Disruptive trends that will transform the auto industry
Technology-driven trends will revolutionize how
industry players respond to changing consumer behavior, develop partnerships,
and drive transformational change.
Today’s economies are dramatically changing,
triggered by development in emerging markets, the accelerated rise of new
technologies, sustainability policies, and changing consumer preferences around
ownership. Digitization, increasing automation, and new business models have
revolutionized other industries, and automotive will be no exception. These
forces are giving rise to four disruptive technology-driven trends in the
automotive sector: diverse mobility, autonomous driving, electrification, and
connectivity.
Most industry
players and experts agree that the four trends will reinforce and accelerate
one another, and that the automotive industry is ripe for disruption. Given the
widespread understanding that game-changing disruption is already on the
horizon, there is still no integrated perspective on how the industry will look
in 10 to 15 years as a result of these trends. To that end, our eight key
perspectives on the “2030 automotive revolution” are aimed at providing
scenarios concerning what kind of changes are coming and how they will affect
traditional vehicle manufacturers and suppliers, potential new players,
regulators, consumers, markets, and the automotive value chain.
This study aims
to make the imminent changes more tangible. The forecasts should thus be
interpreted as a projection of the most probable assumptions across all four
trends, based on our current understanding. They are certainly not
deterministic in nature but should help industry players better prepare for the
uncertainty by discussing potential future states.
1. Driven by shared mobility, connectivity
services, and feature upgrades, new business models could expand automotive
revenue pools by about 30 percent, adding up to $1.5 trillion.
The automotive
revenue pool will significantly increase and diversify toward on-demand
mobility services and data-driven services. This could create up to $1.5
trillion—or 30 percent more—in additional revenue potential in 2030, compared
with about $5.2 trillion from traditional car sales and aftermarket products/services,
up by 50 percent from about $3.5 trillion in 2015.
Connectivity, and later autonomous technology, will increasingly
allow the car to become a platform for drivers and passengers to use their time
in transit to consume novel forms of media and services or dedicate the
freed-up time to other personal activities. The increasing speed of innovation,
especially in software-based systems, will require cars to be upgradable. As
shared mobility solutions with shorter life cycles will become more common,
consumers will be constantly aware of technological advances, which will
further increase demand for upgradability in privately used cars as well.
2. Despite a shift toward shared mobility,
vehicle unit sales will continue to grow, but likely at a lower rate of about 2
percent per year.
Overall global
car sales will continue to grow, but the annual growth rate is expected to drop
from the 3.6 percent over the last five years to around 2 percent by 2030. This
drop will be largely driven by macroeconomic factors and the rise of new
mobility services such as car sharing and e-hailing.
A detailed
analysis suggests that dense areas with a large, established vehicle base are
fertile ground for these new mobility services, and many cities and suburbs of
Europe and North America fit this profile. New mobility services may result in
a decline of private-vehicle sales, but this decline is likely to be offset by
increased sales in shared vehicles that need to be replaced more often due to
higher utilization and related wear and tear.
The remaining
driver of growth in global car sales is the overall positive macroeconomic
development, including the rise of the global consumer middle class. With
established markets slowing in growth, however, growth will continue to rely on
emerging economies, particularly China, while product-mix differences will
explain different development of revenues.
3. Consumer mobility behavior is changing,
leading to up to one out of ten cars sold in 2030 potentially being a shared
vehicle and the subsequent rise of a market for fit-for-purpose mobility
solutions.
Changing
consumer preferences, tightening regulation, and technological breakthroughs
add up to a fundamental shift in individual mobility behavior. Individuals
increasingly use multiple modes of transportation to complete their journey;
goods and services are delivered to rather than fetched by consumers. As a
result, the traditional business model of car sales will be complemented by a
range of diverse, on-demand mobility solutions, especially in dense urban
environments that proactively discourage private-car use.
