The prospect of autonomous cars being a commercial reality is fundamentally changing the mobility ecosystem. As the technology matures, profits have already started shifting toward mobility and connected service providers. However, a lot is still yet to be defined across the ecosystem which makes widespread adoption of autonomous cars devilishly difficult and slow.
As companies begin to navigate the autonomous landscape, there are numerous challenges that make the strategy complex. The technology isn’t perfected. Consumers aren’t fully on board. Roadways need to become more standardized, and issues of liability remain difficult to solve.
Despite the complexity, almost two-thirds (60 percent) of executives surveyed by Accenture are currently piloting autonomous vehicle technologies or planning to pilot in the next year.1 Further, forecasts suggest that by 2030, 50 percent of all vehicles sold will be “fully autonomous.”2 This includes robocabs and optional L5 capability in consumer models.3
Accenture Strategy analysis finds that 60 percent of the estimated $600 billion in auto industry profits in 2020 will accrue to new entrants. The share of traditional original equipment manufacturers (OEMs) and suppliers will drop to below 50 percent. This is giving rise to new ownership and business models that require significant new capabilities, investment from participants and ecosystem partnerships. A new race is forming.
How are profit pools shifting?
The evolving ecosystem
The traditional cluster of competing players has evolved significantly to include: OEMs, massive global tech players, ride-sharing platforms, car suppliers, hardware and software Internet of Things (IOT) providers, and major telecoms players—all bringing unique skills and capabilities to the autonomous vehicle industry.
To date, Accenture Strategy estimates that roughly $130 billion of investment has been made, over $200 billion has been announced, and more than $50 billion of mergers, acquisitions and partnerships have been agreed upon. Big numbers have been put up, mainly by car OEMs, tech companies and large tier 1 auto suppliers, largely around embedded software, AI, cybersecurity and advanced analytics.
This landscape has implications for all players in the ecosystem: Entry is difficult for new players, but niches are there to exploit. To be successful, any player must understand and exert its competitive advantage while partnering with, and leveraging the rest of, the autonomous mobility ecosystem. Be prepared to spend, partner and scale with speed.
Accenture strategy’s perspective
Eighty-two percent of companies surveyed by Accenture Strategy are committed to investing heavily in ecosystem partnerships over the next five years.4 To capitalize on these investments, there are strategic decisions before every participant in the emerging autonomous vehicle ecosystem. Four major “battles” will define the race to value in the autonomous space.
- E2E Solution. Only a few providers will be able to execute end-to-end (E2E) solutions including autonomous technology and appropriate E2E vehicle integration. This is high risk and requires deep pockets and broad capabilities such as the ability to stomach long-term R&D costs, the ability to curate co-opetition, or even the technical ability to build a very complex product.
Key battle – OEMs versus tech giants
- Platform Provider. It is likely that there will be 1-2 dominant platforms that combine the right hardware and software. The winners will be put into every non-E2E solution car to shape standards and drive innovation. This requires significant investment and scale along with unique business models.
Key battle – Platform versus service providers
- Differentiated Technology / Knowledge Supplier. Leadership in specific critical technologies and components will enable high- margin supplier niches. To take full advantage, multiple strong platform partnerships will be required.
Key battle – Diversified versus focused suppliers
- Product Maker. There is still a need to build many of the products (e.g., cars!) with some opportunity to differentiate. This may be the easiest path for most OEMs especially those that are not pouring significant investment into autonomous technology.
Key battle – High-end versus commodity suppliers
How to respond
Ecosystem participants can begin by asking themselves the following key questions to critically assess their businesses and begin investing in the right areas to take advantage of these trends:
- What are the businesses’ strategic advantages? Is your advantage technology versus manufacturing or can you execute multiple business models versus deep expertise in one? This will inform where you should invest, and how you should be positioned in the future.
- What is the financial appetite toward long-term high-spend investments? Determine organizational commitment and financial ability to sustain investment over the long term. Understanding organizational endurance is key to investment success.
- How do you make the "wise pivot"? Optimize current business while gradually shifting to new revenue models and streams. Understanding where to deploy value-based capital is important to a profitable shift.
- What is your partnering strategy? How to build up or be a trusted part of a relevant AV ecosystem vs going solo? Understanding how much of the value chain you plan to cover based on your strengths will impact your product development roadmap and go-to-market strategy.
1 Accenture 2018 Technology Vision research
2 CBS Moneywatch, “What will you be driving in 2030?”, January 2016. Includes L4 and L5.
3 SAE International’s standard J3016 defines six levels of automation to classify a system’s sophistication. L5 equals fully autonomous.
4 Accenture Strategy 2018 Ecosystems research