Autonomous vehicle sales forecast to reach 21 mil. globally in 2035, according to IHS Automotive

The latest forecast from IHS Automotive predicts annual sales of autonomous vehicles will reach nearly 21 million units in 2035, influenced by recent research and development by automotive OEMs and supplier and technology companies that are investing in this area. The new forecast is also based on a wave of recent developments and investments in this sector of the automotive market, as well as activity within various regulatory environments. The United States will lead the world in initial deployment and early adoption of autonomous vehicles, while Japan will simultaneously ramp up industry co-ordination and investment ahead of the Summer Olympics in Tokyo in 2020.

"Global sales of autonomous vehicles will reach nearly 600,000 units in 2025," said Dr Egil Juliussen, director of research at IHS Automotive. "Our new forecast reflects a 43% compound annual growth rate between 2025 and 2035 – a decade of substantial growth, as driverless and self-driving cars alike are more widely adopted in all key global automotive markets."

According to IHS Automotive, key factors influencing this growth include new mobility solutions such as ride-sharing and car-sharing schemes, increasing investment in autonomy by OEMs, suppliers and technology companies. Research-and-development (R&D) centres under way and improved efficiencies are expected to impact the further proliferation of automotive technologies. The IHS analysis also includes unique insight into various mobility trends forming around the world.

A multitude of factors, including current market development of foundational technologies and considerable R&D announcements and collaboration projects under way, are among those driving the revised forecast. These include discussions and initiatives among OEMs and their suppliers, between OEMs and ride-sharing companies, technology company initiatives, and increased investment in autonomy and mobility by other entities as well (see Germany: 6 June 2016: BMW i division to add focus on self-driving technology, Japan - United States: 2 June 2016: Toyota in talks to buy two robotics companies; Germany - Japan - United States: 25 May 2016: Toyota invests in Uber, VW invests in Gett ride-hailing firm; United States: 20 May 2016: Uber begins testing self-driving fleet in US – report; China: 16 May 2016: Nissan opens intelligent mobility research centre with Chinese university and United States: 16 May 2016: GM completes acquisition of Cruise Automation).

"Future mobility will connect and combine many different modes and technologies, and autonomous vehicles will play a central role," said Jeremy Carlson, principal analyst at IHS Automotive. "IHS expects entirely new vehicle segments to be created, in addition to traditional vehicles adding autonomous capabilities. Consumers gain new choices in personal mobility to complement mass transit, and these new choices will increasingly use battery electric and other efficient means of propulsion."

Carlson says also that our forecasts for penetration of fully driverless level five (L5) vehicles and self-driving level four (L4) vehicles are similar in many cases, though some regions may favour one or the other slightly. However, while mature markets are generally expected to adopt technology in traditional vehicles more quickly and emerging markets may integrate L5 transportation earlier on, the balance between the two is fairly even across all markets. This is primarily due to adoption of technology more generally - if the consumer, regulatory and overall landscape accommodates one approach, it is expected to accommodate the other as well. "As much as the technology and implementation matters, the use case and business model impact the forecast outlook more than anything," said Carlson. "Ownership in mature markets will remain strong, while more approachable and less expensive mobility-as-a-service options are likely to gain favor in some emerging markets as well as in major metropolitan areas within mature markets."

Some regional highlights from the updated forecast include the expectation that the US market will see the earliest deployment of autonomous vehicles as it works through challenges posed by regulation, liability and consumer acceptance on behalf of the industry as a whole. Deployment in the US will begin with several thousand autonomous vehicles in 2020, which will grow to nearly 4.5 million vehicles in 2035, according to IHS Automotive forecasts. As in many other markets, a variety of use cases and business models are expected to develop around consumer demand for personal mobility. We also expect the penetration of L4 and L5 vehicles to be quite similar in the US, with L4 seeing a somewhat higher penetration than L5. South America, by contrast, is forecast to see penetration of L5 at 7.2% in 2035 and L4 at 6.6%, an example of a region where mobility needs and infrastructure development may see faster implementation and adoption of L5 as a solution.

Given China's dominance of the global light-vehicle market, it may not be a surprise that IHS Automotive forecasts more than 5.7 million vehicles sold in China in 2035 will be equipped with some level of autonomy, the single largest market for the technology. However, we also forecast that China will adopt the technology later than the US market; China is forecast to see L5 vehicles before L4, with about 6,600 units of L5 in 2023 and L4 offerings joining the market in 2024 and later. Pacing aside, the sheer volume of vehicles expected to be sold in China as well as consumer demand for new technologies will drive growth and provide more upside possible as regulators assess the potential of autonomous mobility to address safety and environmental concerns.

The development of the autonomous vehicle market in the Europe, Middle East and Africa region will be driven by technology advancements in Western Europe. Major markets in Western Europe will maintain industry technology leadership through the premium segment, with a little more than 3 million autonomous vehicles expected to be sold in Western Europe in 2035 and another 1.2 million vehicles in Eastern Europe the same year. In Western Europe, we forecast the penetration rate of L4 to be at 2.5%, versus L5 at 2.9% in 2030. The IHS Automotive also forecasts more than 1 million vehicles with some level of autonomy in the Middle East and Africa in 2035, and for the region to provide significant potential for new and innovative business models and use cases.

Development of the autonomous vehicle market in Japan and South Korea will be encouraged and supported by regional consumer affinity for technology. In Japan and South Korea collectively, we forecast nearly 1.2 million vehicles enabled with some form of autonomous driving capability will be sold in 2035. Demographics and an affinity for technology and innovative solutions help both markets, as the Japanese auto industry unites to close the gap with U.S. and European rivals and as South Korea continues its development of world-class capabilities.

Along with expected potential for improving safety and reducing cost of mobility, the regulatory environment, cyber-security and software are key development influencers for autonomous vehicles. Continued challenges to autonomous vehicle deployment include potential technology risks for software reliability and cyber-security, though both of these are showing improvements as technology evolves and the industry recognizes the threat. In addition, the implementation of local and federal guidelines and regulatory standards, as well as a legal framework for self-driving cars, continue to prove challenging. Various states and regions have taken appropriate measures to begin to develop these frameworks, while others are still crafting their approach.

Outlook and implications

IHS Automotive has adjusted its autonomous vehicle forecast on a variety of factors, driven primarily by the R&D and investment activity dominating headlines over the past 12-18 months. Globally, we forecast tremendous growth between 2025 and 2035, with sales of all autonomous vehicles (L4 and L5) reaching just under 1 million units in 2026 and growing to 21 million units in 2035. The autonomous vehicle and its potential for meaningfully improving mobility in a variety of use cases and business models will drive a compound annual growth rate of nearly 63% between 2020 and 2040, according to IHS Automotive. We forecast nearly 76 million vehicles with some level of autonomy will be sold by 2035.

The growth is being driven by investment from automakers, suppliers, and non-automotive technology companies, by pressure created by increasingly congested megacities and the attraction of huge gains in vehicle safety, tempered to some degree by an uncertain regulatory environment. The pace is increasing rather than slowing, and automakers likely cannot afford to not be involved.

"The future fleets of driverless vehicles will provide mobility services for anyone and anything, creating exciting and new opportunities for the automotive industry," said Juliussen. "Increasing competition from the high-tech and other industries is accelerating the auto industry's autonomous software and cyber-security development efforts." Carlson added, "Those who don't adjust to a changing world will unfortunately be left behind, or will at least face a very different industry."