Automotive 2020 Global Study: New Breed of Consumers Seek Intelligent, Connected and Hybrid Vehicles in ‘Virtual Garages’

IBM Offers Five Imperatives for the Future of the Automotive Industry

TRAVERSE CITY, MI–(EMWNews – August 13, 2008) – The IBM (NYSE: IBM) Automotive 2020

Study, based on a global collaboration with 125 automotive industry

leaders, today revealed an industry grappling with significant change

driven by increasingly sophisticated consumers.

As these consumers seek out a comprehensive mobility experience, industry

experts predict that flexible transportation services will replace the

purchase of personal vehicles for multiple uses, and intelligent vehicles

will cater to consumer demands for greater information, safety, and

environmental responsibility.

The report was unveiled here today at the Center for Automotive Research’s

Management Briefing Seminars conference.

Consumers continue to become better informed and more demanding and they

will drive transformation in the current purchasing model for vehicles.

The study concludes that consumers will expect to purchase or lease a

vehicle that comes with flexible access to a diverse “garage” of vehicles.

In the current model, consumers are often restricted by finances and buy a

compromise vehicle, or they buy a car with features that don’t get used.

In the new model, consumers will drive a primary vehicle that best meets

their daily needs, and have the option to change to a different model, as

needed. For example, someone may drive a small, fuel-efficient vehicle

during the week, but have access to a sport utility vehicle for a weekend

ski trip or a luxury sedan to attend a wedding.

“Basic transportation will no longer be enough for increasingly empowered

consumers. They want an automotive experience that matches their lifestyles

and lets them move seamlessly from life inside the vehicle to their world

outside,” said Sanjay Rishi, Vice President and Global Automotive Industry

Leader for IBM.

The IBM Automotive 2020 Global Study is based on interviews with 125

executives in 15 countries from automotive OEMs, suppliers, and other

thought leaders. Eighty-five percent of the top automotive companies

worldwide — including all of the top 10 — participated. The study,

entitled “Automotive 2020: Clarity Beyond the Chaos,” was developed by the

IBM Institute for Business Value to determine the needs of and anticipate

industry response to today’s changing automotive ecosystem.

The Intelligent Vehicle

Consumers are demanding more information and entertainment from their

vehicles, as well as increased safety, economy, and environmental

responsibility. This is spurring the manufacturing of “intelligent”

vehicles — cars and trucks that use electronics to provide greater

assistance with navigation, and provide more information about the vehicle,

its environment, and connectivity. Technologies that will have a growing

presence in vehicles by 2020 include telematics, including remote vehicle

prognostics and active safety (capabilities that sense and respond to

driving behaviors and road conditions); a wide array of entertainment

choices such as data downloads and streaming media; and power train

innovations.

Consumers will benefit from connectivity between their vehicles and other

vehicles as well as road infrastructure. Information captured from breaking

patterns — for example, from vehicles approaching a recent accident —

will be transmitted to other vehicles. Alternate routing options delivered

dynamically will help consumers avoid congestion and delays, and active

safety features will enable crash avoidance.

Hybrid Engine Trend Accelerates

Alternative power will see continued innovation that extends far beyond

2020, with hybridization and battery technology leading the drive toward

environmentally sustainable transportation.

Micro, mild and full hybridization are currently undergoing extensive

development today, and study participants believe strongly that by 2020 all

new vehicles will have some level of hybridization.

Hydrogen fuel-cell vehicles will remain a viable alternative, but

projections put only a small fraction of vehicle production migrating to

this technology by 2020, due to cost-prohibitive processes and new

infrastructures. Bio-fuels will also see their share of investments, and

non-food-based bio-fuels will grow.

Five Imperatives for the Automotive Industry

Based on the Automotive 2020 study and related research, IBM has defined

five imperatives that are likely to distinguish the outperformers in the

automotive world of 2020:

* Advance mobility. Auto companies must embrace new mobility models, such

as new ownership and usage models and integration of other modes of

transportation; e.g., when you arrive at the train station your car is

waiting for you.

* Transform retail. Auto companies and dealers will need to find new ways

to connect with sophisticated consumers and develop a new value proposition

for dealerships.

* Simplify complexity. As vehicles become more connected and intelligent,

their electronics and embedded software become more complex. IBM recommends

that OEMs establish common processes, and standards so to enable

innovations from traditional and non-traditional suppliers to be rapidly

integrated.

* Partner extensively. To address the increasing cost of innovation,

companies need to widen their enterprise innovation networks and extend the

partnering concept to go beyond the current suppliers. Close relationships

with companies in other industries, especially electronics, energy, and

utilities, will become a necessity.

* Execute globally. OEMs and suppliers should create balanced, flexible

operations aligned with local economies while having a positive social

impact wherever business is done.

“In the face of such significant and chaotic change, finding clarity will

require the automotive industry to take sweeping and rapid action. Two of

the greatest areas of opportunity are meeting consumer demands for

environmental accountability and using technology to transform the way the

industry develops products and goes to market,” said Rishi.

About the Automotive 2020 Global Study

The findings of this report are based upon interviews conducted by IBM in

2008 with 125 executives in 15 countries, from a broad representation of

automotive OEMs, suppliers and influential third parties.

Participants represented 85 percent of the top auto companies worldwide

based on revenue, including all of the top 10. Sixty-two percent of the

interviews were with traditional participants in the industry (OEMs and

suppliers); other interviews were conducted with industry associations,

government economic development groups, specialty companies, academic

institutions and other organizations that provide a viewpoint on the future

of the automotive industry.

Emerging nations, such as Brazil, Russia, India and China, accounted for 27

percent of the interviews. The Automotive 2020 Global Study provides

insights about the future needs and anticipated industry response to the

changing automotive ecosystem.

About IBM

For more information about IBM, visit www.ibm.com.