Changes within the automotive industry are likely to become increasingly impactful over the coming years as new technological innovation and business model innovation develop, and new regulatory conditions are imposed in line with global health and environmental concerns.
In a new report from Roland Berger, the strategy consulting firm considers the wider environment in which the changes will take place, as well as various projections of the effects of the changes to the industry as a whole.
According to the consulting firm, the key trends set to affect the industry from the technology side include new automated driving technologies, from partially automated functions to fully automated driving, connectivity & smart devices, while new powertrain technologies, particularly electrification, too are on the horizon.
Business models are also set for changes, the firm noting that the retail process is becoming increasingly digitalised, while data offers companies with improved ability to predict model performance and maintenance requirements. Finally, new technologies are set to create considerable new dynamics across the automotive value chain, with the potential growth of a sharing economy for cars – which, for a large part, currently stand idle.
Electrification has the potential to create a host of benefits to key environmental metrics, considerably reducing emissions from vehicles, as well as improving the energy efficiency of vehicles. Global frameworks, such the Paris Agreement, are being translated into regulatory requirements on various industries, and, given the 15% contribution of the transport industry more widely, private transport is one area to see considerable attention.
One of the major trends in the industry is increasingly stringent regulatory requirements surrounding greenhouse gas emissions and other exhaust fumes that create negative externalities. In Europe for instance, current regulation allows for emissions at 130g/km of CO2, which is set to fall sharply to 95 g/km of CO2 by 2020 (equivalent to 3.5 l/100 km) – manufacturers face considerable fines for failing to comply with the regulations. In the longer term, ever stricter emission targets may be imposed. In addition to many cities in Europe are planning to ban ICE vehicles from their major cities, creating additional incentives to develop sustainable transportation options.
The US too has a number of factors that are supportive of a transition to more sustainable and health positive transportation methods, including regulatory standards but also considerable subsidies and innovators in the space. In China a combination of regulatory conditions, government set targets for EV sales and financial advantages are likely to push and pull people towards adoption.
According to the firm’s projections, battery electric vehicles (BEV) may grow relatively slowly over the coming decade, representing around 15% of vehicles on the road in Europe in 2025, while plug in hybrid electric vehicles (PHEV) will account for a further 9% of the regions fleet. Diesel vehicles and gasoline vehicles will start to be phased out, each falling by 13% and 11% respectively.
In the US electric vehicles will make up around 35% of the total fleet sold in 2025 in the high electrification model, with gasoline’s share remaining relatively stable while diesel vehicles are phased out. In China around 22% of new vehicles sold in 2025 are set to be electrified.
Aside from the electrification of vehicles, automation is another key trend predicted to affect the industry more widely, as well as disrupt other industries, such as automotive insurance. The technologies affecting the industry are relatively broad in scope, including safety features, such as predictive emergency breaking, emergency steering assist and emergency power down; parking related, such parking with app, valet park assist and, eventually, fully auto valet parking. In terms of driving, a range of technologies are in the pipeline, from assistance in various contexts, such as traffic jams and intersections, to fully automated driving systems – which are likely to be implemented somewhere after 2025.
The effect of automation on revenues and profit are likely to be drastic. OEMs and OES are likely to see their revenues remain relatively flat as a % of total revenues (which themselves are set to hit 9 trillion by 2025) until full automation somewhere in 2030, after which the industry’ revenues are set to fall back to 7.5 trillion with OEMs and independent retail & aftersales providers will see their share of revenues fall steeply; other segments are projected to see considerable growth in revenue – particularly the robocabs.
In terms of profit, the industry as a whole will continue to see profitability increase, until full automation hits – at which point most segments will see profits shifted to robotaxi owners, whose share of the then $550 billion profit pie will climb from almost nothing five years earlier to 40%.