Report By the Board of Directors

Automotive Business Segment

In the Automotive Business Segment, EB offers a range of software products and R&D services for in-car embedded software, as well as professional tools that support the whole process of the in-car software development. Our customers are carmakers, car electronics suppliers and other suppliers to the automotive industry. The offering includes secure & safe technologies and solutions for Connected Car Infrastructure, Driver Assistance and Infotainment solutions containing navigation and human machine interfaces (HMI) technologies. By combining its software products and R&D services, EB is creating unique, customized solutions for the automotive industry. EBīs software products are: EB street director navigation software, EB GUIDE HMI development and speech dialogue platform, EB tresos product line of software components used in ECUs and tools for their configuration, and EB Assist, an extensive product line with tooling and a software development kit for driver assistance solutions. These software products generate license fees, often combined with supply of R&D services for customized solutions.

EB and AUDIīs subsidiary, Audi Electronics Venture GmbH (AEV), have a jointly owned company GmbH that is currently developing infotainment software and provides systems engineering and systems integration services for Volkswagen Group car models. EB also delivers products and R&D services to the joint venture. EB owns 51% and AEV 49% of GmbH. GmbH is consolidated in EB groupīs financial statements by applying proportionate consolidation method.

Development of the Automotive Business Segment in 2014

Net sales of the Automotive Business Segment in January-December 2014 grew to EUR 171.4 million (EUR 138.3 million, in 2013), representing 24.0 per cent growth year-on-year. Operating profit improved clearly from the previous year and was EUR 16.0 million (EUR 8.5 million, in 2013). The demand for EBīs software products and R&D services remained good, including the jointly owned company GmbH. The improvement of the operating profit was driven mainly by the net sales growth of R&D services and good performance in services projects, the growth of software license sales and the lower R&D investments.

During the first quarter EB and Universite de Sherbrooke in Quebec (Canada) presented urban concept vehicle (Vehicle Urbain Electrique (VUE)) with autonomous driving technology at 2014 International CES in Las Vegas in January. EB also announced to have developed breakthrough technology to help car makers test complex driver assistance systems. EB Assist Car Data Recorder is a measurement tool that allows product development engineers to record and visualize data during test drives using a common tablet computer without complicated cable installations, monitors or keyboards.

In June EB introduced new functions for its EB Assist Electronic Horizon Solution, offering more flexibility for carmakers and suppliers for implementing predictive driver assistance systems. The new version enables them to use digital map information across car lines and model configurations, without the need for having an active navigation system.

As recognition to EBīs long-standing expertise in the development of driver assistance software solutions that provide maximum safety, quality and performance, EB received Best Telematics Safety and Security Award for driver assistance software solutions developed with Daimler for Daimler, during the Telematics Detroit 2014 conference and exhibition (June 4-5) in the Detroit suburb of Novi, Michigan.

In August EB announced its plans to build a new automotive software development site in Oulu, Finland. The new site employed 21 software engineers in the end of 2014, focusing on the development of embedded automotive software. EBīs Automotive Business Segment has grown steadily during the last years, and expanding its operations to Oulu, Finland, will offer the company an opportunity to further grow its software engineering capacity for current and future needs.

In October EB presented its new operating system EB tresos Safety OS Multi-Core for automotive ECUs (electronic control units). Car makers need multi-core architectures for safety functions to create state-of-the-art automotive systems that satisfy their customersī needs. EB and Nuance unveiled the integration of voice and natural language understanding (NLU) technology as part of the Virtual Cockpit in the new Audi TT Roadster. As a result, drivers are able to engage in a more natural, conversational dialogue with AUDIīs infotainment and navigation capabilities.

Automotive Business Segment Market Outlook

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 marketī 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. The demand for EBīs products and services is estimated to develop positively year-on-year during 2015 in the Automotive Business Segment.

The market for electronics and software for cars is estimated to continue growing in the long term. The study “Future Industry Structure of Automotive (FAST) Electronics 2025ī from Berylls assumes a growth of automotive electronics from EUR 215 billion in 2012 to 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 majority of in-vehicle innovations come from electronics and software. Using software as a differentiator carmakers are able to develop feature-rich vehicles and differentiate in the areas of comfort, safety and security, information and entertainment, powertrain and communication. The trend of separating hardware from software continues in 2015 and beyond, allowing carmakers to speed up innovation and to improve the quality and cost efficiency of their vehicles. As a software provider, this direction gives EB an opportunity to work directly with the major carmakers, providing them with software development services, products and tools according to their individual requirements. EB also offers software integration services to integrate software applications and modules from various suppliers.
  • Carmakers continue to work on global modular car platforms to achieve scalability as well as good ability to handle the complexity of a growing number of car models and variants. This means volumes for software platforms will increase and software development programs will become global and include localization for all regions.
  • The Increasing complexity of car electronics and software is resulting in increasing efforts to provide safety-compliant systems., EBīs jointly owned company with AUDI, is developing high-end infotainment software solutions for the Volkswagen Group companies. During 2015, development of software will continue and deliveries from are planned for several new car models of Volkswagen Group.
  • 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 all car price categories. This is expected to create continuing demand for development of infotainment software and software development tools, such as EB GUIDE.
  • 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. Gartner estimates that by 2016, the majority of car buyers in the automotive markets, such as in the U.S. and the Western Europe, will view the availability of in-vehicle, web-enabled dynamic content as a key buying criterion when considering a standard brand car.
  • Connected Car solutions and cloud connections enable the introduction of new applications and enhancements to car functions, for example real-time traffic information or map updates for navigation. The increasing demand to better integrate mobile devices with the car has been reflected in the announcements by consumer electronics companies, such as Appleīs “CarPlayī or Googleīs Open Automotive Alliance. These drivers are creating demand for software integration services
  • New Active Safety Systems and Driver Assistance applications are being brought to the market, as automated driving is one of the key trends and an area with significant investments. Carmakers are preparing highly automated driving systems for their new car models to be available in the market in the coming years.