Since its inception, the automobile has been a flashpoint for technological, economic, and social innovation, doing as much as any human invention to change how people live—largely, but not always, for the better. Now it’s time to buckle up again: the levels of disruption coming over the next dozen years are likely to exceed those of the previous 50 or more.
While much uncertainty remains about how, exactly, mobility’s “second great inflection point” will unfold, many of the critical building blocks, and their potential, are becoming clear. Key to these developments are four trends most easily remembered by the acronym ACES: autonomous driving, connectivity, the electrification of vehicles, and shared mobility. Another development—the prospect of hydrogen-powered mobility—is worthy of special attention because of its potential importance for electrification.
In this compilation, McKinsey experts provide quick overviews of how each trend is evolving. The mix of analysis, insight, and data-informed prognostication should serve as a useful thought starter for CEOs and senior executives, in any industry, who seek to understand what the mobility transformation underway could mean for them today and tomorrow.
Table of contents
- Mobility’s autonomous future
- Connectivity: Turbocharging the new mobility ecosystem
- Bending the cost curve for electric vehicles
- Hydrogen cars or battery electric vehicles—why not both?
- Ridesharing and the great urban shift
Part 1
Mobility’s autonomous future
By Kersten Heineke and Philipp Kampshoff
Autonomous vehicles hold the promise of massive social benefits—and industry disruption. Time to buckle up.
It seems a lifetime ago that the first DARPA1 Grand Challenge pitted 15 teams against one another in a driverless race across an uninhabited stretch of California’s Mojave Desert. The 2004 event, dubbed “Woodstock for nerds” by one participant, had no winner; the best performing car traveled fewer than eight of the course’s 142 miles. This was a modest start to what would become a technological revolution.
If the United States fully adopted autonomous vehicles, the benefit to the public would exceed $800 billion a year in 2030.
Fast-forward to December 2018 when Google’s Waymo announced the launch of a commercial autonomous-vehicle (AV) taxi service in the suburbs of Phoenix, Arizona. By October of that year, the company had already surpassed ten million miles driven in AV mode on public roads. Today, nearly every auto OEM and major supplier has an AV project in the works, and dozens of traditional competitors vie with tech upstarts for pole position in a market that promises to reshape the very nature of how people experience mobility.
To better understand the size and scope of the AV opportunity, the McKinsey Center for Future Mobility modeled more than 40 transportation use cases across a global mix of urban and highway settings, and under a range of technological, economic, and other conditions. The upshot? The global revenues associated with AVs in urban areas could reach $1.6 trillion a year in 2030—more than two times the combined 2017 revenues of Ford, General Motors, Toyota, and Volkswagen.
As important as these revenues would be for the providers of end-to-end mobility equipment and services, the effects on society would be more transformative still. If the United States, for example, fully adopted autonomous vehicles, the benefit to the public would exceed $800 billion a year in 2030 (exhibit).
Exhibit
- Nearly one-third of the benefit would arise from the public sector’s redevelopment of unnecessary parking spaces into more productive commercial or residential property. For context, the amount of land taken up by car parking in Los Angeles is more than 17 million square meters—equivalent to nearly 1,400 soccer fields.2
- About 15 percent would accrue annually to workers in the form of more productive commuting time. Further, we anticipate a yearly benefit of about one-half of 1 percent (somewhat less than $4 billion) in the form of reduced environmental damage, since, for example, more efficiently utilized vehicles idle less than others do.
- Finally, more than half of the benefits would stem from safer roadways and the avoidance of the millions of fatal and nonfatal accidents caused each year by human error. A comparable analysis of Germany found that by 2040, self-driving vehicles could save the country €1.2 billion a year through lower costs for hospital stays, rehabilitation, and medication alone.
Of course, not all the second-order effects of an AV-driven future are as unambiguously positive as saved lives. The insurance industry, for example, could face disruption if revenues from premiums shrink and new issues of liability arise; alcohol consumption could well increase as cars become more of a living space (and the crime of drunk driving becomes a memory); energy consumption would rise as self-driving cars, despite their efficiency, tap new pools of latent demand; and, most worryingly for cities, revenues from vehicle taxes and licensing fees would decrease dramatically.
About the authors
Kersten Heineke is a partner in McKinsey’s Frankfurt office, and Philipp Kampshoff is a partner in the Houston office. They lead the McKinsey Center for Future Mobility in Europe and North America, respectively.
Part 2
Connectivity: Turbocharging the new mobility ecosystem
By Michele Bertoncello, Gianluca Camplone, and Asad Husain
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.
One promise of the mobility revolution now underway is that as cars become connected—the nodes of vast information networks—a new dimension of value unfurls for drivers, auto manufacturers, and innovative service providers. 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.
Many manufacturers and suppliers already access a wealth of vehicle data to improve or refine their cars and services, and possibilities abound for other players to share information as new ecosystems form. Consider how connectivity-enabled services could let restaurants advertise to hungry lunchtime travelers along a given travel route. By using new forms of vehicle interactions (say, vocal commands or miniature holographic waiters) restaurants could offer menu options and preordering to save time when diners arrive.
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 1), representing a value pool ranging from $450 billion to $750 billion.1 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.
Exhibit 1
How this may play out for the insurance industry—a key link in the mobility value chain—is instructive (Exhibit 2). At level-1 connectivity, as insurers learn more about risk, drivers might receive a personal discount based on how and where vehicles are driven. Level 2 would aggregate additional profile-based data on drivers and the driving environment, providing insurers with an even better risk profile. At higher levels of connectivity (levels 3 and 4), systems could analyze risky driving practices and signal them to vehicle operators via voice messages. Those precautions could be reinforced with interactive games and tutorials on safer driving strategies.
Exhibit 2
Level-5 sensor systems would incorporate sensors that could detect driver fatigue and suggest rest time—or even allow the car to take over some key driver functions, such as braking or steering to avoid collisions. Much of the value would arise from the diminished risk of insuring a driver, and savings would likely be shared with consumers. An insurer’s in-car platform might get additional revenue from, say, coffee shops advertising to fatigued drivers. Beyond that, these enhancements would create a more compelling proposition that car manufacturers and dealers could offer potential buyers. At the same time, they would create societal benefits by reducing the social costs associated with automobile accidents (such as the hospitalization of injured passengers and road-infrastructure repairs).
In the future, of course, both car owners and riders in passenger vehicles will need to be convinced of the value of new offerings—particularly those commanding a price. They will also need assurances that the data they are increasingly willing to share are secure. Meanwhile, companies will have to organize themselves around new, customer-centric business models and be open to partnerships, particularly with digital giants and innovative start-ups. What’s certain is that the role of the car as we know it is up for revision: shifting from a mere mode of transport to a multimedia environment where connectivity is at the heart of a new customer experience.
About the authors
Michele Bertoncello is a partner in McKinsey’s Milan office, Gianluca Camplone is a senior partner in the Chicago office, and Asad Husain is an associate partner in the Toronto office.
Source: mckinsey
