What does the future of mobility hold for European carmakers? We see a new value chain emerging, shaped by regulations, consumer attitudes, and the pace of technological change. Key to thriving in the new ecosystem: investing strategically—and accepting that not every investment will bear fruit.
The emerging mobility ecosystem has the potential to move people and goods more quickly, cheaply, safely, and cleanly than today. But the future of mobility raises hard questions for auto industry incumbents. How can traditional carmakers remain competitive against tech players with pockets full of cash that they are willing to invest? What will be the impact of in-car software and connected services on R&D capabilities and supplier selection? What kind of asset structure will be needed to provide mobility and digital services? How can companies train their people to ensure they possess a “digital skill set,” and how should they deal with the fact that automation and shifts in vehicle components could make many workers redundant? And what will be the impact on the economy in and around cities and regions that depend on the jobs that automakers provide?
This article attempts to shed some light, from the perspective of a European automaker, on possible developments in the automotive value chain as we move toward 2025 and a new mobility ecosystem.
Without a crystal ball to look ahead, decision-makers can develop scenarios to understand the underlying dynamics shaping the future, and make smart strategic decisions in the face of uncertainty. In the course of a large number of interviews with experts representing automakers, mobility entrepreneurs, researchers, and lobbyists, as well as IT and battery developers, we identified more than 60 factors that are most likely to drive the future of the auto value chain.
Backed by our extensive research data, we then used these driving factors to construct four scenarios or narratives, each giving a different picture of what the value chain might look like in 2025. To test and fine-tune each of these narratives, we held a number of workshops with top executives from original equipment manufacturers (OEMs) and independent industry experts. From these, we drew a series of implications for the market and the value chain, as well as some strategic imperatives for auto OEMs.
To facilitate decision-making in the face of uncertainty, we need to quantify the effect of projected shifts in the market and their implications for the value chain. Taking each of our scenario narratives and profit models, together with Deloitte financial benchmark databases and forecast developments in the factors driving the market, we modeled an income statement and balance sheet for a typical European OEM in 2025.
However, outlining projected profit models and performance indicators for OEMs in 2025 will not answer two important questions that all decision-makers will ask: How do we get there, and where do we start? This study, therefore, concludes by outlining suggestions for possible value-chain transformation paths for OEMs, and also pain points that might be expected along the way. To do this, we place special emphasis on assets, people, and supply structures along the auto value chain.
Throughout this article, we examine how the future might unfold for a typical OEM, headquartered in Europe, with no distinct market positioning—serving both premium and volume segments—but with a respected brand and solid profit streams. With an annual turnover of almost €60 billion and an EBITDA (earnings before interest, taxes, depreciation, and amortization) margin of 12.5 percent, this comes well within the order of magnitude of European carmakers. Throughout, we refer to this typical OEM as the “future car company,” “future automaker,” or simply “the company,” while we refer to carmakers as a whole as OEMs.
