Since the advancement in technology and the advent of digitization, it has become clear that customers are quick to adopt even highly complex and expensive technology if it makes their lives easier. Convenience and ease have become a coveted commodity. These core values have paved the way to make automobiles a significant part of the 20th-century culture. It will depend on how well Multinational Corporations and Emerging Market Players translate these properties in the context of today and the ever-evolving future.
Economies are transforming drastically. This change has been 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.
A large section of industry players and experts believe that these four trends will strengthen and accelerate one another. The automotive industry is on a transformational trajectory. The industry is going to be largely driven by shared mobility, connectivity services, and feature upgrades. The adoption of new business models could expand automotive revenue generation by about 30 percent, adding 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.
Overall global car sales will continue to grow. This growth will be encouraged by positive macroeconomic development, including a spike in the development of the global consumer middle class. However, macroeconomic factors and the rise of new mobility services such as car sharing and e-hailing will result in a drop to 2% by 2030 as opposed to the 3.6% the industry saw in the last five years.
CHANGING BEHAVIOUR
Individual mobility behavior will be impacted by changing consumer preferences, tightening regulation, and technological breakthroughs. Consumers may want the flexibility to choose the best solution for a specific purpose, on demand and via their smartphones. This new habit of availing 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—which is, a car designed for high utilization, robustness, additional mileage, and passenger comfort is already at a million units today, and we are just getting started.
SHIFTING TIDES
In order to have a clear understanding of future business prospects, it will be imperative to segment these markets by city types. Population density, economic development, and prosperity will all be key factors in determining the optimum move within a market. Consumer preferences, policy and regulation, and the availability and price of new business models will strongly diverge across these segments.
After technological and regulatory issues have been settled, it is safe to say that up to 15% of new cars in the industry will have autonomous driving features. Pricing, consumer understanding, and safety/security issues are some of the major challenges getting in the way of swifter market penetration since the introduction of advanced driver-assistance systems (ADAS).
REGULATORY REFORMS
However, with customer acceptance and proper regulatory measures, the automotive industry is looking at a future where autonomous driving features will become the norm, and it is certain that this progression will add value for customers.
The momentum for the penetration of electrified vehicles (hybrid, plug-in, battery electric, and fuel cell) will be strongly driven by increasing consumer acceptance. Stricter emission regulations, lower battery costs, more widely available charging infrastructure will also factor in the adoption of electrified vehicles. The share of electrified vehicles could range from 10 percent to 50 percent of new-vehicle sales by 2030. Densely populated cities with stringent emission regulations and consumer incentives like tax breaks along with discounted electricity pricing will see the faster adoption rates when it comes to the acquisition of electrified vehicles. Once battery costs drop from $150 to $200 per kilowatt-hour over the next decade, electrified vehicles will be in a cost competitive with conventional vehicles. This will result in an optimum environment for market penetration.
REMAINING RELEVANT
With a more complex and diversified industry landscape, traditional car manufacturers will be strong-armed into competing on multiple fronts. With pressure to reduce costs, while being fuel-efficient; the demand for emission reduction will determine to shift market position. It will also potentially lead to new forms of partnerships among incumbent players.
Another factor which will play a significant role in the changing landscape of the automotive industry is software competence. It is fast becoming one of the most differentiating aspects of the industry affecting various areas which include advanced driver-assistance systems (ADAS), connectivity and infotainment. As cars become integrated into the digitally connected world, automakers will not have much of an option but to play a crucial role in the new mobility ecosystems – that are the result of technological and consumer trends.
With the emergence of trendsetting technologies like automated and autonomous driving, smart infotainment and lightweight design; there are various crucial trends which are influencing the sector. For industry players to remain relevant in the evolving automotive landscape key factors like digitization, sustainability, and efficiency and cost saving must be at the forefront of their business models.
