The connected car market seems on track to continue its shake-up of the automotive industry, with PwC predicting the worldwide connected mobility market to increase threefold from around £40bn in 2017 to £120bn in 2022.
According to PwC’s fourth annual Connected Car 2016 study, car makers will need to sell 320 million connected car packages by 2022 in order to realise the market’s potential.
This will prove to be a massive challenge for existing sales channels, as current data suggest that by the end of 2016 OEMs will be capable of selling just 1.4 million connected car packages a month. This means that vehicle manufacturers will need to increase the number of connected car packages sold a month by nearly six fold, to 8.2 million packages a month.
The study coincides with the Paris Motor Show, with this year’s show focusing on how manufacturers are preparing to go head-to-head with tech companies in the race for connectivity.
Due to this evolving market dynamic, and as revenues and profits shift from hardware to software, and from products to services, industry leadership is expected to be turned on its head. Household automotive and traditional manufacturers will feel the pressure of the shift in market – not only will they see the need to innovate quicker, but they will also be impacted by the squeeze in prices and margins caused by the strong volume growth in the market. PwC expects OEMs’ share in profits from the overall mobility sector to fall from 70% (in 2015) to just 50% by 2030.
“The increase in connectivity holds real opportunity and risk. While the overall connected mobility market is growing rapidly, the mix is shifting, with a decline in the navigation and entertainment systems which have been the mainstay for OEMs, coupled with and the spread of connectivity further into the more price sensitive mass market,” said Rich Parkin, UK automotive partner at PwC.
“In the short- to medium-term, suppliers of technology and mobility and digital services are the ones set to profit most from the budding connected car market.”
By 2022 connected vehicle penetration will have reached 2/3 of new vehicles , with PwC expecting autonomous driving to surge in the market, predicting a 27% increase in sales and a volume of £11bn in 2017 to 35% (£42bn) in 2022.
“Despite major manufacturers increasing their development budgets by 8% compared to the previous year and realigning their focus, they are still often being overtaken by newcomers,” said Mr Parkin.
“To capitalise on the opportunity, traditional carmakers will need to not only take advantage of the latest technologies, but also significantly accelerate their rate of innovation. This will often mean altering their culture, management styles, approach to mergers and acquisitions, and recruitment to keep pace with the smaller and more nimble contenders.”