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3 Ways The Automotive Industry Will Change By 2020

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

[Image: Night Lights via Shutterstock]

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."