2014 ET Executive Summary

2014 U.S. Automotive

Emerging Technologies Study SM

EXECUTIVE SUMMARY

April 2014

Global Automotive Division

About the 2014 U.S. Automotive Emerging Technologies Study

The J.D. Power 2014 U.S. Automotive Emerging Technologies Study SM is designed to help OEMs and suppliers identify the features which most interest vehicle owners and how consumer-facing prices affect that level of interest. More specifically, J.D. Power examines pre-price and post-price purchase interest in features related to infotainment, convenience, safety, and fuel efficiency.

In contrast to the 2013 study, which categorized features into Primary and Secondary groups, the 2014 study places features into 13 separate categories to promote understanding of how consumer interest shifts or remains steady across these categories. The categories are:

?Collision Protection

?Comfort

?Connectivity

?Convenience

?Driver Monitoring

?Driving Assistance

?Energy Collection

?Engine Fuel Efficiencies

?Navigation

?Safety Service

?Usability

?Vehicle Aerodynamics

?Visibility Enhancements

Note: A list of individual features by category can be found in the Background section of the study.

Additionally, all vehicle owners complete a market basket exercise—Non-Premium vehicle owners are given a hypothetical budget of $3,500 to spend, and Premium owners are given a hypothetical budget of $7,000. The features chosen during this first exercise are considered the Market Basket—Initial Features Section. After the Initial Features Section is completed, respondents are asked to complete the exercise a second time, with a higher hypothetical budget. To establish that budget, the amount spent in the Initial Features Section on traditional optional features—such as leather seats, sunroof/moonroof, and aluminum wheels—is added to the $3,500 for Non-Premium vehicle owners or to the $7,000 for Premium owners. This second exercise is called the Market Basket—Secondary Features Section.

Study Findings

The 2014 study includes the following findings:

?Surround View / Rear-Vision Camera System and Active Shutter Grille Vents have the highest overall market price purchase intention (72% at $550 and 69% at

$150, respectively).

?Device/Application Link has the highest market price purchase intention among owners with smartphones (79% at $250).

?Laser Headlights and Hand Gesture Controlled Cockpit have the lowest overall market price purchase intention (19% at $2,200 and 15% at $1,000, respectively).

?Before price is introduced, more vehicle owners say they “definitely/probably would” purchase a Wireless Connectivity System (83%) than say the same about

any other feature.

?Before price is introduced, more men than women say they “definitely/probably would” purchase each of the features in this year’s study, with the exception of

Solar Glass Roof, about which the same proportion of both men and women say the same.

?Owners of Premium vehicles are more likely to say they “definitely would” purchase each of the features in the 2014 study than owners of Non-Premium vehicles. Additional study findings show that when vehicle owners are provided a hypothetical budget with which to purchase features in a market basket scenario:

?Premium vehicle owners tend to select more traditional features—those that they are aware of and know how to use—than emerging technologies. The features most often chosen by Premium owners are:

o Leather Seats

o Advanced Keyless Entry

o Factory Installed Navigation System

o Sunroof/Moonroof

o Heated/Cooled Front Seats

o Rain-Sensing Wipers

o Back-Up Assist

o Blind Spot Detection and Prevention System

o Surround-View Camera System

o Branded Premium Sound System

o Fuel Economy Indicator

o Wireless Charging Station

o Wireless Connectivity System

o Personalized Driver Settings

o Smartphone Remote Control

?Non-Premium vehicle owners also select more traditional features than emerging technologies. The most-frequently chosen features by Non-Premium owners are:

o Fuel Economy Indicator

o Advanced Keyless Entry

o Back-Up Assist

o Wireless Charging Station

o Heated/Cooled Front Seats

o Sunroof/Moonroof

o Heated Front Seats

o Factory Installed Navigation System

o Predictive Maintenance

o Leather Seats

o Rain-Sensing Wipers

o Wireless Connectivity System

o Blind Spot Detection and Prevention System

o Smartphone Remote Control

o Surround-View Camera System

?Biometrics, Eye Tracking Controls, and Hand Gesture Controlled Cockpit are the three least-frequently chosen features among both Premium and Non-Premium vehicle owners.

