1、John Paul MacDuffie,Program for Vehicle and Mobility Innovation,Wharton SchoolCEIBS Auto Forum,November 29,2023 JP MacDuffie,20231Learning from Automobiles and Mobility Services:Modularity,Ecosystems,and Value MigraonProf.John Paul MacDuffieDirector,Program on Vehicle and Mobility Innova8onMack Ins8

2、tute of Innova8on ManagementWharton SchoolUniversity of PennsylvaniaCEIBS Auto Forum“The Sustainable Development of New Energy Vehicles”Shanghai China,November 29,20231PVMI:Its Roots in IMVPThe roots of the Program on Vehicle and Mobility Innovations(PVMI)are in the International Motor Vehicle Progr

3、am(IMVP),founded in 1985 at MIT.“IMVP is an international network of faculty,Ph.D.students,and researchers delivering knowledge and insight about the global automotive industry.”“IMVP organizes international teams of researchers to do collaborative research on topics throughout the automotive value

4、chain.”PVMI is the new name and provides the new direction for the IMVP network,and Whartons Mack Institute of Innovation Management is its home.2John Paul MacDuffie,Program for Vehicle and Mobility Innovation,Wharton SchoolCEIBS Auto Forum,November 29,2023 JP MacDuffie,202323“A Once-in-a Century Tr

5、ansforma5on”4John Paul MacDuffie,Program for Vehicle and Mobility Innovation,Wharton SchoolCEIBS Auto Forum,November 29,2023 JP MacDuffie,20233 Heavy,fast-moving physical object that operates entirely in public space and is dangerous to humans and property Integral product architecture requiring a c

6、apable system integrator Society holds the system integrator responsible(regulations,legal liability)The Existential Essence of the Automobile5 Primarily integral(vs.modular)architecture Strong and persistent system integrator(SI)role for OEMs SI role bolstered by OEMs regulatory responsibility,lega

7、l liability OEMs invest to“know more than they make”via massive R&D budgets OEMs outsource much of a vehicles value to suppliers,yet retain control over product architecture and supply chainStructural Features of Auto Industry(why value didnt migrate in ICEV era)6John Paul MacDuffie,Program for Vehi

8、cle and Mobility Innovation,Wharton SchoolCEIBS Auto Forum,November 29,2023 JP MacDuffie,20234 C:“Connected car”within-vehicle network;vehicle-to-vehicle(V2V);vehicle-to-infrastructure(V2I);infotainment services A:Autonomous vehicle “driver assist”(Levels 1&2)to“primary vehicle control”(Level 3)to“f

9、ull vehicle control”(Levels 4 and 5)S:Shared-New mobility services,w/high asset utilization strategies(car-sharing/ride-hailing)that reduce vehicle ownership E:Electric vehicles(BEV,PHEV,fuel cell)and new fuel sources(electricity,hydrogen,ethanol,biodiesel)Disruptive Technologies/Business Models:Wha

10、t Impact of CASE(separately and together)?7Q:Will CASE Migrate Value from OEMs to Tech New Entrants?A:For E(BEVs)NO*NO*Tesla and BYD are OEMs8John Paul MacDuffie,Program for Vehicle and Mobility InnovaHon,Wharton SchoolCEIBS Auto Forum,November 29,2023 JP MacDuffie,20235Sponsored byWharton Lifelong

11、LearningTech and Automotive:March 2021Setting the Stage:How Much Transformation?Most easily incorporated within OEMs existing SI role and supply chain mgmt Drive train is more modular but must still be integrated with all other systems architecture stays primarily integral Hardware/software integrat

12、ion is key for energy management,but OEMs can learn this Still many barriers to customer acceptance of EVs but EVs dont threaten OEMs role or opportunity to maintain share of valueTesla has a big lead but most new EV models will be designed and manufactured by incumbent OEMsElectrification9Tesla Val

13、uations Suggest They Will Make*All*Future EVsbecause amid pressure for a faster shi2 to EVs,mul7ple OEMs will have a piece of the growing marketThe Tesla Is Not EnoughBut This Cant Possibly Be True!10John Paul MacDuffie,Program for Vehicle and Mobility Innovation,Wharton SchoolCEIBS Auto Forum,Novem

14、ber 29,2023 JP MacDuffie,20236A Partial Account of Key Players in the Transition to BEVs(est 14.5M sales in 2023)Non-auto ba*ery firm,acquires auto OEM(2003),makes ICEV(to 2022),PHEV,BEVSold 431K BEVs in Q3 of 2023Up nearly 100%YoYFast growth in Europe and LatamBYDDe novo BEV firm,first model in 200

