AVs, EVs, and the Future of Urban Mobility with McKinsey's Dr. Timo Möller

Interview with Dr Timo Möller - Episode 21 Podcast Intro Kaan: Thank you for listening to Mobility Redefined, brought to you by Modaxo. For more insights and information, please visit mobilityredefined.com. That is mobilityredefined.

com. Meet Dr Timo Möller Kaan: Welcome to the Mobility Redefined podcast, where we explore the leadership, strategy, and innovation shaping how the world is moving. I am Dr. Kaan Yildizgoz, and today I am delighted to welcome Dr.

Timo Möller, partner at McKinsey, and co-leader of McKinsey's Center for Future of Mobility. Timo and his team closely track global mobility trends all around the world, and they also work with different mobility shapers and incumbents from different countries. Welcome, Dr. Timo.

Thank you for joining me. Timo: Thanks for having me, Kaan. Kaan: It will be a pleasure to discuss with you today and get your insights. Mobility Funding Reset Kaan: I would like to start by discussing the topic of funding, which is a very essential and important subject for the sector today.

Based on your reports, I was reading closely that mobility funding dropped significantly after the 2021 and 2022 peak, and is now gradually recovering. From your perspective, was that decline primarily a macroeconomic correction, or did it reflect a structural reassessment of mobility business models and timelines? Timo: Yeah, indeed, you're right. We have been tracking investment into the mobility sector since 2010, and what we saw in 2021 was $81 billion of US dollars flowing into mobility shapers, or disruptors as we call them.

And that was clearly, I would call it, a hype year, where money seemed to flow into basically everything mobility-related. And there was clearly a correction in the meantime. But we did still reach last year a level which I would say is a healthy inflow into real and valuable business models. And we are now grounded, I think, in reality.

So this is probably a level we can, and should be able to, work with over the next few years. Kaan: And what fundamental change do you see in how investors are evaluating mobility opportunities today? Timo: It was clearly observable that the shift was from growth to, let's say, working, scaling business models which have a clear path to profitability, or are even already profitable. And hence the discussion with investors is now more centred around financial KPIs and your path to profitability, versus just the aspiration of building something completely new, being very disruptive, entering a potential market which hadn't been there before - which was a bit the discussion in 2021 and even before.

Where Capital Flows Now Kaan: And if you look at different sub-verticals - autonomous, connectivity, electrification, shared mobility - where do you see capital becoming more disciplined and selective? Timo: I think that general trend of discipline, as you call it, is true across basically all investments flowing into the mobility space. If you go through what we call ACES - or have been calling ACES - we see a very stable inflow of investment into the autonomous space, while it is moving more into AV integration into ecosystem builds, and so on.

We see a very solid inflow of investments into the electrification space, again with a focus on scaling. These days that means batteries, charging infrastructure, but still EV components and even vehicles as well. And I think the third area of inflows is in the whole digitisation of the broader ecosystem. Very often that is in the operations space - AI-enabled production systems and similar developments.

This is still at a different or lower level compared to the first two, but we are tracking an increase in those kinds of investments. Kaan: Thank you, Dr. Timo. Robotaxis Go Commercial Kaan: You mentioned autonomous mobility, and I recall one of your latest insights highlighted that more than 6,000 robotaxis and autonomous shuttles are already circulating globally, with commercial services operating in a limited number of cities.

What gives you confidence that autonomy is moving from experimentation to commercialisation this time? Timo: I think we have been seeing this in our work with autonomous disruptors over the last couple of years already - that the focus is really shifting from the technology itself and the hardware and software stack. While there is still money flowing into this area and things still need to be solved, the focus is shifting more towards building AV ecosystems. What I mean by this is mostly how the value chain end to end is being built in a given city.

That starts with obviously the hardware - the vehicles themselves. Who is financing them? Then who is operating that fleet and maintaining it? How is it built and connected into mobility as a service, or into the other modes of transport in that city?

