Over the past ten years, the keys to business success have changed markedly. As a result, technology giants in the US and China now dominate the ranks of the world’s biggest companies—and technology players are casting their net wide. In today’s transport field, the potential of electric cars and data-driven solutions as future sources of profits are causing traditional players to rethink their business models.
The forces of change will be equally unstoppable in the ’20s, and the winners in business will be those companies that embrace disruption. What will this mean for mobility companies?
New profit pools will emerge in automotive
Technological advances and changes in behaviour will usher in, or accelerate, new ways of getting around. Electric cars will become commonplace, with battery electric (BEV) and plug-in hybrid (PHEV) vehicles accounting for 20% of new car sales by the end of the decade. Demand for self-driving vehicles and shared mobility will also increase. By 2030, autonomous vehicles (both personal and shared) will represent around 10% of new car sales, and on-demand mobility will account for the same proportion of passenger miles.
The biggest transformation in vehicles in the ’20s will be their connectivity. At BCG, we estimate that nearly all new cars sold by 2030 will be connected to the internet, enabling sharing of data between devices inside and outside the vehicle using 5G wireless technology. This, in turn, will open up the prospect of greater connectivity with road infrastructure and other vehicles—a prerequisite for self-driving cars—as well as opportunities in predictive maintenance, dynamic traffic management and improving the customer experience.
These trends will bring an end to the steady rise in sales of cars powered by internal combustion engines that automakers have enjoyed since the 1950s. From the middle of the 2020s, total global vehicle sales will plateau as self-driving, on-demand mobility models and vehicles curb consumers’ appetite for private car ownership—enabling planners to redesign cities so they better meet the needs of pedestrians. Sales of traditional vehicles are projected to dip even sooner, as we will explore in a separate article.
Automakers can expect to see a radical shift in profit pools in the years ahead. The global market in automotive and car mobility will continue to grow—rising to over US$5bn in revenues by 2030—but the traditional activities that have supported automakers, including traditional components, sales of gasoline, diesel and hybrid-electric vehicles, financing, and aftermarket support, will increasingly take a back seat.
By the end of the decade, we forecast that new profit pools in sales of BEVs, components for electric and autonomous vehicles, data and connectivity services, and on-demand mobility offerings will account for 26% of industry profits—and 40% by 2035 (See Exhibit 1). The shift will favour tech-savvy suppliers and will pressure automakers to invest in new capabilities if they are to compete.
We estimate that the market for automotive-related data and connectivity alone will be worth more than US$200bn by 2030. This includes sensor-based smart parking systems to help drivers locate parking bays as well as charging networks for electric vehicles. But opportunities will also emerge in other areas, including operating fleets for ride-hailing and vehicle sharing, and providing traffic management and journey planning services (See Exhibit 2).
Cities will take an active role in urban mobility
The importance of urban transport will increase. By 2030, about three-fifths of the world’s population will live in cities, many of them in super-sized megacities. For municipal authorities, the ability to attract talented individuals with digital and entrepreneurial skills will be an ever more important differentiator.
Cities will be actively involved in developing efficient mobility networks and tackling congestion and emissions so that they can create the high-quality urban environment that will lure skilled workers. For example, since 2010, Moscow has steadily been pedestrianising its streets and introducing cycle paths and bike-sharing to make the city more liveable and boost its competitiveness.
For new technologies to take hold, we anticipate that different mobility players will organise themselves into an ‘ecosystem’, blurring the distinction between competitors and collaborators. Savvy planners will orchestrate the ecosystem in their city and collaborate with software companies, fleet operators, and micro-mobility companies.
Doing so will enable them to bring order to the competing demands of new and existing mobility operators which threaten to overwhelm some cities. In Berlin today, for example, users can select from more than 20 services, including shared electric bikes, cars, kick scooters, and electric scooters. But by taking control, cities will also tackle municipal goals, including access for disadvantaged social groups, improved road safety, and reduced congestion and emissions, and meet the needs of their citizens.
BCG recently supported a leading European city with its mobility vision for the future. By conducting wide-ranging interviews asking stakeholders about their concerns, creating a framework to help analyse the key characteristics of different mobility offerings, and benchmarking the city against its peers, we created a strategy with the aim of reducing private vehicle usage in the city by 40% by 2030.
Urban mobility platforms will transform city transport
Regulation will remain an important lever for cities to govern players in their transport networks. But the emergence of urban mobility platforms—digital interfaces that link different mobility options and enable customers to easily and seamlessly navigate their journeys—will allow cities to better organise the mobility ecosystem through access to the platform. At the same time, data about myriad customer journeys collected from the platform will provide valuable insights for planners.
Ownership of these mobility platforms is likely to develop along regional lines. In the US, entrenched mobility providers such as transport network companies and ride-hailing firms could morph into platform companies, leading municipal authorities to select them as preferred partners to develop new platform-based transport offerings in their cities. In Europe, cities are more likely to prioritise neutrality and select software companies that can impartially integrate different mobility players on the platform, leaving the authorities to decide how it operates and who can join.
Although platforms will develop differently in different regions, we expect that successful providers will meet some or all of the following five imperatives. They will make urban mobility as simple and convenient as possible by offering a smart and seamless end-to-end travel experience; act as unbiased brokers to gain the support of municipal authorities and mobility operators; keep barriers to entry low and use common APIs to encourage mobility operators and other stakeholders to join; tailor their offerings to the requirements of individual cities; and develop a modular approach so that their offerings can easily be scaled up in new locations.
Both last-mile delivery within cities and logistics services between cities will be transformed by new technologies in the coming decade. The growth in e-commerce, and increasingly transactions conduced over mobile devices, will make new demands on logistics providers. At the same time, 3D printing techniques will enable suppliers to produce smaller lots closer to the point of sale. We expect logistics providers to rise to the challenge by using drones and autonomous vehicles to deliver goods faster, more cheaply, and to remoter locations.
Preparing for change
In the 2020s, established mobility players will have to act boldly in response to the changing business landscape if they are to thrive. In the short-term, they should review their M&A pipelines and identify opportunities that can fill technology and capability gaps in the company’s portfolio—keeping autonomous vehicles and other future mobility needs in mind. In the medium- to longer-term, companies will need to innovate and expand into both adjacent and new business fields, using incubators, innovation labs and venture capital to do so. If they do, companies can embrace the uncertainty of the new decade, and come out ahead.
About the author: Arturs Smilkstins is Partner and UK Automotive & Mobility lead at Boston Consulting Group