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The future car

Auto business models: out with the old, in with the new

Connected autonomous vehicles (CAVs) are with us and, in the long run, will come to dominate the road. Parallel to this will be the decline of engine-driven cars and the rise of their battery-driven equivalents.

Industry players are already thinking hard about what the rise of electric CAVs means for their businesses. For some, there are opportunities. Data from connected cars could be used to generate revenue, reduce costs and improve safety. And, if harnessed correctly, this data may offer new business models – not only for existing automotive firms but also companies from outside the sector.

But there are threats too of course. With the rise of electric vehicles (EVs), suppliers of engine parts and related systems will have to transform to stay in business; repair businesses will have less to repair. As cars move towards full autonomy, manufacturers will have to rethink vehicle design and change the way they build their products, including by digitising their factories.

Annual global sales of EVs

More broadly, the popularity of ride- and car-sharing platforms is beginning – in larger urban areas at least – to reduce demand for car ownership. With younger people becoming well used to summoning or locating a vehicle via their mobile phone, the car market will gradually shrink. This could in turn reduce the number of dealerships and the financing deals that offer manufacturers a useful additional revenue stream.

Rocky Mountain Institute

But despite all this, some scepticism remains about whether our roads will ever be dominated by CAVs – at least of the level 5 variety. The public may resist self-driving cars due to real or imagined safety or cyber security issues – or because many people still simply enjoy the physical act of driving.

So in the short- to medium-term, the market for cars remains. Exactly how it will change is not clear, but manufacturers will still have to continue marketing products that not only are safe and well-designed but also provide cutting-edge driving-assistance and in-car technologies that buyers have come to expect.