That is mostly where the attention is these days - how to build this and ramp it up, because that will be critical to deploying such a service to all of us as citizens in those cities. We are seeing that the tech is working, and not just from one player but from several players that they have it under control. So now it is about how to scale it. And for this, we need an ecosystem.

This is what is being built. Cars Become AI Native Kaan: I was also following the discussions happening at CES in Las Vegas earlier this year, and your team was there. When I look at your team's report, they were emphasising the shift from perception-centric autonomy to reasoning-based, AI-driven systems, alongside centralised compute architectures and rising semiconductor intensity. My question is: is the vehicle becoming an AI-native platform today?

Timo: I think the answer is clearly yes. And while we are still not fully clear where this is all going at the end of the day, we are seeing that this mobile phone on wheels has already become a reality, and we want to see more of this in the future. My observation - and this was also the observation during CES - is that autonomous vehicles seem to be the most obvious use case for physical AI, as it was often described, as a very strong use case to bring AI into a physical context.

Hence hardware and software linked to that are clearly the driver behind autonomous vehicles. But even ADAS-enabled vehicles - advanced driver assistance systems - and the infotainment in a non-autonomous vehicle require a lot of software and hardware to make all of this happen. So even there, the technology dimension is very important. Interestingly, and maybe this is my final thought on this: when we listen to private consumers - what is making you choose one vehicle over another - the key buying factors are still very traditional, in the sense that it is the price of the vehicle, the total cost of ownership, the range of the vehicle if it is an EV, and so on.

The technology dimensions I would call them - HMI, connectivity, and so on - are not in the top five for private vehicles. It is obviously different for autonomous vehicles. But for more traditional ones, it is not yet on top of everybody's mind. I would read into this that consumers see it as a given that their vehicles get smarter.

They expect it, but it is not necessarily the most important differentiator when buying a car. Kaan: Thank you. Electrification By Region Kaan: We have been talking about the main trend of autonomous mobility. But another area you have been touching on is electrification, which is a very significant trend in the mobility sector over the last ten to twenty years.

How do you assess where electrification is going? From my own experience, particularly on the shared mobility side - buses, taxis, and individual use cars - China has been leading the main drive in recent years. How do you see the next ten years from the perspective of electric vehicles and electrification? Timo: Maybe to start with, in the sense of electrification, the world is really differentiating into different regions.

We see at least three different speeds across the world. You mentioned China, where I would say there is now clearly a consumer pull for electrification. The recent announcements from public authorities and governments - saying they are pulling away more and more incentives and subsidies in this sector because they believe it has now reached a level that is self-sufficient and that people like it and use it - reflect that. This is also true for commercial users who look mostly at total cost of ownership and operational reliability.

This seems to be working well for everyone in China, and it has clearly become a pull market and is scaling. At the other end, I would say, is the US, where we are seeing the market stalling for electrification, given the political environment and the incentive situation there. It has not yet reached a level where there is a consumer pull - it was still in a governmental push stage. So it is probably falling further behind in terms of electrification.

And we in Europe are a little bit in the middle field, where we are seeing that in some segments we are making that transition from governmental push to consumer pull. With around twenty-five percent take rate these days, we have clearly reached a critical mass. We see a lot of new attractive models in basically all vehicle segments entering or already existing. So this is clearly a growth market and will continue to grow.

I think the reality we need to live with is that we have different speeds of electrification across the globe. For global players active everywhere, that means they need to adapt to those different speeds in the powertrain field. Kaan: Thank you, Timo. That is very interesting.

I myself have been following the electrification of taxis and of buses in particular. From my perspective, I was giving a lot of attention to taxi fleet electrification, because today the taxi fleet is perhaps 2% of the total number of cars in the world, but responsible for around 20% of greenhouse gas emissions because taxis cover significantly more kilometres. I was always asking authorities to prioritise and provide more incentives specifically for the electrification of taxi fleets.

