Analysts at research firm Frost & Sullivan (F&S) have highlighted a trend towards falling car ownership in congested urban areas that is forcing vehicle makers to seize growing opportunities in the emerging car sharing sector.
In the large and relatively affluent urban areas of Western Europe, a trend is emerging that is of concern to car makers. Young people are getting turned off the idea of owning a car. It is partly about the rising costs of running a car, especially insurance premiums and petrol, which are felt especially acutely by young people on relatively low incomes. Attitudes are changing.
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“The car sharing sector, enabling people to hire a car by the hour, is a rapidly emerging high-growth part of the urban transportation landscape,” says F&S consultant Martyn Briggs.
“Young people now are much more environmentally aware than previous generations and are interested in smart solutions that come with environmental responsibility or an element of fashion kudos. Car sharing – involving the latest green vehicles rather than the kind of used car that kids used to start off their driving lives in – plays into that.”
Electric vehicles could also figure prominently in the car sharing sector. Frost & Sullivan forecasts that up to a third of car sharing operators’ fleets could be EVs by 2020, although there are practical problems with recharging that will need to be solved.
The car sharing sector certainly looks like a business that the car makers have little option but to get into. F&S says that per capita car ownership in London is declining and forecasts that it will drop by 15% between 2010 and 2020.
“This leaves the OEMs with a need to diversify and act positively to be a part of the changing transportation make-up in big cities,” Briggs maintains. The OEMs can obviously exploit the opportunity to sell to the emerging and fast-growing car clubs, but there is more to it than that.
“We’re seeing a shift away from the car ownership model to more car sharing in cities,” Briggs says. “And that expanding customer base is also a good place to lock-in brand loyalty for young drivers at an early age. Later on they may be in a position to buy a car and the positive experience with the brand via car sharing would be helpful to future sales.”
Briggs identifies three key drivers in the growth of car sharing in developed economy cities:
- the rising cost of running a car;
- heavy investment in public transport alongside transport policy regimes which mean that alternatives to owning a car are getting better;
- the rising opportunity – facilitated by connectivity technology – for mobility on demand.
“Mobility on demand will be a real game-changer,” says Briggs. “It will fundamentally change the way people consider the journeys that they make and the modes of travel they use. Personal mobility apps on portable devices will increasingly enable travellers to choose the way they make a journey based on cost, journey times and environmental impact. People will also get real-time updates to take account of things like congestion or train breakdown.”
The car will be an important part of the picture, but the urban transportation scene is facing significant change over the next ten years. “The car makers have to have a strategy to be a part of the changes that are coming,” Briggs maintains. “And they will perhaps have to see themselves increasingly as companies that provide transportation services as the transportation sector and the business models it serves experience rapid change.”
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