Growth of electric and self-driving vehicles

Mobility significantly decreased in many regions as the COVID-19 pandemic spread in 2020. With industry stakeholders focused on keeping their businesses running, preserving margins, and protecting employees, it sometimes seemed as if the sector was at a standstill. After all, companies that were struggling to survive would likely gain little by investing in innovative technologies or mobility services. And with car sales plummeting, few consumers appeared willing or able to purchase new vehicles.

This view of the mobility industry, however, fails to account for several important developments. Although the COVID-19 pandemic has temporarily slowed growth, the mobility sector is undergoing a profound transformation and opening new opportunities for players that are willing to invest in vehicle electrification, autonomous driving, and other revolutionary products and services. What’s more, our recent consumer survey of around 7,000 respondents worldwide, conducted in cooperation with the World Economic Forum, has highlighted several trends that make it imperative for mobility players to act now if they want to emerge stronger in the next normal.1 Here’s what we found.

Positive consumer sentiment could boost the mobility industry

While the COVID-19 pandemic has created challenges for both automotive manufacturing and sales, OEMs could benefit from favorable consumer sentiment.

Across regions, our survey revealed that the number of respondents with a positive view of OEMs had increased since the pandemic began, with the greatest growth occurring in Asia (Exhibit 1).

a chart showing that automotive consumers now view original-equipment manufacturers more favourably than they did before the COVID-19 pandemic
Consumer opinions on original-equipment manufacturers have changed during the pandemic.Image: Mckinsey & Company

COVID-19 has increased interest in low-emissions transportation

The COVID-19 pandemic appears to have increased consumer awareness about the negative effects of travel, including congested roads and heavy emissions. Annual global passenger plug-in electric vehicle (EV) sales hit three million in 2020—a more than 40 percent year-on-year increase—with 46 percent of fiscal-year sales coming from Europe, 39 percent from China, and 12 percent from North America.

In our survey, many respondents stated that they were now more interested in battery-electric vehicles (BEVs) and partial-hybrid electric vehicles (PHEV) (Exhibit 2). Europe was the only region where interest in BEVs and PHEVs declined. This trend is somewhat paradoxical, since Europe still has the highest EV sales, and may be occurring because European respondents are becoming more concerned about vehicle ownership in general. More than 55 percent of survey respondents from North America, which has lagged in EV sales compared to Asia and Europe, expressed increased interest in these vehicles. More importantly, when asked about the factors contributing to their interests, respondents across regions were most likely to cite increased sustainability concerns and air-quality improvements.

a chart showing that the COVID-19 pandemic has increased interest in buying battery electric vehicles and partial-hybrid electric vehicles
The electric and partial-hybrid vehicle market has grown throughout COVID-19.Image: Mckinsey & Company

The shift in consumer sentiment could have implications for commercial transport. More than 70 percent of survey respondents stated that delivery of goods should shift from vehicles with internal combustion engines (ICE) to BEVs or H2EVs (also known as hydrogen fuel-cell plug-in hybrid electric vehicles) for long-haul trucking and intracity transport (Exhibit 3). Surprisingly, more than 40 percent of respondents in all regions stated that they were willing to pay a premium to enable this shift. Anecdotal evidence from online retailers indicates that actions are still lagging sentiment, however, as the percentage of consumers willing to pay to offset the carbon from their delivery appears to be lower.

a chart showing that a majority of consumers believe that electric vehicles should handle long-haul trucking and intracity delivery; many are willing to pay a premium for the shift
Most consumers are willing to pay more so that electric vehicles can adapt to long-haul trucking and intracity delivery.Image: Mckinsey & Company

In another major shift, low-emissions manufacturing is becoming more vital. Of the survey respondents who were considering an EV purchase, over half stated that it was a moderately or extremely important consideration (Exhibit 4). This development suggests that changing consumer sentiment will affect not only vehicle sales but also the entire supply chain. Many respondents were also interested in end-of-life vehicle recycling.

a chart showing that many electric vehicle buyers valued low-emissions manufacturing and end-of-life recycling.
Consumer preferences are changing among potential electric-vehicle buyers.Image: Mckinsey & Company

The survey also showed that use of sustainable materials was an important consideration for potential EV buyers (Exhibit 5). Use of a local manufacturer was also moderately to extremely important to many respondents.

a chart showing that many potential electric vehicle buyers were interested in the use of sustainable materials and local manufacturing
Potential electric vehicle buyers are now more interested in sustainability.Image: Mckinsey & Company

COVID-19 has increased interest in autonomous driving, but many barriers remain

Our survey showed that the COVID-19 pandemic has made consumers more likely to use delivery services, via traditional methods and autonomous technology.

Similar trends were seen across regions, and Exhibit 6 shows the results for North America, as an example. Both quarantine restrictions and the desire to limit human contact are contributing to these results. The next normal has accelerated the interest in autonomous technology, with the number of North American respondents stating that they would be extremely or somewhat likely to take deliveries from autonomous vehicles (AVs) increasing from 18 percent to 28 percent. There was a more modest uptick in the number who were willing to use AVs for people transport. This shift in consumer sentiment and acceptance could unlock opportunities for AV players to test, pilot, and deploy AV deliveries.

a chart showing that the COVID-19 pandemic has accelerated consumers' interest in autonomous-vehicle delivery
Interest in autonomous vehicle delivery is on the rise.Image: Mckinsey & Company

Despite the growing acceptance of AVs, OEMs and other stakeholders face many barriers to adoption. Overall knowledge of this technology is still relatively low, with many respondents stating that they had never heard of AVs or advanced driver-assistance systems (ADAS), or that they did not fully understand the meaning of these terms (Exhibit 7).

a chart showing that most people cannot differentiate between advanced driver-assistance systems and autonomous vehicles
Public knowledge of the difference between advanced driver-assistance systems and autonomous vehicles appears to be limited.Image: Mckinsey & Company

The lack of consumer education contributes to the relatively low trust in AVs—something that is still pronounced despite the increase in the number of people willing to use them. When we asked survey respondents what kept them from using AVs, most stated that they did not believe the technology was ready (Exhibit 8). Many others stated that they did not believe AV technology was safer than their own driving. Overall, trust is so low that almost half of consumers would not trust OEMs, regulatory bodies, or independent third parties to validate technology.

a chart showing that the major factors preventing the adoption of autonomous vehicles includes lack of trust in the technology and safety concerns
Lack of trust and safety concerns is preventing the purchasing of autonomous vehicles.Image: Mckinsey & Company

Mobility has decreased during the pandemic, but our survey indicates that consumer interest in autonomous driving and vehicle electrification has accelerated. Players along the mobility chain who want to thrive in the next normal should consider pivoting their investments to these areas while simultaneously educating consumers about their benefits. Such educational efforts will be particularly important for AVs, since public trust remains low and many people are still reluctant to use these vehicles. In addition, the greater openness of consumers toward autonomous-delivery solutions could make them more familiar with AV technology, potentially opening more opportunities.