If new car customers opt to rent cars on-demand rather than own them, the car industry potentially faces a major problem. Sharing the asset – the vehicle that sits around doing nothing most of the time – means that fewer vehicles are needed and the smaller vehicle parc translates to a smaller annual market. It’s enough to keep car company bosses awake at night. Except that plenty of people will probably elect to continue to own a car because on-demand transport solutions are not going to be perfect everywhere (population density is one factor that creates market imperfections).
Also, not everyone likes car sharing and there are a number of reasons why many people will still opt to own a vehicle. A car is not simply a commodity product for everyone, though let’s not kid ourselves – for some, a sizeable group, it is. And this group will also embrace the driverless vehicle that saves them from the chore of driving.
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The forecasters have their work cut out in projecting how the disruption caused by car sharing and also driverless vehicles, will eventually play out. There are plenty of uncertainties for timelines. And some of the changes expected could create new opportunities for car companies as we move to a world in which the assets – ie vehicles – are utilised more intensively than currently. If vehicles are travelling greater distances, operated for much longer spells during a typical week, their life-cycle becomes shorter. That would actually lead to more market demand.
Of course, the net effect may still be heavily negative. Much depends on how the asset sharing market in transportation actually evolves. One observation I would make is that the entrepreneurs and innovators making use of personal connectivity and creating new business models seem to be able to operate very quickly to exploit market opportunities. It would be a brave person who would forecast that the auto industry is not going to see fundamental change over the next twenty years, with traditional business models upset. But the path is likely to be an uneven one that is difficult to predict with a high degree of certainty.
There is also the thorny issue of legacy vehicles. Let’s say there are around 2bn vehicles on the road globally and the capacity of the world’s auto industry is around 100m vehicles a year. If all vehicles made and sold were autonomous from now – all of them – it would take twenty years to convert the world’s fleet. The transition ahead will take time. Many emerging markets – where much future market growth is coming – will be resistant to anything that increases the price to the consumer of motorisation, whether that is the cost of the vehicle itself, or the associated transportation infrastructure (autonomous vehicles like well-defined roads that are properly digitally mapped).
There may be fewer takers nowadays, but some people still buy newspapers and like the feel of a newspaper, the familiarity of the experience, even the smell of print. And it’s not necessarily a binary thing, one or the other. I still like to look at favoured print titles, but I also consume plenty of media digitally and I am eternally grateful for the ability to search online rather than having to rifle through back issues of magazines looking for an article. I have a kindle e-reader, but I do also buy printed books. I own a car but I also rent cars from time to time. Don’t expect a sudden dramatic switchover, perhaps, but be prepared for steady change and be part of that change, the unfolding evolution in the marketplace for transportation services, rather than a change resister inhabiting an ever decreasing part of the market.
See also:
Car sharing could boost auto sales – research
Car sharing not as disruptive as driverless cars – BCG study
