Islands of Autonomy
The U.S. auto market is about to transition to islands of autonomous mobility: What it means for OEMs
With November’s commitments by multiple OEMs, mobility providers, and tech companies to launch scaled, autonomous fleets in 2018 or 2019, we are swiftly arriving at a new and disruptive transportation mode: driverless vehicles coupled with mobility services. Our consumer research and modeling indicates that, like smartphones and the personal computers, consumers will flock to this new transportation mode, changing forever their relationship to cars and transportation.
The adoption of this new transportation mode won’t roll out the same way as it did for cell phones and computers, almost instantly across the country and world. Instead, it will develop place-by-place, location-by-location, based on the unique land-use and living patterns of our cities—what we call islands of autonomy. To win in this new world, auto and mobility companies must understand trip-by-trip human movement patterns in metropolitan areas that each have their own district mix of consumer travel needs, many of which may be best delivered by properly configured autonomous mobility offerings.
Get ready to rethink automotive product, service, and investment decisions. The market is no longer simply about volumes modeled on underlying GDP per-capita growth and product plans built around a hypothetical target-buyer family of four plus a dog or an empty-nester couple with a sailboat. Instead it is about understanding trip origin and destination, duration, distance, occupancy mission, and velocity for each and every trip in a metro area—understanding the optimal service and vehicle for each of those trips and then looking across those metropolitan islands to find platform scale. For carmakers and others in the transportation and mobility industries, the consequences and opportunities of the islands are enormous and will demand new tools to evaluate the market, new services, and all-new types of vehicles.
Going forward, consumers will have far more choices in transportation. They can push a button and their driverless car will appear, or push another button and a mobility service will arrive. The vehicle that appears before them will accommodate their need to go to the office, go to the grocery store, or spend a night on the town.
Those greater options translate into different consumer buying behavior—less of a need to own, which signals a far more rapid decline in auto sales than many original equipment manufacturers (OEMs) expect. That is especially true with mass market vehicles in the A, B, and C segments. As consumers increasingly utilize autonomous vehicles based mobility as a service (AV-MaaS),and choose a car to drop from the household fleet, we calculate a massive decline in personally owned sedans, the segment’s sales dropping from 5.4 million units sold today to just 2.1 million units by 2030. For many in the future Islands of Autonomy, the cars they choose to own rather than hail will most likely be “cars with personality,” not a mass-market four-door sedan.
This dramatic decline in traditional sedans will lead to greater and more narrowly targeted overcapacity in supply than many OEMs have anticipated. In this increasingly competitive market, some carmakers and major brands may struggle to stay in business unless they actively re-focus their offerings where they have, or can develop, a unique right-to-win. Public markets are aligning with these perceptions. Think of the shockingly low valuations of some global behemoths relative to those on the vanguard of change.
Not all is lost, however. A trillion-dollar market will soon arise around mobility and selling miles. The key to understanding the market of the future and its opportunities are within the Islands of Autonomy.