15、8,rapid growth since Model 3 in 2018Sold 435K BEVs in Q3 of 2023Up 36%YoY,will produce 1.8M in 2023Model Y is top-selling passenger carTeslaHyundai/Kia,GM,VW,Ford all lag Tesla&BYD Sales growing yet 1/10 of Tesla volumeMany new models in 2024,producaon scale-upMoving to 2nd-generaaon plaborms,new pl

16、antsLegacy OEMsLargest EV market by far(60%global market share)SAIC,GAC,Geely/Volvo:5-7%market share eachNotable de novo startups:Nio,Lucid,XpengExports expanding rapidly amid domestic price warsRest of ChinaLargest ba*ery maker(35%global market share)Customers:Tesla China,GACs Aion,Li Auto,Geely,Ni

17、oChina-built BEVs must,by law,have Chinese ba*eriesPioneer of Lithium-Ferro-Phosphate(LFP)chemistryCATL(Contemporary Amperex Technology Co.Limited)11More modular?(Product Architecture)Produced and sourced differently?(Industry Architecture)If EVs of the Future Are Made by Multiple OEMs(incumbent and

18、 new),Will They Be:12John Paul MacDuffie,Program for Vehicle and Mobility InnovaHon,Wharton SchoolCEIBS Auto Forum,November 29,2023 JP MacDuffie,20237Sponsored byWharton Lifelong LearningTech and Automotive:March 2021Setting the Stage:How Much Transformation?A Commonly-Held Belief“Battery electric v

19、ehicles are more modular than combustion engine vehicles.”Guenther Schuh,founder of BEV start-up e.Go13Based on evidence to date,this is wrong.14John Paul MacDuffie,Program for Vehicle and Mobility Innovation,Wharton SchoolCEIBS Auto Forum,November 29,2023 JP MacDuffie,20238Murmann&Schuler(2023)Inve

20、stigated the Modularity of BEVs and ICEVs Design:Created detailed structural descriptions of the two powertrains Collected design structure matrices(DSMs)of BEVs and ICEVs at the system level Computation of propagation cost of BEVs and ICEVs as a measure of modularity Data:From 2 global automakers m

21、anufacturing both ICEVs and BEVs and 1 start-up manufacturing exclusively BEVs“Exploring the Structure and Modularity of ICEVs and BEVs”Johann Peter Murmann&Benedikt Alexander Schuler Industrial and Corporate Change,202215Ulrichs example of trailer design shows how modular and integral product archi

22、tectures differ in the extent of design dependencies“The role of product architecture in the manufacturing firm,”Karl Ulrich,Research Policy,1995One to one One to many;many to one 16John Paul MacDuffie,Program for Vehicle and Mobility Innovation,Wharton SchoolCEIBS Auto Forum,November 29,2023 JP Mac

23、Duffie,20239Experts at incumbent and startups filled out DSMs(Design Structure Matrix)StartupA modular product architecture clusters interdependencies along the diagonal.17On all measures of product architecture,ICEVs and BEVs were the same or BEVs were more integralGlobal Automakers(n=2)BEV Start-u

24、p(n=1)ICEVBEVBEVDesign Parameters282828Direct Dependencies229241328%of all DSM cells29%31%42%Symmetric dependencies164132170Propagation cost0.9310.9660.96618John Paul MacDuffie,Program for Vehicle and Mobility Innovation,Wharton SchoolCEIBS Auto Forum,November 29,2023 JP MacDuffie,202310Murmann&Schu

25、ler Conclude:Claim:“Battery electric vehicles are more modular than combustion engine vehicles.”Correct at level of drive trainFalse at entire system level The assump7on that BEVs are much simpler to design and build than ICEVs should be ques7oned.How modular is the Ao 3?19Based on evidence to date,

26、this is wrong.20John Paul MacDuffie,Program for Vehicle and Mobility InnovaHon,Wharton SchoolCEIBS Auto Forum,November 29,2023 JP MacDuffie,202311Are BEVs Manufactured Differently?(c.2021)74/76 of the observed BEVs from 19 OEMs are manufactured in mixed-model producDon within the exisDng assembly pl

27、ants of the worlds automakers.Newcomers follow a producDon process that is highly similar to that of tradiDonal automakers.21Are Components of BEVs Sourced Differently?(c.2021)None of the observed automakers make cells.But 68%of them have a“make”capability for battery packs and over 50%have design c

28、apability for the Battery Management System(software)68%of the observed automakers have a“make”capability for e-motors.“Mirroring in ProducEon?Early Evidence from the Scale-up of BEVs”Marc Alochet,John Paul MacDuffie,&Christophe MidlerIndustrial and Corporate Change,202222John Paul MacDuffie,Program

