In the next ten years, the auto industry will undergo a profound transformation: the cars it builds, the companies that build them and the consumers who buy them will look significantly different. Technology will be leading this change, but it will be shaped by four key themes. The car of 2025 will be:

Source: https://www.goldmansachs.com/insights/technology-driving-innovation/cars-2025/

FILLING UP, PLUGGING IN

Concerns about greenhouse gases and pollution are driving an industry-wide change in the way cars are powered. Regulations on fuel economy and CO2 emissions are forcing carmakers to make engines more efficient. By 2025, 25% of cars sold will have electric engines, up from 5% today. But most of those will be hybrids, and 95% of cars will still rely on fossil fuels for at least part of their power. That means automakers will need to make internal combustion engines more efficient to comply with new standards.

The development of alternative power sources such as fuel cells will add to overall efficiency, but only if people can afford them. The Japanese government has set a target price of ¥2.2million—around US $18,000—for fuel-cell vehicles by 2025. While they would still be a small niche in global sales, that target price would allow them to become competitive with popular hybrids.

LIGHTENING UP

That conflict is starting to ease, as companies explore materials that are both light and strong—including aluminum, high-tensile steel and carbon fiber reinforced plastic (CFRP).

However, these are more expensive materials. CFRP, in particular, is primarily used only in specialty sports cars today. Over time, the push for fuel efficiency will mean more use of aluminum and high-tensile steel.