Consumers today
use their cars as all-purpose vehicles, whether they are commuting alone to
work or taking the whole family to the beach. In the future, they may want the
flexibility to choose the best solution for a specific purpose, on demand and
via their smartphones. We already see early signs that the importance of
private-car ownership is declining: in the United States, for example, the
share of young people (16 to 24 years) who hold a driver’s license dropped from
76 percent in 2000 to 71 percent in 2013, while there has been over 30 percent
annual growth in car-sharing members in North America and Germany over the last
five years.
Consumers’ new
habit of using tailored solutions for each purpose will lead to new segments of
specialized vehicles designed for very specific needs. For example, the market
for a car specifically built for e-hailing services—that is, a car designed for
high utilization, robustness, additional mileage, and passenger comfort—would
already be millions of units today, and this is just the beginning.
As a result of
this shift to diverse mobility solutions, up to one out of ten new cars sold in
2030 may likely be a shared vehicle, which could reduce sales of private-use
vehicles. This would mean that more than 30 percent of miles driven in new cars
sold could be from shared mobility. On this trajectory, one out of three new
cars sold could potentially be a shared vehicle as soon as 2050.
4. City type will replace country or region as
the most relevant segmentation dimension that determines mobility behavior and,
thus, the speed and scope of the automotive revolution.
Understanding
where future business opportunities lie requires a more granular view of
mobility markets than ever before. Specifically, it is necessary to segment
these markets by city types based primarily on their population density,
economic development, and prosperity. Across those segments, consumer
preferences, policy and regulation, and the availability and price of new
business models will strongly diverge. In megacities such as London, for
example, car ownership is already becoming a burden for many, due to congestion
fees, a lack of parking, traffic jams, et cetera. By contrast, in rural areas
such as the state of Iowa in the United States, private-car usage will remain
the preferred means of transport by far.
The type of
city will thus become the key indicator for mobility behavior, replacing the
traditional regional perspective on the mobility market. By 2030, the car
market in New York will likely have much more in common with the market in
Shanghai than with that of Kansas.
5. Once technological and regulatory issues have
been resolved, up to 15 percent of new cars sold in 2030 could be fully
autonomous.
Fully
autonomous vehicles are unlikely to be commercially available before 2020.
Meanwhile, advanced driver-assistance systems (ADAS) will play a crucial role
in preparing regulators, consumers, and corporations for the medium-term
reality of cars taking over control from drivers.
The market
introduction of ADAS has shown that the primary challenges impeding faster
market penetration are pricing, consumer understanding, and safety/security
issues. Regarding technological readiness, tech players and start-ups will
likely also play an important role in the development of autonomous vehicles.
Regulation and consumer acceptance may represent additional hurdles for
autonomous vehicles. However, once these challenges are addressed, autonomous
vehicles will offer tremendous value for consumers (for example, the ability to
work while commuting, or the convenience of using social media or watching
movies while traveling).
A progressive
scenario would see fully autonomous cars accounting for up to 15 percent of
passenger vehicles sold worldwide in 2030.
6. Electrified vehicles are becoming viable and
competitive; however, the speed of their adoption will vary strongly at the
local level.
Stricter
emission regulations, lower battery costs, more widely available charging
infrastructure, and increasing consumer acceptance will create new and strong
momentum for penetration of electrified vehicles (hybrid, plug-in, battery
electric, and fuel cell) in the coming years. The speed of adoption will be
determined by the interaction of consumer pull (partially driven by total cost
of ownership) and regulatory push, which will vary strongly at the regional and
local level.
In 2030, the
share of electrified vehicles could range from 10 percent to 50 percent of
new-vehicle sales. Adoption rates will be highest in developed dense cities
with strict emission regulations and consumer incentives (tax breaks, special
parking and driving privileges, discounted electricity pricing, et cetera).
Sales penetration will be slower in small towns and rural areas with lower
levels of charging infrastructure and higher dependency on driving range.
Through
continuous improvements in battery technology and cost, those local differences
will become less pronounced, and electrified vehicles are expected to gain more
and more market share from conventional vehicles. With battery costs
potentially decreasing to $150 to $200 per kilowatt-hour over the next decade,
electrified vehicles will achieve cost competitiveness with conventional
vehicles, creating the most significant catalyst for market penetration. At the
same time, it is important to note that electrified vehicles include a large
portion of hybrid electrics, which means that even beyond 2030, the
internal-combustion engine will remain very relevant.
