE
powertrain production by 2040 • China is implementing specific quotas
of zero- and low-emission vehicles for
• California announced ban on the sale of
automakers starting 2019 Tightening fuel efficiency
new cars and trucks powered by fossil
fuels in 2040 • Many US states including California standards
have zero-emission vehicle (ZEV) credits • South Korea to tighten fuel efficiency
standards by 2020; 30% reduction
compared to 2015
• European commission has proposed
further emission cuts of 15%-30%
beyond 2021.

OEMs are planning to launch all electric SUVs in coming years to meet the rising preference of
customers for SUVs.
OEMs have revealed all-electric SUVs concepts which are planned to go into Why are OEMs focusing on SUV launches?
production next 3 years
• Growing customer preference for larger
SUVs
Ford: new small SUV
• Accelerating decline of diesel vehicle sale
which is the preferred powertrain for SUVs
Mercedes: Generation EQ
• Difficult to meet emission regulations of
BMW: X3 future with conventional powertrain SUVs
as they cause higher emissions
Jaguar: iPace • SUVs are more profitable to OEMs as

compared to sedans and hatchbacks
2016 2017 2018 2019 2020
Launch Production
OEMs are adding EV launch targets to their plans to diversify the product portfolios.
Jaguar
Ford BMW
Land Rover
40 EVs (16 BEVs, 25 EV and
All models to have
24 PHEVs) hybrid models
EV option
2018 2019 2020 2022 2023 2025 2030
Volvo Renault Baic VW

TAll new models to Nissan Only EVs post 300 electric
be only hybrids / Mitsubishi 2025 models
pure EVs 12 pure EVs, a
range of hybrids
Toyota
All models to have
EV option
Mercedes
All models to
have EV option
PSA Group
All models to
have EV option
Sources: News articles

Automakers are adopting new models to sell EVs, particularly with an aim to reduce the high
upfront cost and also address concerns around residual value.
Automakers are exploring access based models to drive EV adoption.
Ownership based models Access based models

80%
Cash Guaranteed
Model Financing EV Leasing Battery leasing Subscription
purchase resale*
Share of BEVs that are
Customer Customer Customer / Captive finance Vehicle: customer; Automaker / bought on lease in the US,
Captive finance co. / third party Battery: Automaker Dealerships 55% for plug-in hybrids;
Ownership co. / third party financer compared to around 30%
financer
for overall new car sales
Upfront cost High High Medium/Low None Medium None
90%
Monthly
NA NA Low Low Low Medium/High
payment
Examples of VW, Nissan, Tesla Volvo, BMW, Volvo, BMW, Renault BMW,
automakers Toyota, Tesla Hyundai Nİssan, Tesla Polestar
Renault EV customers
who lease their car
*Tesla offered this option for some time (now discontinued) to reassure buyers of residual value of its EVs; buyers got
an option to resell EV after 36 months for a residual value higher than competing luxury car models
batteries, Renault owns
these batteries across
their lifecycle
Source: Bloomberg, Renault website, News articles, EY analysis
Automakers are following varied manufacturing approaches to develop EVs
Future focus area for OEMs and suppliers Manufacturing approaches being followed by
automakers
• Underpin EVs on the same ICEV* platforms to save cost
High
and achieve flexibility

HUDs • Examples of existing models electrification – Volvo XC90, GM
ECU Bolt, Toyota – Camry, BMW 3-series
Electric • Develop a new dedicated platform such as NEP (New
motor Onboard Batteries electric platform) and NEVD (New electric vehicle
Brakes software concept design)
Tires • For example NEVD platform – Tesla, Nissan Leaf, Toyota Prius,
Expected growth
Fuel cells Power Bolt, etc.

electronics • Faraday Future’s – VPA (Variable platform architecture) to
support vehicles with different sizes, powertrains and battery
configurations
• Invest in requisite ecosystem to retool or support the
expanding green vehicle market
Turbo
Transmission • For example, Ford’s Michigan Truck Plant was retooled with
chargers
the help of ATVM loans (Advanced Technology Vehicles
Manufacturing Loan Program) to build electric vehicles.
Chassis
• Focusing on in-house battery manufacturing
Steering • Tesla to manufacture batteries at its Giga factory; expecting
to slash battery costs by 30%
Low
• Nissan to develop next generation EV batteries at its plant in

Innovation potential UK, Sunderland
Low High
• Ford to develop in-house cell for its EVs
Source: EY analysis *Internal Combustion Engine Vehicle

