New business models are bringing dramatic change to the automotive industry and challenging the dominance of established carmakers.
The rise of electric vehicles, self-driving cars and shared mobility will change the sources of profitability and influence in the industry over the next 10 to 15 years, according to a recent article written for the World Economic Forum.
Nikolaus Lang and Charley Xu from Boston Consulting Group say that emerging profit pools – ranging from battery-powered electric vehicles (BEVs) and their components, to data and connectivity services and on-demand mobility offerings will account for 40% of industry profits in 2035, up from just 1% in 2017.
So what factors are driving this transformation?
New car sales: Annual growth in new car sales is forecast to remain relatively flat from around 2025.
Component supply: Value creation will shift from original equipment manufacturers (OEMs) to suppliers as BEV penetration increases, Lang and Xu suggest.
Aftermarket: BEVs require nearly 60% less maintenance per year than internal combustion engine (ICE) powered vehicles, so their wider adoption is likely to impact OEMs’ high-margin aftermarket business.
Data and connectivity: Revenue related to connectivity services is predicted to increase from $4bn (£3.3bn) in 2017 to $157bn (£128bn) in 2035 thanks to the adoption of BEVs and autonomous vehicles (AVs). Connectivity revenue will be generated by in-car advertisements and recommendations; digitally-enabled services, feature unlocks and subscriptions; and business-to-business data brokerage, Lang and Xu explain.
On-demand mobility: AVs will lead to a major change in how we get around. Self-driving taxis, for example, will reduce the cost of on-demand mobility compared not only with traditional taxis, but also with existing ride-hailing and car-sharing services. Fewer people are expected to own their own car, with many choosing instead to hail an AV wherever and whenever they need it.
All these developments mean that traditional manufacturers and suppliers will find their market position challenged on multiple fronts over the next 15 years — and the winners will be those that plan ahead and embrace the change.
Download our Next-generation connectivity report to learn more about how new technologies and next-generation internet connectivity will transform the automotive industry.