ACES: autonomous, connected, electric and shared will continue to matter in mobility in 2020, says McKinsey & Company
Autonomous, connectivity, electric and shared (ACES) will continue to disrupt the automotive and mobility markets in 2020, just as they did in 2019.
That’s the key message from McKinsey & Company’s latest article on the topic of ‘new mobility’ entitled The future of mobility is at our doorstep.
Co-authored by Timo Möller, Asutosh Padhi, Dickon Pinner and Andreas Tschiesner, the article reflects on last year’s milestones in mobility and considers how the ACES trends will continue to influence the market and shape the movement of people and goods going forward.
Source: McKinsey & Company
According to the article’s authors, 2019 was pivotal with many achievements across the four disruptive pillars of autonomous driving, connectivity, electrification and shared mobility.
EV sales, for instance, hit a global high and grabbed the public’s attention in many key automotive markets, such as Europe.
New milestones were set in autonomous driving with driverless cars without backup drivers; while two big disruptors in the ride-hailing space, Uber and Lyft, went public in the spring.
By the same token, 2019 was also a year of reality checks, the authors add; with congestion and issues surrounding public transport reaching new heights around the globe. Further, timelines for technology like AVs were postponed and some projects mothballed. Car manufacturers also had a tough year, with stricter emission regulations and slowing sales combining to trigger profit warnings at large OEMs and suppliers.
“Given that key risks for the industry remain elevated and that competition from new mobility attackers is intensifying, the road ahead remains bumpy, as today’s reality delivers a mixed picture for the future of mobility,” the authors warn. “On the one hand, there are big expectations with regard to future technologies and business models; on the other hand, there is an urgent need for a “double transformation”. In other words, preparing companies for the mobility of tomorrow also means making today’s business crisis resistant.”
Investment in relevant technologies across the mobility landscape continues apace, the article reveals. E-hailing, semiconductors and sensors for advance driving-assistance systems lead the investment activity with e-hailing winning $56.2m investment since 2010, semiconductors netting $38.1bn and sensors $29.9bn.
By geography, investment activity is strongest in the US but also notable in markets like Israel. An ecosystem in mobility is also beginning to emerge, say the article’s authors with new partnerships and co-operations becoming manifest and for good reason – McKinsey & Company suggest an OEM would have to invest nearly $70bn to win a defensible position across the ACES technologies. “Hence, there is a renewed interest within the automotive industry for co-operation,” it says.
Autonomous driving
Autonomous technology and self-driving cars continue to attract significant attention from all stakeholders in terms of the future mobility. However, forecasts were scaled back in 2019 since progress in AV technology was not as fast as previously anticipated, McKinsey & Company reports.
But the appeal for autonomous driving remains intact, especially in cities, researchers add.
“We believe electric, shared AVs-also called robo-taxis or -shuttles-could address mobility’s pain points in cities (such as road congestion, crowded parking spaces, and pollution) while revolutionizing urban mobility, making it more affordable, efficient, user friendly, environment friendly, and available to everyone,” McKinsey & Company says. “If integrated seamlessly in the public-transportation system, it will be an important enabler in reducing today’s share of private-car traffic.”
By country, China has the potential to become the world’s largest market for AVs and with researchers forecasting such vehicles could account for two thirds (66%) of passenger-kilometres traveled in 2040, generating $0.9 trillion in sales and accounting for 40% of new vehicle sales.
Connectivity
According to McKinsey & Company, connected cars will “become potent information platforms” providing new driver experiences plus opportunities for businesses to create value. Researchers suggest cars will evolve into “information enveloped automobiles” that offer both their drivers and passengers new experiences enhanced by AI and other new technologies.
McKinsey & Company has pinpointed five levels of connectivity – each introducing new elements of functionality to improve the customer experience.
“These levels reflect the potential for connectivity to stretch from today’s increasingly common data links between individuals and the hardware of their vehicles to future offerings of preference-based personalisation and live dialogue, culminating with cars functioning as virtual chauffeurs,” McKinsey & Company says.
Further, the company’s research suggests 45% of new vehicles will reach the third level of connectivity by 2030; while 40% of today’s drivers would be willing to change vehicle brands for their next purchase in return for greater connectivity.
Electrification
The trend towards EVs gained momentum in 2019, driven by tightening regulation and rising customer demand, McKinsey & Company reports.
Globally, EV sales grew to more than 2m units in 2018, an increase of 63% on the previous year. However, with a penetration of just 2.2%, EVs still only account for a tiny proportion of the overall light-vehicle market, McKinsey & Company adds.
By geography, China’s EV market is three times the size of that of Europe or the US with sales growing by 69% per annum versus 28% in the European Union and 46% in the States. As a consequence, China has an EV penetration of 3.9% versus 1.8% in the European Union and 2.1% in the US.
Europe’s automotive industry, in particular, faces steep challenges on EV in order to meet its 2021 CO2 targets with sales of up to 2.2m EV units required – equivalent to global EV sales in 2018 – McKinsey & Company reports. Plus, there would be a knock on effect in adjacent industries such as battery supply and other raw materials.
OEMs are therefore moving quickly to meet regulator and customer demand, researchers report. They and their suppliers are also working hard to make EVs profitable through advancements in battery technology, economies of scale and co-operation etc.
However, with demand rising, all stakeholders need to scale up sustainable battery production, McKinsey & Company says. It estimates battery demand – across all uses ranging from EVs to mobile phones – to increase 14-fold by 2030 and possibly 19-fold.
Shared mobility
Shared mobility also brings its own challenges, according to researchers.
Mobility, especially in cites, must become smarter to become more sustainable. McKinsey & Company suggest cities combine multiple models of transport – private cars, public transport, micromobility, cycling and walking etc – into integrated transport systems in order to tackle congestion and pollution and thus improve the quality of life.
2019 saw many cities announce future mobility visions, which included micromobility. An emerging market in Europe, multiple start-ups launched shared e-scooters in European cities. McKinsey & Company has estimated the shared micromobility market across China, the European Union and US as $300-500bn in 2030 or a quarter of the forecast for global shared autonomous driving.
Shared or smart mobility can bring other unwanted side effects, McKinsey & Company warns. In the US, for example, e-hailing has led to congestion as more than half of e-hailing trips were new passenger-vehicle miles rather than being a substitute for a traditional mode of transport.
2020 vision
McKinsey & Company suggests future mobility will continue to be interesting in 2020 across four key dimensions: consumers, technology, market & competition and regulation.
With new CO2 regs in Europe kicking in next year, more EVs will need to be sold. “2020 will be an important year to measure the reinforcing power of electrification,” says McKinsey & Company.
More attention may be given to goods transportation in 2020 with potential for developments in commercial-mobility, say researchers. Examples could include autonomous driving in the context of shared mobility and alternative power trains.
Players will need to navigate the market carefully in 2020 too, managing the economic slowdown while reimagining their business models amid new regulation, disruptions and changing consumer needs.
The growing role of regulation, meanwhile, means that for many players and technologies, cities will be the key stakeholders.
“It will be cities where the future of mobility will be decided. And 2020 will likely see bold announcements by cities to change their mobility systems,” McKinsey & Company concludes.
