Mobility’s second great inflection point

By Rajat Dhawan, Russell Hensley, Asutosh Padhi, and Andreas Tschiesner

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There’s a well-known quote attributed to Henry Ford that he actually never said but that historians confirm he almost certainly believed: “If I had asked people what they wanted, they would have said faster horses.”1 The story resonates, of course, because we know what consumers circa 1900 thought mobility was supposed to mean, and we know from about 1920 onward what mobility in fact came to mean.

And still does. Indeed, the extent to which Ford’s (and his contemporaries’) automobile paradigm has endured is remarkable. One hundred years ago, mobility conjured cars and trucks, a space to park and the price at the pump, city streets and open roads. And more: “the freedom machine,” mass transportation, car dealerships, internal combustion. Congestion. Accidents. Pollution.

At the first great inflection point, the fundamental dimensions of transportation—cost, convenience, user experience, safety, and environment—saw “mobility” and “cars” become well-nigh synonymous. That was a dramatic shift from the previous several hundred years, when overland mobility meant horses, which people needed in ever-growing numbers. Emissions problems of a different sort than today’s were an unintended consequence. In 1894, the London Times ran the numbers: at prevailing rates, nine feet of manure would accumulate on city streets by the mid-1940s.2

A forecast in 1894 envisioned nine feet of manure on the streets of London by the mid-1940s.

The amazing developments of 1900–20 represented mobility’s first inflection point. They took us from steam to internal-combustion engines (ICEs), the “Great Horse Manure Crisis” of 1894 to “Big Oil,” and premium automobiles for the few to mass-produced cars for the millions. They also altered and even birthed entire businesses, industries, and government entities that developed alongside, but distinct from, the automotive industry: repair shops, highway authorities, gas stations, commuter railways, and car washes, to name just a few. The landscape has endured for decades.

But for how much longer? By 2030, we’ll see developments that may be as profound as those of a hundred years before. Radical changes—“horses-to-cars” changes, “how-we-think-about-mobility” changes—are coming, even faster this time, and across multiple dimensions. The characteristics of mobility at the second great inflection point will be significantly, not just marginally, better. Electric and autonomous vehicles, more interconnected and intelligent road networks, new customer interfaces and services, and a dramatically different competitive landscape in which tech giants, start-ups, and OEMs mix and mingle are just a few of the shifts in store. Radical improvements in cost-effectiveness, convenience, experience, safety, and environmental impact will, taken together, disrupt myriad business models on an almost inconceivable scale (exhibit).

Exhibit

With any luck, it will be what people actually want—not “faster horses,” but something qualitatively different and better. We call these coming changes mobility’s Second Great Inflection Point. In this article, we’ll explain why we think it’s coming, starting with a look back at the inflection point that took place 100 years ago, including its unintended consequences, and the forces at work pushing toward a new paradigm. A second, companion article lays out the likely characteristics of the emerging mobility ecosystem, along with the impact it is likely to have on business and society (see “Reimagining mobility: A CEO’s guide”).

As with many great changes, the picture is compelling both at a distance and in close-up. More than two dozen of our McKinsey colleagues, plus some of the executives leading the charge toward the future, provide the latter—snapshots of the technology shifts that leaders should have on their radar screen, the variations on this story in different geographies, and the ways in which cities as we know them are likely to change. Neither we nor anyone else knows exactly how or when these shifts will play out. What’s become increasingly clear, though, is that the change is coming much faster than most of us thought possible just a few years ago.

Part 1

The first great inflection point

When discussing automobiles and timelines, it’s worth remembering that it took a long time for the car to become mainstream. The first steam-powered vehicle was crafted in the late 17th century, though it was too small to carry people or cargo. It took 200 years for contraptions with internal-combustion engines to be on the open roads. By the dawn of the 20th century, vehicles were progressing from open “buggies without horses” to more sophisticated “road locomotives”—self-powered cars.

Until the dawn of the 20th century, however, these vehicles had been tailored primarily for the privileged “class” market. What made the Model T so transformative when it rolled out in October 1908 was not that it introduced the assembly line (it didn’t) or that it was an inconceivable leap in technology (it wasn’t). Instead, the Model T’s combination of reliability, innovation, and, especially, affordability could at last bring personalized, mechanized mobility to the masses. Henry Ford famously made sure to pay his employees $5 per day; they, too, would be able to afford them. His car was priced around $500, less than $10,000 in today’s dollars.

It was only when the automobile became affordable that it truly became the freedom machine.

The freedom machine was born, and giving the people what they wanted (lower transportation costs, more convenience, a better driving experience), even with the trade-offs (particularly in terms of safety and the environment), sparked one of the greatest success stories in business history. In 1900, about 4,000 automobiles were produced in the United States; none of them were trucks. During the 1910s, the number of automobiles across different parts of the United States began to eclipse the number of horses and buggies. By 1920, America had more than 9.2 million registered motor vehicles, including more than one million trucks.

