4 megatrends shaping the automotive and car market

17 September 2015 Consultancy.uk

Connectivity will boost automotive revenues to $40 billion by 2018, research by AlixPartners shows. Other megatrends expected to reshape the car industry and the ways of engaging with vehicles are automation, which will reduce the need for drivers; sharing, which will add a wide range of new transport options; and electrification.

In a recent research titled ‘Car of the Future’, AlixPartners explores the development of the automotive market in terms of major trends expected in the coming decades. The consulting firm identifies four major trends projected to create a relatively large amount of disruption to the ecosystem: connectivity, automation, sharing and electrification.

The research shows that over the coming four years the number of connected vehicles is expected to jump to two times the number available today, as more and more vehicles are equipped with mobile connectivity solutions designed to meet demand among regulators and consumers for safety and security features, as well as infotainment and navigation services.

Global connected car market

In terms of revenues, the new technology is expected to add considerably on the technology available today, jumping from $16 billion in 2013 to $40 billion in 2018, representing 20% annual growth. In 2018, $25 billion will come from in-vehicle services, such as traffic information, call centre support and web-based entertainment; $5 billion from the delivery of telematics services, including customer relationship management; $4 billion from the provision of connectivity/data, such as mobile data traffic and $7 billion from the sale of hardware, for instance telematics control units.

Automation of car market

A further feature of the development in vehicle technology is automation. According to the research, the technology is expected to develop rapidly over the coming decade, with hands and feet off technology in certain contexts already available today. By 2018 the technology is expected to have matured to the point where drivers no longer need to look at the road as the vehicle can assess surroundings and move itself. After 2020, the technology will, in time, allow for users to simply be driven to their location without required input. According to research by The Boston Consulting Group, the autonomous car market will hit $42 billion by 2025.

Global car sharing members’ growth 2014-2020

Car sharing
The number of members using car sharing has exploded in recent years, reaching 5 million users in 2014. By 2020, the number of users is expected to hit 26 million, which represents growth of 32% annually, and will according to Roland Berger be worth €7.2 billion.

The development of sharing has come from enhanced interconnections through smartphones and social networks; altered consumer behaviours and giving up of ownership; more individuality through autonomy and niche services; increased convenience and commoditisation; and environmental challenges and more sustainable use of resources.

Global electric vehicle sales 2010-2014

Electric vehicles
The number of electric vehicles is also expected to increase significantly over the coming decade, with the number of electric vehicles in the past years growing rapidly on government backed initiatives. Nonetheless, even with strong growth, electric cars only represent 0.1% of the world’s total car fleet and made up only 0.4% of global sales in 2014.

In the last 5 years however, the number of EV models has more than doubled in major automotive markets to more than 50. Hybrid vehicles also remain draw cards for consumers, with particularly a recent shift to plugin hybrids that increase the electrification of the vehicle but still retain some of the ICE performance/range benefits. Also increasingly popular are ‘extend range hybrids’, which place a small ICE into an EV, with OEMs trying to expand the consumer appeal of EVs by increasing the vehicle range.

Projected EV sales 2015-2025

As a result of continued development of the technology, the number of electric cars sold is expected to increase rapidly between now and 2025. The analysis from AlixPartners presents the forecast as a current projection, as well as in terms of an optimistic and conservative projection.

For the optimistic projection the number of electric vehicles will hit nearly 6% of units sold globally by 2020, while the current forecast sees more modest growth of 31% seeing electric vehicles hit 6% of global sales by 2025. The conservative forecast sees a 24% annual growth rate and only a 3% sale of electric vehicles by 2025.


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