More than 50 companies are now working on autonomous vehicle technology, and the cost of AV systems could drop 78 percent by 2025 due to competition, according to an AlixPartners survey of the auto industry.
New entrants in the autonomous space often have different DNA than traditional automakers, “including being used to very high returns on capital,” according to the consulting firm.
“This ‘Wild West’-environment will likely result in a handful of big winners, says the study, but on the other hand, also many disappointed investors,” AlixPartners said in a Wednesday statement.
A new automotive ecosystem is developing and many players may not be prepared, John Hoffecker, global vice chairman at AlixPartners, said in a statement.
“The changes coming are the biggest since the internal combustion engine pushed aside horses and buggies, yet what the exact changes will be [are] as unpredictable as trying to guess which app is going to be most popular on next year’s smartphones.”
The leading players will be those who “both study hard and are fast on their feet,” Hoffecker said.
Other findings in the AlixPartners report on the auto sector include:
- A forecast of a significant downturn in U.S. vehicle sales, from 16.9 million light vehicle sales in 2017 to 15.2 million in 2019. The trend will be partly driven by a “used-car time bomb” of 500,000 more off-lease vehicle returns this year than in 2016, according to the firm.
- 9 percent of millennials surveyed in key markets told AlixPartners that ride-hailing services have allowed them to postpone or avoid getting a driver’s license.
- Of 103 electric vehicles to be launched by 2020, 49 will come from automakers based in China.
Munster: I Wouldn’t Want To Be An Auto CEO
Loup Ventures cofounder Gene Munster recently told Benzinga that “traditional automotive is going to be the tough spot” as autonomous technology develops, and said traditional automotive is “still trying to struggle with things that Tesla Inc TSLA 1.35% dealt with three years ago.”
Traditional automakers are faced with the problem of breaking with profitable pieces of their business in order to focus on electric and autonomous vehicle technology and compete with younger companies, Munster said.
Ford Motor Company F 0.69% is “in a tough spot,” Munster said. “It’s a tough position to be in. I don’t want to beat the point too hard, but I would not want the job of being head of an automotive company right now.”