Predicting the timing of industry disruptions
Fewer people will own cars in the future, observers agree, but the question is when
In one way or another, all industries deal with some form of disruption. Recently, many cases of disruption have occurred in the digital/technological space, and the auto industry is receiving a double dose of both.
The automotive business model is continually changing; there’s not one single automaker that hasn’t had to readjust its plans and explore alternatives, seek out a new sustainable competitive advantage, align with software or service partners to boost connectivity and, in some instances, alter what mobility will look like in the future.
Industry experts can make prognostications, but no one has a complete picture of what the auto industry will look like in five, 10 or 20 years’ time. The only certainty is that digital and technological advancements will play a large role in what’s to come.
In a 2016 report, McKinsey & Company, a global management consulting firm, predicted that vehicle ownership will soon become a smaller piece of the transportation pie. That perspective has been echoed by many automakers, including Ford Motor Company.
“We are at an inflection point, and mobility is the natural extension of our business model,” explains Raj Nair, executive vice-president, product development at Ford Motor Company.
So, what has brought the auto industry to this inflection point?
There are many contributing factors, but the main disruptions have come from ride-sharing programs and the advancements in fully autonomous driving. Ride-sharing The term ride-sharing or car-sharing is everywhere in automotive lingo and potentially the biggest disrupter to the current automotive purchasing model. The former currently exists with companies such as Uber and Lyft, while the latter utilizes companies such as ZipCar and car2go, and those programs are expected to expand with further automaker integration.
The ascension of companies such as Uber comes down to convenience and cost, especially in heavy-traffic cities. People are choosing these modes of transportation not only to eliminate the stress of stop-and-go traffic and finding a parking space, but also to be more productive with their time.
According to a survey by ReportLinker, millennials are key to the rise of these car-sharing programs, with 70 per cent opting for that service when going out for an evening. In addition, 91 per cent of older genera- tions own vehicles, but that percentage is reduced to 78 for millennials.
Trends come and go, but the question remains whether ride-sharing services are enough to displace the ownership of a vehicle. It certainly makes sense to use one under circumstances when alcohol may play a factor, but the costs will add up when you work in errands throughout the day. That’s where car-sharing programs come in, and a combination of both might simply do the trick.
The world isn’t ready yet for autonomous driving, evidenced by Volvo’s slowdown on its ‘Drive Me’ program planned in Sweden
Autonomous driving Another disrupter going hand-inhand with ride-sharing programs are fully autonomous vehicles.
The world isn’t ready yet for autonomous driving, evidenced by Volvo’s slowdown on its “Drive Me” program planned in Sweden.
It was supposed to begin in late 2017 as Volvo pushed to be the first traditional automaker to showcase a significant autonomous program, but it is pushing until 2021its plan to deliver 100 self-driving cars to 100 Swedish people.
Autonomous driving may not be ready for the regular day-to-day world, but that’s not impeding automakers and cities from working to- gether to test future plans on private grounds. According to Bloomberg Philanthropies and the Aspen Institute, 47 cities around the globe are testing or have committed to autonomous pilot programs with 38 of them beginning projects within 2017.
Developing the technology hasn’t been the problem with an abundance of semi-autonomous aids already in existence. The concern comes down to safety and regulations — an area clouded in mystery. Who would be at fault in a car accident: the driver or the automaker?
“It’s not just vehicle-to-vehicle communication that has to exist, but vehicle-to-infrastructure communication that needs a lot of attention, and this is currently being restricted by national and provincial legislation,” explains Barrie Kirk, executive director of the Canadian Automated Vehicles Centre of Excellence.
“Nobody is going to flick a light switch for fully autonomous cars to launch,” Kirk says. “It will be a gradual rollout with low-speed electric autonomous taxis coming out first in urban/downtown areas, and by middecade we will start to see a business or personal extension of that.”
The billions of research and development dollars being spent on advancements in autonomous technology are at a frenzied pace. At this rate, fully autonomous vehicles could be ready and functional by 2020 or 2021, but more likely will be held back from being the next big mobility service due to city and infrastructure challenges.
Once those are addressed, the auto industry will face a world of disruption to its existing model with automakers pushing out less vehicles and placing more emphasis on technology and connectivity.