Transformation is well underway, as advancing technologies, economic factors and lifestyle trends foster an era of mobility.
Industry as we know it is at a crossroads. A number of disruptive forces are shaping how people and goods move from point A to point B. From emerging technologies and increasingly demanding consumers — to the deployment of smart city innovations — the issue of mobility is at the forefront of global discussions. In addition to triggering a renewed analysis of business models, industry leaders are actively engaged in establishing a mobility future while sustaining profitable growth.
Industry executives are clear that the mobility ecosystem is vast—and evolving rapidly. The implications of connected, autonomous, shared and electric vehicles go far beyond the automotive industry into other areas, such as mass transit, infrastructure, regulation, finance and insurance. As you navigate the related challenges and opportunities, many questions remain.
|Key mobility questions to consider|
The world around us continues to get smaller. With the rise of the World Wide Web in the 1990s, people around the world were able to easily communicate with one another in real time. Ideas were exchanged, best practices established and the modern business environment began to take shape. The industrial and consumer Internet of Things (IoT) promises to evolve, or potentially disrupt, the way we communicate to both one another and the devices that we depend on each day.
The connected car is a vehicle that has the ability to communicate with any number of things, including other vehicles, the physical infrastructure in which it operates, the electric grid that helps power it (in the case of electric vehicles) and to any number of smart devices and apps.
Given the broad scope of interaction, the possibilities around the connected car seem limitless. To provide some context, PwC predicts that by 2022 the connected car space could grow to $155.9 billion, up from an estimated $52.5 billion in 2017. However, these revenues will become increasingly fragmented as a result of new services, technologies and suppliers.
What other trends will impact the connected car space? What challenges lie ahead and what does your organization need to do to prepare?
The idea of sharing a ride certainly isn’t a new one. People have been carpooling for decades to save money on gas, reduce the wear and tear on their vehicles and limit the amount of rush hour stress behind the wheel. However, since the turn of the century a new form of shared mobility has started to emerge. The idea of building an entire service platform around shedding private ownership of vehicles has resulted in companies offering consumers a number of new transportation alternatives. The largest trends, ride sharing and car sharing, offer direct competition to traditional taxi cabs and private ownership. The appeal of these services varies widely based on a number of factors, including frequency of transportation needs, proximity to urban areas and economics compared to ownership and privacy.
Recent investments and rapid population growth in urban areas are strong indicators that shared mobility will become an increasingly important option for the world’s population. According to the United Nations, 1.5 million people are added to the global urban population every week. At that rate, over 60% of the world will live in urban areas by 2050, up from less than 50% today. As people continue to migrate closer to cities, the appeal for shared mobility services will likely increase. Beyond the growing choices of ride and car sharing, additional options for sharing other forms of transportation like scooters, bicycles, shuttles and microtransit routes have also seen a significant uptick as consumers look to expand their mobility options. Increased data sharing and analytics are expected to improve the user experience and ROI for companies, further diversifying the mobility ecosystem in the coming years.
Several self-driving technologies already in use today are designed to improve safety, including rear view cameras, automatic braking, adaptive cruise control, lane departure warning and blind spot monitoring. These options can be increasingly found in Level 1 (function-specific) and 2 (combined function) autonomous vehicles and are quickly becoming standard.
The path to level 3 (limited self-driving) and 4 (full self-driving) autonomy is a bumpier road, as challenges exist around high-definition mapping, interacting with (and predicting) human drivers and adapting to changing infrastructures and conditions, as well as many other considerations. This is not to say that these aren’t being aggressively worked on. Rather, the complexity of these challenges requires significant investment and cooperation, the fruits of which will likely not be seen for some time. While the world is on an inevitable road to self-driving vehicles, it is a long and winding one. Taking into account these challenges, PwC’s Strategy& team anticipates that by 2025 a mere 7% of global new vehicle sales will have level 3 capability, with only 1% capable of full self-driving.
Regulatory bodies certainly have their hands full these days. While most of the world continues to push for increasingly stringent fuel economy and emission targets, vehicle safety standards still vary significantly between mature and emerging markets, and to date have prevented penetration by new companies in the former.
