Five megatrends—technological breakthroughs; climate change and resource scarcity; demographic and social change; a shift in global economic power; and rapid urbanisation—provide the backdrop for many of the key uncertainties facing the automotive industry. The industry has not seen significant changes in the last 10 years, except for sleeker cars and more feature-loaded vehicles. The changing customer behaviour and regulators shaping the environment for competition will have a significant impact on the automobile industry over the next 5-10 years. This may portend billions of dollar shifts in the market, depending on how consumer demand will evolve with new technologies and habits.
Car-sharing and ride-sharing models are gaining popularity and acceptance worldwide. This is resulting in a shift towards valuing personal mobility over individual vehicle ownership. Many consumers are accustomed to using smartphones and tablets to meet their daily chores—so calling up a ride or looking for taxis on an app may feel like the logical next step. This is especially true in urban environments where the next shared car or ride may be only steps or minutes away. Hence, owning a car is less likely to be seen as a functional necessity. The impact on car sales due to change in customer preferences is difficult to estimate. While individuals using the service may choose not to buy cars, Uber/Ola drivers or fleet operators still need to replace cars that wear out. Expansion of ride-sharing schemes reflects continuing demand for individual mobility—and that could mean a much more positive outlook for the industry.
Urban consumers, who value convenience, immediacy and connected technology, drive the early adoption of the personal mobility model. They get most of their sense of freedom from social media, expect their transportation to connect with their personal technology, and welcome autonomous driving solutions that give them time to work, socialise or relax during their trip.
Governments around the world will have a significant influence on the automotive industry. Regulations around safety, as well as end-of-life disposal and emissions requirements, will shape product development, while labour regulation will impact production standards. Trade and financial regulations will affect the flow of cars from factories to markets, and the decisions on where factories of car makers and suppliers are located. Technological advances around autonomous driving features/vehicles will be profoundly influenced by the extent to which governments regulate these technologies—or choose to encourage them through subsidies or other incentives. Regulations around car-sharing and ride-sharing models will impact growth of those models.
Regulatory trends will be equally important to the industry’s future. Succeeding in emerging markets, especially China and India, will be critical for obtaining capital to compete globally and achieving economies of scale. If emerging market policies favour open competition, today’s leading manufacturers can reinforce their global positions in the future. More restrictive policies could lead to a localisation of business models, and how technological advances unfold will depend a lot on governments around the world.
The author is partner, PW, and an auto expert
This article is based on the global automotive report PwC released this week, called “Re-inventing the wheel: Scenarios for the transformation of the automotive industry”