In 2022, mobility was . . . on the move. This was a year of transition, which included some leaps forward and some retrenchments. A few indicators of disruption became quite visible—even part of daily life. More and more electric vehicles (EVs) can now be seen cruising down the roads. Newly installed charging points are popping up in many countries. Novel business models (for instance, cars as a subscription service or as a direct-to-consumer product) have blossomed. In city centers, car use has come under increasing scrutiny from government authorities, and micromobility options, such as electric scooters, are increasing.
As for other realms of mobility, 2022 was a year for realignment. Investments in air mobility failed to equal 2021’s record, though many players are advancing their technologies and inching closer to regulatory approval. The fanfare around autonomous driving—once the subject of record-breaking funding announcements, seemingly on a weekly basis—has apparently subsided. But leading entrants are making tremendous technological progress, scaling their operations across multiple cities, and laying a path toward greater customer acceptance.
The automotive sector faced significant headwinds, generated in large part by geopolitical issues and macroeconomic uncertainty. Many automakers have handled this difficult environment with aplomb, building resilience in the expectation of a challenging near-term future. Some suppliers are suffering because of supply chain challenges and the contraction of the internal-combustion-engine market, but pockets of growth remain for those that can act boldly.
In this article, we shed light on the most important developments of the past 12 months and use the lenses of technology, customer sentiment, and the regulatory and operating environments to envision what those developments could mean in the year to come.
Consumer psychology’s influence on mobility
A panoply of consumer archetypes—or personas—has been emerging and will play a role in shaping mobility’s future (Exhibit 1). Some personas will become more widespread over time. Others will fade or evolve.
In urban areas, non-car-centric personas are poised to proliferate. Members of this group will probably sell their current cars without replacing them, or at least drive those cars much less often, reducing the frequency of replacement and thus spending on vehicles. Sometimes decisions will reflect “eco-hyperawareness.” Sometimes they’ll result in larger part from concerns about the rising cost of car ownership.
Micromobility enthusiasts enjoy zipping around town on e-bikes and stand-up electric scooters, aka e-kickscooters. These consumers tend to use and own different types of micromobility vehicles. The “multimodal urbanist” persona is partial to a sort of portfolio play, believing there’s a proper form factor for any given travel purpose.
Car-centric consumer personas will endure, but their definition of “car” might expand to include emissions-free models. They might also begin to supplement car usage with other types of mobility more often.
Micromobility evolves, minimobility enters the scene
Before the COVID-19 pandemic, funding levels in the shared-micromobility industry (primarily electric bicycles, mopeds, and e-kickscooters) soared in line with growing ridership. From 2015 to 2019, almost $7 billion was invested in this market. Funding contracted sharply in 2020, to roughly $800 million, but the industry soon resumed its growth trajectory, with capital flows rising again in concert. In 2021, micromobility players attracted approximately $2.9 billion in new investment, primarily for e-kickscooters.
In 2023, we expect that investments in the privately held ecosystem supporting e-bikes will proceed apace but project that micromobility investors, in general, will sharpen their focus on profitability. This could further the industry’s ongoing consolidation. Meanwhile, investment flows might continue to shift away from Asia and toward Europe (Exhibit 2).
Another mobility segment has gained traction below the surface. Minimobility options, which include three- and four-wheeled EVs that can fit one or two people, sit in the space between cars and bicycles. These vehicles have an average weight from 100 to 500 kilograms (about 220 to 1,100 pounds) when unoccupied. Depending on the vehicle type and local regulations, their maximum speed varies from 25 to 90 kilometers (about 15.5 to 56 miles an hour). If interest continues to rise, and regulators are on board, the minimobility segment could reach a total addressable market of $100 billion annually across China, Europe, and North America by 2030. In a 2021 McKinsey survey of 26,000 people across eight countries, more than 30 percent of the respondents stated that they were likely or very likely to consider using a minimobility vehicle as one of their future mobility options. Viewpoints varied dramatically by geographic region, however (Exhibit 3).
Autonomous vehicles: The rise of the robo-taxi and robo-shuttle
In 2022, the fortunes of various robo-taxi and robo-shuttle players diverged: some discontinued development, while others announced aggressive efforts to scale up their businesses. Strategic investors swallowed smaller players in transactions that were primarily intended for “acquihires.”
