SHIFTING GEARS: GLOBAL MARKET FOR AUTONOMOUS AND ASSISTIVE SAFETY AND COMFORT FEATURES WILL REACH $22-$26 BILLION BY 2025

New research by Bain & Company forecasts annual growth at 12-14 percent as buyers become increasingly interested in new technologies

Munich – 6 March 2017 – Driving is shifting into the next gear as autonomous cars become more prevalent. The B2B market for assistive and autonomous technologies, which includes software, hardware and services sold by suppliers to automakers, promises to be attractive, even in pessimistic scenarios. Bain & Company estimates that the global opportunity will be in the range of $22 to $26 billion annually by 2025, with annual growth between 12 percent and 14 percent.

The estimates assumes significant price declines in both conservative and optimistic scenarios as new technologies achieve scale production. In all scenarios the majority of both the volume and value in the market will remain in driver assistance systems, which require a human driver to continue to monitoring the vehicle. Even in our most optimistic scenario, by 2025 only 10 percent of advanced driver assistance systems (ADAS)/Autonomous driving (AD) systems will be fully automated, replacing the driver or at least allowing drivers to divert their attention from the driving task under specific circumstances like conditional automation.

“The autonomous driving market will be slow in developing, but that doesn’t mean the auto industry should take its foot off the gas,” said Dr. Hans Joachim Heider, Bain partner and co-author of the study. “We anticipate continued strong interest in autonomous driving among consumers around the world, particularly as the cost and complexity of driver assistance technologies decrease.”

Autonomous vehicles and advanced driver assistance: What do customers want?

The number of autonomous vehicles on the roads is likely to remain small for the next 5-10 years, even in the most receptive markets. To get a sense of what consumers are looking for in these new technologies, Bain surveyed more than 4,000 consumers in Germany, France, Italy, Spain, Great Britain, China, Japan, and the U.S. about what features they want the most – from fully autonomous vehicles to advanced driver assistance systems like parking assistance or rear-view cameras.

Drivers named safer driving and lower fuel and insurance costs as the leading benefits from these technologies. However, their enthusiasm is tempered by concerns about high costs and the reliability of the technology, including its vulnerability to being hacked. Liability issues were also a concern.

Bain’s research, which examined the tradeoffs buyers were willing to make between different features of a car, showed that customers were not willing to spend much more on advanced ADAS features (including fully autonomous highway driving) than they spend today on basic ADAS features like adaptive cruise control.

Implications for suppliers

Suppliers have their work cut out for them in this evolving market to deliver highly reliable technologies at costs that match those of today’s assistive features. Leading suppliers will need to adopt a scenario-based approach to strategy, identifying different possible outcomes and defining the signposts that will help them track developments and make adjustments accordingly.

As these scenarios approach, leading companies will seek to win by taking and holding market share. To do that, they’ll need to take action on four fronts:

• Play in both AD and ADAS segments. As noted, fully autonomous cars are likely to remain most interesting to mobility service providers over the next decade while individual consumers will remain comfortable with assistive features only – at least until autonomous vehicles are well proven and economical. Leading auto makers and top suppliers will have their eye on both markets.

• Monitor the entire market for signs of strategic surprise. For top-tier suppliers, it will become increasingly important and valuable to scan the entire landscape, in order to understand the competitive moves not only of other top suppliers but also technology companies and second-tier suppliers looking to capture a larger slice of the pie.

• Develop key capabilities. Although top suppliers are well positioned to continue to lead into the era of autonomous vehicles, the most successful companies are likely to be those that develop new competencies essential for leadership as the industry evolves.

• Pursue M&A partnerships. M&A will become increasingly important as ways to acquire talent and fill gaps in capabilities, in order to allow suppliers to deliver complete and fully functional systems. M&A and strategic partnerships will continue to be a critical tool to close technology gaps, particularly around the important control points of raw data fusion and machine learning.

In order to thrive in this increasingly competitive environment, top-tier suppliers will need to move from the reactive stance of a component maker to a more proactive position that represents a unique perspective on the market and customer preferences. As auto makers come to rely on suppliers to deliver complete integrated systems, the makers of those systems must develop a better understanding of customers, what they want, and what they’re willing to pay for today and in the future. Suppliers that can deliver these solutions will make themselves indispensable to the automakers.

“The big automotive suppliers must be present in both markets,” said Dr. Heider. “The assistance system segment guarantees the sales volume for the coming years, while autonomous driving will ensure future business.”

Editor’s Note: To request a copy of the report or speak with Dr. Heider, please contact Aliza Medina at aliza.medina@bain.com or +44 20-7969-6480.

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