Recurring revenues in the global automotive market could explode from $30 billion in 2015 to $1.5 trillion in 2030 thanks to the massive growth in new services, not least in the field of shared mobility, consultancy firm McKinsey & Partners reckons.
Interestingly, this shared mobility is likely to slow down global vehicle sales, but not reverse it. In fact, increasing vehicle demand in developing markets such as Asia will more than compensate for the loss of sales in Europe and the U.S. In 2015, some 87 million private vehicles were sold across the planet. According to McKinsey, this volume will grow to 115 million vehicles by 2030.
Where these 28 million extra vehicles come from? As a result of macroeconomic growth and urbanisation, McKinsey thinks emerging markets will add 41 million vehicles to the global count. On the other hand, declining private ownership is expected to take 23 million units off the balance, which is partly offset by the extra sales of shared vehicles, representing an estimated 10 million units.
In other words, OEMs will have to reinvent themselves, moving away from sheer manufacturing and selling conventional cars towards new services and purpose-built vehicles. McKinsey identifies four trends – the same ones already embraced by OEMs like Volkswagen (I.D.) and Mercedes (EQ): connected cars, electrification, shared mobility and autonomous driving.
Sharing mobility, not the cake
If there is one phenomenon that has already shaken the global automotive industry, it is shared mobility. OEMs are facing huge competition from the likes of Uber, Lyft (U.S.) and Didi (China), which are gaining in market valuation. In 2016, shared mobility was worth $53 billion across the U.S. ($23 billion), China ($24 billion) and Europe (just under $6 billion).
Indeed, Europe’s market is substantially smaller than the American and the Chinese. The reason, according to McKinsey, is that Europe is much more fragmented, with countries and large cities taking individual initiatives, In the U.S. and China, the markets are much more uniform, i.e. dominated by e-hailing players: in the former country, Uber takes 85 percent of the cake; in the latter, Didi has 95 percent of the business.
No one-size-fits-all solution
Clearly, there is no mobility model that works everywhere. Berlin, for instance, has limited e-hailing possibilities due to taxi regulations, but car sharing is well developed. Beijing, on the other hand, is strongly focused on ride-hailing through mobile devices.
A 2017 consumer study by McKinsey shows that the majority of users expects to increase their usage of both non-taxi ride- hailing services and car sharing significantly. Still, shared mobility today makes up only about 1 percentage point of the 30 percent of annual vehicle miles that could actually be travelled with non-shared means of transport.
Driverless, purpose-built vehicles
Further success of shared mobility largely depends on cost. OEMs therefore need to consider building purpose-built vehicles, with a lower degree of complexity, easier to clean interiors, less complicated assembly processes and lower distribution costs. McKinsey believes this could reduce vehicle cost by 25 percent.
The biggest cost factor, however, remains the driver. Today, car sharing is hardly viable economically in cities with less than half a million inhabitants. With self-driving cars, mobility players can reposition their cars in an optimal fashion, assuring adequate coverage with smaller fleets.