IHS Markit has carried out a new study which shows that the new era of mobility – selling miles travelled instead of cars – will result in the greatest transformation since the dawn of the automotive age.
In accordance with the new major research initiative, the automotive future will be different – though with some remarkable similarities – as the confluence of government policies, disruptive technologies and new business models usher in a new era of multidimensional competition.
The study declares that a shift from acquiring cars to acquiring “mobility” will be a driving force of change in the automotive future. By the year 2040, vehicle miles travelled (VMT) will have risen to an all-time high of approximately 11 billion miles per year (a 65% growth since 2017) in China, India, Europe and the U.S. – the key markets analysed for the study – and will keep rising. At the same time, sales increase of new light-duty vehicles will decelerate considerably.
The conclusions are part of Reinventing the Wheel, a significant new multi-client, scenarios-based research initiative by HIS Markit which merges the expertise of the company’s automotive, chemical and energy teams so as to offer a first-of-its-kind, system-wide analysis of the new reality of transportation. The project centres on the world’s largest automotive markets: the U.S., Europe and Chine. It also covers India, which is a fast-growing and large market.
The competition between the electric vehicles and internal combustion engine, the disruptive force of “mobility-as-a-service” (MaaS) – such as ride-hailing – as well as the much-anticipated entry of autonomous vehicles will drive to deeper changes in personal transportation than experienced over the past century combined, the study asserts.
“A great ‘automotive paradox’ – where there will be more travel via car than ever, but fewer cars will be needed by people – will be a defining quality of the new automotive future” declared Daniel Yergin, HIS Markit vice chairman, Pulitzer Prize winner and project chairman. “The shift is just beginning. By 2040, the changes in transportation will be accelerating in a way that will be visible on roads and highways around the world. The pace and degree of this dynamic shift will have significant implications for industry, for public transportation systems and for how people get to work and live their lives – and spend their money on transport.”
Jim Burkhard, vice president, global energy market and mobility, went on “We could very well be on the cusp of the greatest transformation in personal transportation since the dawn of the automotive age. Understanding the implications of such a transformation requires a broad perspective that goes beyond any single industry or market.”
The continued appearance of MaaS providers will be one of the most significant and disruptive forces in the future, the study states. The MaaS industry is expected to acquire more than 10 million cars in the study’s key markets in 2040 – in comparison to just 300,000 in 2017.
“Mobility service companies will be a prime driver of shifting car sales from personal to fleet economics,” assert Tom De Vleesschauwer, transport and mobility practise leader, HIS Markit. “Ride hailing has the potential to be so disruptive because it is often the most convenient for consumers and can significantly increase access to car transport, particularly in markets with low car ownership rates.”
Oil’s monopoly as a transport fuel will decline, notwithstanding the fact it will remain an important part of the automotive landscape, the study states. Market share for cars principally powered by diesel and gasoline will still account for 62% of new cars in 2040 in the four major key markets (decrease from 98% in 2016) with a total of 54 million new vehicle sales in 2040, as stated in the study’s baseline scenario. In this scenario, global oil demand still grows from 98 mdb today to 115 mdb in 2040 (the study also analyses a more radical scenario in which oil demand in 2040 is less than it is today).
The dominance of the full internal combustion engine (ICE) will slide away, the study shows. ICE vehicles still comprise a majority of new car sales in 2040 – buoyed by sales of mild to full hybrids, which still principally rely on internal combustion engines. Nevertheless, cars powered solely by diesel or gasoline will have decreased below 50% of new cars sales by 2031.
Higher fuel economy and emissions standards and the diminution in gasoline’s share of new vehicle sales will lead to a decrease in aggregate gasoline demand in key markets during the 2020s, the study states, although overall oil demand will grow.
“Oil’s monopoly as a transport fuel will erode as a new era of multidimensional competition takes hold – but it will remain a major player,” Burkhard declared. “Many of its advantages as a fuel, such as its high energy density, will persist. And the size of the current automotive ecosystem will moderate the pace of change.”
Electric Vehicles evolution
Electric vehicles (EVs) will account for more than 30% of new cars sold in key automotive markets analysed for the study by 2040 – up from just 1%of new car sales in 2016. A key inflection point will be battery pack costs, which are expected to decrease to a price point in the 2030s that will make EVs cost competitive with internal combustion engine vehicles, the study states.
Autonomous Vehicles evolution
Autonomous vehicles are also expected to emerge as a significant share of new vehicle sales after 2030, the study identifies.
“It’s not only a matter of technology,” stated Yergin. “Political, regulatory, social and psychological barriers to adoption will also need to be overcome.”
Mobility-as-a-service companies are expected to be among the key adopters of electric and driverless cars with a shift towards acquiring their own fleets as opposed to drivers providing their own cars. The easier maintenance from fewer moving parts, cheaper cost of electricity versus gasoline and the ability to utilize centralized charging depots, as well as networks for fleet-based transportation are among the factors expected to contribute to adoption of autonomous and electric vehicles for “mobility as a service.”
Reinventing the Wheel also studies the impacts of the new automotive future on major industries such as chemicals and electric power. For chemicals, changes to the automotive ecosystem will substantially impact what is an important market for the industry, affect the availability of feedstocks and have critical implications for competitive strategy and investments.
“The shift from ICEs to EVs provides one example of the big impacts that will result from coming changes in the automotive industry,” stated Anthony Palmer, vice president, chemical consulting for IHS Markit. “The growth of EVs as a share of new vehicle sales means decreases in demand for chemicals and plastics materials traditionally used in “under-the-hood” applications, including engineering plastics, that can withstand high temperatures, as well as for commodity plastics, used in gasoline tanks. But the transition to EVs also means new opportunities for chemical companies, which are preparing for the changes by investing significantly in future production for battery materials.”
The change in the use of liquid transportation fuels, as the automotive industry moves toward EVs, will also impact on the chemical industry, Palmer stated. “As the demand for gasoline and diesel fuel used in light-duty vehicles weakens, more refinery products will be available to serve as chemical feedstocks. Such a shift would encourage investment in naphtha crackers in the growing Asian demand centres, including China and India.”
For the power industry, greater adoption of EVs will push electricity demand higher in the U.S. and Europe by the year 2040. With U.S. and European on-grid electricity demand increase slowing relative to historical rates, EVs provide an uplift to the electricity market, the study shows.
Although the coming decades will be a period of transformation for the automotive future, the sheer scale of the current automotive ecosystem will serve as a moderating influence on the pace of change, the study states.
“The automotive future will be defined by transformation unlike anything we have seen since the dawn of the automotive age,” stated Tom De Vleesschauwer. “Still our analysis shows that there will be much that looks familiar, even in 2040. The majority of new cars sold and miles travelled will be in vehicles purchased for personal use. And a large share of those will have internal combustion engines that run on refined crude products. But the future of automotive transport will be an era defined by multidimensional competition. And the changes that future brings about will be profound and permanent.”