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Betting on the future of automobiles

The industry is investing hundreds of billions on battery-electric vehicles (BEVs). Will those bets pay off?

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For a century, a single fuel-powertrain combination鈥� the petroleum-powered internal-combustion engine (ICE)鈥攈as dominated the global automotive industry. How automotive companies are structured, how they are financed, how they go to market鈥攅verything was optimized for producing and selling ICE-based vehicles.

Now, the conventional wisdom says that the battery-electric powertrain will triumph鈥攂ecoming the dominant force in the automotive business that ICE has been. And automotive companies are making massive bets on this scenario. Yet, we still don鈥檛 know when battery-electric vehicles (BEVs) might reach a tipping point and become popular with a wide swath of consumers, generating the sales鈥攁nd profits鈥攖o justify the billion-dollar investment auto makers are making in BEV development. ICE is going to lose dominance, but the future industry may look more like a mosaic鈥攚ith multiple fuel/powertrain combinations and far more complexity than the conventional wisdom assumes.聽

Key takeaways

1

The century-long reign of the ICE powertrain is ending鈥攂ut no one knows how quickly; analyst estimates of 2030 BEV penetration range from as little as 24 percent to nearly 40 percent.

2

The industry will look more like a mosaic.聽Contrary to the conventional wisdom and $200 billion- plus of investments, the future won鈥檛 just be BEVs. There will be multiple fuel/powertrain combinations鈥攊ncluding ICE hybrids, and hydrogen鈥攖o meet the needs of the market.

3

Too many players, too few consumers?聽Today, many BEV players are aiming at a narrow ($50,000 and up) slice of the U.S. market, representing only 2.4 million units or 17 percent. By 2030, even if BEV penetration reaches 30 percent (including more lowerprice models) the available market may only be 5.1 million out of a 17 million-unit market.

4

Massive ICE manufacturing overcapacity.聽If the 30 percent BEV penetration forecast is even close, by 2030 there could be nearly 40 million units per year of excess ICE manufacturing capacity globally鈥攖he equivalent of 200 assembly plants. That does not include the multiplier effect on suppliers and their plants.

5

Unanswered infrastructure questions.聽Not only is there uncertainty about building out charging infrastructure (for EVs and hydrogen vehicles), but also about the needed electrical supply. Nearly 4 billion people live in countries with inadequate electrical infrastructure for EVs. Even in wealthy economies, the electric grid is vulnerable and not ready for widespread EV use.

6

Sweeping structural change.聽In almost any scenario, the industry can expect massive structural change. New competitors will take share. Value chains will be shattered, and supply chains will be reconfigured; companies will need to adjust their portfolios of businesses.

7

The stakes could not be higher.聽The bets鈥攁nd the uncertainty and complexity鈥攁re enormous. New dominant positions will be built, and old empires may fall. A decade from now, there could be a new pecking order in automotive鈥攁nd one or more of today鈥檚 top players may have been acquired or disappeared.

8

The mosaic can show how to place your bets wisely.聽To win, companies will need to choose new strategic postures and adopt a dynamic decision-making framework to plan and place their bets. They need the mosaic.

In our paper,聽Place your billion-dollar bets wisely: Powertrain strategies for the post-ICE automotive industry, we describe why for the next 10 to 20 years, multiple fuel/powertrain combinations (including gasoline/internal combustion) will coexist, and innovation will continue on multiple fronts. So, instead of a monolith built around one dominant fuel/powertrain combination, the industry will look more like a mosaic of a variety of powertrains to meet the need of different market segments. This mosaic can help auto companies evaluate possible scenario drivers鈥攅conomics, technology evolution, regulation, etc.鈥攕o they can place their billion-dollar bets wisely and to revise strategies as factors change over time.

Dive into our thinking:

Place your billion-dollar bets wisely: Powertrain strategies for the post-ICE automotive industry

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Meet our team

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Yoshi Suganuma
Managing Director, Strategy, 乐鱼（Leyu）体育官网 LLP
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Yoshi Suganuma
Managing Director, Strategy, 乐鱼（Leyu）体育官网 LLP
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