But for buses and for regular passenger cars, we are certainly seeing a lot of development around the world. Micromobility Goes Habitual Kaan: The last pillar of your ACES framework is shared mobility. I have in front of me an interesting statistic which tells me that e-scooter users riding at least once per week increased from 41% in 2023 to 50% in 2025. Does this suggest that shared micromobility is becoming habitual rather than opportunistic in the world today?

Timo: I would clearly confirm that based on our consumer surveys, which we carry out every year, as well as the real-life numbers we are seeing. Yes, this is a trend. We are seeing that the very dominant private car modal share - which we see more or less across the world - is decreasing slightly year over year. This is already happening today, primarily in the urban environment, and is contributing to growth across basically all other modes of transport, meaning shared modes like shared micromobility, but also public transport.

Even walking, we see, is growing. Based on our consumer surveys, people see this clearly as a trend that will continue. The only mode of transport where consumers across the world are telling us they want to use less in the future is the private car. All other modes they tell us they want to use more.

I would definitely agree that micromobility - both private and shared - is here to stay and to grow. The conclusion is that this is very helpful for how we do mobility in cities. Micromobility is perfectly complementary to classical public transport, but also to what I would call the new public transport - autonomous shuttles or robo-shuttles. Micromobility is definitely filling a gap here and should become part of the future mobility ecosystem of every city in the world.

Kaan: Thank you. What we are seeing in recent years is a significant increase in the number of users and riders of micromobility modes. It is not just an accessory today - it is becoming a main mode of transport in our cities, with a growing market share year on year. 2030 Value Pools Outlook Kaan: One of my last questions looks further ahead.

We have talked about autonomous mobility, electrification, and shared mobility. Looking towards 2030, which mobility value pools do you believe will expand most significantly? Timo: Basically all of the ones you have just mentioned are not yet at a mature stage and are going to grow. We are just at the tipping point where these themes and topics are really becoming relevant, scaling, and becoming genuine market segments to play in.

Overall, electrification is the most mature already, given the lead markets we have and also that this trend has been around the longest. So it is probably the biggest one already today, with still massive growth potential. But autonomous will now really start to scale. We see a whole shift in the urban mobility environment, and with that, the shared element is going to grow as well.

The AI-enabled or digitised ecosystems are just starting to materialise. So basically everything is just about to grow and become real value pools. Kaan: We have touched on a wide range of areas - the investment landscape, the approach of investors to the sector and its sub-verticals - and it has been great. You have shared a structured and strategic view on autonomy, artificial intelligence, electrification, shared mobility, and the evolving investment landscape.

Closing Vision And Wrap Kaan: Before we conclude, are there any final messages or points you would like to share with the listeners of Mobility Redefined? Timo: Yes. I think we should just be embracing the potential of all of this and be positive about the opportunities we have to shape the future urban mobility ecosystem. Very often this whole shift is looked at as a transformation we need to manage - things are changing, things are complicated.

I would rather turn it around. If I paint a picture of how we can do mobility in the future - in the near future - I see cities which have a lot more space for us as citizens, which are less packed with vehicles, which offer a higher quality of mobility and a more efficient way to get from A to B, meaning a faster way. So for me, this brings a lot of opportunities to improve our quality of life. And that is the spirit we should all have, while acknowledging that this means change - which can be tough for us as individuals, but also for companies transitioning their business models.

But I think the future is brighter than the past, so to say, in how we do mobility. Kaan: Thank you so much, Dr. Timo Möller, for joining us today on this episode of Mobility Redefined and sharing your experience and your view of the future. I also want to thank our listeners for tuning in today, and I look forward to bringing them together for the next episode.

Timo: Thanks a lot, Dr. Kaan. Outro And Subscribe Kaan: Thank you for listening to Mobility Redefined, brought to you by Modaxo. For more insights, visit our website at mobilityredefined.

com or follow us on LinkedIn. Be sure to subscribe to the podcast on your favourite app to stay updated with our latest episodes. Thank you for tuning in and we hope you enjoyed the conversation.