Powered by surprisingly strong consumer interest, partially autonomous vehicles (AVs) are likely to penetrate the market as early as 2017. In the years following, a series of enhancements will make fully self-driving cars a market reality in a decade and a common sight within two decades, according to new research by The Boston Consulting Group (BCG).
On the basis of in-depth analyses of the trends driving the development and likely adoption of AVs, BCG expects that partially self-driving cars with highway autopilot functionality and traffic jam autopilot will hit the roads in large numbers by 2017, followed by urban autopilot by 2022, and fully autonomous driving by 2025.
The implications for automotive manufacturing are unclear but there are several possible outcomes. One is no change from the current ownership model, with individuals purchasing or leasing cars as before and operating them in similar ways. There is a possibility however, of the emergence of an Uber-like virtual world where self-driving taxis carry users everywhere with no personal ownership of vehicles. This outcome would not only require significantly fewer vehicles, but could break the pattern of style-driven planned obsolescence in favor of a more common, utilitarian vehicle fleet. If the cost of a subscription-based self-driving vehicle fleet taxi service is close to the total cost of ownership of a personal vehicle, demand and vehicle production volumes could be affected, and quickly.
Mass adoption of AVs will not occur, however, until vehicles are secure from cyberattack, uncertainty about liability is resolved, remaining social resistance is overcome, and high-precision maps are developed. Assuming those conditions are satisfied, a market opportunity of roughly $42 billion by 2025 awaits, says the global management consulting firm.
“Many people don’t realize how far along some of these technologies are,” said Xavier Mosquet, North America leader of BCG's Automotive practice and managing director of the firm's Detroit office. “Even more surprising, consumer interest and the production costs will make autonomous vehicles highly attractive to both carmakers and their customers. We are witnessing a decades-old dream come true. But OEMs and technology suppliers will need time to build the right scale and reduce costs.”
Comprehensive Research Underlies the Findings
BCG’s study pulls together several strands of research, including an analysis of AV technologies and economics; U.S. consumer survey data; interviews with executives of automobile companies, suppliers, and technology companies around the world; and an extensive review of industry publications, among other sources. As part of the research, BCG surveyed more than 1,500 U.S. drivers in September 2014 about their willingness to buy partially and fully autonomous vehicles. Fifty-five percent of respondents said they would likely or very likely buy a partially self-driving car within approximately five years, and 44 percent said they would likely or very likely buy a fully self-driving car within about ten years. About 20 percent said they would pay more than $5,000 extra for features such as highway or urban autopilot. Consumers in other markets, such as China, Germany, and Japan, would be willing to pay even more, according to published estimates.
Consumers cited the following as the most important reasons for buying a partially or fully self-driving car: lower insurance and fuel costs, increased safety, and the ability to multitask or be entertained while the vehicle drives.
The price of AV technology, expected to come in at $2,000 to $10,000 per vehicle at launch, will decline at about 4 to 10 percent (on a compound annual basis) in the first ten years or so, according to BCG. That will create a favorable business case for OEMs, which could achieve about 25 percent market penetration of AVs by 2035 with a favorable pricing strategy. Roughly 15 percent (18 million units) would be partially autonomous vehicles and 10 percent (12 million units) would be fully autonomous. To achieve a higher rate of penetration, OEMs would need to find ways to reduce the total cost of ownership or persuade consumers to pay a higher premium for autonomous features.
Japan and Western Europe should be the fastest adopters, based on past experience with adaptive cruise control. The U.S. is expected to keep pace with global adoption rates, and China is expected to become the largest market for autonomous features, representing roughly 25 to 30 percent of global unit sales by 2035.
“Carmakers need to act now to prepare for this future. A significant new market is still theirs for the taking,” said Thomas Dauner, global leader of BCG’s Automotive practice and a Stuttgart-based senior partner. “They should step up R&D investment in autonomous-driving features, with an expanded focus on software, sensor fusion, and system integration. OEMs would also have to address alternate market segmentation in order to adapt to new trade-offs that consumers will make between autonomy and other car features.”
For the automotive supply chain as it now exists, those consumer trade-offs will continue to be toward telematics and away from traditional automotive performance attributes like power or styling. And unlike platform specific technologies like suspension powertrain, sensor suites and automation can work seamlessly across an entire manufacturer's product range. The sensors in a Corvette will be the same as those in a Cruze. This suggests higher Tier 1 unit volumes from fewer suppliers.
The Future Is Now
Several original equipment manufacturers (OEMs), technology companies, and universities already have pilot projects under way or on the launch pad to test varying levels of self-driving capability. A number of near-term rollouts have been reported or announced. For example:
- Daimler’s Mercedes-Benz now sells a system that can pilot a car on a freeway, but its design requires the driver to keep a hand on the wheel. By 2016, the company plans to introduce Autobahn Pilot, which will allow hands-free highway driving with autonomous overtaking of other vehicles.
- Tesla Motors plans to offer hands-free highway driving in its Model S electric sedans in 2015.
- General Motors will offer Super Cruise in a new 2016 Cadillac sedan. The system will allow the car to automatically keep its lane, autonomously trigger braking, and control speed.
- Volkswagen’s Audi unit intends to roll out technology to enable autonomous driving in urban traffic around 2016.
- Also in the 2016 time frame, Mobileye plans to launch, with two partner OEMs, the first hands-free-capable driving at highway speeds and in congested traffic situations.
Far-Reaching Implications for Transport and Related Sectors
Mass adoption of self-driving technology will carry with it tremendous economic and societal benefits, while disrupting business as usual for a wide variety of companies, including OEMs, mobility providers, and component makers.
The cost and safety advantages of fully automated “robo-taxis” could revolutionize city driving, especially in the developing world. BCG case studies for New York City and Shanghai show that AVs have the potential to be 25 to 35 percent cheaper than conventional taxis. In Shanghai, the cost of a ride in a robo-taxi would be less than the cost of driving a private vehicle, even if the robo-taxi carried only one passenger, according to BCG.
Clearly there is considerable consumer interest in autonomous vehicles, with owners willing to pay a substantial price premium to get self-driving capability. In an increasingly urban world, with limited space and parking for privately owned vehicles, the self-driving taxi model may be the future of transportation. That vision is less clear for suburban and rural markets. The challenge for auto manufacturers in an autonomous vehicle world is maintaining the consumer’s love affair with personal transportation and the automobile as a statement of personal style. While full autonomous capability is a decade away, significant autopilot functionality will be in dealer showrooms within two years. By the time full self-driving technology arrives, consumers will be ready. Will automakers be ready too?
To view selected highlights from the research, please visit SlideShare at http://on.bcg.com/RoadToAutonomousDriving.
A formal BCG report containing the findings will be published in the first quarter of 2015 on the firm’s publishing portal, www.bcgperspectives.com.