The Future Unfolds: Navigating the Road Ahead
Remember those times stuck in bumper-to-bumper traffic, the frustration mounting with each agonizing inch? The automotive industry finds itself in a similar position, on the cusp of a revolution, and the solution might be closer than we think. With three decades of experience in the industry, I’ve witnessed the continuous innovation driving this sector and bringing new features to drivers. Yet, the fundamental car—metal on four wheels with seats—hasn’t changed much in the last century. However, changes are accelerating.
This transformation is driven by a confluence of factors: environmental concerns, shifting consumer preferences, digital and technological advancements, geopolitical dynamics, and a global economic landscape in constant flux. Let’s examine the future MarketsandMarkets’s foresighting team predicted in their recently published report.
A Resilient Industry
The automotive industry has demonstrated remarkable resilience throughout history, consistently rebounding from economic downturns. This resilience is expected to continue, with the industry poised for significant growth and innovation through 2035. Historically, the sector has correlated strongly with real GDP growth, particularly light vehicle sales, showing its strong connection to overall economic health. The sector often recovers within two years of a recession, positioning itself for sustained growth.
With the average age of cars at an all-time high, replacement cycles are expected to trigger in the developed world. Milestone goals include 100 million sales by 2028 and a global vehicle parc of 2 billion by 2030, signaling the beginning of a significant transformation in the industry.
Peak ICE: EVs Take the Lead
While electric vehicles (EVs) might face a temporary slowdown in growth rate, they are projected to surpass internal combustion engine (ICE) vehicles by 2036, the same year we will see Peak ICE. This shift will be a significant turning point. Advances in battery technology, including solid-state batteries, promise to lower prices below $80 per kWh and extend battery life cycles. In addition, growing environmental awareness further fuels this transformation.
Chinese manufacturers such as BYD, Geely, Chery, Changan, and SAIC are taking center stage. Their robust EV portfolios will position them to become key players in the coming years.
Emerging Markets: New Demand
India’s automotive industry is experiencing rapid growth, contributing significantly to the global market. While India might not surpass China in sales volume, its strong growth rate is driving significant manufacturing development. Emerging markets like India and Indonesia are poised to be key contributors between 2025 and 2030.
From 2030 to 2035, Mexico, the Philippines, and Turkey will join the significant growth drivers. Post-2035, Nigeria is expected to lead this trajectory, fueled by a rising middle class and the Gen Z population. This demographic shift will reshape the industry’s product development and marketing strategies.
Consolidation of EV Platforms
The next seven years will witness a significant consolidation of EV platforms. OEMs are set to reduce the number of platforms by over 60%. Since EV rolling chassis can constitute 70-85% of the total BEV BOM cost, compared to ~20% for ICE, this transition is driving this change.
By focusing on cost savings and flexibility, companies like Volkswagen might exceed 20 models per platform by 2030, while smaller ones may have 5-9 vehicles per platform. The flexible platforms will focus on EV production, with hatchbacks, sedans, SUVs, LCVs, and pickups manufactured on a single platform. This highlights the industry’s move towards more efficient and scalable production methods.
From Kaizen to Kakushin in Manufacturing
The automotive will pivot towards modularity and micro-factories. This will enable flexible production and customization. This shift from Kaizen’s incremental improvement to Kakushin’s radical innovation indicates an evolving need for agility, sustainability, and disruptive advancements in technology and manufacturing processes. Imagine modular factories capable of producing many vehicles with customization and techniques like Gigacasting to build the body in white – that’s the future we’re headed toward.
Connected Technology Generates Revenue
Connected technology is set to revolutionize the automotive industry with 5G and satellite standards. The total addressable market (TAM) for connected vehicle technologies is forecast to surge from USD 0.8 billion in 2023 to USD 568 billion by 2035 according to a recent MarketsandMarkets study. This growth is driven by enhanced features, with potential earnings of USD 1,600 per car each year. Smart technologies through IoT will create an efficient, automated lifestyle, connecting vehicles with infrastructure.
Future vehicles will offer over 300 connected features.
The Autonomous World
While achieving Level 5 (L5) autonomous driving is a distant goal, advancements in ADAS will quickly transition vehicles from Level 2 to Level 2.5 and subsequently to Levels 3 and 4. Level 4 is pushed back with limited volumes by 2030. Commercial vehicles (CVs) are expected to transition from Level 2 to Level 4 faster than cars.
The autonomous vehicle market is expected to unlock a $10 trillion opportunity by 2035, encompassing various sectors, from robotics to off-highway vehicles. Several other emerging trends in the automotive industry that we will see are:
- Transition to Multi-Cycle Service Providers: OEMs will evolve from merely manufacturing cars to offering multi cycle (2nd and 3rd hand cars) vehicle sales with integrated services that combine Energy, Connectivity, and Vehicle-as-a-Service models, including subscription plans that extend beyond traditional monthly car leases.
- Chinese OEMs Leading Innovation: Chinese OEMs will dominate not only in EV production but also in connectivity and autonomous vehicle technology, with advanced digital cockpits and futuristic interiors enhancing the customer experience.
- Global Sales and Collaboration: By 2030, more than five OEMs are expected to surpass 10 million sales globally. Increased collaboration and partnerships will be essential for building economies of scale, while those without scale risk being acquired or merged.
- Longevity of Batteries: Soon next-generation batteries will outlast the cars they power, retaining higher residual value than the vehicles at the end of their lifecycle.
- Efficiency and Cost Reduction in EVs: OEMs will focus on improving EV efficiency and reducing costs through advancements like high C-rate up to 10 for charging (based on battery chemistry), shift to high voltage 800 – 1500V architectures, development of wide bandgap semiconductors – GaN, high-frequency high RPM motors, and 5-in-1 integrated e-Powertrains.
- Hyper-Connected Tech Stacks: Future cars will feature horizontally developed, hyper-connected tech stacks, with Tier 1 suppliers integrating sensor suites, high-compute platforms, and embodied AI to create seamless, advanced automotive technologies.
- SUVs are Here to Stay: In 2018, SUVs comprised 46.1% of total passenger vehicle sales, growing to 57.4% by 2023. This trend is expected to continue, with SUVs projected to exceed 65% of total passenger vehicle sales by 2030.
Conclusion
Reflecting on those moments of frustration in traffic and the wish for a better solution, it’s clear that the future of the automotive industry will transform our entire approach to mobility. The journey, from traffic jams to seamless transportation, showcases significant changes ahead. The industry’s resilience, combined with its embrace of electric and autonomous technologies, sets the stage for exciting, disruptive growth.
