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Disruptive technology will change the auto industry

Disruptive innovation is a buzz phrase born from businesses such as Apple’s effect on the music industry, Amazon’s takeover of book sales and SpaceX’s privatisation of space rockets, to name just a few. The automotive industry is next in line, as new technologies emerge following over a century of reliance on the internal combustion engine operated by a human driver.

Technology-driven trends are set to revolutionise the industry in more ways than one. In a previous blog, we looked at Alternatively Fuelled Vehicles (AFVs) and the impact they’re already having on the market, as well as the legislative and strategic changes moving manufacturers towards an electrified future. But alongside technologically advancing fuel efficiency, cars are set to become so much more than personal transportation devices.


How will self-driving cars revolutionise ownership?

Whatever scepticism surrounds self-driving cars and their readiness for the roads, most major car manufacturers are already testing the technology, not to mention tech firms such as Google and Uber building their own fleets of vehicles. In November 2017, Uber announced plans to buy 24,000 self-driving cars by 2021, the BBC reported.

One of the key features being touted for self-driving cars is the disruptive effect they will have on vehicle ownership. Car sharing and e-hailing may result in the decline of private-sales, as consumers opt to call for an ever-cheaper taxi to work (no driver to pay) rather than invest in a vehicle themselves. This trend may be especially prevalent in major cities such as London, where congestion charges, traffic and a lack of parking are only set to increase.

Despite a shift toward shared mobility, vehicle unit sales are likely to continue to grow, but at a lower annual rate of about 2% by 2030, reports Automotive World. Any decline in private sales may be offset by an increase in shared vehicle sales, due to their need to be replaced more often due to higher utilisation and related wear and tear.


New revenue streams and greater competition

Worldwide consulting firm McKinsey & Company, which informed the aforementioned report from Automotive World, has said new business models based on technology advances could add around 30% revenue in 2030 – up to £1.1 trillion, compared with around £4 trillion from traditional car sales and aftermarket products and services. This is due to diversification towards mobility and data driven services.

As well as car sharing and e-hailing, there will be higher annual maintenance for shared cars and premium prices for electric vehicles and self-driving technology. Connectivity has also been highlighted as a future in-car market, with drivers and passengers having more time to consume novel forms of media such as apps and entertainment, or tend to other personal activities.

This disruptive shift to the way we use our cars is likely to bring new manufacturers to the industry. Only two new players have appeared on the list of the top 15 automotive OEMs in the last 15 years, but firms such as Apple, Google, Tesla and Uber are looking to take ever larger portions of the auto-industry pie. Traditional manufacturers will be forced to compete, which will only drive up innovation and quality, as well as drive down prices for consumers.


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