OEMs are collaborating with players both within and outside the automotive industry to
focus on EV manufacturing.
Alliances, mergers and acquisition focused on EV Key considerations for stakeholders
manufacturing
OEMs are forming partnerships to co-develop batteries and EVs
EV-centric • A high share of pure EVs is
• Honda Motor and General Motors (GM) considering jointly building a expected to benefit EV battery
growth manufacturers, and OEMs and
fuel cell plant
markets suppliers specializing in BEVs.
• General Motors and LG Group will jointly design and engineer future
electric vehicles • These markets are more likely to
• Daimler, Ford and Nissan to jointly develop common fuel cell system witness a decline in the share of
ICE-related components.
• Toyota, Mazda and Denso to jointly develop technology for electric cars
Ford – in-house battery research Daimler – acquiring energy
related startups
• Ford conducting research in battery • Daimler invested in two energy Hybrid- • A larger share of HEVs in
the overall EV mix presents
chemistries; also, expanding its related startups (Deutsche dominant opportunities for stakeholders
R&D for EVs battery in Europe and ACCUmotive and Li-Tech
growth to diversify in EV-related
Asia Battery)
markets components and maintain
GM – focus on manufacturing Toyota – battery research on a focus on ICEs and hybrid
energy batteries the use of magnesium powertrains’ specific
components.
• GM has invested in energy storage • Toyota is researching the use
company, Sakti3, renewable energy of magnesium, in place of
company , Coskata and companies lithium, as the base chemical
involved in developing unique for batteries that could appear
materials, Sirrus Chemistry, the in the next 20 years
Nanosteel Company Source: EY analysis, News articles
Adaptive platform strategy, flexible production lines and enabling infrastructure will define
the right manufacturing depth for an OEM.
Deployment of EVs requires overcoming three primary challenges "developing enabling infrastructure, delivering
programs and driving customer adoptions…
Developing Enabling Structure

• Funding the capital requirement Delivering Complex Programs
Driving Customer Adoptation
• Mitigating technical obsolescence • Delivering leading-edge innovation
• Providing effective stimulus
• Developing technology standards & projects
measures
regulations • Defining policies and regulations
• Battling supply-side constraints
• Designing tariffs for charging stations • Integrating multiple IT systems
• Engaging the customer
• Planning & deploying charging • Complying with regulatory
• Changing customer behaviours
stations milestones
• Staging effective marketing
• Integrating with other demand-side • Managing complex stakeholder
campaigns
offerings environment
• Overcoming technology maturity
• Resolving customer complaints & • Integrating with existing Smart
concerns
liability programs
• Countering customer apathy
• Managing large spikes in localized • Coordinating all aspects in concert
• Appealing to business &
grid demand
commercial customers
…however, choosing right form of manufacturing will be equally important to achieve cost benefits and production flexibility
Forms of manufacturing
Tier 0.5/ Contract OEM to OEM In-house R&D and

manufacturing (outsourcing (electric vehicle platform innovation Crowd sourcing
model lines) and technology sharing) (battery innovation) (for mass customization)
Implications for automotive suppliers
Transition from ICE to EVs to have a significant impact on suppliers in terms of content loss,
opportunities and technology shifts.
Opportunities for suppliers
Outsourcing of components earlier built in-house

Challenges facing the suppliers
OEMs are likely to increase outsourcing of components to
compensate for high R&D expenditure on EVs, providing
High exposure to OEMs
suppliers with new revenue opportunities
Shift to EVs is likely to impact the profitability of OEMs
until the technology matures; supplier earnings will also
New product opportunities resulting from transition be impacted as the OEMs will look to reduce expenses
New suppliers of electrical/electronic systems will come
into picture where content will grow significantly
Powertrain content loss
Exclusive suppliers of engine, exhaust, fuel injection and
Higher prices of components most transmission content will run out of business as
these components are obsolete on a battery EV
Suppliers can demand high prices for new products
resulting from technology shift until the time of
mass penetration Share loss due to new entrants
Battery suppliers like LG, Samsung and Panasonic can
take up share of tier-1 suppliers of displays, infotainment,
Invest in innovation potential
interior electronics etc.
Suppliers need to invest in components that present
a higher innovation potential and a higher growth in
the future for better business sustainability Need for a diverse portfolio
Suppliers’ need of building a diverse portfolio of
powertrains will increase to navigate the shift
towards alternate fuel technologies
Source: EY analysis
Transition from ICE to EVs to have a significant impact on suppliers in terms of content loss,
opportunities and technology shifts. (2/2)
Components impacted due to EV shift

