What’s changing in the autos industry? For one thing, the geography of car sales is shifting. As people in emerging markets – particularly in China – get richer, they’ll probably want cars. According to consultancy firm McKinsey, emerging markets will make up two-thirds of auto firms’ profit by 2020. And as the Chinese car market expands, “aftersales” are forecast to grow too: cars already on the road will need spare parts and servicing.

But eventually today’s cars will break down – and they won’t be replaced by the same gas-guzzlers. Fossil fuel scarcity and climate change is moving the world towards electric cars: researchers at PwC think that over 95% of new car sales in 2030 will be partially electric, with over half fully electric. As consumers feel pressured to swap out their current models, that could be a boon for car manufacturers.

Are there any other technological changes on the horizon? Companies like Tesla talk a big game about autonomous vehicles. While the technology isn’t quite there yet, it is rapidly improving. PwC thinks 40% of European personal mileage could be autonomous by 2030. In China, where the public is more comfortable with the technology, almost half of all miles traveled could be autonomous by then.

That could have a seismic impact on the way we get around. Some analysts think the future of mobility is “shared autonomous driving”: instead of owning cars, people will hail self-driving taxis. And even people that do own cars will likely rent them out, Airbnb-style – why have an empty car sitting in the garage all day when it could be put to use?

What does that mean for the industry? As people replace their cars with taxi trips, the total number of cars in circulation might decrease: in Europe, there could be a 25% drop in cars on the road by 2030, with a similar decline expected in the US. Though that might sound bad for the autos industry, it need not be. Car sharing massively increases the utilization of vehicles – people will still need to travel, they’ll just be traversing the same number of miles in a different way – and more mileage may mean cars will have to be replaced more often. That should keep overall sales ticking upwards: the 25% drop in the number of European cars could come alongside a 34% rise in sales.

But new tech will bring challenges for manufacturers too – on to a peek at the roadblocks ahead.

The challenges ahead

What challenges are autos firms facing? Advanced technology – like self-driving capabilities and electric cars – doesn’t come cheap. Rather than developing all this tech in house, some autos firms are outsourcing increasingly large chunks of their cars. Though that bodes well for parts manufacturers (more on that in the next session), it means profit margins could decrease for the car companies themselves as there’s somebody else taking a cut along the way.

Government regulation on emissions and efficiency could put those margins under even more pressure. And failure to meet these targets could spell disaster for firms: Volkswagen’s 2015 emission cheating scandal cost the company over $30 billion in fines and payouts.

How about the immediate future? The US-China trade war has been unpleasant for car firms: tariffs on steel and car parts have driven up their costs. Thus far, car companies have chosen to mostly swallow these higher costs rather than pass them onto consumers – but if things worsen, they may be forced to raise prices. That could put drivers off buying and see sales dwindle even more.

The threat of US tariffs on imported cars also has manufacturers worried – as does the prospect of a recession. The autos industry tends to get hit particularly hard during an economic contraction – consumers would rather stick with their existing vehicle than put down thousands on something new (the average US price of a new vehicle is now a record high of $33,319).

Evidence suggests a recession is coming in the next couple of years (check out our Recessions Pack for more on this), and with the autonomous boom still some years away, the immediate road ahead could be bumpy.

All that’s driven credit rating agency Moody’s to issue a warning about the auto industry’s future; it’s forecasting sales growth of just 0.5% in 2019 and 0.8% in 2020. But things could get better over time – and if they do, you could benefit from savvy investing. Last, we’ll look at where you can park your cash.