Today, it seems nearly every incremental advance is labelled a ‘disruptive technology’. But being able to turn off the lights with our smartphone is not a technology revolution. That we have electricity running to our homes in the first place? Now that was a disruptive technology. It’s not simply a matter of semantics: by setting the bar too low for what constitutes true disruption, we risk focusing on the wrong priorities, wasting time and resources—and missing the real transformational opportunities before us.
Mobility is not immune to the hype. Given the excitement and attention around the convergence of vehicle electrification, autonomy, and shared mobility, in particular, it’s worth asking: is this a true disruption? To understand if the trends shaping the future of mobility rise to this level, let’s go back well over 100 years and examine the last time three truly disruptive technologies emerged and converged in transportation: mass-produced cars, distributed electricity, and the extraction and refinement of petroleum.
Is new mobility a true disruption?
In 1908, the first Model T rolled off the Detroit assembly line of the Ford Motor Company. Thanks to the efficiencies from mass production, the price dropped from US$825 to US$360 over the vehicle’s 19-year production run. It became the first truly affordable car for the masses, and in the process reshaped how Americans got from A to B. More than 16 million were sold, and even today the Model T remains among the ten most-sold cars ever.
At nearly the same time, electric power was being extended nationwide (interestingly, Henry Ford’s first job was as an engineer at Edison Electric). In 1895, Niagara Power State No. 1, an AC plant powered by Westinghouse generators, came online, proving that electricity could be generated remotely and then distributed over a wide geography. That advancement enabled the eventual electrification of the entire continental US. Still, electrical power remained difficult to transport and store, which led to the third truly disruptive technology: oil extraction and refining.
Driven by John D. Rockefeller’s Standard Oil, which controlled 91% of oil production at its peak in 1904, the emergence of the modern petrochemical industry enabled the creation of today’s internal combustion engine (ICE)-driven transportation system. 99% of the global vehicle fleet runs on refined petroleum products. Together, these three technological disruptions fundamentally reshaped how people and goods moved about and how entire swaths of the economy were organised.
Will the convergence of electric powertrains, shared mobility, and vehicle autonomy similarly disrupt the extended automotive ecosystem—including key partners such as petrochemicals and advanced materials providers? And if so, how? The answer is important; a significant part of the global chemical industry is tied to the automotive sector. Indeed, the American Chemistry Council has widely reported that there are around US$3,000 worth of chemicals in every car, and that 50% of the physical volume of a car is constructed from materials sourced from the chemical industry.
Electric motors enable the reimagination of what a vehicle can be
Let’s first consider the electrification of vehicle powertrains. Just as the widespread availability of electricity to homes and businesses reordered how, where, and when work could be done, replacing ICEs with electric motors will enable the reimagining of what a vehicle can be. The ‘under the hood’ architecture and bill of materials changes dramatically. Gone is the need for engine oils, engine cooling systems, fuel tanks, and more. To offer one specific example: the ICE-powered VW Golf has 167 moving or wearing parts; the fully-electric Chevy Bolt has 24.
99% of the global vehicle fleet runs on refined petroleum products. Together, these three technological disruptions fundamentally reshaped how people and goods moved about and how entire swaths of the economy were organised
Shared mobility, from ride-hailing and car-sharing to ‘micromobility’ services like e-scooters, will impact materials in many ways. Perhaps most directly, it could contribute to there simply being fewer individually-owned cars being sold, to the extent that consumers forego personal vehicles for a suite of on-demand options. Relatedly, the biggest impact for materials suppliers may come from a shift in who is buying vehicles. Today, cars are designed for and marketed to individual consumers. This influences many material choices, from paint colour to interior finishes. In a shared mobility world, the car buyer will likely shift from individuals to fleet owners/operators, especially as autonomous vehicle technology becomes more prevalent. The utilisation of a car goes from 10% to say 80%, which necessitates different, perhaps more durable materials of construction.
Autonomy will require a car to see and be seen, and it will come with a suite of sensors, likely requiring a variety of new, specialty materials. More prosaically, cars that don’t crash don’t need to be re-painted, with implications for aftermarket suppliers. Safety requirements are likely to shift, in turn prompting changes in the materials used to design everything from headrests to bumpers. The entire interior could be reconfigured: Will steering wheels still need a soft touch wrapping when they are rarely used? Will there be a steering wheel at all?
Significant and disruptive impacts—but at what speed?
Directionally, the development of shared, electric, and autonomous vehicles appears to have the potential to significantly disrupt the petrochemical and advanced materials industry. But how significantly? To more fully understand the impact, Deloitte conducted a table-top analysis. We considered over 40 major classes of materials (representing literally tens of thousands of individual product grades, from paints to polymers) used to manufacture the components of a modern light vehicle. We looked separately at the interior, exterior, and under-the-hood applications and asked a simple question: Will the shift to shared mobility, electrification, and autonomy significantly impact (or perhaps even eliminate) the use of these classes of materials in automotive applications? We found that 71% of material classes would be affected by electrification, nearly half by autonomy, and one-third by greater adoption of shared mobility. We would argue those are significant and disruptive impacts, by almost any measure.
Encouragingly, in our conversations with oil, gas, and chemicals executives, we see little disagreement that the shifts in mobility are truly disruptive and that they will impact their businesses. What’s less clear is the second-derivative question: What is the rate of this change? Therein lies the potential for massive disruption to business models—and this is a particularly difficult question for the chemicals industry. Managers in these companies have spent their careers at the ‘top of the S-curve’ of product maturity. Many product classes have been around for 80 years and are managed as such.
The bottom of the S-curve of technology adoption is completely different. The ‘numbers’ of a new technology are low, and the growth looks linear. Not without reason, a common response is to wait and see. The risk, however, is that it is easy to miss the moment when the second derivative—the rate of change—goes positive, which is the same moment when hard decisions must be made (to increase R&D, sell a business at its peak value, or adopt new business models, for example). Unfortunately, it is all too common to wait until the adoption rate is strongly accelerating, and by that time it can be too late. Economic history is full of such examples.
It is possible that the convergence of electrification, shared mobility, and autonomy will be typical of the last 40 years, with incremental change. But there is also a more disruptive scenario that should be considered, one that moves beyond material substitutions to shifts in actual material production and supply chains—a world of shortages of key materials (for example, cobalt), new and unlikely competitors, vastly different purchasing behaviours, and dislocation to typical chemicals and materials channels.
Well-known operating models could come under pressure, requiring skills and talents that petrochemical companies do not typically possess or unanticipated technology and business model innovations that require petrochemical producers to operate and perform differently. The odds of such a disruptive future coming to pass are difficult to know, but it behooves market participants to consider and plan for all possible scenarios.
About the authors: Robert J. Kumpf is a specialist executive with Deloitte Consulting LLP; Duane Dickson is a vice chairman and principal in Deloitte Consulting LLP’s Energy Resources & Industrials industry group, as well as the US Oil, Gas & Chemicals sector leader and the Global Chemicals & Specialty Materials Consulting leader