Study: A New Breed Of Vehicles

August 2018 Study Shared Mobility New Breed Vehicles
Study: A New Breed Of Vehicles

A recent study has revealed that the potential annual sales volume for purpose-built ride-sharing vehicles and taxis in Europe, the US and China in 2020 would be up to one million vehicles, rising to 2.5 mn by 2025. These electrified purpose-built ride-sharing vehicles would have an expected lifetime of 3-5 years, and could potentially save 50 % on vehicle-to-market costs. Excerpts from a Roland Berger study.

By now it has become a common view that the automotive market will gradually shift from vehicle ownership to new shared mobility concepts within the coming decade – Mobility on Demand and Mobility as a Service (MaaS) are the latest buzzwords. While this undoubtedly creates headaches for executives in the automotive industry given that fewer vehicles will be sold to end customers, it also opens up a new opportunity – a new breed of purpose-built vehicles for shared mobility concepts!

Ultimately those vehicles will be fully autonomous vehicles or “robocabs”. While several players like Waymo or GM have announced plans to launch those vehicles as early as 2019, a more widespread adoption will most likely not occur before 2025. But vehicle manufacturers have the chance to start producing a new breed of car now: purpose-built electric vehicles for on-demand mobility solutions. Manufacturers could gain a foothold in this new segment and in so doing gain valuable experience that they can later profit from in the production of fully autonomous vehicles.


Optimising vehicle concepts for shared mobility requires a radical shift of focus, from driver experience to passenger ride experience. It means designing flexible interior concepts to support different use cases, concentrating on durability and serviceability and including a significant amount of additional vehicle content. Passengers value quality time during rides and will soon expect to be able to request a vehicle with an interior design and facilities tailored to their needs and moods – whether that is getting work done, catching up on sleep or simply having fun with friends.

At the same time, purpose-built ride-sharing vehicles provide automakers an opportunity to significantly lower vehicle-to-market costs thanks to their shorter development times, lower vehicle complexity and limited number of customers. This new breed of vehicles also has implications for lifecycle management as they have shorter lifetimes and their modular nature makes it easy to replace parts.


OEMs are busy working on designs for fully autonomous “robocabs”. But these vehicles are unlikely to enter mass production before 2025. In the meantime automakers have a unique opportunity to capture the valuable new market for purpose-built vehicles for on-demand mobility services – an emerging segment that they cannot afford to ignore. If they can succeed in positioning themselves in the game now, winning customers and building up valuable early experience, they will be well prepared for the next step into the robocab universe. When driverless technology finally arrives it will then be relatively simple for them to take their tried-and-tested purpose-built vehicle designs and basically replace the driver with the automated driving system, with user experience of driving the vehicle already tested and optimised to a large extent. This will put some OEMs ahead of the game as compared to other OEMs that have adopted a more cautious, wait-and-see approach.


Dominating the new types of on-demand mobility services is ride-sharing (also known as “ride hailing” or “ride for hire”). Players such as Uber, Lyft in the United States and Didi Chuxing in China do pretty much what taxis did in the past, moving passengers from A to B in return for payment of a fare. However, the competitive pricing of these new entrants and their focus on convenient service offerings has added a new dimension to the traditional market.

Globally the market size for ride-sharing services is now an estimated 50 mn rides a day. China, where the leading ride-sharing company Didi Chuxing provides an average of 25 mn rides a day, is showing remarkable growth. Current forecasts are that ride-sharing will represent 20 % of total consumer transportation in the country in 2018, as compared to less than one % in 2015. The market in 2018 will be worth around € 180 bn.

This exponential growth is due to a widespread lack of mobility, the result of China’s limited public transit capacity, insufficient taxi services and restrictions on the number of license plates issued for privately owned vehicles. Indeed, Roland Berger estimates that approximately 40 % of demand for licensed taxi services in China is currently unfulfilled, met instead by unlicensed taxis and public transit, where available.

The question is, what sort of vehicles should these mobility-on-demand services use? The black cab in London developed over decades with particular needs in mind – a narrow turning circle, access for wheelchair users, capacity for six, seven or even eight passengers and space for luggage instead of a front passenger seat, depending on the model. Other purpose-built EVs – albeit not designed for mobility on demand – have a very different history. Deutsche Post, having failed to find an OEM that would produce a vehicle that met its specific requirements, acquired an existing start-up, StreetScooter. The company recently revealed that it is working with Tier 1 supplier ZF and chip producer NVIDIA to deploy a fleet of autonomous delivery trucks starting this year.

