Jukka Harju, CEO

Strategic guidelines of the Automotive Business Segment

The Board of Directors of Elektrobit Corporation has on February 18, 2015 updated the strategic guidelines of the Automotive Business Segment based on recent market trends and business plans of the Company.

The software market for passenger vehicles is expected to continue growing and to provide EB an attractive long term growth potential. The global car market is expected to grow in 2015 between 2% according to the forecast made by VDA (Verband der Automobilindustrie) and 4% according to the study “The global automotive market“ by Euler Hermes. The outlook for global passenger car demand is more mixed than at the corresponding time a year ago, particularly in view of the sharp fall in the price of oil and varying economic development in different regions. However the carmakers continue to invest in automotive software for new car models and the market for software products and services is estimated to continue growing during 2015. Based on Beryll“s “Future Structure of Automotive (FAST) Electronics 2025“ study, electronics for automotive industry are expected to grow from EUR 215 billion in 2012 into EUR 456 billion in 2025 (CAGR 6%).

Growth in the automotive software market in 2015 and beyond, and growth for EB, is expected to be driven mainly by the following factors:

  • The majority of in-vehicle innovations come from electronics and software.
  • Carmakers continue to develop modular car platforms for global markets to achieve scalability as well as good ability to handle the complexity of a growing number of car models and variants.
  • Consumers expect in the car the same richness of features and user experience they know from the Internet and mobile devices, and therefore infotainment systems become increasingly common in cars of all price categories.
  • Mobile connectivity will become one of the fastest-growing Internet-connected device platforms among other connected consumer electronics devices, such as media tablets and smartphones.
  • Connected Car solutions and cloud connections enable introduction of new applications and enhancements to car functions, for example real-time traffic information or map updates for navigation. e.solutions GmbH, a company jointly owned by EB and AUDI, is developing high-end infotainment software solutions for various car models of the Volkswagen group companies. The software solutions developed by e.solutions will be used in several new car models.
  • Autonomous driving is becoming one of the key trends and an important area for new investments, which will drive development of new safety solutions such as Active Safety and Driver Assistance, in compliance with the functional safety requirements of the automotive industry.
  • Increasing complexity of electronics and software will create more demand on developing software which fulfils the relevant data security requirements.

The markets are evolving from in-car software products and their development tools to solutions, which provide connectivity to outside information systems and services. Connected Car applications enable e.g. the development of increasingly autonomous driving solutions and new value added services to car owners and to companies active in the automotive industry.

In the Automotive Business Segment, EB focuses on in-car software and aims at expanding its service offering to connected car solutions and new service applications emerging from the increasing connectivity. In addition to research and development services and software products, EB provides customized solutions based on product platforms and know-how in latest technologies and systems integration. Autonomous driving solutions are an example of a new area that EB will emphasize in the future by bringing new technologies and product solutions to the market. EB also develops products and customized solutions together with business partners who offer complementary solutions. Co-operation is also being built-up with the EB“s Wireless Business Segment especially in Connected Car applications, and the build-up of co-operation would continue also with Bittium if the demerger is implemented.

EB“s key customers are leading car manufacturers and car electronics suppliers. EB targets to expand its customer base also to companies that focus on software based services. EB will also continue to make selected R&D investments into its own products and product platforms. In the coming years, EB aims to gradually develop its business model increasingly towards software products and connectivity-related services, which will slightly increase the direct dependency of net sales to car production volumes. The share of customized product development services of net sales will continue to stay significant, as in-car software is typically tailored to the needs of each carmaker and car model. In 2014, the net sales of software products and licenses linked to car production volumes and other software license sales (volume based turnover) amounted to approximately 25% of the segment“s total net sales. In some of the Company“s development projects, customer specific development costs cannot be fully invoiced during the development phase, but will be included in the license fees to be invoiced based on the actual car delivery volumes. EB is developing partnerships and will explore M&A opportunities that would strengthen its competitiveness and create new future market opportunities.