As with the development of any new technology or concept, multiple options and paths emerge. It is impossible to have a standardized set of rules or specifications until the technology has matured to a critical point. To that end, governments and regulatory bodies have had a difficult time keeping up with how to create a playbook to help guide the development of autonomous & connected vehicles, and how they interact with the world around them.
There have been both benchmarks and cautionary tales along the way about how to best regulate and partner with those driving innovation. Regardless of the path, public safety must be paramount. Municipalities are increasingly reaching out to technology companies, academia and service providers to come up with the best possible combination of public and private partnerships, all while keeping its citizens safe.
Upkeep is expensive. Maintaining roads, bridges, tunnels, power plants, the electric grid, water supply and other services that society needs to prosper comes at a daunting cost. On top of simply maintaining these crucial components, planners are taking into account future infrastructure requirements. Integrating things like road sensors, next-gen parking meters, lights, garages and other other smart technology into planning has allowed cities to more effectively utilize their limited space as populations continue to grow within their borders. PwC estimates that over $4.5 trillion will be spent globally each year on infrastructure between now and 2020. While many politicians have championed heavy infrastructure investment, coming up with the needed funds can be a difficult task. With tax dollars strained, there is an increased reliance on private investment to help drive infrastructure projects.
PwC’s Capital Projects and Infrastructure team has identified additional technologies like autonomous vehicles, 3D printing, drones, augmented reality and the Internet of Things (IoT) that will help to transform infrastructure from a traditionally predictable, engineering-driven, labor-intensive set of projects into a living, breathing landscape of innovation.
Easing urban congestion is a complex issue. Many experts agree that a host of technologies and modes of transportation offer the best hope of improving how people and goods move from point to point. Increasingly, cities are leveraging data to better understand how its citizens and goods are traveling, allowing for more efficient and customized solutions based on factors like population density, climate and layout.
Part of the solution may be the connected car and its ability to communicate with the world around it. Subways, trains, buses, taxi fleets and other modes of transportation are also working together to improve quality of life by increasing their interaction with one another. By sharing information, our society may be able to decrease maintenance and improve flow during peak usage times with the help of predictive analytics.
The emergence of autonomous and connected vehicles is likely to have a dramatic impact on sales, finance and insurance models. Additionally, as more of the population continues to gravitate toward urban areas where options like mass transit and ride and car sharing are increasingly available, vehicle purchases (particularly in mature markets) have the potential to suffer.
The overall customer experience of buying a vehicle has already begun to change with online shopping, car delivery services and direct sales to consumers that can leave dealerships out of the loop entirely. The pie runs the risk of shrinking for auto lenders as well. In an effort to get in front of these trends, new financing models have already been introduced in conjunction with ride and car sharing companies to incentivize new vehicle sales to non-traditional consumers. Further transparency of loan modeling, as well as continued transformation of finance options to improve the customer experience are also expected to drive transformation.
Insurance will also be significantly affected. As autonomous and connected vehicles offer the promise to improve safety to pedestrians and reduce vehicle to vehicle collisions, insurance costs could plummet. While the exact rate of adoption remains unknown, the near-term impact will likely result in lower premiums for drivers. Longer term, the overall insurance market is expected to see a continued decline as claims decrease. Some insurance providers have begun offering Usage Based Insurance (UBI) as one alternative option for those who are either not regular drivers or participate in ride and car sharing programs.
Digital has been one of the largest drivers of technological innovation since the turn of the century, becoming an integral part of the mobility initiative. Products and services offered while traveling, including in-vehicle e-commerce and social media apps, are examples of the huge role this technology plays in the overall customer experience. Digital is also helping to improve supply chains, a key theme of Industry 4.0.
Of course with so many participants offering products and services, which are often layered on top of one another with increasing complexity, the risk of cybersecurity threats becomes very real. For e-commerce and other applications that require payment or other sensitive information, blockchain is seen as a key safety measure that is being used in a growing number of areas. Further consolidation and collaboration of digital systems is another step being taken: working together and finding communization represents a common sense approach to minimizing risk. However, at every turn, hackers continue to evolve—so the fight goes on.
Automotive Leader, PwC US
Automotive Director and Mobility Leader, PwC US
Tel: +1 (313) 394 6098
Global Automotive Leader, PwC Germany
Tel: +49 711 25034 3309