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    Editor's Pick (1 - 4 of 8)
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    A New Transportation Mode is Swiftly Arriving: What it means for the Future of Auto

    Gary A Silberg, Head of Automotive, KPMG LLP

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    Gary A Silberg, Head of Automotive, KPMG LLP

    We are swiftly arriving at something magical, a new and disruptive transportation mode: driverless vehicles coupled with mobility services. We think consumers will want this. We think it will be fantastic for them. We think it will be transformative in the same way the smartphone and personal computer have been. Consumers embraced them so completely that they never looked back; flip phones and typewriters were all but gone from their thoughts. We think consumers will likewise flock to this new transportation mode, changing forever their relationship to cars and transportation.

    But the embrace—the adoption of this new transportation mode—won’t roll out the same way as it did for cell phones and computers, instantly across the country and world. Instead, carmakers will have to think of its adoption as coming place by place, location by location—what we call islands of autonomy. These islands are cities but not only cities. They are cities across the world that fit certain demographic criteria, but they are also bounded concentrations of populations in places that range from college towns to cities-within-cities, and they include cities that push beyond their boundaries until they merge into other communities.

    We believe these islands will be first to experience this transformation due to a number of factors. First, mobility service providers will require network density afforded by cities in order to affordably meet customer demands for two to three minute response times, which appears to be a tipping point.

    This astonishing decline will lead to greater overcapacity in supply and further disruption of the market than OEMs have anticipated

    Second, early autonomous cars will operate most effectively in geofenced city centers, where they can make the frequent observations of the driving environment they will need to gather data and improve performance.

    The islands of autonomy will have enormous consequences for the planning of cities and transportation systems, from how to construct highways to where and how much parking will be needed. For carmakers and others in the transportation and mobility industries, the consequences of the islands are also enormous. The current market, which has existed for decades, will no longer be recognizable. In its place will be a market driven by product, service, and investment decisions according to the requirements of consumers on these islands.

    Islands of autonomy identify the segmentation of the market for autonomous vehicles and mobility as a service (AV-MaaS). Knowing how and where these islands develop will make all the difference in understanding how consumer behaviour will soon change in them, how vehicle ownership will change, and where and how mobility services will grow. It will be essential for where and how those in the auto industry will find value.

    The ramifications are incredible. They predict that consumers will have far more choices in transportation. They can push a button and their driverless car will appear, or push another button and a mobility service will arrive. The vehicle that appears before them will accommodate their need to go to the office, go to the grocery store, spend a night on the town, or take that ski trip. Those greater options translate into different consumer buying behaviour—less of a need to own, which signals a far more rapid decline in auto sales than original equipment manufacturers (OEMs) expect. That is especially true with “standard” vehicles in the A, B, and C segments. We calculate a massive decline in personally owned sedans in the United States as a result of these islands, dropping from 5.4 million units sold today to just 2.1 million units by 2030.

    This astonishing decline will lead to greater overcapacity in supply and further disruption of the market than OEMs have anticipated. In this fantastically competitive market, some carmakers and major auto players may struggle to stay in business. Public markets are aligning with these perceptions. Think of the shockingly low valuations of global behemoths and the shockingly high valuations of those on the vanguard of change.

    Not all is lost, however. A trillion dollar market will soon arise around mobility and selling miles. The key to understanding the decline and the opportunities are the islands of autonomy.

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