Research Shows Autonomous Vehicles Can Offer OEMs Potential Growth
December 14, 2021
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The AV (autonomous vehicle) industry may appear to be in its infancy — with just 1,400 self-driving cars on the road today in the U.S. — but experts are projecting that by the year 2040 there will be 33 million AVs on the road. What’s more, this figure takes into account just fully autonomous vehicles. And while robo-taxis are currently gaining more attention than self-driving cars, a report by McKinsey suggests that AVs can offer OEMs the potential for growth.

AVs: A “Game Changer” for the Automotive Industry

While there have been some early setbacks in the development of AVs, McKinsey explains that they have the potential to transform mobility as we know it, in the following ways:

  • Increased road safety as AD (automated driving) systems would reduce accidents caused by human error
  • Drivers would have more time to relax or perform side tasks instead of focusing solely on the road

However, challenges remain, including:

  • Technological obstacles
  • Uncertainties caused by the COVID-19 pandemic
  • Uncertainties around future regulatory requirements
  • Customer willingness to pay

Still, the report by McKinsey insists that the AVs will be a “game changer” for the industry, pointing out a recent survey they conducted that revealed AD capabilities as a “key buying factor” for customers. In the survey of 1,000 people in China, Europe, and the United States, approximately 60 percent in each region said they would switch automotive brands to get a vehicle with better AD features.

A Look at Driving Automation Standards

Driving automation standards are currently categorized by The Society of Automotive Engineers (SAE) on a scale from Level 0 (no automation) to Level 5 (full automation). According to the International Data Corporation (IDC), in 2019, there were 31.4 million Level 1 vehicles on the road, and this is predicted to grow to 54.2 million by 2024.

At the 2020 Consumer Electronics Show, there appeared to be a shift from highly or fully autonomous features —the SAE Level 3 and Level 4 levels— to partially automated driving at advanced Level 2, reports McKinsey. “These systems are more reliable and satisfy customers by allowing hands-free driving, backed up (within the boundaries of the law) by an alert driver,” the researchers explained.

Availability of AD Technologies

Some of the largest automakers, such as Tesla, Alphabet, Ford, GM, and Volvo, are already active in the AD space. Take Waymo, a subsidiary of Alphabet Inc., as an example with their launch of a robo-taxi company in Phoenix in October 2020. At the same time, consumer and regulatory bodies such as the National Transportation Safety Board (NTSB) are raising concerns, which may prove to be a challenge to self-driving vehicle makers.

While automakers around the globe have announced plans for releasing Level 3 and Level 4 features in their vehicles, their plans have been significantly delayed. McKinsey reports:

“The latest announcements indicate that the first Level 3 highway systems will hit the market at some point from 2021 to 2024. Two to three years later, companies will probably upgrade their vehicle systems to Level 4. If uncertainty persists at the start of production, however, many target dates will probably slip. Technological challenges and regulatory issues are likely to account for most of the delays.”

As with many industries, the pandemic could also cause delays, but the full impact of COVID-19 is currently unknown.

The disruption AVs are creating in the automotive industry will likely have a number of implications on OEMs as well as suppliers, which underlies the importance of continuing to study the market for necessary insights. Take a look at McKinsey’s market model, and keep visiting our Carzato blog for continued updates.