The European automotive industry has reached the top of the global market. It has seen record sales and is an integral part of European society as a major employer and source of substantial grantmaking. However, fundamental changes in the industry are jeopardizing Europe’s leadership position. Leaders will have to make tough decisions if the European automotive industry remains competitive in this evolving landscape. A shared vision of the sector’s position is essential.
We studied the future of Europe’s automotive industry to inform this discussion. This research was based on McKinsey Center for Future Mobility analysis and proprietary knowledge, interviews with automakers and European Automobile Manufacturers Association executives members, and conversations with key stakeholders from major automotive associations. Our new report, RACE 2050, which presents our findings, is a vision for Europe’s automotive industry. It envisions it as a Responsible Automotive Customer-Centric Ecosystem (RACE).
The report is divided into three sections. The first section examines the unprecedented changes occurring in Europe’s automotive industry. The second section outlines a long-term vision, and the third section focuses on five initiatives that could be used to help achieve this vision. The rest of the article is focused on the future vision and what it will take for the ride to the technological megatrends that are redefining mobility.
The vision must be compelling. A compelling narrative is needed to maintain Europe’s leading position in the global automobile industry. This narrative should include a clear understanding of the building blocks of the vision 2050 (see the sidebar “Building blocks to the industry in 2050”)
McKinsey’s vision of the European automotive industry is based on the belief that, while the industry is a world leader in exporting and selling technologically advanced products, it will need to make a paradigm shift to become a mobility industry.
The solid foundation of success in the European automotive industry has been built on three building blocks: customer orientation, environmental awareness and economic value creation (Exhibit 1). These concepts are also the foundation for the future vision if they are taken to the next level. The shifts from customer orientation to customer-centricity, environmental awareness to sustainable mobility, profitability to positive economic value, or the “European Way” will be crucial to achieving the 2050 target for the European automotive industry. The report introduces the idea of the European way for future mobility. It offers a clear value proposition that addresses diverse global mobility requirements that the European automotive sector is well-positioned to meet.
Creating a customer-centric European mobility sector
McKinsey’s 2050 vision for individual mobility and commercial vehicles places the customer at its core. A customer-centric approach to mobility is more important than a technology-focused one to win the next generation of customers, given the abundance of information and big data.
Since 2005, the number of fatalities in Europe has decreased by over 40%. Our goal is to eliminate all accidents by 2050. With many innovations in active safety and passive safety, as well as advanced driver assistance systems (ADAS), the EU mobility industry could be a leader in this vision.
Individual mobility will also be more accessible than the current 60-70 per cent. This is in addition to the fact that around 90% of the population can access it (including seniors and teenagers). Technological advancements, new powertrains and optimized shared mobility services could reduce mobility costs by EUR0.10 per km in certain cases. This means that lower-income groups are possible to be reached. Advanced ADAS systems, eventually connected and autonomous vehicles, will increase individual mobility for younger and older generations.
First-place in Sustainable Mobility
Despite ongoing discussions on emission compliance, it is a fact today that vehicle passenger- and commercial-vehicle fuel consumptions and carbon dioxide (CO 2) emissions are much lower than they were twenty to thirty years ago. However, this is still not enough. This vision extends beyond the 2030 targets, Paris Agreement, and the United Nations Environment Programme 2030 Agenda. It aims to achieve zero net-impact emission, including emission-free cities, carbon-neutral fuels, green electricity, and further suburban and rural mobility. Zero net-impact emissions mean that there are no total emissions from the vehicle, whether due to the tank-to-wheel emission of hydrogen or green electricity or because the fuel is carbon-neutral (e-fuels or biofuels, for example). The automotive industry can also contribute to a successful carbon reduction across all industries by requiring renewable-energy sources of hydrogen and electricity or through an efficient emission-certificate trade system to maximize emission reductions per euro spent. Our vision also includes the second element: significantly contributing to protecting the environment for future generations.
Creating superior, sustainable economic value by using the European way
The economic-value contribution must be a key requirement to create a sustainable future mobility industry that is profitable and competitive. It also helps to keep the industry relevant as a global export sector. Expect revenue pools and even more radical profit pools to shift from the traditional business model of classic vehicle sales and aftermarket to new disruptive business models. This includes mobility, data-enabled services, connected and autonomous vehicles, and electrified cars. Based on consumer spending, McKinsey Auto 2030 predicts that European automotive revenues will nearly double from EUR850 billion in 2016 and EUR1,400 billion by 2030. From 0.2 per cent, the share of data-enabled services and shared mobility will rise to 27 per cent over the same period. European automotive players must secure several industry control points to capture a significant share of the industry profit pool. These technologies allow for full or partial control over entire processes and systems. Potential player-specific control points include:
- Battery cells.
- Battery-management systems.
- Intelligent e-drive systems.
- Fuel-cell systems.
- Artificial-intelligence software for AVs.
- Mobility platforms.
The commercial-vehicle aspect of the vision is about reducing inefficiencies by multimodal optimization of holistic transportation ecosystems. Our vision is for a 100% on-time, cost-efficient and customer-focused delivery. Transport costs could drop by as much as 40% through 2050, depending on how autonomous commercial vehicles are used.