The Future of Cars: How Disruptive Technology is Transforming the Automotive Industry
The automotive sector stands at a crucial inflection point, profoundly shaped by significant new market trends. While recent regional sales fluctuations exist, the industry’s trajectory towards electrification remains clear. A substantial majority of consumers are altering their transportation habits due to sustainability concerns, with many specifically seeking electric vehicles (EVs) for their next purchase. Projections indicate that by 2030, a significant percentage of new cars sold globally, particularly in leading markets like Europe and China, will be fully electric, highlighting the rapid shift driven by the disruptive technology in automotive industry.
However, this transformation isn’t without hurdles. While advancements in autonomous driving technology continue, challenges and setbacks remain. Despite some companies exiting the space, others are pushing forward with deployments like robo-taxis and robo-shuttles, expecting considerable growth soon. The evolving landscape also poses questions for related sectors, such as how auto insurance will adapt to shared and autonomous mobility. Furthermore, meeting the escalating demand for EVs necessitates a stable supply of lithium-ion batteries, requiring battery manufacturers to strengthen supply chains, accelerate industrialization, and prioritize decarbonization efforts.
To thrive in this rapidly changing environment, automotive executives must prioritize building new businesses. Research suggests that companies focusing on innovation and new ventures significantly outperform those that do not. While incumbents face competition from numerous startups disrupting the mobility space, they possess inherent advantages, including extensive experience, financial reserves, and established customer bases. The convergence of various forces – emerging markets, new technologies, sustainability policies, and changing consumer preferences – is fundamentally reshaping economies and industries, with the automotive sector undergoing revolutionary changes driven by digitization, automation, and novel business models. These forces are giving rise to four interconnected disruptive technology-driven trends: diverse mobility, autonomous driving, electrification, and connectivity, which are set to redefine the automotive technology industry.
Industry experts largely agree that these four trends will mutually reinforce and accelerate each other, confirming the automotive industry’s readiness for disruption. Despite this broad understanding, a unified vision of the industry’s state in 10-15 years based on these trends remains elusive. To address this, analysis offers perspectives on the “2030 automotive revolution,” providing scenarios for upcoming changes and their impact on traditional players, new entrants, regulators, consumers, markets, and the entire automotive value chain. These projections represent the most probable assumptions across the four trends based on current understanding, serving as a guide for industry players to prepare for future uncertainties.
New Business Models and Revenue Growth
Driven by trends like shared mobility, connectivity services, and feature upgrades, new business models are poised to significantly expand automotive revenue streams. This shift could generate an additional $1.5 trillion in revenue potential by 2030, representing a substantial increase compared to traditional car sales and aftermarket services. This projected figure highlights a dramatic diversification of the automotive revenue pool towards on-demand mobility and data-centric services.
Connectivity, followed by autonomous technology, will increasingly transform the car into a platform. This allows drivers and passengers to utilize transit time for consuming media and services or engaging in personal activities. The accelerating pace of innovation, particularly in software systems, will make vehicle upgradability essential. As shared mobility solutions with shorter life cycles become more prevalent, consumers will become more aware of technological advancements, further increasing the demand for upgradability in privately owned vehicles as well.
Shifting Dynamics in Vehicle Sales
Overall global car sales are expected to continue growing, albeit at a slower annual rate of around 2 percent by 2030, down from 3.6 percent over the preceding five years. This slowdown is primarily attributed to macroeconomic factors and the rise of new mobility services like car sharing and e-hailing.
Detailed analysis suggests that dense urban areas with a large existing vehicle base are particularly conducive to the growth of these new mobility services. Many cities and suburbs in Europe and North America fit this profile. While new mobility services might reduce private-vehicle sales in these areas, this potential decline is likely to be offset by increased sales of shared vehicles. These vehicles experience higher utilization and wear and tear, requiring more frequent replacement. The main driver of continued global car sales growth remains positive macroeconomic development and the expansion of the global consumer middle class. However, with growth slowing in established markets, future expansion will heavily rely on emerging economies, especially China, although variations in product mix will lead to different revenue developments across regions.
Evolving Consumer Mobility Behavior
Changing consumer preferences, increasingly strict regulations, and technological breakthroughs are collectively driving a fundamental shift in individual mobility behavior. Consumers are increasingly adopting multiple modes of transportation for their journeys, and goods and services are being delivered to them rather than fetched. Consequently, the traditional model of car ownership and sales is being complemented by a diverse array of on-demand mobility solutions, particularly in dense urban environments where private car use is actively discouraged. This shift reflects a move away from the single all-purpose vehicle towards tailored solutions for specific needs, accessible via smartphones.
We are already witnessing early indications of this trend; for instance, the percentage of young people holding driver’s licenses has declined in some developed countries, while membership in car-sharing services has seen significant annual growth. This new consumer habit of choosing tailored solutions is expected to foster new segments of specialized vehicles designed for specific purposes, such as robust cars optimized for high-utilization e-hailing services. As a result of this transition to diverse mobility solutions, forecasts suggest that up to one out of ten new cars sold in 2030 could be a shared vehicle, potentially reducing private-use vehicle sales. This could mean that over 30 percent of the miles driven in new cars sold might be attributed to shared mobility. On this trajectory, shared vehicles could account for potentially one out of three new cars sold as early as 2050. This evolving landscape creates opportunities for various forms of technology for the automotive industry.