But simply counting cars and trucks fails to capture the magnitude of the First Great Inflection Point and the immensity of its second-order effects. On the left side of the growth curve were steam and hay (and feet), dirt roads, manure-filled cities, and sleepy countryside. Past the inflection came gasoline, paved roads and highways, motels, fast-food restaurants, and suburbia. Mobility was not just cars, but parts manufacturers and suppliers, mechanics, taxis, buses, commuter railways, and, in time, metro-area airports.

The auto industry created millions of jobs and massive new profit pools. Three of the top ten highest incomes reported to the Internal Revenue Service in 1924 came from automobile-industry titans. These developments were more than just economic; they were social. People of all means increasingly came to fret about “keeping up with the Joneses” and strove to purchase new and better cars, across a proliferating range of makes and models. GM president Alfred Sloan called it “a car for every purse and purpose” and drove the cycle forward with “dynamic obsolescence.”

Costs and consequences

But oh, those trade-offs. The consequences of traffic accidents are shattering. More than a million people are killed each year on global roadways; traffic injuries are a leading cause of death worldwide for people under 30; deaths from air pollution are increasing steadily worldwide in every geographic region; and carbon emissions, which had been plateauing in recent years, appear to be rising again.3 Even in cities with well-developed electrical grids and robust mass-transit systems, transportation can account for a quarter of carbon emissions (23 percent in New York City). In cities in the developing world, it’s even higher, such as in Rio de Janeiro (32 percent) and Mexico City (45 percent).4

Meanwhile, traffic congestion exacts a toll of 2 to 5 percent of national GDP, by measures such as lost time, wasted fuel, and increased cost of doing business. And it’s not just dollars and cents: longer commute times, brought on by congestion, correlate with lower life satisfaction and increase risk of anxiety, poor fitness, obesity, high blood pressure, and other physical maladies.

Almost 25 percent of carbon emissions in New York City come from transportation. In developing cities such as Rio de Janeiro and Mexico City, the levels are even higher. (Pictured here: Mexico City)

Suboptimal infrastructure adds to the burden, and the situation is getting worse. In the United States, where the transportation network arguably suffers from a “first-mover disadvantage,” many of the nation’s arteries are crumbling. In Europe, where infrastructure conditions can vary widely, large projects are becoming significantly more expensive and more difficult to “sell” to voters. Even in Asia, where in many respects the infrastructure is the newest in the world, rapid economic growth has led to transportation networks that are sometimes patchwork and often struggle to keep up.

What’s more, mobility may be reverting to two tiers, haves and have-nots. While e-hailing services seem to make on-demand mobility accessible to a broader share of the population, their customer demographic skews toward more educated, urban users, and, assuming one travels more than about 3,500 miles per year (as some 90 to 95 percent of US car owners do), the cost per mile can greatly exceed that of an owned car. Congestion pricing and for-pay fast lanes mean that only the wealthy enjoy unfettered use of their freedom machines. Parking access is restricted in some cities to those who live in certain districts; if you can’t afford to live there, you can be legally barred from parking there. The impediments are reinforced by tolls on roads and bridges and rising costs of public transportation and their governing authorities, which operate at a loss in any case.

Part 3

New frontiers for mobility innovation

A cluster of innovative forces are coming together with the potential to mitigate some of these costs and make the benefits even better. In many ways, of course, the automotive industry has always been an innovation engine. A car, never just a “metal box,” integrates multiple technologies—chemical, mechanical, electrical, and, increasingly, digital. Five years ago, the average high-end car already had roughly seven times more code than a Boeing 787. As we approach the next inflection point, cars will become productive data centers and, ultimately, components of a larger mobility network. That’s already evident in e-hailing and real-time, data-driven navigation systems. Those technologies are among the first crest of a rising wave of mobility innovations, which itself is the remarkable confluence of technological breakthroughs worldwide.

Because of remarkable leaps in computing power, data generation through sensors and cameras, and virtually free data storage, the probability of unprecedented automotive innovations hitting the market by 2030 is high. Blockchain is one striking example, with potentially multiple applications that could be game changers, including fare collection for robo-taxis, payments for tolls and parking, and a “golden record” of a vehicle’s ownership, maintenance, and usage history. Governments, for their part, are coming to demand that technological improvements be implemented to reduce emissions and increase safety. All US cars sold are now required to have rear-view cameras, and regulators are encouraging and even requiring other elements of advanced driver-assistance systems, or ADAS. Even without governmental pressure, carmakers are likely to innovate out of market-oriented self-preservation. McKinsey research finds that approximately two in five customers are willing to switch car brands for better connectivity features. That’s double the level of just four years ago.