The automotive industry is ramping up to a period of transformation. But what does the future look like, and what do the predicted changes mean for existing players?

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Within the past 50 years, the world around us has been transformed by two industrial
revolutions: the first one defined by automation, computers, and electronics, and the
second revolution we are living through now – characterised by artificial intelligence, big
data, and boundless connectivity.1
Many consumer categories have been impacted, except
it seems, mobility; the fundamental way most people get around has remained largely the
same. This will not be the case for much longer.
The automotive industry is ramping up to a period of colossal transformation, driven by
multiple factors. Connectivity is increasingly an imperative and regulation is being
introduced to reduce emissions (the first stage of which will come into effect in 2021 in
the EU) which will force manufacturers to make a fundamental shift in focus, toward the
production of electric vehicles. In addition, consumer behaviour and expectations are
changing at an unprecedented pace, driven by experiences across other industries. These
factors combined ensure the future automotive landscape will look very different.
We are on the cusp of an automotive revolution, that has
been on the horizon for many years.
Analysts agree, the future of the automotive category will be defined by electric,
connected and autonomous vehicles. On top of this fundamental product re-orientation,
cars are expected to increasingly be shared rather than privately owned. The automotive
market will be much broader than it is today, encompassing car-sharing services (offering
the flexible use of a car that you drive yourself) and ride-sharing services (in which you
don’t drive but share you journey with others, such as Uber Pool), which are expected to
grow in popularity.2
Today, car owners use their privately-owned vehicles. In the future,
they will choose the optimal mobility solution, including the most suitable type of ‘vehicle’,
for each specific purpose. Predictions vary, but worst-case forecasts suggest private car
ownership could fall by 80% in the US by 20303
.
URBANISATION AND CHANGING NEEDS
This fundamental change in car ownership and associated growth in mobility services is in
part the result of a wider societal change - as society becomes increasingly urbanised,
methods of transport must adapt to the demands of the city. Currently, 55% of people are
1 https://www.businessinsider.com/tesla-was-best-auto-stock-2018-2018-12?r=US&IR=T
2 : PWC 2018, McKInsey 2018

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city-dwellers, but that number is expected to increase by 2050 to 68%.4
In cites,
traditional private car ownership is rarely the most efficient travel option - already
upwards of 40 hours per driver are lost each year in major urban areas due to commuting
congestion.5
In addition, a 2017 study found that using mobility services such as “Uber or
Lyft was cheaper than owning a car for 25% of Americans,” especially among those who
drive fewer monthly miles than average.6
Alternatives to car ownership can often be more
convenient and less stressful; if they can also become more affordable, their appeal will
likely accelerate. As ride-sharing services experiment with autonomous vehicles, the cost
is only set to fall.
If consumers continue to shift away from car ownership, it will have a huge impact on who
auto brands will need to communicate to. When it comes to selling cars today, there is a
limited pool of potential customers (of which 90% already own a car7
), constrained by
affordability, license ownership, ability to drive, space and parking considerations.
However, everyone will be a potential user of mobility services of the future.
In theory, we will all be making mobility decisions multiple times a day; against only
buying a car every few years today. This means that the factors that matter in choosing
our transportation, as well as the decision-making process are set to change. Convenience
and entertainment will grow in importance, alongside the traditional automotive needs of
who will provide the safest, best value, most practical way of getting from A to B.
REDEFINING THE MARKET REDEFINES THE COMPETITION
As this revolution takes hold and the definition of the auto market widens, the competitive
set will expand significantly. Automotive manufacturers won’t just compete with each
other, but with companies that take consumers places, like Uber and Lyft; with companies
that bring consumers things, like Amazon, Asos and Deliveroo; and with companies that
give consumers flexible driving options, like Car2Go, Zipcar, DriveNow and AutoLib.
Another question that remains yet unanswered is who customers will trust the most to
provide connected or autonomous features, with tech brands and new players entering
the market – particularly in China, where a large number of new EV (Electric Vehicle)
makers have emerged to chase the opportunity. Legacy automotive brands may find
themselves playing catch-up with new competitors who have technology built into their
business models from the start.
3 : https://www.forbes.com/sites/quora/2017/06/22/what-will-car-ownership-look-like-in-the-future/
4 : https://www.euronews.com/2018/02/07/which-european-commuters-spend-the-most-time-in-traffic-jams-
5
: https://www.businessinsider.com/uber-or-lyft-could-be-cheaper-than-owning-a-car-2017-10?r=US&IR=T
6
: Observatoire Celem

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However, legacy players do have advantages over this new competitive set. Their
advantage is particularly strong in logistics, as Ford CEO Jim Hackett explained: “Ford
builds a vehicle every four seconds. So there’s something about the fitness of our system
that those who are starting out can’t yet equal. How it all gets choreographed is a really
hard physics problem—just as hard as putting a rocket into space.”8
This is potentially a huge advantage, as shared cars would in fact increase the pressure on
car production - shared vehicles will be more frequently used, and so will wear out and
need replacing faster. Consequently, McKinsey predicts the combined value of one-time
vehicle sales and the aftermarket will grow by $1630b globally, or 47%, between 2016-
20309
.
Incumbents have another advantage – if they can maximise it – in that their brands are
established, and most auto players have the basis for relationships with existing owners of
their cars around the world. However, car makers need to act now to build on their
existing relationships and to develop perceptions of their ability to deliver beyond the
traditional confines of the industry, if they want to be seen as leaders in the new auto
future. Exactly what the industry will look like is yet to be defined, and will be shaped by
those who get there first.
Automotive manufacturers have the opportunity not just to
adapt to the future demands of the industry, but to shape it.
WHAT THIS MEANS FOR AUTO PLAYERS
The reality is that the revolution won’t happen overnight. The infrastructure isn’t yet in
place for autonomous or electric vehicles at scale, and nor are consumer attitudes. Only
about 18% of Europeans, and 13% of Americans, say they “can live well today without a
private car;”10
a view that may partially be influenced by the belief that “owning a car
represents independence and freedom,” for just over half of both populations.11
It will take
a significant shift in public opinion, alongside the development of affordable alternatives,
before ditching the private car becomes a mainstream practice:
8
HBR, Rethinking Efficiency 2019 9
https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/the-automotive-revolution-is-speeding-up 10
Statista Global Consumer Survey 2018 11
Statista Global Consumer Survey 2018

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“People overestimate the impact of technology in the short
run and underestimate its impact in the long run.” - Jim
Hackett, CEO Ford
For automotive manufacturers looking to the future, sales must remain a focus today, as
today’s profits are vital to stay ahead of the competition. Auto companies have to make
the right investments in car sharing, ride-hailing, and new mobility methods as well as
evolving their core product. They face many challenges, but an exciting future full of
opportunities for those willing to commit to innovation and maintain relevance to the
changing customers.
If you are interested in learning more about the subject of this article, please contact
Sarah Emmerson, Insights Planner, emmersons@bbdoknows.com,
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