We expect consolidation to continue in 2023—especially for smaller and lagging competitors—which will ultimately strengthen the marketplace. Outside China, we project that only two to four players will eventually provide fully autonomous robo-taxi and robo-shuttle technology.
Consumers could benefit from per-mile costs lower than those of other transportation options in coming years (Exhibit 4). Robo-taxis might be favored in the United States. Europe will more likely favor robo-shuttles, which could steal significant modal mix share from private vehicles, so that cities and citizens can reclaim space from private cars.
Air mobility continues to attract funding
Urban and advanced air mobility—a segment that includes electric vertical takeoff and landing (eVTOL) aircraft—enjoyed record funding in 2021: roughly $6.9 billion in new investments. Funding cooled in 2022, partly as a result of macroeconomic conditions, but remained well ahead of its prepandemic pace (Exhibit 5).
Leading eVTOL players are following aggressive time lines, hoping to achieve important certifications by the mid-2020s. Meanwhile, incumbents are trying to catch up: 72 percent of the largest 25 aircraft OEMs and 64 percent of the largest 25 suppliers now participate in some type of advanced air mobility activity. The upcoming year will pose a crucial test for entrants that wish to stay on path for near-term flight certification.
EV uptake differs by region and segment
A successful net-zero transition will require dramatically increased EV sales in coming decades (Exhibit 6). Recent trends have included some regional divergences in EV adoption rates. Last year, uptake rose by about 80 percent in China and by about 40 percent in the United States (compared with 2021). But Europe remains roughly at 2021 levels. The slowdown reflects declining subsidies, high prices for electricity, and the rising cost of raw materials—up 120 percent for lithium, to give one example.
If conditions don’t change, EV sales in the European Union could continue to slow. So could overall car sales, as individual mobility becomes more and more expensive for many Europeans. Meanwhile, in the United States, long-term uptake could be accelerated by recently legislated subsidies that support EV purchasing, battery cell production, and the build-out of charging infrastructure. With a continued generous regulatory push, the United States could reach EV penetration on par with European levels.
An EV adoption divide has also begun to emerge between segments. Buyers in the premium segment are less price sensitive and more likely to charge electric vehicles at home. Premium OEMs are also setting ambitious EV targets. As a result, the premium segment is two years ahead of the volume segment in the pace of electrification.
Batteries remain in high demand
As a result of increased EV production, demand for batteries is surging—and further acceleration is expected (Exhibit 7). To provide commensurate supply, more and larger battery factories will be needed around the world. So far, announcements about future battery supply capabilities roughly match expected demand. But we project that a significant portion of announced future supply will not materialize in a timely manner, so shortages will probably occur.
Regional mismatches in supply and demand could create additional bottlenecks. Despite rising local demand, China will probably continue to have significant excessive production capacity, for instance, while Europe and North America might not be able to meet their own local demand for cell production. The US Inflation Reduction Act, with its subsidies for battery makers, has made North American production a more appealing option. Further regional regulatory announcements could reshape the attractiveness of battery production in other locales, such as Europe.
To support the scale-up, battery manufacturers will need to secure additional manufacturing equipment and raw materials. This could pose challenges. Australia and Chile, for example, now produce about 70 percent of the world’s supply of lithium—which could be a limiting factor. Supply chain snags, and shortages of raw materials such as nickel, could also influence shifts in favored battery chemistry. Eventually, the battery market could be even more dramatically disrupted by developments in next-generation batteries (for example, silicon anode and solid-state varieties), as well as new technologies, such as sodium ion.
Europe must ramp up the charging infrastructure
With more EVs on roads in Europe, it will need a major build-out of its EV-charging infrastructure. A recent analysis suggests that in even the most conservative scenario, the EU-27 will require at least 3.4 million operational public-charging points by 2030—a significant step up from the estimated 375,000 charging stations in 2021 (Exhibit 8).
Extensive utility grid upgrades will be necessary to distribute electricity to these new charging stations. Higher renewable-energy production capacity will be needed to supply those grids with clean power. In all, the build-out of Europe’s EV-charging infrastructure might cumulatively cost upward of €240 billion by 2030.