Components to face loss Components to benefit from Components providing new opportunities due to
of content increased content technology shift
Transmission Batteries Thermal/HVAC
Engine components Electric motors Electrical
Exhaust Battery thermal management Connections
Power electronics Steering
Interior electronics Axle
Autonomous sensors Brakes
Lightweight materials
Source: Analyst reports

Mass adoption of alternate fuel vehicles will alter the supply chain, offering new opportunities
for component suppliers and disrupters.
Conventional combustion vehicle

Component Part OEMs
supplier supplier Although EVs and conventional vehicles share
component parts, there are a large number of new
systems used for EVs that are not compatible with a
conventional ICE vehicle
Growing • Mass deployment of EVs will require supply chains

Battery/ opportunity to be retooled, thereby opening up opportunities for
cell pack Automotive battery makers, cell component makers, and their
players parts and for suppliers
suppliers.
Cell component
components suppliers
and • Along with the automotive value chain, EVs will create
electronics a significant opportunity for infrastructure providers.
• The development of the smart grid will go hand-

Automotive
Materials in-hand with mass EV deployment, along with
OEMs exploration of vehicle-to-grid (V2G) technology.
EVs
Sources: International Economic Development Council, EY analysis
Building a diverse portfolio of powertrain technologies is expected to be the key success factor
for automotive stakeholders in the future.
1
Component suppliers across the value chain need
to make strategic investments across different
powertrain technologies as the industry begins its
shift from ICEs to EVs and FCEVs
Hybrids
• Different powertrain technologies are expected to
5 2
coexist for a foreseeable future requiring component
suppliers to build competencies across these various
domains.
Range extender
and fuel cell Diverse portfolio Plug-in-
of powertrain hybrids • ICEs are expected to remain dominant until
(long term)
technologies to 2020; electric powertrains adoption will depend
form as basis of on the regulatory environment, technology and
investment strategy infrastructure development.
4 3
• Electric powertrains fuelled by batteries or fuel cells
are expected to play a significant role in urban transit
over the longer term.
Electric car
High-efficiency
(partially with
combustion
range extender)
engine
Source: EY analysis

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Automotive

Global Automotive Industry vs Turkey 16

Digitalization in automotive industry 40

OEM go-to-market strategy 78

Implications for automotive suppliers 82

Automotive Industry Agenda - Special Edition 2019 | 1

The automotive world is undergoing a significant transformation. Being one of

2 | Automotive Industry Agenda - Special Edition 2019

Distinguished stakeholders of the automotive industry and members of the sector,

This special edition provides context on the following:

• Evaluation of the end of 2018 and the first quarter of 2019

Automotive Industry Agenda - Special Edition 2019 | 3

4 | Automotive Industry Agenda - Special Edition 2019

Global Automotive Industry vs Turkey

Investment incentives in automotive

Automotive industry research

Digitalization in automotive sector

Global EV market analysis

Automotive Industry Agenda - Special Edition 2019 | 5

The auto market contracted at the close of 2018 after

sales. Turkish-built models accounted for 73% of Renault’s

LCV Truck Bus

Locally Produced Imported 80

55 7 Top 10 LCV brands in 2017

-5 2014 2015 2016 2017 2018

Source: Automotive Distributors Association (ODD)

Locally Produced Imported

Market share of premium0brands

Locally Produced Imported

14 Performance of premium brands in 2018

European auto market Status of the largest 5 auto markets

4,000 3,810 3,822

500 1,026 337

8 | Automotive Industry Agenda - Special Edition 2019

Commercial vehicle production Commercial car production on brand basis

1,200 1,143 1,026

150 1,200 1,143 133

100 1,026 800

200 400 444

1,000 921 875 2017 2018

800 Automotive Industry Agenda - Special Edition 2019 | 9

Automotive industry trend analysis

Passenger car export Passenger car export on brand basis

Due to the growth in the European auto market and10,500

A record increase has been witnessed in commercial

Commercial vehicle export Commercial vehicle export on brand basis

250 0 6,500 6,438

Automotive production Commercial vehicle production Passenger car production

1,800 1,696 600 1,600

2017 2018 2017 2018 2017 2018

12 | Automotive Industry Agenda - Special Edition 2019

Market by vehicle type Commercial vehicle market on segment basis

January-March 2018 January-March 2019 4,500 January-March 2018 January-March 2019

The European auto market, which is among the key export

4,900 967 980

Automotive Industry Agenda - Special Edition 2019 | 13

200 Summary First Quarter Evaluation of 2019

According to the results of the first quarter in 2019,

87 drop was observed in the production quantities of commercial

A9017,000-unit 0 vehicle manufacturers in the first quarter of 2019.