09/11/17
Digital Auto Report 2017: Exponential growth in new mobility services

Car manufacturer share in industry value-added falls to under 50% / Electric vehicles cheaper than combustion models from 2025 / In 2030, 36% of all mileage driven in Europe will be in shared-use vehicles, and 42% in self-driving vehicles / 25% drop in car numbers in the market / Mobility set to become the contested local service business

Stuttgart, September 11, 2017 — The car models being presented in 2017 clearly demonstrate that manufacturers are definitively gearing their focus on self-driving, connected and electric cars.

As early as 2025, according to estimates, 58% of all new car sales in Europe, the USA and China will be electric or hybrid vehicles. In these areas today, over 85% of all new cars are already classed as connected, and by 2025 there will be over 470 million connected vehicles on the roads in Europe, the USA and China alone. The first “robot cars” (series-ready, self-driving vehicles) are anticipated from 2023 (Level 4) or 2028 (Level 5), and by 2030 there are set to be around 80 million such cars in circulation in these regions – these are just some of the key findings of the “Digital Auto Report 2017” by Strategy&, PwC’s strategic consulting team. The future belongs to “shared mobility”: based on connected and self-driving cars, the so-called “roboconomy” is set to come about, with mobility offerings and the associated, car-related digital services. Customers around the world will spend around EUR 2.2 trillion annually on these.

“Connected cars are already part of the scene on today’s roads, and electric and self-driving vehicles are only a few years away from definitive breakthrough. Our assumption is that electric cars are set to become cheaper than combustion models in the period between 2025 and 2030, based on overall costs which factor in depreciation, fuel costs, servicing, taxes and insurance. It is particularly in the area of opportunity combining ‘connected’ and ‘self-driving’ that a huge new business segment is set to evolve in the years ahead for the entire automotive sector, in the form of digital mobility services,” comments Richard Viereckl, Managing Director at Strategy& and co-author of the study.

In the medium-term, the transition to “mobility as a service” is set to influence both the value-added chain in the automotive sector and customer behavior when it comes to mobility. By 2030, just over 20% of the profit potential in the mobility market will be occupied by “mobility as a service” services, further increasing the pressure on margins in the conventional car production segment. In future, barely 50% of sectoral value-added will be contributed from car production or car sales – today, the figure is still around 85%. The remaining part will be played out in the fleet management and digital services areas. By 2030, 36% of all mileage driven in Europe will be in shared-use vehicles, and 42% in self-driving vehicles. The 16% mileage share claimed by privately-owned self-driving vehicles in Europe in 2030 indicates that, in an international comparison, Europeans are showing the greatest interest in self-driving vehicles in private ownership (USA: 11%; China: 10%). Because road-based mobility will be more readily available and more easy to use in future, the number of miles driven in these three regions of the world will increase by 23% by 2030, compared with 2017, whilst at the same time the average household will need to spend around 10% less on mobility. Through rapid build-up of self-driving vehicle fleets, car manufacturers will sell up to 28% more new cars over this period than they do currently. In the long term, however, shared use will mean 25% fewer cars travelling on the roads in Europe and the USA and in other mature markets, compared to today.

The market volume in shared mobility is set to rise annually by 24% in Europe, the USA and China alone over the period from 2017 to 2030, to EUR 1.3 billion. By 2030, around 33% of all new vehicles will be used for shared mobility. Alex Koster, Managing Director at Strategy& and co-author of the study, explains: “The transition to shared or self-driving fleets means a massive upheaval for the automotive sector. In future, vehicles will be used far more intensively than is the case for private cars today. Given the rapid depreciation, business segments such as the used car trade will become less relevant, and the manufacturers will also be increasingly engaged in regular servicing work on fleet vehicles. Moving forward, the competition is a different one: through fleet management, regionally different transport regulations and infrastructure, mobility is set to become a local business. We anticipate tough competition at city level, with significantly lower margins for the individual market participants. There will be no global market leaders or strong dominance of any individual mobility model, given the wide-ranging mobility requirements.” In the medium term, the strong demand for self-driving fleets will also result in convergence and a parallel competitive situation involving e-commerce players, logistics companies and fleet operators.

With a view to their future role in the “roboconomy”, automotive manufacturers need to decide whether they want to be infrastructure operators with their own end-customer service, to adopt a role as intermediary between the mobility providers and end-customers, or to retreat to today’s core competences of vehicle development and of their integration capacity as a parts supplier network. Market potentials present themselves, for instance, via functional enhancements or improving cars by using digital technologies that reduce manufacturing or servicing costs and increase customer lifetime value. In the long term, however, successful market participants will also have to overcome the challenge of breaking out from the individual categories and developing into an overarching hub for services and e-commerce.

“Shareholders expect a clear strategy for how the car manufacturers are going to handle the transformation from the current hybrid status to clearly-differentiated mobility business areas. Owing to the far more frequent and more direct customer contact in future, the car sector needs a significantly more customer-centered approach, not least when it comes to research, and it needs to be looking to strategic partnerships with technology firms when developing digital services,” concludes Koster.

About the study
For the “Digital Auto Report 2017”, Strategy& conducted over 50 interviews worldwide with managers of automotive manufacturers and suppliers, academics and analysts. In addition, the study investigated R&D pipelines and current test series for connected, self-driving and electric vehicles.

About Strategy&

Strategy& is a global team of practical strategists committed to helping you seize essential advantage. We do that by working alongside you to solve your toughest problems and helping you capture your greatest opportunities. We bring 100 years of strategy consulting experience and the unrivaled industry and functional capabilities of the PwC network to the task. We are part of the PwC network of firms in 157 countries with more than 223,000 people committed to delivering quality in assurance, tax, and advisory services.

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Meike Hegge
Senior Manager Marketing & Communications
PwC Strategy& (Germany) GmbH
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