The 2020 Strategy& Digital Auto Report Series

Navigating through a post-pandemic world

Post pandemic market dynamics

The ninth annual global Digital Auto Report offers a quantitative market outlook to 2035 based on detailed survey research and interviews with a number of industry executives at OEMs and suppliers, leading academics and industry analysts. The survey has a consumer focus covering the US, EU and Asia, and the findings will be published as a series. 

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Regulatory changes, changing expectations and smart mobility (volume 1)

  • With adjusted technology expectations and changing post-pandemic customer preferences, CASE evolves. Data shows that consumers do not expect fully automated cars before early 2030s and shared mobility growth is slowing down.
  • The total vehicle parc is expected to shrink in Europe while growing in the US and China by 2035, driven by regional differences in: 1) mobility demand growth; 2) customer preferences of shared mobility; and 3) vehicle disposal rate.  
  • Due to regulatory requirements in the EU and US, basic connectivity is now incorporated in over 85% of new cars sold in these regions this year, while China is still at 44%. 
  • In electric mobility, the EU and China are leading the transformation, with battery electric vehicles (BEVs) expected to account for 17% and 19% of new vehicle sales by 2025. The US will have a lower penetration of 5% by 2025 due to lower government support.
  • Shifts in individual mobility patterns require a new segmentation approach along private-versus-shared and active-versus-passive driving – each with multiple use cases at different levels of automation.
  • Given the increasing proliferation of use cases and business models, many players will have to reevaluate their CASE strategies with a fact-based view on available technology, value pool sizes and unit economics, as well as investment requirements and their right-to-win.

Capturing CASE value opportunities requires refocused investment strategy aligned with player’s core capabilities (volume 2)

  • The expected market potential of CASE use cases vary among +60 industry experts in Europe, the US and China:
    • Connected: Behind first peak with most value expected in B2B applications 
    • Electric: While BEV use cases approaching plateau stage, fuel cell not yet at peak
    • Automated: Higher value expectations in Level-4 goods transport than in private passenger transport
    • Smart mobility: Micro-mobility with high value expectation – on par with ride hailing; view on air taxis not yet converging
  • A large number of well funded startups is trying to capture this market potential putting traditional automotive players under pressure in connected, electric and automated driving
  • For OEMs and suppliers, specific vehicle-centric business models are most promising despite strong competition
  • Looking at smart mobility, the line between traditional car sales / leasing and alternative ownership with rental / subscription / sharing / hailing / on-demand continues to blur. Cost per kilometer ranges between $0,7 (subscription) and $2 (ride hailing) vs. $0,6 (own car)
  • The market for alternative ownership models is expected to grow from $276bn to $1.084bn in Europe, USA and China by 2035 – led by Europe with $549bn vs. China $362bn given higher consumer prices in mobility and value captured per km in EU
  • The pandemic has widened the investment gap between OEMs and VCs and technology players. CASE investments of Top 10 OEMs went from 47 to 16 transactions in Q1/2 ’20 vs. previous year, while VC invest grew from 36 to 66 transactions and Top 10 Tech players remained flat

Building a software-enabled automotive company (volume 3)

  • Software has become the differentiating factor for modern vehicles with almost doubling development costs – growing on average from €181m to €331m per model series over the next 10 years
  • Autonomous driving functions will be the main cost driver with 45% of total software development cost by 2030
  • A growing spectrum of software components and functions prevents innovation leadership and pushes OEMs as well as suppliers to carefully select areas of own value creation
  • Partnerships with competitors, suppliers and technology players on an equal footing can help to master complexity, the need for talent and to reduce expenditure by 35-60% per project
  • Transformation of mindset from strategy to decision making is needed across the company to adapt to the new paradigm and to build successful software-enabled products

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Ozan Cığızoğlu

Ozan Cığızoğlu

Partner, Strategy& Türkiye

Tolga Baloğlu

Tolga Baloğlu

Partner, Strategy& Türkiye

Ulaş Ceylanlı

Ulaş Ceylanlı

Industrial Manufacturing and Automotive Industry Leader, PwC Türkiye

Tel: +90 212 326 6248

Ethemcan Bakırlıoğlu

Ethemcan Bakırlıoğlu

Director, Strategy& Türkiye

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