A new McKinsey report focuses on the Disruptive trends that will transform the auto industry. Their work suggests that the world economies are dramatically changing via developments in emerging markets, the exponential pace of technology, sustainability policies, and changing consumer preferences around ownership. They see the rise of four disruptive trends in the automotive sector: diverse mobility, autonomous driving, electrification, and connectivity. For me, these findings underscore the movement from our current automotive industry to the future Mobility Ecosystem. If we can make the mental model shift from our long standing view of Industry and competition, to this emerging view of ecosystem and shared value, we can begin to visualize the different ways value will be created and captured in the future.
Here are some interesting findings from the report:
- New business models could expand automotive revenue pools by about 30 percent by 2030 – driven by shared mobility, connectivity services, and feature upgrades, the authors estimate adding up to $1.5 trillion via this expansion, with revenue diversifying toward on-demand mobility and data-driven services
- Vehicle unit sales will continue to grow – the ownership versus access dialog would have many believing that car sales will plummet. Despite the shift towards different mobility services, sales will grow, but the report sees a lower growth rate of about 2 percent per year. Some of the decline in private-vehicle sales is likely to be offset by increased sales in shared vehicles that need to be replaced more often due to higher utilization and related wear and tear
- One out of ten cars sold in 2030 is potentially a shared vehicle – they see traditional car sales business models being complemented by a range of diverse, on-demand mobility solutions. The authors see early signs of a decline in car ownership importance in the United States. They cite a drop in share of young people (16 to 24 years) who hold a driver’s license from 76 percent in 2000 to 71 percent in 2013
- City type will replace country or region as the most relevant segmentation dimension – a more granular view of mobility markets is required to understand where future business opportunities lie. Attributes like population density, economic development, and prosperity are necessary to segment these markets by city types. Across those segments, consumer preferences, policy and regulation, and the availability and price of new business models will strongly diverge. Note: this specific point has broad application. Various future scenarios intersect with the urbanization and emerging middle class social phenomena, requiring a greater understanding of emerging cities if new opportunity is to be realized
- Up to 15 percent of new cars sold in 2030 could be fully autonomous – technological and regulatory issues remain potential obstacles to autonomous vehicle adoption, so the report concludes that fully autonomous vehicles are unlikely to be commercially available before 2020. Advanced driver-assistance systems show us that pricing, consumer understanding, safety, and security issues are likely to impede faster market penetration. The authors see a progressive scenario being 15 percent penetration of fully autonomous cars by 2030. As referenced in a recent post on Future Thinking, this type of scenario analysis is critical to help us both understand and shape our future. This visual from the report is a great example of Future Thinking:
- Electric vehicles are becoming viable and competitive – new and strong momentum for penetration of electric vehicles is expected in the coming years. A number of drivers like stricter emission regulations, lower battery costs, more widely available charging infrastructure, and increasing consumer acceptance will serve as catalysts. The authors see the share of electric vehicles ranging from 10 percent to 50 percent of new-vehicle sales by 2030. They provide an interesting analysis of adoption rates and sales penetration. Since these vehicles include a large portion of hybrids, the authors believe that the internal-combustion engine will remain very relevant beyond 2030
- The shift from industry to ecosystem – as with any emerging ecosystem, complexity will rise, and the number of participating stakeholders rises with it. The authors note that incumbent players will face shifting forms of competition and cooperation. This is one of those shifts in traditional beliefs that is critical to success within an ecosystem paradigm. As this Future Scenarios visual describes, each scenario is in and of itself a paradigm shift; and a shift to mobility as a service forces traditional car manufacturers to compete on multiple fronts, such as: mobility providers (e.g. Uber), technology giants (e.g. Apple, Google), and specialty OEMs (e.g. Tesla). In addition, the authors point to a phenomenon that is rippling through every industry: the importance of software competence
- Many new players are likely to enter the market – another example of a phenomenon that applies across industries. As the authors point out, diverging markets open opportunities for new players, and while Tesla, Google, and Apple dominate the conversation, many new players are likely to enter the market
Much like the discussion around Creating a Wellness Ecosystem, we are witnessing the early days of an emerging Mobility Ecosystem. It’s a fun time to be alive, as we are witnessing the undoing of many of the traditional beliefs, institutions, and structures that represent all we have known. Our challenge is to unlearn that which we know.