Semiconductor shortages persist
Demand for automotive semiconductors continues to outpace supply, but the gap varies by node size (Exhibit 9). For nodes greater than 90 nanometers (nm), which are in high demand by the automotive industry, the shortage is likely to persist because mature nodes have low profit margins. Some customers value the low price points for these nodes and have little incentive to migrate to smaller ones. For wafers from 22 to 65 nm, the shortage will not be fully resolved over the short to medium term but may lessen if (as expected) semiconductor companies increase supply. Overall, however, it is difficult to predict the size of the demand–supply gap for specific products that use smaller nodes, because of the high heterogeneity of device types and technologies. Semiconductor shortages will probably persist until 2026, given the long lead times for chip manufacturing.
To mitigate chip supply issues, OEMs can take several steps, including the following:
- establishing control rooms that combine staff from procurement, supply chain management, and sales to help ensure that near-term supplies of semiconductors don’t drop to unacceptable levels
- charting clear technology road maps that more precisely define future semiconductor needs (for next-generation products, among other things)
- jointly investing with suppliers in projects to improve capacity
The growing importance of software
Automotive companies and their suppliers continue to invest heavily in software. By 2030, the global automotive software and electronics market is expected to reach $462 billion—a 5.5 percent CAGR from 2019 to 2030 (Exhibit 10).
In contrast, the overall automotive market for passenger cars and light commercial vehicles is projected to grow at a compound annual rate of only 1 percent during the same period. This divergence, reflecting a significant shift in the future of mobility, has been propelled by the expansion of urban access restrictions, such as bans on internal-combustion-engine vehicles in city centers; the rising adoption of nonownership models, including car sharing and micromobility; and disruptive technologies, such as urban autonomous driving. In this environment, automotive companies look to software and electronics as the next frontier for transforming the industry.
Ongoing pressure on automotive suppliers
Over the past four years, as players across the automotive value chain increased their margins, the profitability of automotive suppliers fell by half. In 2022, the margin pressures for automotive suppliers accelerated for various reasons, including shortages of semiconductors and energy, increasing costs for raw materials and freight, supply base consolidation, shrinking demand, and the volatility (sometimes daily) of automotive production volumes (Exhibit 11).
In 2023, we project that margin pressures will continue because of ongoing macroeconomic, geopolitical, and technological disruptions. Increases in the cost of labor and energy could add to the squeeze. Automotive suppliers will need to focus on keeping their costs in check. Possible cost reduction measures include the following:
- ensuring that OEMs provide strong support (through, for example, indexation, raw-material clauses, or direct or directed buy programs) to compensate for price increases
- revising OEM contracts and booking longer-term commitments to stabilize volumes
- adapting portfolios and canceling smaller, unprofitable programs
- rightsizing footprints and overhead costs
We also project that suppliers of components for internal-combustion-engine vehicles will experience future consolidation as production of those vehicles declines.
Demand for zero-emissions trucks
For electric light commercial vehicles, hockey stick growth in demand could outstrip supply. In this market, many companies are looking for zero-emissions delivery vehicles because of various factors:
- more stringent decarbonization regulations in both the United States and Europe, at the national and the city levels
- environmental, social, and governance accounting standards (which expand accountability across the value chain) for Scope 3 emissions
- the desire to take advantage of emerging low-cost financing to reduce the costs of a transition to zero-emissions vehicles
- greater corporate commitments to ambitious emissions reduction targets in response to rising consumer demand for more sustainable products
- fluctuating energy prices and a general decline in the cost of battery packs, both of which are pushing the total cost of ownership toward parity—even today, in certain use cases—between zero-emissions vehicles and their diesel-powered counterparts (Exhibit 12)
In 2022, mobility shifted away from major new announcements and concepts and toward a sharpened focus on implementation and scaling. Traditional OEMs and tier-one suppliers remained preoccupied with the short-term effects of supply chain issues and the transition to electric vehicles. Disruptors marched ahead—but faced increasing consolidation. Meanwhile, regulators continued to pressure players to decarbonize more quickly. Cities ramped up their urban-mobility initiatives. And consumer interest in sustainable (and shared) mobility accelerated further and will almost certainly continue to accelerate.
The industry landscape will have a very different shape beyond 2030. But the next 18 to 24 months could indicate who the winners on the other side of that transformation might be.
