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Onerous Car Ownership?

by Roger Lanctot | Apr 25, 2017

As the automotive industry faces and embraces its future in car sharing and a broad range of other ad hoc car usage scenarios and, ultimately, autonomous driving it is being forced to confront real change. Real change means upending current business models and conventional wisdom and simultaneously supporting seemingly incompatible visions of individual transportation.

onerous ownership

The stark reality of this was conveyed to me by a slide (above) presented at last month’s CityCarSummit in Berlin by design firm Siberia.io. I had seen such numbers before as when Thomas Moorehead, the owner of BMW of Sterling (my dealer), several years ago quoted the lifetime value of a customer to a dealer at upwards of $400,000. But looking at the flipside of that equation from the perspective of the savings resulting from a carless existence is disturbing.

It was particularly disturbing to me given that my three sons have all committed themselves to a car-owning lifestyle with recent new car purchases. I felt as if I had let them down by not sharing the figures (above) with them to help them make a more enlightened decision regarding their transportation and financial future.

Of course, they never listen to me anyway – so this was a brief and pointless reverie on my part. But it forced me to think about my own car ownership and usage patterns and how difficult it would be for me to part company with my individually owned vehicle. I drive my car so infrequently that during my equally infrequent dealer visits the service manager invariably chides me that I need to drive more or I am going to damage my battery.

The lesson for car makers seeking to face and embrace this change is that this phase of new service exploration in the form of car sharing and ride hailing is no time for trial balloons. The organizations bringing tens of thousands of shared vehicles to markets around the world are committed to aggressively seeking to undermine and destroy existing business models built around selling and owning cars – in spite of the fact that the two businesses must co-exist.

Most forecasts for car sharing are relatively modest – showing a few hundred thousand cars in such programs a few years from now with a few million users/subscribers. Let’s be perfectly clear. Incrementalism isn’t going to get the job done. Nothing short of Clay Christensen-style creative destruction will suffice.

Car sharing organizations – of which there are thousands – are committed to prying consumers out of their owned vehicles. This effort is occurring in concert with cities pursuing the same objective – introducing “road diets” and traffic calming or elimination measures or outright banning of cars from city centers.

Car enthusiasts look on baffled as bike sharing propositions pop up near public transportation nodes and pedestrians proliferate. Some regions are feeling the early impacts of these efforts, such as Scandinavian countries where aggressive transportation policies are negatively (positively?) impacting vehicle ownership rates. Germany, arguably the epicenter of car sharing innovation, is next. The beating heart of automotive design and devotion appears poised to abandon the automobile. If you don't believe me take a close look at what is happening in Hamburg and Berlin.

The decline in prices for fossil fuels and the recent economic recovery may well be masking or delaying a broader and more massive shift to ad hoc transportation options underway around the world. I found it noteworthy that Daimler saw fit to send a vehicle production expert to the CityCarSummit. The potential impact on the type and number of cars to be manufactured is in the balance.

The industry must come to terms with a broad range of implications including:

  • The increasing importance of emerging markets in Asia to drive vehicle demand
  • The rise in pedestrian fatalities as we indeed pry drivers and passengers out of their cars
  • The limitations of public transportation to take up the demand
  • The changing role of dealers
  • The creation of vast wealth as money previously committed to personally owned transportation is liberated for other purposes
  • Societal savings in the hundreds of billions from fatalities and injuries avoided and pollution mitigated

One of the most immediate impacts listed above is the rising toll being taken among pedestrians. The Governor’s Highway Safety Association in the U.S. published their report on pedestrian fatalities last week noting an increase in pedestrian fatalities to levels not seen in decades.

http://tinyurl.com/le3o278 - Pedestrian Traffic Fatalities by State: 2016 Preliminary Data

A curious picture emerges of Western developed societies returning to two wheeled and two legged transportation options as emerging markets trade in two and three-wheeled vehicles for four wheels. But even these societies experiencing the rise of the automobile are simultaneously integrating car sharing and ride hailing options as well.

To be successful, car makers cannot treat car sharing as a foot in the door opportunity. Car sharing must permeate each organization’s strategy.

  • New car dealers should use their own-brand car sharing services – ie. ReachNow at BMW, Maven at GM or Car2Go at Daimler.
  • New car buyers should not only be immediately enrolled in car sharing programs, the vehicles should also be available at the dealer as service loaners. 
  • Shared cars should be available to buy or even to be repurposed for ride hailing services – something that ReachNow already enables.
  • Existing fleet contracts should be re-evaluated to determine whether they are more easily and flexibly fulfilled with shared cars or light trucks. 
  • Dealers should manage the car sharing fleets – in the context of supporting the broader networked service. Dealers are not only better positioned to service the cars, but are also in position to sell the cars where desired by the user. (Though they would have to provide 24/7 emergency response services.)

The conundrum of promoting car sharing in a world that is today dominated by car owning is identical to the conflict over selling internal combustion engine vehicles side-by-side with electric vehicles. Dealers are clearly conflicted over the prospect of selling an EV which will require little service attention over its lifetime relative to an ICE-propelled car or truck.

The result is the same. Dealers and car makers must aggressively promote and tout the virtues of EVs over ICEs even if EV success threatens the core business model based on selling and servicing ICEs.

In the same way, car sharing must be advertised and promoted on an equal footing with the existing range of car owning options. Only by committing adequate resources to the car sharing program will car makers obtain a reliable read on the willingness of consumers to alter existing vehicle relationships.

Anyone doubting whether the times are changing need only note former GM/Chrysler/BMW senior executive Bob Lutz who told the L.A. Times that manual driving of cars will ultimately be banned from public roads and only accessible on the racetrack equivalent of today's "dude ranches."

http://tinyurl.com/kzowuf4 - "Bob Lutz, the auto industry's 85-year-old bad boy, goes off on Elon Musk and President Trump"

This is no time for finger-in-the-wind marketing. Nothing short of a full on car sharing campaign from every car maker is required for long-term success. You can’t nibble at the EV market and you can’t pick at car sharing. It’s time to take a seat at the table.

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