29、 for Vehicle and Mobility InnovaHon,Wharton SchoolCEIBS Auto Forum,November 29,2023 JP MacDuffie,202312Assessment of Transforma=on from BEVs(c.2021)The ways in which BEV designs differ from ICEV design did not,at first,impact how manufacturing is doneBEVs slotted readily into existing ICEV productio

30、n processesInnovations in BEV manufacturing affect body shops but less clear how they will change auto assembly;legacy manufacturing capabilities still valuableNor has the industry architecture changed substantiallyRather than a boost in outsourcing to suppliers,the trend instead is”make”or“ally to

31、make”for battery packs&e-motorsOverall,BEVs are produced with more integration(more integral design,more vertically integrated supply chains),not less.This trend continues to the present(2023).23Our View:The Future for BEVs Wont Be Like Computers and SmartphonesInstead,expect that OEMs will con5nue

32、to play a central system integrator roleBEV design and manufacturing will evolve,not suddenly transformIntegra5on in product and industry architecture will increase,for a 5meMul5ple OEMs will drive scale-up of EVs(some incumbent,some new)We see obstacles for:Designed by Mobility in Harmony(MIH),Buil

33、t by Foxconn24John Paul MacDuffie,Program for Vehicle and Mobility InnovaHon,Wharton SchoolCEIBS Auto Forum,November 29,2023 JP MacDuffie,202313Q:Will CASE Migrate Value from OEMs to Tech New Entrants?A:For CAS(Mobility Services)MAYBEMAYBE25Form of Disrup,onWhat Does the Incumbent Lose?Automotive Ex

34、ampleHow Can Incumbents Respond?(1)Substitute captures market share(classic disruption)Market shareEV and ICE are substitute powertrains.EV replaces ICE over time.OEMs convert their designs and production facilities from ICE to EV.(2)Complement drives down added value(commoditization)Margin,influenc

35、e,controlAV“brain”becomes the vehicles central component;interactions between“brain”producer and other AV component suppliers become key.Ridesharing platforms become the dominant way in which users interact with vehicles,breaking direct relationship with OEM brands.OEMs bring AV technology in house

36、through internal development and/or acquisition.OEMs develop ridesharing platforms and/or partner with existing platforms.(3)Complement enters as direct rival(adjacent entry)Market share,influence,control,bargaining power“Brain”producers(e.g.,Waymo)and/or ridesharing platform companies(e.g.,Uber)ent

37、er vehicle production(possibly using contract manufacturer).OEMs take steps to raise entry barriers.OEMs sell their operations to the new entrants.(4)Complement becomessubstitute(displacement throughvalue inversion)Market sizeRidesharing platforms allow for more efficient vehicle utilization,reducin

38、g the number vehicles required to serve the market.AV technology increases safety,eliminating the need to insure against driver error.OEMs retreat to the high-performance segment as the automotive market bifurcates into ridesharing vehicles and recreational cars.Insurance companies(initially providi

39、ng a key complement to the automobile)are the incumbents who are displaced.Adner and Lieberman predict“Disruption by Complements”26John Paul MacDuffie,Program for Vehicle and Mobility Innovation,Wharton SchoolCEIBS Auto Forum,November 29,2023 JP MacDuffie,202314“Disruption by Complements”Could Mean:

40、The new complementors may be able to capture much or most of the value in the system These complementors may be able to replace the OEMs in terms of centrality“Brain”supplierDealers?CustomerAssemblerSensor suppliersTier 1 suppliersTier 1 suppliersTier 2 suppliersTier 2 suppliersTier 2 suppliersDisru

41、ption of OEMs by Information IntegratorsRideshare companiesRegulators5G:Standards,Systems,InfrastructureDataHere the“brain supplier”(OS for AV)displaces OEMsRon Adner and Marvin Lieberman,“Disruption Through Complements.”Strategy Science,2021.272828On This Fundamental Question,We See Something Diffe

42、rent The transiaon from ICEVs to BEVs are deemed disrupave to ICEV OEMs.The morphing of a physical vehicle with digital components is considered disrupave to the automakers.How do these technological disrup3ons affect the exis3ng industrial order?28John Paul MacDuffie,Program for Vehicle and Mobilit

43、y Innovation,Wharton SchoolCEIBS Auto Forum,November 29,2023 JP MacDuffie,2023152929The transition from ICEVs to BEVsSource:The EconomistThe EV startup boom is over.Companies are now trying to avoid a bust.Source:The Automotive NewsThe reality(thus far)The#of parts has decreased for BEVs,BUT their d

