Future of Automotive

[100 Pages Report] The automotive industry, encompassing PV, LCV, and MHCV, size is projected to grow from 88 million units in 2024 and is projected to hit 104 million units by 2030, at a CAGR of 2.4%. Factors such as the extended driving range of EVs and the increasing interest among consumers indicate EVs potential as an alternative for zero-emission mobility. Additionally, the rising involvement of investors, advancements in technology by OEMs, and governmental initiatives toward zero-emission transportation are expected to boost the market growth. This shift towards shared mobility and connected living is already experiencing global traction, notably in passenger vehicles, where autonomous driving is also progressively gaining favor.

Dedicated to achieving zero emission targets, the OEMs have planned to invest over USD 500 Billion by 2030 for EV production facilities. Hyundai invested over $1.5 billion to build new Ulsan EV Factory in South Korea in November 2023. Similarly, Honda, Volkswagen, Ford and others have made investments in new manufacturing facilities. Further, the prices of lithium-ion battery packs went down by 14% in 2023 to reach a new record low of $139/kWh. Moreover, OEMs have attempted to regulate the EV battery supply chain to further cut down the raw material, manufacturing and maintenance of the batteries.

Tracking the rise of automotive market, in 1980 the sales of PV, LCV, and MHCV was over 38 million, it reached 52 million in 2000, further it increased to about 90 million in 2019 and was just below 88 million in 2023. It is further estimated to cross 104 million in 2030. Despite facing challenges like economic downturns and supply chain disruptions occasionally and the COVID-19 pandemic in 2020, the automotive market has historically rebounded within 2-3 years.

The global vehicle parc, including PV and CV, to reach 2 billion by 2030. The average age of vehicles, currently 12.1 years, will increase by 1 month annually in most markets. Over the period from 2023 to 2030, the parc of ICE vehicles will grow at a CAGR of 2.1%, while the parc of non-ICE vehicles will grow at a CAGR of 18.9%.

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Market Dynamics

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Driver: Consistent growth in the EV segment over traditional ICE vehicles

The EV segment registered a strong growth in 2023 due growing preference towards clean transportation and government support through incentives. The EV segment would demonstrate double digit growth till 2030. However the electrification in commercial vehicles is challenged by factors such as range limitations, inadequate charging infrastructure and concerns on vehicle performance.

The EV charging infrastructure is significantly growing to cater the needs of the consumers. In 2023, over a million new EV charging points were installed around the world. These charging points consisted of both slow chargers as well as fast chargers. For instance, in 2023, close to 16,000 charging points were installed in the UK, taking the number of total charging points over 53,000; wherein, more than 4,500 were fast charging points. In addition, successful pilot projects were carried out for wireless charging points in Japan, China, Germany, US and other countries in Europe. A collective of over $50 billion was announced by the governments and EV charging solution providers in 2023. The sum of the money will be gradually invested to setup charging points across the world.

Further, the years 2022 and 2023 saw significant rise in driving technology of cars wherein autonomous cars have been introduced in the market to enhance safety and security of the passengers. OEMs such as BMW and Mercedes have received approval for L3 autonomous vehicles in Germany and the US, respectively. BMW has also received approval to test its L3 vehicles in Shanghai, China. We expect L3 vehicle sales to gain pace in 2024 as these OEMs start rolling out their L3 models.

Restraint: Highly dependent on the global economic factors

Due to continuous unrest in the geopolitics taking place around the world, the manufacturing of components of vehicles and fuel prices have risen. The automotive industry is highly dependent on the GDP growth of the country and other socio-economic factors. For instance, the Ukraine-Russia disrupted the trade of oil & gas as well as the manufacturing of vehicles. Ukraine and Russia are amongst the major countries that manufacture vehicle components. Therefore, the war between these two countries led to shortage of vehicle components and thus led to fluctuation of prices of vehicles. In addition, there were sanctions of the oil & gas from Russia to the European nations, which led to rise in fuel prices. Moreover, the trade war between the US and China had a negative impact of the supply chain of the automotive industry causing price fluctuation. While the Israel-Hamas war had limited impact on the automotive industry, the war resulted in increased oil prices which marginally affected the industry growth. Further, the newly developed technologies such as autonomy levels, connected features cost a little high in its initial stage therefore paying high prices for these technologies and building trust on them takes a considerable amount of time. Furthermore, technologies such as shared mobility is completely dependent on the business models and services provided by the players operating in its ecosystem. A slight collapse in the software or hardware in the operating system restraints the consumers from adopting the technology.