7. Within a more complex and diversified
mobility-industry landscape, incumbent players will be forced to compete
simultaneously on multiple fronts and cooperate with competitors.
While other
industries, such as telecommunications or mobile phones/handsets, have already
been disrupted, the automotive industry has seen very little change and
consolidation so far. For example, only two new players have appeared on the
list of the top-15 automotive original-equipment manufacturers (OEMs) in the
last 15 years, compared with ten new players in the handset industry.
A paradigm
shift to mobility as a service, along with new entrants, will inevitably force
traditional car manufacturers to compete on multiple fronts. Mobility providers
(Uber, for example), tech giants (such as Apple, Google), and specialty OEMs
(Tesla, for instance) increase the complexity of the competitive landscape.
Traditional automotive players that are under continuous pressure to reduce
costs, improve fuel efficiency, reduce emissions, and become more
capital-efficient will feel the squeeze, likely leading to shifting market
positions in the evolving automotive and mobility industries, potentially
leading to consolidation or new forms of partnerships among incumbent players.
In another
game-changing development, software competence is increasingly becoming one of
the most important differentiating factors for the industry, for various domain
areas, including ADAS/active safety, connectivity, and infotainment. Further
on, as cars are increasingly integrated into the connected world, automakers
will have no choice but to participate in the new mobility ecosystems that
emerge as a result of technological and consumer trends.
8. New market entrants are expected to target
initially only specific, economically attractive segments and activities along
the value chain before potentially exploring further fields.
Diverging
markets will open opportunities for new players, which will initially focus on
a few selected steps along the value chain and target only specific,
economically attractive market segments—and then expand from there. While
Tesla, Google, and Apple currently generate significant interest, we believe
that they represent just the tip of the iceberg. Many more new players are
likely to enter the market, especially cash-rich high-tech companies and
start-ups. These new entrants from outside the industry are also wielding more
influence with consumers and regulators (that is, generating interest around
new mobility forms and lobbying for favorable regulation of new technologies).
Similarly, some Chinese car manufacturers, with impressive sales growth
recently, might leverage the ongoing disruptions to play an important role
globally.
Automotive
incumbents cannot predict the future of the industry with certainty. They can,
however, make strategic moves now to shape the industry’s evolution. To get
ahead of the inevitable disruption, incumbent players need to implement a
four-pronged strategic approach:
Prepare for uncertainty. Success in 2030 will
require automotive players to shift to a continuous process of anticipating new
market trends, exploring alternatives and complements to the traditional
business model, and exploring new mobility business models and their economic
and consumer viability. This will require a sophisticated degree of scenario
planning and agility to identify and scale new attractive business models.
Leverage partnerships. The industry is
transforming from competition among peers toward new competitive interactions,
but also partnerships and open, scalable ecosystems. To succeed, automotive
manufacturers, suppliers, and service providers need to form alliances or
participate in ecosystems—for example, around infrastructure for autonomous and
electrified vehicles.
Drive transformational change. With innovation and product
value increasingly defined by software, OEMs need to align their skills and
processes to address new challenges like software-enabled consumer value
definition, cybersecurity, data privacy, and continuous product updates.
Reshape the
value proposition. Car manufacturers must further differentiate their
products/services and change their value proposition from traditional car sales
and maintenance to integrated mobility services. This will put them in a
stronger position to retain a share of the globally growing automotive revenue
and profit pool, including new business models such as online sales and
mobility services, and cross-fertilizing the opportunities between the core automotive-business
and new mobility-business models.
byPaul Gao, Hans-Werner Kaas, Detlev Mohr, and Dominik Wee
http://www.mckinsey.com/insights/high_tech_telecoms_internet/Disruptive_trends_that_will_transform_the_auto_industry?cid=other-eml-alt-mip-mck-oth-1601
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