44、esigns are not as modular.ProducDon remains in-house,and there is no major contract manufacturer(yet).Value has migrated among OEMs,not from OEMs.A few BEV startups succeed,many do not.?293030Enter Schumpeter Mark III:Mark I+Mark II+(BEVs)Parts/InputNew parts:baPeries and electric motorsManufacturin

45、gIntegraEve capabiliEes&scaling know-how crucialComplementsNew complement:charging infrastructureIncumbents developing new capabilitiesPartnerships with rivalsLeverage patent portfoliosIncrease R&D spendingPush for in-house modular designDevelop parts to share risksManufacture in-house for productiv

46、ity&scalingInvest in new entrantsInvest from scratchDevelop/access charging infrastructureNew entrantsBattery suppliers&assemblersNEW BEV-only OEMsOpen/modular consortium(MiH)Charging stations30John Paul MacDuffie,Program for Vehicle and Mobility Innovation,Wharton SchoolCEIBS Auto Forum,November 29

47、,2023 JP MacDuffie,2023163131BEVsIncumbent OEMAdjacent entryInvestment in capabilitiesPartnerships w/rivalsValue chain updatesFordExtensive patent porLolioTesla(charging)VW,GMCATL,LG Energy Solution,SK OnGM$6.6billion in EV technologyHonda,GMCharging network allianceLG Energy Solution,Samsung SDIBMW

48、Investment in AMPECO,ONEMB,ToyotaCharging network allianceAESC,EVE,NorthvoltHyundai/Kia$16billion in electrification,patent portfolioCharging network allianceCATL,Samsung SDI,SK On TeslaAutomaWon of MFGFord(charging)FoxconnContract MFG diversificationAcquisition of LordstownfactoryMobility in Harmon

49、y(MIH)BYDForward integrationAcquisition of small OEMs in ChinaIn BEV,Mark III characterizes both incumbents and new entrants313232The rise of Phygital:Connected,Autonomous,and Shared(CAS)Big Techs Next Monopoly Game:Building the Car of the FutureSource:PoliticoGM thinks it can wean you off Apple Car

50、Play and Android AutoSource:The VergeSource:McKinseyEvidence that Uber,Lyft reduce car ownershipSource:University of MichiganDespite Ride-Sharing,People Are Still Buying CarsSource:The StreetThe reality(thus far)OEMs and Big Tech fight over the control and ownership of data from connected vehicles.T

51、here is very limited adoption of autonomous vehicles.Shared vehicle firms(ride-hailing and P2P)have had limited impact on legacy OEMS.Complementors havent disrupted the industry architecture of the auto sector yet!32John Paul MacDuffie,Program for Vehicle and Mobility Innovation,Wharton SchoolCEIBS

52、Auto Forum,November 29,2023 JP MacDuffie,2023173333CAS technologiesIncumbent OEMAdjacent entryAcquire/learn new capabilitiesPartnerships w/other participantsFordCavnue,Google,Lyft,PhantomAIGMCruise,Microsoft,Turo,Lyft,WejoBMWMyTaxi(FreeNow),May Mobility Mercedes-BenzHyundai/KiaGrab,Ola,ApWv,Supernal

53、,$13 billion in sowareAlphabetConnected&Autonomous technologies(CarPlay,Android Automotive,Echo Auto)Waymo,Latent LogicAmazonRivian,Aurora Innovation,ZooxAppleiCarAlso for CAS:Mark III fits what incumbents and tech entrants do33 Tech companies wont want to learn to build vehicles Auto OEMs will neve

54、r be that good at digital services nor at monetizing data Component innovators(suppliers)will need OEMs as system integrators Digital innovators will need help with precise control of“fast-moving heavy objects operating in public space”Out of many attempted partnerships,a few stable coalitions will

55、emerge The winning coalitions will succeed not just in meeting customer needs/wants but also societal goals and expectationsNot“Autos vs.Tech”But“Autos+Tech”October 3,201834John Paul MacDuffie,Program for Vehicle and Mobility Innovation,Wharton SchoolCEIBS Auto Forum,November 29,2023 JP MacDuffie,20

56、23183535ConclusionThe product and industry architecture for the vehicles remains relatively integrated.Disruption is partial at best,and disruptors are tightly interwoven with(and invested in by)incumbents,i.e.,Mark III approach to innovationAs digitization proceeds,sectoral boundaries increasingly overlap and intersect,requiring us to look not only at the level of an industry but an interrelated set of sectors.Regulations will be all the more important given that competition and cooperation are taking place among powerful incumbents and successful new entrants in adjacent sectors.3536