‘Peak car’ and likely end of an industry
FOR YEARS, Martin Bruesch was the bread and butter of the German auto industry. He routinely used his 211-horsepower Audi A4 station wagon for the 20minute trip to the office.
Now on work days his car usually stays parked outside his apartment in the aff luent Berlin neighbourhood of Charlottenburg and the human resources executive hails a new carpooling service instead.
“If I’m truly honest with myself, then owning a car is too expensive with all these alternatives around,” Bruesch, 32, said as he got into one of CleverShuttle’s battery-powered Nissan Leafs one evening this month.
As young people like Bruesch increasingly ditch driving, they’re accelerating the shift toward what’s being dubbed ‘ peak car’ – a time in the nottoodistant future when sales of private vehicles across the western world will plateau before making a swift descent.
This is especially true in big cities where people are becoming more inclined to share rather than own a vehicle that sits idle most of the time. The number of Germans 25 and under getting driving licenses slid 28 per cent in the past decade, and it’s a similar story in pretty much every other major economy.
It’s a moment of reckoning for an industry that had been able to count on three things since the car was invented in Germany more than a century ago: cars ran on combustion engines and people not only desired to own one, they also drove it exclusively. With the age of car- sharing, battery- powered fleets and self- driving cars upon us, carmakers need to reinvent themselves into mobility companies to survive.
It’s hardly surprising, then, that luxury Mercedes- Benz manufacturer Daimler AG bought a stake in CleverShuttle after it began operations in 2016. The service uses an Uber-like app to pair individuals searching for a ride with other commuters in the same vicinity. In the five German cities it runs, users have more than doubled since January to 650,000.
Fast forward just five years and such services will eat into vehicle sales, leaving carmakers vulnerable if they don’t find ways to augment their income, according to Munich- based consultancy Berylls Strategy Advisors. By 2030 in the US, where data is most readily available, Berylls predicts that total sales of cars - individually owned and shared - will fall almost 12 per cent to 15.1 million vehicles.
“It will be the first time carmakers ever have to deal with a decline that’s structural, and not down to temporary factors like an economic downturn,” said Arthur Kipferler, a Berylls consultant who, while working for Jaguar Land Rover Automotive Plc, helped close the deal to fill Alphabet Inc.’s planned self- driving Waymo taxi service with 20,000 electric I-Pace crossovers.
Problem is, it’s not as simple as replacing car sales with revenue from mobility services. While German heavyweights like Daimler, BMW AG and Volkswagen AG have invested hundreds of millions of euros in various ride- hailing and car- sharing schemes, they’re nowhere near breaking even on them. Take the DriveNow carsharing service BMW started in 2011, which charges users by the minute to rent more than 6,000 BMWs and Minis in 13 European cities. After seven years, it’s still turning a loss, and last year made up just 0.07 per cent of the company’s sales.
The rest came mostly from selling almost 2.5 million luxury vehicles, like the BMW 3- Series sedan. Aside from the cost of building a f leet big enough to serve customers across a city, there are numerous ongoing expenses- things like car maintenance, paying drivers and managing and updating software.
And yet BMW’s own estimates show that in a decade, one carsharing vehicle will replace at least three privately owned ones, and mobility services, including autonomous cars, will account for a third of all trips. According to New York- based consultancy Oliver Wyman, mobility will be a US$ 227 billion ( RM931 billion) business by 2040.
“Carmakers are desperate for their mobility divisions to be monetised,” said Michael Dean, a senior automotive analyst at Bloomberg Intelligence. “They must be involved in future mobility to avoid being left behind by the likes of Uber and Lyft.”
Already, Uber and its Chinese rival DiDi Chuxing Inc. are together valued at about US$ 124 billion- just shy of BMW and Daimler’s combined market value, he said.
So much is at stake that BMW merged DriveNow with its longtime arch rival Daimler’s car2go service in March. Their goal: to build a one- stop- shop where people can do everything from call taxis, locate parking spots and find charging stations for their electric cars.
“As pioneers in automotive engineering, we will not leave the task of shaping future urban mobility to others,” Daimler Chief Executive Officer Dieter Zetsche vowed when the partnership was announced. — Washington Post.
If I’m truly honest with myself, then owning a car is too expensive with all these alternatives around. Martin Bruesch, 32