? A higher percentage of Non-Premium vehicle owners than Premium owners indicate they would prefer not to spend any of the allotted money (9% vs. 5%, respectively). Note: Features that are highlighted in bold are those that are measured in the 2014 study. Non-highlighted features are those that are included only in the market

basket exercise.

Purchase Intent for Emerging Technologies—Market Price

Purchase intent, or interest, at multiple price points is examined for all features in the 2014

study, including a variety of technologies related to infotainment, convenience, safety, and

fuel efficiency.

Vehicle owners were asked about their general purchase interest in each feature prior to

being presented with a price. After gauging pre-price purchase interest, owners were presented with one of three price points and were asked once again about their level of

interest in purchasing the technology. This section focuses on market (or mid-price) interest only. Pre-price interest is examined in a separate section of this study.

Based on market price interest, the Vehicle Aerodynamics and Convenience categories have

more features included among the top 10 than the other categories. Owners are interested in improving Vehicle Aerodynamics, which can equate to higher gas mileage and thus help reduce the costs of vehicle ownership. Notably, the Cylinder Deactivation feature, from the Engine Fuel Efficiencies category, is among the top 10 features. Owners also show great interest in leveraging their smartphones while driving a vehicle, as evidenced by the inclusion of Device/Application Link, Wireless Charging Station and Smartphone Navigation Vehicle Interface among the top 10.

Figure 1: Top 10 Features – Market Price Convenience and Vehicle Aerodynamics are among the top feature categories included in the 2014 U.S. Automotive Emerging Technologies Study.

Among the bottom 10 features based on market price interest are those with which owners are less familiar; therefore, owners are also less likely to understand the benefits of these features. The bottom 10 features are also among the most expensive. Usability features are prevalent in the bottom 10, with considerably low purchase intent for such features as Hand Gesture Controlled Cockpit , Tactile Touch Screen , and Eye Tracking Controls .

Figure 2: Bottom 10 Features – Market Price

Purchase Intent for Emerging Technologies —Categories

As illustrated in the previous section, features from the Convenience and Vehicle Aerodynamics categories are among the top features when considering market price

interest. Analysis of individual features shows that the range of variability in interest within each category is greater among emerging technologies that have lower purchase intent. Within the Usability category, 57% of vehi cle owners say they “definitely w ould ” or

“probably w ould ” purchase Smartphone Voice Integration on their next vehicle, while 15% indicate they would purchase Hand Gesture Controlled Cockpit —a 42 percentage point gap. Among the top three categories, the largest gap in purchase intent is in Collision Protection, in which there is a 21-percentage-point difference between Low-Speed Collision Avoidance System (62%) and Smart Intersection (41%).

Variability in

interest of specific features within each category is greater for features with lower purchase intent.

In assessing the individual feature interests within their respective technology groupings, the categories comprised of features that collectively place higher in interest are from Convenience, Vehicle Aerodynamics, and Collision Protection, while the categories that collectively span lower in interest are from Usability, Driving Assistance, and Energy Collection. However, the Usability features Smartphone Voice Integration and Natural Language Voice-Activation place individually in the top half of overall feature interest.

Despite consumer interest in fuel-saving technologies, vehicle owners generally do not show as much interest in Energy Collection features, largely because of the price associated with them—29% for Solar Glass Roof($2,000)and 22% for Energy Recovery Suspension ($2,200). Less costly fuel-saving technologies, such as those in the Vehicle Aerodynamics category, are of greater interest to vehicle owners as they provide additional fuel efficiency at a much lower price point ($150-$200).

The five features in the Driving Assistance category also have lower interest, falling between 35% for Fully Autonomous Parking System ($400)and 23% for Speed Limit Assist System ($800).Like features in Energy Collection, those in Driving Assistance are also toward the lower end of interest.

