Connected car report 2016: Opportunities, risk, and turmoil on the road to autonomous vehicles

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Executive summary

The race to build the fully connected car, and ultimately the completely autonomous vehicle, is already under way. Who will cross the finish line successfully, and where exactly that finish line is, remains to be seen. In this report — based on extensive market research, interviews with auto industry experts, and engagement with auto manufacturers, suppliers, and technology companies across the globe — the automotive practice of Strategy&, PwC’s strategy consulting group, addresses these questions.

Today, 70 percent of global connected service sales come from premium brands. By 2022, that number will fall to 50 percent, at the expense of falling margins. Although connected services will generate sales of US$155 billion, most of this value will be offset by falling sales from legacy features such as navigation, entertainment, and safety systems. These trends will contribute to a squeeze in profits for OEMs and suppliers. Higher R&D expenses will not convert into higher overall sales. On the supply side, by 2030, profits available to traditional automakers and suppliers may drop from 70 percent to less than 50 percent of the industry total. The balance of $120 billion may be captured by new entrants, including suppliers of new technology, mobility services, or digital services. Many of today’s manufacturers and suppliers lack the skill, agility, and boldness to turn their companies digital quickly enough to take advantage of this change.

The report is divided into seven sections, each of which focuses on one key question about the opportunities and risks to be found in the industry’s business models, ecosystem, market growth, geographic distribution, and technologies involved in developing the connected car:

  • How does technological change affect the distribution of value in the rapidly restructuring automotive industry?
  • How can automakers recoup their investments in connected and autonomous vehicles?
  • How quickly will the market for connected car packages grow, and how will the revenue opportunities break down in terms of region, car segment, and type of package?
  • How will suppliers be transformed by this industry-wide change, and what will it take for them to succeed?
  • How will China move into the connected car market, and how will those efforts, abetted by its digitally sophisticated car buyers and broad range of innovation, affect the car of the future?
  • How will connected car technology be protected against cyber-attack, and how can automakers effectively meet the related organizational and technical challenges?
  • How will autonomous vehicle technologies, now in the early stages of development, transform the driving experience of tomorrow?

Automakers, suppliers, and technology companies are beginning to jockey for position. Our goal here is to provide you with a deep understanding of where your company stands, and what it will take for you to win

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