Opportunity: Growing adoption of connected vehicles

The total addressable market (TAM) for connected vehicle technologies is forecasted to surge from USD 0.8 billion in 2023 to USD 568 billion by 2035. This growth is driven by enhanced features and services, with potential earnings of USD 1,600 per car annually. Connectivity in vehicles provides better consumer experience, efficient data-driven services and opens innovative business models. Future cars will offer over 300 connected features, signaling the automotive industry's shift towards more connected, autonomous, shared, and electric vehicles, driving a fundamental transformation in mobility. In 2022, approximately 90% of the connected cars had integration of 4G technology. However, with 5G connectivity the share of connected cars is expected to grow. It is expected that over 20% of the cars on road will be connected to cellular network by the end of 2024. Companies have started exploring the connectivity space to gain first mover advantage in the market. For instance, in December 2023, Magna, a major supplier in the automotive industry joined Telia and Ericsson’s NorthStar Program to innovate and deploy the 5G ADAS system.

Challenge: Short range of EVs and charging time

The automotive market has witnessed numerous innovations and technological advancements in the EV sector. However,  The limited range of the battery operated vehicles is a major challenge faced by the EV customer. Moreover, the charging time required for the batteries subsequently increases the travel time as well as increases the number of stops for charging considering the long-distance travel. This causes major challenge to the OEMs to scale in the EV market. 

Market Ecosystem

Digital connected living services to cross $500 billion mark by 2035

The connected living integrates smart technologies through the Internet of Things (IoT) to create an efficient, automated lifestyle, connecting home devices, wearables, vehicles, and urban infrastructure for enhanced convenience and security. The advanced vehicle connectivity and digital features will integrate vehicles, occupants, and the external environment, revolutionizing the lifecycle from pre-purchase to end-of-life management.  The total addressable market (TAM) for connected vehicle technologies is forecasted to surge from USD 0.8 billion in 2023 to USD 568 billion by 2035. This growth is driven by enhanced features and services, with potential earnings of USD 1,600 per car annually. The future cars will offer over 300 connected features, signaling the automotive industry's shift towards more connected, autonomous, shared, and electric vehicles, driving a fundamental transformation in mobility.

Asia holds the major share of vehicle parc

Asia regions hold the major share of vehicle parc in terms of volume of PV and CV combined. The major factor for this is the intensive manufacturing and export of cars in China. The Chinese market is the worlds largest market in terms of vehicle sales as well as production. In 2023, China’s sales volume for passenger vehicles was over 25 million units, with a share of around 50% globally. Moreover, the Chinese market has significantly grown post COVID halt. The recovery effect of the economy in China has led to intensifying of the manufacturing sector. One of the key strategies followed by the Chinese EV makers is expansion to the European market for EV sales expansion. Companies such as NIO and Xpeng are aggressively expanding into the European region with plans of establishing their vehicle as well as battery production plants. Moreover, countries such as Japan, India and South Korea significantly contribute to the growth of the automobile sector in the Asian region, wherein, the Asian region (excluding China) holds over 245 million units and China alone holds over 350 million Vehicles In Operation (VIO) in its vehicle parc.

Key Market Players

The top performing OEMs in 2023 were Toyota Motor Corporation, Volkswagen AG, Hyundai Motor Group, General Motors, Renault-Nissan-Mitsubishi, Stellantis N.V. accounting over 50% of the market share. By 2030, 3 automotive groups will contribute over 10 million units in light vehicle sales. By 2035, market will be led by companies with robust EV portfolios with more Chinese manufacturers in the top 10. Wherein BYD Auto, Tesla and Volkswagen group will lead the EV segment. By 2035, Chinese players such as Geely, Chery, SAIC and Changan will join BYD in top 10.

These companies adopted new product launches, acquisitions, partnerships, collaborations, and other key strategies to gain traction in the automotive market.

Recent Developments

• In June 2024, Honda started the of production of its new 2025 Honda CR-V e:FCEV fuel cell electric vehicle (FCEV) at the Performance Manufacturing Center (PMC) in Ohio, US.
• In May 2024, BYD launched the e-Platform 3.0 Evo, an upgraded version of its BEV model platform and Sea Lion 07 EV SUV will be the first model based on this model.
• In May 2024, Exicom, a leading EV charger and power solution provider in India launched a Harmony Gen 1.5 DC fast charger.
• In May 2024, Polestar announces the expansion of its collaboration with Canadian EV subscription platform, Weeve.
• In June 2024, Nissan demonstrated autonomous Leaf prototype, featuring 14 cameras, 10 radars, and sic lidar sensors on public roads in Japan.
• In April 2024, CATL launched the battery pack with Yutung Bus Co to power commercial vehicles like buses and different classes of trucks.
• In January 2024, Tata Motors announced its new Acti.ev electric vehicle platform, which is developed to manufacture electric versions of its cars such as Punch, Curvv, Sierra and Harrier.
• In May 2023, Ford announced a collaboration with CATL to setup a EV battery plant in Michigan, US by investing $3.5 billion, which will be operational by 2026.
• In February 2023, bp announced to invest $1 billion in EN charging across US by 2030 to meet the demands from Hertz’s EV rentals.

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