We see that rising to about 40 in an autonomous car

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Nature of Mathematics
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Chapter 1 / Exercise 23
Nature of Mathematics
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software. We see that rising to about 40% in an autonomous car environment. Content : We see the emergence of in-house OEM and third party-created content for use in autonomous vehicles, including for entertainment, productivity, and functionality. This content could come in the form of audio, video, or apps, or in other forms. Today, very little value of the car to the customer comes from the media content—we see that increasing to about 20% in an autonomous car environment. Exhibit 59 Value of the Car – Today vs. Tomorrow Today Tomorrow Software 10% Hardware 90% Content 20% Software 40% Hardware 40% Source: Morgan Stanley Research
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Nature of Mathematics
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Chapter 1 / Exercise 23
Nature of Mathematics
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M O R G A N S T A N L E Y R E S E A R C H 69 November 6, 2013 Autonomous Vehicles: Self-Driving the New Auto Industry Paradigm The traditional OEM-supplier auto industry business model is also likely to change, with some companies trying to specialize in each of the three functions we describe, and with others trying to vertically integrate across the spectrum. This is likely to mirror the PC/smartphone industry, with hardware specialists, software specialists, and integrated experience creators. The “hardware” business model We believe the current auto industry structure can remain largely in place with OEMs and suppliers making great cars. Even if cars were to drive themselves–or perhaps even more so because of it–cars will have to remain safe, comfortable, quick, connected, quiet, and stylish. The OEMs will continue to be the most influential players in the industry through their design, assembly, distribution, marketing and service capabilities. The suppliers can continue to add value and build sustainable business models by focusing on the growth areas of fuel efficiency, safety, emissions, and interior content. However, the gap between the secular and cyclical suppliers could widen. With the value of the automotive hardware declining as part of the overall value provided by the autonomous car, only the most critical hardware components within the car can continue to command pricing power. The “metal-benders” and “widget makers,” who are already facing significant challenges within the industry, will particularly suffer if the value of the hardware as a whole declines. The stability of the hardware business model, however, does not mean that there will not be major changes. As cars evolve from what they are today to fully autonomous vehicles in our utopian scenario, we envision several changes in the form and function of the various parts of the car, as we highlight in Part 1. Suppliers who make components that serve little to no function in an autonomous car will be particularly at risk. The “software” business model The average car today contains a reasonable amount of software—about 5-10 million lines of code. The software in a car today typically regulates independent functions of a car, including drive-by-wire, traction management, active safety and infotainment. However, these systems act largely as independent silos today, with only a few “handshakes” or exchanges between components. The autonomous car of the

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