In the middle area of purchase intent, more variability is evident. The Usability category has the most variation in interest and consists of seven features, while Collision Protection has the next-most-variability and consists of four features. Vehicle owners show some interest in these categories of technologies, but are being selective about those on which they would be willing to spend money.

Figure 3: Market Price Feature Interest—Top Three and Bottom Three Categories

Smartphone Integration

During the past 8 years, smartphone use has increased to 70% in 2014 from 16% in 2007, an increase of 54 percentage points. As smartphone penetration continues to increase, the

integration of phone and vehicle options becomes increasingly important to vehicle owners. Two ways of integrating smartphones into vehicles are through Device/Application Link and Wireless Connectivity Systems .

Figure 4: Device Ownership

A Device/Application Link replicates the display of a device connected to the vehicle via Wi-Fi, Bluetooth ?, or a USB. This feature makes it possible to view and control devices and/or applications through the factory-installed equipment on a vehicle. At a midpoint price of $250, 79% of smartphone owners say they “definitely /probably would ” purchase a Device/Application Link feature, which has the highest purchase intent of owners among all the features measured in the 2014 study. Slightly more than three-fourths (77%) of

vehicle owners say they “definitely w ould ” or “probably w ould ” purchase this feature at both the low and high price points ($200 and $300, respectively), indicating that consumer interest in this feature is not price sensitive. Furthermore, 23% of vehicle owners indicate this feature should be standard on the next vehicle they purchase, while 15% indicate they currently have it on their vehicle.

Smartphone use has increased to 70% in 2014 from 16% in 2007.

Device/Application Link has the highest rate of purchase intent.

A Wireless Connectivity System is an in-vehicle system that creates a wireless

communication link between a device and the vehicle, regardless of the device’s brand or manufacturer. More than 50% of vehicle owners say they “definitely w ould ” or “probably would ” purchase a Wireless Connectivity System at a midpoint price of $300. Unlike the Device/Application Link feature, the Wireless Connectivity System has a 23 percentage point difference between the high and low price points (45% at $400 vs. 68% at $200, respectively). Three-in-five (60%) vehicle owners indicate that a Wireless Connectivity System should be standard equipment in the next vehicle they purchase, and when given the choice, three in four prefer a Wireless Connectivity System over Device/Application Link .

Figure 5 shows the top 10 tasks vehicle owners want to perform in their vehicle vs. those they can currently perform —all of which are related to connectivity. The tasks with the greatest disparity between want and currently have are checking traffic; having text

displayed via in-vehicle screen; having emails read audibly through vehicle sound system; and getting directions (i.e., mobile navigation). This reflects the need for greater smartphone integration within vehicles through either the Device/Application Link or Wireless Connectivity System .

Figure 5: Want to Perform in Vehicle vs. Currently Perform in Vehicle

Not surprisingly, owners who send a substantial number of daily text messages are more likely to purchase connectivity features than those who send few text messages daily. On average, 37% of vehicle owners in this year’s study send 11 or more text messages per day. These higher text usage owners not only have a desire to use connectivity features, but are

More than one-half (60%) of vehicle owners indicate that a Wireless Connectivity

System should be standard

equipment on the next vehicle they purchase.

smartphones into vehicles for navigation and voice are both about 40 percentage points more likely to be purchased by owners who send at least 20 text messages per day than owners who do not text at all. Targeting and enabling owners who currently engage in connectivity such as texting can increase revenue for manufacturers.

Figure 6: Feature Purchase by Number of Text Messages Sent Daily

Autonomous Driving

Autonomous Driving Mode equips vehicles with sensors and cameras so it no longer needs to be controlled by a human. This technology enables a vehicle to sense its own environment and navigate to a selected destination, all without any human intervention. More than four in 10 (42%) vehicle owners indicate they would be interested in purchasing Autonomous

Driving Mode before price is introduced. At a price point of $3,000, purchase intent drops to 24%, a decline of 18 percentage points, which is still higher than the 21% in 2013.

During the past 3 years, market price feature interest has increased across all autonomous driving features, most notably for Emergency Braking and Steering System (9 percentage points) and Low-Speed Collision Avoidance System (7 percentage points). Consumers, especially those who own Premium vehicles, have become more aware of these technologies and recognize the benefits that autonomous and semi-autonomous driving modes can provide.