There is a lesson here for OEMs. To avoid missing out on such opportunities in the future, they should remember that tomorrow’s on-demand mobility service vehicles will likewise be purpose-built with the needs of tomorrow’s passengers and drivers in mind.

(1) Vehicle sales for taxis and mobility on demand [‘000 units, CAGR]; Source: Roland Berger


The shift from vehicle ownership to new mobility concepts is unstoppable. However, it will be a gradual process rather than a sudden change. We expect the size of the global car parc to remain ownership-driven; owned vehicles will account for a forecast 98 % of all vehicles in 2020 and 96 % in 2025. At the same time, new sales will shift strongly toward new mobility concepts, representing an expected 13 % of new sales in 2020, rising to 20 % in 2025.

We estimate that the number of ride-sharing drivers will grow rapidly between 2020 to 2025, reaching around 57 mn. This represents a CAGR of 13 %. Including taxis, the total annual addressable market for new vehicle concepts in Europe, the United States and China will grow steadily from some 700,000 vehicles in 2016 up to one million in 2020 – a CAGR of eight %. With the introduction of purpose-built vehicles, the five years that follow (2020-2025) could see a CAGR as high as 21 %, taking the total number of vehicles to almost 2.5 mn.

These estimates refer to the volume market only as there will likely be strong cost pressure on the budget market and only marginal volume in the premium market. Another five years (2025-2030) and the advent of self-driving robocabs could see the number of purpose-built vehicles double to five million, (1).

The main geographical growth engine for purpose-built EVs for mobility on demand in the period to 2020 will undoubtedly be where the need for PMVs has already been communicated. China will account for in excess of 60 % of business – more than North America, the EU, the Middle East and North Africa put together, (2). Consequently, OEMs may want to consider entering into cooperation with a Chinese partner.

The scale of this exciting new market makes this an opportunity that OEMs and suppliers cannot afford to miss out on. Moreover, what they learn about developing purpose-built vehicles will stand them in good stead for developing their own autonomous vehicles. To a large extent they will already know exactly what passengers want, what traffic conditions demand (e.g. to access/leave the vehicle quickly and easily) and have the expertise to meet these requirements.

(2) Vehicle sales for taxis and mobility on demand by region, 2020 [‘000 units]; Source: Roland Berger


Designing vehicles for specific uses is already common for commercial vehicles, such as postal delivery vans and buses. Passenger vehicles, on the other hand, are designed for private use, with their primary focus on the driver.

Ride-sharing is essentially an extension of passenger vehicle use. Rather than using their own cars, passengers consume a mobility service. But because they are paying customers, they expect the design of the vehicle to be geared towards their needs rather than those of the driver. This requires a shift of perspective for automotive manufacturers, who decide to manufacture purpose-built vehicles, whether for mobility service providers or traditional taxi firms.

Today’s traditional taxis – with the exception of London’s black cabs and JPN taxi (Toyota) – are little more than conventional vehicles with a taxi sign on top. Purpose-built vehicles are a whole new ball game. They offer almost unlimited potential for automakers to shape a unique selling proposition (USP), generate customer enthusiasm and at the same time build a powerful brand identity.


In order to identify current “pain points” – real or perceived problems – we conducted a survey of users of taxis and ride-hailing services. We also asked what features vehicle manufacturers could include that would add value. The things that passengers complained about came as no surprise. The ride was uncomfortable when the vehicle was full. They couldn’t control the air conditioning in the rear seats of the vehicle. They had problems fitting baby strollers into conventional vehicles, let alone wheelchairs. They were tired of annoying conversations with opinionated drivers.

Purpose-built vehicles can eliminate these problems. More importantly still, they can create “wow” effects for customers – features that surprise and delight them. We believe that these features should be based around the core elements of the future mobility experience: connectivity, infotainment and customisation. Based on our research, we have defined three interior design options, each of which meets different passenger needs.

