Over the next decade, two major forces will revolutionise the auto industry. As with certain other industries, the pressure is coming from the outside, mostly from tech-based firms that have no legacy attachments to the old way of doing things. To date, the biggest change is the electric vehicle, led by outsiders like Tesla. On top of this, though, is something that will become increasingly mainstream and promises a greater impact: self-driving vehicles. But Rome wasn’t built in a day and these changes will occur in stages. In this report, we examine the disruption taking place, the timing and pick winners from the impending Autocalypse.
Full autonomous driving, whereby the car drives itself without any occupant (called Level 4), is required to truly disrupt auto sales. Yet our analysis suggests this is more a 2025 or later event. While electronic vehicles (EVs) will disrupt the auto world, we believe plug-in hybrids will grow at a faster rate over 2016-19, as a stop-gap measure by incumbent players. The risk is that car battery demand disappoints during this time (PHEVs use 11kWh batteries vs 28kWh for pure EVs). However, from 2020, the pendulum will swing back to EVs growing faster, and those without an EV strategy will start to derate. Indeed, R&D spending pressures are likely to weigh on industry margins in the next few years, particularly if global auto demand is lukewarm, leaving less industry pricing power.
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