2013-09-05

3 Ways The Automotive Industry Will Change By 2020

Self-driving vehicles? All electric fleets? See what's next for car makers.

Electric vehicles, autonomous cars, vehicle-to-vehicle connectivity—anyone who pays even a little bit of attention to the automotive industry has an inkling of what the future of driving will look like. In a new report, McKinsey & Company outlines how the global auto industry will shift by 2020. Hint: It's a whole lot different than what you might expect.

Below are McKinsey's three big takeaways:

Your fully autonomous car is not coming anytime soon

Autonomous vehicle technology will be adopted in stages, according to Hans-Werner Kaas, the senior partner at McKinsey who co-authored the report. Semi-autonomous safety technology, such as features that would prevent you from accidentally steering off the road, will be adopted first. But automakers have a number of decisions to make, including which of these safety technologies are most likely to be adopted by consumers and how to handle liability issues.

"It's not just a binary jump from today's vehicles to autonomous vehicles," says Kaas. Volvo's prototype highway trains, which let drivers take their hands off the wheel in designated "road trains," exemplify the kind of stepping stones we might see before fully autonomous vehicles take over.

They may not be autonomous, but a large number of vehicles will be connected in some way by 2020—whether to wireless networks, diagnostic tools, or each other. One in five will be connected to the Internet, with the number of connected cars expected to jump 30% each year for many years to come.

The internal combustion engine is hard to beat

Environmental regulations for vehicles are tightening around the world, with carbon dioxide emissions rules in Europe and China, as well as fuel economy standards in the U.S. This will lead to a rise in hybrid vehicles—McKinsey predicts that they will make up 20% to 25% of all vehicles by 2020. But the internal combustion engine will still be king, present in more than 90% of vehicles (including those hybrids). Fully-electric vehicles probably won't make up more than 5% of all vehicles manufactured, according to McKinsey.

Kaas says there are two reasons for this: the high cost of electric vehicle batteries and consumer "range anxiety," or the fear that an EV will run out of juice while on the road. "It's something that does need to be addressed in a more educational manner," he says.

Emerging markets are a big deal

Today, established markets (like the U.S. and Europe) make up 50% of all vehicle sales. That number will drop to 40% by 2020. One big reason: small vehicles—like microcars and subcompact vehicles—continue to grow in popularity. More than 60% of these vehicles are sold in emerging markets, and more specifically in urban areas. "The amount of shift of the profit pool towards emerging markets is quite substantial," says Kaas.

That's not to say the number of vehicles per consumer is declining in the U.S, despite recent reports to the contrary. Says Kaas: "For younger, affluent consumers, vehicle ownership remains a very relevant investment priority. I do not see a fundamental shift in terms of vehicle ownership being on the downward slope."

[Image: Night Lights via Shutterstock]

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7 Comments

  • Renate Jakupca

    One design concept that would simplify everyone's life is to put the gas tank filler cap on the same side of the car for all models - It is crazy the confusion this causes as cars jockey round and round at busy gas stations just to get fuel!

  • Steve Miskelley

    Paul - I would bet against Google in this case because NHTSA will take 20 years to study and approve its autonomous vehicle and its affects on other drivers.  They can't even approve drivers-side convex outside mirrors, even though its been shown they offer 17-30% improvement in field of view.  All other developed nations on earth use a variant known as an aspheric mirror on the drivers side.  And that's a no-brainer compared to the implementation of back-up cameras.  The bill requiring those was signed into law by George W. Bush and Sec. of Transporation Ray LaHood has delayed implmentation 5 times on the grounds that further study of the costs-per-life-saved are necessary.   Google will  likely be ready by 2017 but the project will die in governmental oversight and red-tape.  They would be better of introducing it in Germany or Japan.

  • Paul Godsmark

    Interesting that McKinsey have chosen to ignore Google's very clearly stated aspiration to have fully automated vehicle technology, capable of unmanned driving, in public hands by 2017.  I would think that could significantly change matters - and from my research certainly not something that I would bet against.

  • keithdude

    No mention of fuel cell vehicles relative to internal combustion engines and electric cars. I wonder if they view it as too early to tell. [Disclosure: I work for the California Fuel Cell Partnership.]

  • Matt

    So what they're saying is not much is going to change in the next 6 1/2 years, other than current trends will continue: more autonomy, more hybrids, and more new markets/manufacturers. Hint: most people expect all this stuff.

  • claudiosestili

    Hi, could you tell me where can i find the McKinsey report?
    Thanks
    Claudio Sestili

  • psghosh

    Isn't this the same McKinsey that told AT&T in 1980 that cell phones would be a niche market?