Urban vs. Rural: The Geographic Divide
Understanding future business opportunities necessitates a more granular view of mobility markets than ever before. Specifically, market segmentation based on city types, considering population density, economic development, and prosperity, is becoming crucial. Across these segments, consumer preferences, policies, regulations, and the availability and pricing of new business models will vary significantly. For instance, in megacities, car ownership is already becoming burdensome due to congestion fees and traffic issues. Conversely, in less dense, rural areas, private car usage will likely remain the dominant mode of transport.
The type of city will therefore become the primary determinant of mobility behavior, superseding the traditional regional segmentation of the automotive market. By 2030, the automotive market dynamics in a megacity like New York or London are expected to have far more in common with markets in cities like Shanghai than with those in rural areas. This highlights the differing paces at which disruptive technologies impact various geographic segments, including how small town automotive technologies might evolve compared to urban centers.
The Rise of Autonomous Driving
Fully autonomous vehicles are not expected to be widely commercially available before 2020, as referenced in the original report. In the interim, advanced driver-assistance systems (ADAS) play a critical role in preparing regulatory bodies, consumers, and corporations for the eventual reality of cars taking over control from human drivers. The introduction of ADAS has revealed that key barriers to faster market penetration include pricing, consumer comprehension, and concerns related to safety and security.
Regarding technological readiness, technology companies and startups are anticipated to play significant roles in the development of autonomous vehicles. Regulatory frameworks and consumer acceptance may present additional challenges for autonomous vehicle adoption. However, once these hurdles are addressed, autonomous vehicles promise substantial benefits for consumers, such as the ability to work or engage in entertainment while commuting or traveling. A progressive scenario projects that fully autonomous cars could constitute up to 15 percent of global passenger vehicle sales by 2030.
Accelerating Electrification
Electrified vehicles, encompassing hybrid, plug-in hybrid, battery electric, and fuel cell types, are increasingly becoming viable and competitive alternatives. Stricter emission standards, declining battery costs, expanding charging infrastructure, and growing consumer acceptance are creating strong momentum for their market penetration in the coming years. The pace of adoption will significantly depend on the interplay between consumer pull (driven partly by total cost of ownership) and regulatory push, which will vary considerably at regional and local levels. This focus on sustainable automotive technologies is gaining momentum.
By 2030, the share of electrified vehicles could range widely, from 10 percent to 50 percent of new vehicle sales, depending on the region. Adoption rates are expected to be highest in developed, dense urban areas with stringent emission regulations and government incentives like tax breaks and parking privileges. Conversely, sales penetration will likely be slower in smaller towns and rural regions where charging infrastructure is less developed and driving range dependency is higher. Continuous improvements in battery technology and cost are expected to reduce these local disparities over time, enabling electrified vehicles to capture an increasing share of the market from conventional vehicles. With battery costs potentially falling significantly over the next decade, electrified vehicles are forecast to achieve cost competitiveness with traditional internal combustion engine vehicles, acting as a major catalyst for market penetration. However, it’s important to note that electrified vehicle forecasts include a large proportion of hybrid electrics, meaning the internal combustion engine will remain relevant well beyond 2030.
A Transformed Competitive Landscape
Unlike industries such as telecommunications, which have already experienced significant disruption and consolidation, the automotive industry has seen relatively little change historically. The paradigm shift towards mobility as a service, coupled with the entry of new players, will inevitably compel traditional car manufacturers to compete simultaneously across multiple fronts and even collaborate with competitors. Mobility providers, tech giants, and specialized OEMs are collectively increasing the complexity of the competitive environment.
Traditional automotive players, already facing continuous pressure to reduce costs, improve efficiency, and become more capital-efficient, will feel this squeeze. This is likely to lead to shifts in market positions within the evolving automotive and mobility sectors, potentially resulting in industry consolidation or new forms of partnerships among established companies. Furthermore, software expertise is rapidly becoming one of the most critical differentiating factors for the industry, impacting areas like ADAS, connectivity, and infotainment. As cars become increasingly integrated into the connected world, automakers must participate in the new mobility ecosystems driven by technological advancements and changing consumer trends. This changing dynamic underscores the transformation within the automotive technology industry.
Abstract image representing automotive technology or the automotive industry
New Players Reshape the Market
The emergence of diverse markets opens significant opportunities for new entrants. These players are expected to initially focus on specific, economically attractive segments and activities within the automotive value chain before potentially expanding into broader fields. While companies like Tesla, Google, and Apple have captured considerable attention, they are seen as just the beginning. Many more new players, particularly well-funded high-tech companies and startups, are anticipated to enter the market. These newcomers from outside the traditional automotive sector are also exerting increasing influence over consumers and regulators, generating interest in new mobility forms and advocating for regulations favorable to new technologies. Simultaneously, certain Chinese car manufacturers, having demonstrated impressive recent sales growth, are well-positioned to leverage the ongoing disruptions to establish a significant global presence.
Automotive incumbents cannot predict the future with absolute certainty, but they can make strategic moves now to help shape the industry’s evolution. To stay ahead of the inevitable disruption driven by Disruptive Technology Automotive Industry trends, established players need to adopt a proactive, four-pronged strategic approach. This involves preparing for uncertainty by continuously anticipating trends and exploring new business models, leveraging partnerships by forming alliances and participating in ecosystems, driving transformational change by aligning skills and processes with new software-defined value drivers, and reshaping their value proposition by shifting focus from traditional sales to integrated mobility services and embracing new models like online sales. By doing so, they can better position themselves to retain a share of the growing global automotive revenue and profit pools.
