The further development of ADAS through to autonomous driving will become a significant source of revenue for the automotive industry in the future.
With an annual increase of 15-20%, the market for driver assistance systems and autonomous driving for private vehicles will grow from around $50 billion today to $300-400 billion in 2035, a McKinsey study has calculated. It also sheds light on the extra price customers are willing to pay for smart cars.
Level 4 functions, i.e. driverless driving under certain conditions, will account for most of the additional revenue. That’s according to a new analysis, “Autonomous driving’s future: Convenient and connected,” presented by consulting firm McKinsey & Company at the 2023 Consumer Electronics Show in Las Vegas.
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Even though driverless driving, i.e., building vehicles with electronic equipment that meets Level 5 of the SAE scale, seems to have made little progress in recent years, McKinsey continues to believe that robocars have a bright future. “The dream of the driverless car is not over,” says Kersten Heineke, a McKinsey partner and co-author of the study. “While some companies have postponed the launch of their fully autonomous vehicles, we’re seeing big leaps in development, especially for advanced Level 2 and Level 3 driver assistance systems, and an increasing number of cars with these features on the road.”
To reflect the technological uncertainties, the study calculated three scenarios for further development. In the base scenario – with the development times communicated by automakers to date, as well as medium customer interest – 12% of all new vehicles would be equipped with at least Level 3+ driving assistance systems in 2030, and as many as 37% in 2035.
Another result of the study is that customer interest in driver assistance systems remains high: A quarter of the more than 25,000 customers surveyed stated that they would very likely place value on an advanced driver assistance system when they next bought a vehicle. Two-thirds of these customers, for example, are willing to pay a one-time fee of $10,000 for a Level 4 highway pilot.
However, customer interest in completely driverless vehicles (Level 5) has declined for the first time: While 35% of respondents were still willing to switch to a fully autonomous car in 2020, this figure has currently fallen to 26%. The main reason for this is reduced confidence in the technology: 64% of customers stated that safety still needs to be improved. “The regulatory environment should also continue to develop, although we have already seen the right steps being taken in Germany and other countries,” says Heineke.
Components market grows to as much as $80 billion
For the automotive industry as a whole, the further development of ADAS means a change in its business model. “The auto industry should pay even greater attention to software and, above all, think about monetization options over the entire lifecycle of a vehicle,” Heineke said. “Selling the vehicles is a major mainstay; but unlocking features after the fact can become another important source of revenue for the auto industry.”
Assisted and autonomous driving may also provide additional growth opportunities for the automotive supply industry, the study reckons: the market for components such as control units, cameras, sensors, and lidar and radar systems is expected to grow from $8-12 billion today to as much as $80 billion.