Cars 2025 - What Will Drive You?

Episode Summary

Executive Summary: Goldman Sachs’ CARS 2025 discussion outlines a decade of disruption in autos driven by three converging shifts: zero-emission mobility, autonomous driving, and connectivity. Stefan Bergstahler argues the industry will move incrementally but decisively toward electrification, self-driving features, and connected services, reshaping consumer ownership, urban mobility, safety, insurance, and the competitive landscape for automakers and tech firms alike.

Main Topics: Three disruptive forces reshaping autos (Priority: 5/5): The report centers on zero-emission mobility, autonomous driving, and connectivity as simultaneous changes that will redefine both transportation and the auto industry. Autonomous driving: revolutionary tech vs. gradual auto-industry adoption (Priority: 5/5): Technology firms are pushing for full autonomy quickly, while automakers prefer a staged rollout through safety features, highway automation, and eventually urban driving capabilities. Consumer benefits and changing mobility behavior (Priority: 4/5): Autonomous cars are framed as more convenient, safer, and better suited to urban congestion, while millennials and rising costs support a shift toward sharing and flexible access over ownership. Emissions regulation and powertrain diversification (Priority: 5/5): Tighter CO2 standards are forcing investment across combustion engines, hybrids, plug-ins, electrics, and hydrogen, with infrastructure and battery economics remaining major hurdles. Emerging markets and global sales growth (Priority: 4/5): China and India are presented as major growth engines, with rising incomes, urbanization, and market-specific constraints influencing vehicle design and mobility models. Connected cars and industry spillovers (Priority: 4/5): Car connectivity will enable data-driven traffic management, new infotainment models, road pricing, and major disruption to insurance and other adjacent sectors. Industry resilience and strategic adaptation (Priority: 3/5): Despite past pressures, automakers have improved profitability and adapted to change, though future leadership will require managing technology, regulation, and new business models.

Key Arguments: The next decade is significant because multiple structural changes are accelerating at once, creating a transformational period for the global auto industry. Autonomous driving will likely arrive through two paths: fast-moving technology companies pursuing full autonomy and traditional automakers introducing features step by step. Consumers may accept autonomy because it offers convenience, safety, and better use of time in increasingly congested cities. Urbanization and congestion make the car a poor-utilization asset today, strengthening the case for sharing and mobility services. Tighter emissions rules will force broad investment across powertrains, not just batteries, because no single technology can satisfy cost, range, and regulatory requirements alone. Battery cost and range remain key constraints, but significant improvements are expected over the next decade, with mass-market EVs still further out. China and India will drive much of global auto demand growth, but each market will require different vehicle and technology strategies. Connected and autonomous cars will generate valuable data that could reshape traffic management, road taxation, infotainment, and insurance economics. The industry has historically adapted well to shocks, but the next wave of change will test management beyond traditional carmaking. By 2025, new car sales are expected to be more fuel-efficient, with around 25% electric power systems and broad availability of plug-in hybrids, while autonomy and connectivity remain most advanced in premium segments.

Data Points: Global urban population by 2050: 6 billion - Used to illustrate increasing congestion and the need for new mobility solutions Urban population growth: 50% increase - Expected growth in urban population by 2050 Megacities by 2030: 48 cities - Projected number of cities with more than 10 million inhabitants, up from 28 Current megacities: 28 cities - Baseline used for the 2030 projection Time spent in traffic in the U.S.: a whole working week - Average time lost in traffic jams, cited as an economic burden Economic loss from traffic jams: $100,000 - Official estimate referenced in discussion of congestion costs Time spent in a car in developed world: 300 to 400 hours per year - Compared against time spent online and on mobile phones Half of annual traffic fatalities/injuries: 500,000 deaths; more than 7 million injuries - Global road safety statistics used to support autonomous vehicle safety claims Share of accidents caused by human error: 7 out of 8 - Used to argue machines could materially improve safety Average vehicle utilization: less than 5% - Based on 12,000 miles driven at 30 mph average speed and ~400 hours annually Average miles driven per car per year: 12,000 miles - Used to show low utilization of privately owned cars Average speed assumption: 30 miles per hour - Used in the utilization calculation People favoring sharing in survey: more than one third - Nielsen survey of 21-34 year olds willing to actively share products or services 2015 EU fleet CO2 target: 130 grams of CO2 per kilometer - Baseline emissions standard cited 2021 EU fleet CO2 target: 95 grams of CO2 per kilometer - Upcoming regulatory benchmark Contemplated 2025 EU fleet CO2 target: 72 grams of CO2 per kilometer - Discussed as a possible future requirement Potential CO2 reduction required: about half over the next decade - If the 2025 target is adopted Global auto sales in 2015: 80 million - Starting point for sales growth forecast Global auto sales in 2020: 100 million - Forecast driven largely by developing markets Global auto sales in 2025: 120 million - Forecast driven largely by developing markets China market growth outlook: 5% per annum on average - Expected growth over the next decade India market size by 2025: more than 7.5 million cars - Projected to become the third-largest car market Battery cost trend: will halve over the next decade - Expected improvement in EV economics Mass-market EV battery weight target: around 80 kilograms - Projected for around 2030 Current battery weight: 200 to 300 kilograms - Compared with future target battery weight Revenue/premium share from automotive insurance: about one third - Used to show how connected/autonomous vehicles could disrupt insurers Automotive industry volumes: 80 million from 60 million - Describes improvement over roughly eight years Profit pool growth: $120 billion from $64 billion - Shows industry financial recovery and resilience Average industry margins: 6.2% vs. 4.4% in 2007 - Evidence of improved profitability New car sales powertrain mix in 2025: about 75% internal combustion / 25% electric power systems - Stefan’s forecast for the 2025 new-sales mix

Pivotal Quotes: "We believe we have a transformational mark on the global automotive industry over the next decade." — Stefan Bergstahler: Explaining why the next 10 years are so significant for autos "The autonomous car is going to change how we use mobility in our society." — Dr. Dieter Zetsche (quoted by Stefan Bergstahler): Illustrating the broader societal impact of self-driving vehicles "The automotive industry is a tough industry. The industry has to deliver a lot to us, the consumer, and we tend to not be willing to pay for it." — Stefan Bergstahler: Summarizing the sector’s low-margin, high-expectation economics

Implications: Autos are moving from a product business to a mobility-and-data platform. Expect more electrification, early autonomy in premium models, growth in sharing, and pressure on insurers, cities, and suppliers to adapt to connected, software-driven vehicles.