OEMs have three options, when it comes to designing this new breed of cars.
:: First, base the vehicle on an existing model. This entails high production costs; we estimate around € 32,500 for a six-seater MPV-sized car in 2020 based on an annual production volume of 100,000 vehicles. To make this economically attractive, production volumes will need to be as high as possible.
:: Second, follow the traditional product development concept and build the new, purpose-built vehicle on the basis of an existing model or platform, reducing the number of features or downgrading the performance specifications in order to optimise costs. Moderate production volume will be needed for this approach but production costs may be up to one-third lower, at around € 21,000. This approach is suitable for manufacturers, who are able to produce vehicles more cheaply than traditional OEMs.
:: The third option is to design a completely new, out-of-the-box vehicle concept. This approach entails higher costs on the design side but highly competitive costs on the production side, at an estimated € 16,000 – almost half the production costs of the first option. Manufacturers can use 3D printing for the majority of parts or construct them from a single block of aluminium, as with the StreetScooter. Even with very low volumes of vehicles, this approach is economically viable. Producing the vehicles in China would reduce the costs even further: the additional saving could be up to € 600 per vehicle.

Whichever solution automakers choose, they should aim for the least complexity possible. The simpler the vehicle’s design, the easier it will be to build it on the production line – and the simpler and cheaper to manufacture the end product.


From the perspective of customers, purpose-built EVs will also represent significant savings in terms of total cost of ownership (TCO). Savings will stem from a multitude of areas: the lower purchase price and slower depreciation of the vehicle; its significantly lower maintenance cost (with 50 to 70 % fewer components, significantly fewer mechanical parts, no liquids to replace such as oil, less wear on brakes, cheaper components and so on); less expensive insurance due to the lower purchase price, lower component costs and lower top speed; and cheaper fuel.

How these vehicles will be serviced depends on the operating model of the fleet. Large ride-sharing providers such as Didi and Uber will most probably establish their own affiliated network of independent repair shops in order to further improve the TCO of the entire fleet. However, OEMs could generate additional upside by offering usage-based, full-service “pay-per-km” models, including insurance, servicing and so on.

(3) Price per kilometer of selected means of transportation – Example in Europe (EUR/km); Source: Roland Berger


The development of purpose-built vehicles for mobility on demand will go hand in hand with the emergence of new business models for established automotive OEMs, suppliers, mobility platform providers and new entrants. We foresee three main potential business models:
:: First, OEMs could develop and produce purpose-built vehicles and also operate their own ride-sharing services. We already see this happening in the car-sharing industry, with automakers such as BMW (through DriveNow) and Daimler (car2go) using their car-sharing fleet for revenue as well as an extra channel for acquiring new customers. Given the high costs of vehicle production and maintenance by the OEM through its own in-house service network, the profit margins from operating the fleet will be rather low, making lean ride-sharing operations essential. This business model is both a threat and an opportunity for the automotive industry. While new mobility offers will reduce sales of passenger cars and LCVs, autonomous fleets will create an attractive new market for the service network.
:: The second option would be for OEMs to build purpose-built vehicles and provide ride-sharing companies such as Uber and Didi with Vehicle as a Service (VaaS) solutions. These solutions would bundle the financing, insurance, service, repair and operation of the vehicle fleet. Essentially this translates into a fixed monthly fee or “pay-per-km” model. It would mean a new role for OEMs, one that offers new revenue streams but also demands new skills, such as maintenance-free vehicles, residual value management and the remarketing of fleets.
:: A third option would be for ride-sharing providers, be they current players or new entrants, to specify their requirements for a vehicle and then contract manufacturers to build that vehicle for them on a white-label basis. Once again, OEMs would miss out on a valuable opportunity to develop their own vehicles. For ride-sharing companies, this is probably the most cost-effective option.

Today, taxi services are the most expensive mode of transportation at € 1.5-2/km, followed by ride-sharing services and traditional vehicle ownership. However, using the new purpose-built vehicles for ride-sharing gives an even lower price at around € 0.5-0.8/km – a direct result of the vehicle-to-market cost reduction potential of purpose-built EVs. The only options that beat these vehicles on price/km are public transit and, looking forward, fully automated robocabs, (3).


Where does that leave the incumbent players in the automotive industry? With some important decisions to make. A new market segment is evolving that requires a new breed of vehicles. This represents an attractive opportunity in terms of market size, customer demand and cost assumptions. But OEMs are not the only ones to have spotted the emerging potential. Ride-sharing service providers may want to muscle in on the action, too. All players must therefore make careful decisions about their investment strategy and how they plan to integrate their value chain, if at all. And they must make those decisions sooner rather than later.