What mattered in the automotive and mobility markets in 2019, and what will dominate the space in 2020? We look closer at the autonomous, connected, electrified, and shared trends that matter.

With many important achievements across the disruptive dimensions of mobility: autonomous driving, connectivity, electrification, and shared mobility (ACES). In 2019, electric-vehicle (EV) sales set another sales record globally, and EVs became much more prominent in the public awareness in major automotive markets, such as Europe. Many more cities have announced and already partially implemented further regulation of private-car-based mobility. Some players demonstrated truly driverless cars without backup drivers, setting new milestones in autonomous driving. Uber and Lyft—the two big disruptors in the ride-hailing space—went public in spring 2019. Also in 2019, regulators began granting approval to drone deliveries and to electric vertical takeoff and landing crafts, with these types of vehicles flying for the first time.However, 2019 was also a year of reality checks, as congestion and public-transportation woes reached new heights for cities around the world, realization timelines for technology like autonomous vehicles (AVs) were postponed, and some new mobility business models failed to win over investors. Economically, global automakers had a tougher time in 2018 and 2019, with several headwinds: higher expenses required to meet stricter emission regulations, global trade tensions, and slowing sales in key end markets. These triggered profit warnings at several large OEMs and suppliers.Given that key risks for the industry remain elevated and that competition from new mobility attackers is intensifying, the road ahead remains bumpy, as today’s reality delivers a mixed picture for the future of mobility. On the one hand, there are big expectations with regard to future technologies and business models; on the other hand, there is an urgent need for a “double transformation.” In other words, preparing companies for the mobility of tomorrow also means making today’s business crisis resistant.

Please join us as we reflect upon this past year’s milestones and look ahead to what we expect will be the continued momentum and additional wake-up calls that will keep on shaping the movement of people and goods going forward.

Investments across the mobility landscape

First, we see continued acceleration of investments in the relevant technologies—with e-hailing, semiconductors, and sensors for advanced driving-assistance systems and autonomous driving still being the front-runners (Exhibit 1).

On a regional level, activity in the United States is strongest, but tech-intense locations, such as Israel, also play important roles in the mobility ecosystem. (Read more in “Israel: Hot spot for future mobility technologies.”)

And the automotive industry actually is quickly turning into a true mobility ecosystem. OEMs have traditionally worked hand in hand with tier-one suppliers, but today, we are seeing the emergence of a broader ecosystem. This ecosystem is coalescing, as high-tech players enter the market, incumbents form new partnerships, and tier-two suppliers cut in line to offer products and services directly to OEMs, thus bypassing tier-one companies.

By our analysis, an OEM would have to invest nearly $70 billion to gain a defensible position across the critical ACES technologies. Hence, there is a renewed interest within the automotive industry for cooperation (Exhibit 2). For decades, OEMs have shared the financial burden in core areas like engine development and production. But given the challenges ahead, cooperation will become an even bigger success factor.

Let us now have a look at the 2019 highlights of each of the ACES trends.

Autonomous driving

For investors, executives, and enthusiasts alike, autonomous technology and self-driving cars have long been some of the most interesting areas within the future-of-mobility space. This continues to be so. But 2019 certainly was a year in which optimistic forecasts had to be scaled back to a certain degree. Progress in AV technology was not as fast as previously anticipated; both value and premium OEMs—as well as tech players—revised their schedule for level 4 and level 5 applications, sometimes by years.

Yet the underlying logic for autonomous driving, especially in cities, remains intact. We believe electric, shared AVs—also called robo-taxis or -shuttles—could address mobility’s pain points in cities (such as road congestion, crowded parking spaces, and pollution) while revolutionizing urban mobility, making it more affordable, efficient, user friendly, environment friendly, and available to everyone. If integrated seamlessly in the public-transportation system, it will be an important enabler in reducing today’s share of private-car traffic (Exhibit 3).

As our colleagues explain in “Change vehicles: How robo-taxis and shuttles will reinvent mobility”: “To reduce the levels of uncertainty surrounding shared AV mobility, the McKinsey Center for Future Mobility (MCFM) has developed a detailed and holistic model based on a thorough fact base, consumer surveys, expert estimates, and extensive discussions with relevant stakeholders.”

Of the global markets for AVs, China catches the eye (Exhibit 4). It has the potential to become the world’s largest market for AVs. As colleagues outlined in “How China will help fuel the revolution in autonomous vehicles,” “in our base forecast, such vehicles could account for as much as 66 percent of the passenger-kilometers traveled in 2040, generating market revenue of $1.1 trillion from mobility services and $0.9 trillion from sales of autonomous vehicles by that year. In unit terms, that means autonomous vehicles will make up just over 40 percent of new vehicle sales in 2040, and 12 percent of the vehicle installed base.”

While the new technologies will surely generate enormous value, no one can say where the economic profit will flow—or when.

For more, see “Development in the mobility technology ecosystem—how can 5G help?

Connectivity

Connected cars are poised to become potent information platforms that not only provide better experiences for drivers but also open new avenues for businesses to create value. Conventional vehicles, once heralded as “freedom machines,” will evolve into information-enveloped automobiles that offer drivers and passengers a range of novel experiences, increasingly enhanced by artificial intelligence and intuitive interfaces that far surpass today’s capabilities. The key success factor for connectivity services is the clear value proposition the offering has, either to an external customer or to an internal stakeholder. It seems that this value is very often created only by combining data assets and capabilities from various partners.

As our colleagues lay out in “The trends transforming mobility’s future,” “we have identified five levels of connectivity, each involving incremental degrees of functionality that enrich the consumer experience, as well as a widening potential for new revenue streams, cost savings, and passenger safety and security. These levels reflect the potential for connectivity to stretch from today’s increasingly common data links between individuals and the hardware of their vehicles to future offerings of preference-based personalization and live dialogue, culminating with cars functioning as virtual chauffeurs. Our research suggests that by 2030, 45 percent of new vehicles will reach the third level of connectivity [Exhibit 5], representing a value pool ranging from $450 billion to $750 billion. Our surveys also indicate that 40 percent of today’s drivers would be willing to change vehicle brands for their next purchase in return for greater connectivity.”

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