Roland Berger Automotive Outlook 2040: China on the Rise, Europe Holds Its Ground

The global automotive industry is undergoing a transformation that will massively change the sector over the next one and a half decades. This is shown in the new "Automotive Outlook 2040" by Roland Berger. A central factor is the regional shift in markets: While new car sales in the global South and China are growing strongly and will together account for around 60 percent of the global market by 2040, Western markets have surpassed the peak of the automotive economy. Nonetheless, they remain the most important sales market for the industry alongside China. Overall, the number of new car sales worldwide will grow by around 1.1 percent per year by 2040. At the same time, electrification continues: by 2040, around 70 percent of new cars worldwide will be purely electric. In addition, automation and an increasing network of vehicles will shape the industry, with software becoming more important than hardware. This changes the value chains and revenue sources of established manufacturers and suppliers. Those who set strategic priorities correctly will still have good growth opportunities.

"The global change in the automotive industry is unstoppable and will accelerate further in the coming years. The high pace of change will overwhelm many companies. Nevertheless, pessimism is misplaced, as the upheaval brings many new opportunities that will benefit those who position themselves smartly," predicts Felix Mogge, partner at Roland Berger.

To identify the drivers of this development and to design scenarios for the future, Roland Berger conducted an in-depth analysis of the industry and its markets, bringing it all together in the Automotive Outlook 2040. Four central trends emerge that will shape the transformation by 2040: Polarization, Automation, Connectivity, and Electrification.

"Peak Auto" in the West, further growth in the rest of the world

Polarization is particularly evident in new car sales: In the Western markets of Europe, the USA, and Canada, the number has reached the peak ("Peak Auto") and in some cases already surpassed it. Accordingly, these markets are expected to stagnate or shrink slightly. However, given their size, they still offer considerable absolute growth, which Roland Berger experts estimate at 520 billion euros up to 2040. A strong increase in new registrations will occur in China (+1.2% per year), India (+4.2% per year), South and Central America (+2.4% per year), and other countries in the global South.

In absolute numbers, revenues in China will grow the most strongly up to 2040, with around 590 billion euros. Markets in the global South will increase their revenue by around 480 billion euros, but despite high growth rates, their share of the total market will only rise from today's 14 percent to 20 percent in 2040. Overall, the global sales volume will grow by an average of 1.1 percent per year between 2025 and 2040 (after 2.4 percent in 2010-2019).

Shared mobility has little influence worldwide

One factor that contrary to earlier forecasts has little influence on global vehicle sales is shared mobility solutions. According to Roland Berger experts, their use will continue to increase but not at the previously expected pace and only in large cities and metropolitan areas. Since only about ten percent of travel distances are covered in these areas and shared mobility often does not replace but rather complements private car use, it remains a subordinate factor in the development of the automotive industry.
 

The trend towards electric cars is irreversible

On the other hand, the trend towards electric vehicles is irreversible, despite the current reluctance to purchase in certain markets. Worldwide, the number of purely electric cars (BEV) is growing rapidly, and for 2040, the experts at Roland Berger expect a share of new cars to be between 64 and 71 percent, depending on the scenario. In addition, there will be 20 percent hybrids, while hydrogen and synthetic fuels will play hardly any role due to efficiency disadvantages and high costs. The pace of electrification varies by region: Europe is expected to be fully electrified within just over ten years with a 99 percent electric share of new registrations if the EU maintains its existing regulations. China surpassed the 50 percent mark in July 2024 and will reach a share of between 70 and 85 percent by 2040, while the USA will be between 42 and 60 percent, and the rest of the world will be around 50 percent.

"With electrification, the balance of power in the industry is changing, not only because dependence on China for raw materials is increasing," says Jan-Philipp Hasenberg, Partner at Roland Berger. "There are structural shifts between component categories, along supply chains, and in target markets. The decline in components for internal combustion engines will be more than compensated for by the increase in electric drives and batteries. Additionally, there are electronics and components for assistance systems and automation."

Overall, the global revenue for suppliers is expected to grow by 3.4 percent per year until 2040. In the course of increasing connectivity, almost all new vehicles will be based on the concept of the "software-defined vehicle" by 2040, where the vehicle is built around the software platform and not the other way around. "All this changes the demand for components, creates new business models, and thus reinforces the shifts in the industry," says Mogge. "We expect the number of European suppliers among the world's top 20 to decrease from the current seven to five by 2040, while the number of Chinese suppliers will rise from two to six; and the world's largest supplier will no longer be based in Europe, but in China."