Before price is introduced, 42% of respondents indicate they would be interested in purchasing Autonomous Driving Mode .

Figure 7: Market Price Feature Interest

Among vehicle owners, interest in such semi-autonomous features as Low-Speed Collision Avoidance System , Emergency Braking and Steering System , Fully Autonomous Parking System , and Traffic Jam Assist is higher than interest in Autonomous Driving Mode . Certainly, the large price difference between Autonomous Driving Mode ($3,000) and the lower costs of the various semi-autonomous features contributes to the difference in interest. However, as consumers are becoming aware of semi-autonomous features or even experiencing firsthand their benefits, these driver-assist features are gaining consumer trust. This, too, contributes to the growing interest across all of these features.

The 2014 study includes a segmentation analysis that uses psychographic and behavioral questions from the study survey, as well as such demographics as age, gender, marital status, number of children in the household, education, and miles driven. The primary goal of the segmentation analysis is to identify groups, or clusters, of individuals who share similar attitudes, while being maximally different from other groups. The analysis has categorized respondents into six different consumer segments: Socially Active Tech-Enthusiast Families; Socially Active Practical Families; Penny-Wise Tech Enthusiasts; Practical Traditionalists; Luxury Unconnected Traditionalists; and Luxury Tech Enthusiasts. A description of each segment is in the Background section of the study.

Semi-autonomous features are

helping to increase awareness and trust in

Autonomous Driving Mode

Figure 8 outlines the level of interest in the autonomous and semi-autonomous driving features across each segment.

Figure 8: Autonomous and Semi-Autonomous Driving Feature Purchase Interest by Consumer Segmentation

Socially Active Tech-Enthusiast Families Socially

Active

Practical

Families

Penny-

Wise Tech

Enthusiasts

Practical

Traditionalists

Luxury

Unconnected

Traditionalists

Luxury

Tech

Enthusiasts

Autonomous Driving Mode ($3,000) 67% 35% 19% 10% 9% 18% Emergency Braking and Steering

System ($800)

76% 47% 51% 30% 37% 54% Enhanced Adaptive Cruise Control

($900)

72% 46% 27% 12% 18% 36% Fully Autonomous Parking System

($400)

76% 42% 39% 17% 15% 34% Low-Speed Collision Avoidance

System ($250)

80% 57% 66% 46% 53% 72% Traffic Jam Assist ($800) 75% 44% 31% 11% 17% 26% Speed Limit Assist ($800) 72% 35% 22% 7% 8% 14%

Socially Active Tech-Enthusiast Families are, across the board, more interested in

autonomous and semi-autonomous features, compared to the other consumer segments. The

feature with the most interest across all segments is Low-Speed Collision Avoidance

System.Speed Limit Assist has the lowest (in a tie for lowest) interest among all but one

consumer segment—Socially Active Tech-Enthusiast Families, which is least interested in

Autonomous Driving Mode. As familiarity with driver assist technologies increases and

their use becomes more widespread, semi-autonomous applications will likely become a

gateway to acceptance of the fully autonomous vehicle.

Pre-Price Feature Interest

Pre-price and post-price purchase intent for selected features was measured in the 2014 study. Due to the length of the survey, pre-price interest was not measured for all features. Figure 9 shows the features that were measured for pre-price interest. Figure 9: Pre-Price Feature Interest

Market Price Feature Interest

Figure 10 lists purchase intent at the mid or market price for all features in the 2014 study.

Figure 10: Market Price Feature Interest

Market Basket Exercise Chart Figure 11: Non-Premium Market Basket Exercise

Market Basket Exercise Chart (continued) Figure 12: Premium Market Basket Exercise

Contributors

Steven George—Research Specialist, Global Research Operations

Allison LaDuc—Research Director, Global Research Operations

Rob Preston—Manager, Global Automotive

Michael VanNieuwkuyk—Executive Director, Global Automotive

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