The Transform Technology Summits start October 13th with Low-Code/No Code: Enabling Enterprise Agility. Register now!
The automotive industry is facing a new era of self-driving cars, the “Uber Effect,” and the decline of oil-dependent vehicles.
For much of the 20th century, the car represented the modern frontier: speed, innovation, sex appeal, individuality, and escape. Many countries built highway infrastructures — blazing a path through the countryside in the name of connectedness. But just as Henry Ford (the original automotive disruptor) changed the face of the industry in 1908 by industrializing production of the Model T, we are again at a moment ripe for innovation.
The industry as we know it will not survive the 21st century. Some incumbents will adapt to electric vehicles, self-driving cars, and the sharing economy, but others will be swept aside as today’s upstarts lead us into new terrain.
EVs will end the internal combustion engine
That new car you just bought will most likely be your last to have an internal combustion engine (ICE), as the electric vehicle (EV) is taking hold. For years, the prevailing thoughts on EVs were that they would require too much infrastructure to ever catch on and that we were too dependant on speed and oil to let go of our ICEs.
But electric vehicle technology has been around for years, as detailed by the documentary Who Killed the Electric Car (2006). Aside from the oil lobby issues that the film outlines, a major block to mass adoption has been problems with cost and efficiency. Until enough people are buying, production costs will remain high. And many Americans are still choosing a hybrid over an EV because gas stations are still more common across the U.S. than charging stations.
Other parts of the world are already seeing the shift to EVs, however. In a study conducted by Nissan in 2017, the Japanese car manufacturer found that there’s been a 75 percent drop in the number of gas stations in the U.K. over the last 40 years. The study projects that by summer 2020, the number of gas stations will drop to 7,870, while EV charging stations will grow to around 7,900, a more than 90 percent increase. Countries like the U.K. and France have gone as far to promise that cars reliant on petrol will be illegal by 2040. In the U.S., there are 23 plug-in electric cars and 36 hybrid cars available on the market today, and nearly every major car manufacturer has publicly announced significant investments toward realizing an electric future in the coming decade. And as the infrastructure for charging EVs expands, we are sure to see a change in automotive buying habits.
For some, cars are more than a means of getting from point A to point B. Cars are status. Cars are fun. Cars are fast. This is why companies like Tesla and BMW have been so crucial in upgrading the profile of EVs. With the current technological developments in electric engines, there’s no reason a hybrid or EV shouldn’t look as good and drive as well as a luxury vehicle. And as sales of these luxury EVs rise in places like New York and California, more economical options are also appearing on the market.
For rational buyers unswayed by the emotional appeal of a Tesla or BMW, there is another perfectly sensible reason to switch to an EVV: The total cost of ownership over the vehicle’s lifetime is becoming equal to or lower than that of an ICE car. With fewer moving parts to service, maintenance costs are lower. On top of that, the resale value of ICE cars will begin to fall as demand diminishes, perhaps even getting to a point where consumers will have to pay to dispose of ICE cars.
As an additional benefit, the growing market for EVs could have a real impact on our nationwide carbon footprint.
The “Uber effect” on car ownership
Ride-sharing and rental services have also changed our relationship to cars. Uber launched in 2010 and has since expanded to 77 countries and over 600 cities worldwide, with an estimated 10 million trips taken each day. If it’s easier, cheaper, and safer to use an app like Lyft, Zipcar, or Car-to-Go, will individuals even own cars anymore? A 2017 study suggested that car ownership is decreasing in areas with ride-hailing services. Inversely, in Austin, a ban on Uber and Lyft meant that 41 percent of participants filled the void using personal vehicles, and 9 percent purchased an additional car.
The auto industry was one of the hardest hit after the 2008 housing crash; industry-wide sales plummeted and it took years (and a government buyout) for the major U.S. players to recover. And although we’ve seen healthy growth in terms of blind sales, what hasn’t changed since the crash is the demographics of people buying cars. Since 2009-2010, the number of no-car households has increased by 9 percent, and the average age of car buyers has increased by 5 years. If this trend continues, Baby Boomers could end up being the last generation to whole-heartedly embrace car ownership, which will have a huge effect on the industry in the next 10 to 20 years. Companies will have to look for new opportunities to engage the next generations of drivers and car owners.
In order to adapt to this shift, the automotive industry needs to find new business models, and incumbents have already begun pursuing some of these options. Volvo recently rolled out the Care by Volvo subscription model for its XC40, Ford has expanded its definition of mobility with Ford GoBike and an investment in ride-sharing company Chariot, and others have pursued partnerships with some of the very companies that threaten their existence. Almost every major automaker has some sort of “mobility-as-a-service” initiative in place, often based around earning customer loyalty by bringing aspects of our digital lives into the mobility experience. The idea is to reinforce our relationship with the automotive brand while transcending the specific car we’re riding in. As these initiatives launch in the market, expect the number of inventive experiments and unlikely partnerships to increase.
Shifts in employment and infrastructure
This February, California became the first state to allow road testing of autonomous cars without a backup driver, meaning companies like Uber and Google’s Waymo are well on their way to putting automated cars on the market. How these vehicles will affect our lives remains an open question. Researchers have explored the potential impact these cars will have on cities, infrastructure, business models, and employment, but we are even more interested in how they will change our daily lives.
Although delivery and ride-hailing services seem the most obvious applications for fleets of self-driving cars, car ownership offers another opportunity. Perhaps individuals will still buy self-driving cars to maximize their time during work commutes. Or maybe parents will buy a self-driving car to help out with errands and pickups, or to spend more time engaged with their children while en route.
Along with these advantages, self-driving cars could be a real boon to the independent living sector, especially for the elderly and those living with disabilities. Internet services from food delivery to ecommerce have already had a profound impact on those who cannot drive or who have difficulty getting around without assistance. Imagine if your local supermarket, shopping mall, health clinic, restaurant, or church could send a fleet vehicle to pick you up and drop you at home without the assistance of an aid or attendant.
Radical industry redesign
Many opportunities exist for those willing to evolve with the fast-paced technological advancements of the industry. Some changes will bring benefits, such as increased accessibility, less-congested commutes, and a reprieve from certain environmental challenges. By employing human-centered design, we could even push the auto industry toward a new dream, one that is environmentally sound and accessible to all. Transitional periods allow newer companies to enter the market, which can reshuffle the value chain. This is the moment for radical redesign not just of the vehicle, but of the entire industry.
Timothy Morey is the vice president of strategy at strategy and design firm Frog.
Sam Haddaway is a strategist at Frog.
VentureBeatVentureBeat's mission is to be a digital town square for technical decision-makers to gain knowledge about transformative technology and transact. Our site delivers essential information on data technologies and strategies to guide you as you lead your organizations. We invite you to become a member of our community, to access:
- up-to-date information on the subjects of interest to you
- our newsletters
- gated thought-leader content and discounted access to our prized events, such as Transform 2021: Learn More
- networking features, and more