Auto industry to shift gears due to challenges of self-driving vehicles
Global vehicle sales are set to peak in the next decade, as wide ranging mega-trends, from electrification to on-demand mobility, change the way vehicles operate and are consumed. The effects will be felt by a wide range of players in the current automotive ecosystem, as demand shifts towards suppliers of components for electrification and automation, while whole new sharing related industries are set to arise.
The research related to the effect of various mega-trends in the automotive industry results from The Boston Consulting Group. The automotive industry, according to the firm’s analysis, various megatrends, as technological, social and environmental pressures shift the industry. Electrification remains a key force, as societies seek to meet climate change conditions, while further lowering the impact of vehicles on health. A further shift is expected from autonomous driving reducing the number of vehicles required as well as accidents, while connectivity impacts vehicle related services.
However, just as technology creates additional possibilities, it also presents challenges within the existing social sphere. These changes will potentially usher in a new transport era, focused increasingly on sharing, urbanisation and how people work, as well as a shift in the regulatory landscape to improve the atmosphere within cities and the effect of vehicles on the environment and human health, as the automotive industry heads into the next decade.
The growth of the vehicle market previously seemed to some to be bottomless, with various booms, and dips, seeing the market increase its yearly new sales from zero at the turn of last century to almost 95 million units in 2017. However, the relative inefficiency of the market, with many vehicles spending the day idle while seats filled per trip remain low, means that considerable opportunity exists to transform the vehicle mobility model – particularly in light of automation and digitalisation.
The net effect of the trend to improve vehicle usage, could see an end to focus on individual car ownership, with total new vehicles sales therefore, expected to slump in the years ahead. The technological and social changes are expected to increasingly impact the automotive industry going forward. Electrification, for instance, will mean that by 2030 around half of new cars sold will be some form of electric vehicle, radically changing key supplier relationships for OEMs as well as implying considerable investment into new models for the industry.
Self-driving cars will account for around 11% of the vehicle fleet by 2030, with both personal and taxi variants on the road ahead. The social aspect of changes is expected to see around 9% of all trips be made by some form of mobility service.
Shifting profits
The research shows that current automotive manufactures, incumbent suppliers and various auxiliary players represent the majority of the around $226 billion industry profit pool. New car sales represent around $79 billion in profit, followed by suppliers on $67 billion. The emerging profit pools, emerging from the key mega trends, meanwhile, remain tiny in comparison at around ~2 billion in profit.
The future is likely to see a considerable shift in terms of key profit segments, with on-demand mobility profit up an ~10% per annum to $76 billion by 2035, while new electric car sales could top $21 billion in profit. AV and BEV components, meanwhile, will generate around $26 billion in profit, while classic components will see profitability stagnate. OEM ICE and hybrid manufacturers, will see their new car sale profit decline by around $19 billion by 2025. Financing and the aftermarket will remain relatively stable at $33 billion and $66 billion respectively.
Commenting on the changes, Thomas Dauner, Global Leader of BCG’s automotive practice and a co-author of the study, said, “Incumbent automotive OEMs and suppliers need to lay the groundwork today in order for their companies to thrive in a market that will undergo fundamental changes over the next 15 years. OEMs will find their competitive positions under attack by newly empowered market players, including suppliers, on-demand platforms, and tech giants, as well as cities that play an increasingly active role in mobility.”
