No Country For Old Cars
Cars are being buffeted by the winds of change.
The car’s success can be measured in many ways: from rising global temperatures to the auto-industry’s colossal multi-trillion dollar annual profits. This success however is its only weakness as cars sales slow in saturated advanced markets. This slow down is driven in part by a cultural shift away from ownership towards mobility-as-a-service. In developing markets like the BRICS car sales are growing but their price remains low.
The multi-trillion dollar business of making, selling and keeping over 1 billion cars on the road is now buffeted by the winds of technological change. The future of mobility will be driven by a series of interacting trends: connectivity, urbanization, shared mobility, electrification and autonomy.
Sadly there is no longer a country for old cars.
You Probably Live In A City Right Now
Humans have become a majority urban species with over 50% of the global population now living in cities. Yet we have to ask ourselves who have our cities actually been designed for?
Your City Was Designed For Cars
In the United States there are 1 billion parking spaces for 253 million vehicles. Which means everyone ends up subsidising the costs of car ownership.
But Wasn’t Designed Well Enough
The problem is that cities aren’t designed well. Urban sprawl drives up commute times. Extra traffic causes congestion costing which cost around $200 billion for the UK, French, German and US economies in 2013. And congestion eats up time, wastes fuel, causes stress and pollutes city air. So whether you’re a driver or not the hidden costs of mobility are priced into everything from your apartment, your services and even the quality of your air.
Your Car Is Lazy
Like me, it’s basically idle 96% of the time. Most of you will use your car for just 4% of the day.
Cars Really Don’t Go That Far Anyway
The OECD estimates 89% of all car journeys cover less than 20 miles with the average driver racking up a measly 29.7 miles per day.
Freeriders
The economics of owning things in our more expensive cities has driven many young people back into a medieval style sharing economy. Anyway, there are increasingly cheap alternatives to getting from A-to-B. This is reflected in the falling percentages of young Americans applying for drivers licences. If you look at the 20- to 24-year-old the figures in 1983, 2008, 2011, and 2014 were 91.8%, 82.0%, 79.7%, and 76.7% respectively. It may just be that the smartphone has also usurped for itself many of the core functions that had made the car indispensable: it provides access to takeaway food, status, socialising & sex (though not literally though, gross).
Your Car Is The New Platform
For people who still buy cars there has been a shift in gravity from hardware to software. Connectivity is seeing the merging of the car and the smartphone. By 2020 there will be 260 million connected cars on the road in total.
Billboards Are Dead
User interface rather than engineering is increasingly becoming the key differentiating feature between models. The car is an entirely new frontier of consumer services aimed at enhancing the everyday ride. Think ride-sharing and HD mapping or even tie ins with local bars (for fully autonomous cars only, of course). Advertising will have to shift from roadside to small screen AR projections into your side windows perhaps. Or maybe people will have their attention increasingly on their dashboard screens or headsets. There may even be luxury ad blockers for sale by prescription to block out advertisers who don’t have a relationship with the auto/software-maker. Whether this is actually quite dangerous will depend on the level of autonomous safety features compensating for the distracting AR pizza advertising on the windshield.
Who Holds Back The Electric Car?
The big hurdle to be overcome lies in the battery which makes up 1/3 of the total manufacturing costs. Electric Vehicles exist inside an existential chicken and egg situation. They need charging infrastructure before people feel comfortable buying them. But without charging stations peppered all over the place it’s hard to drive up demand.
The shadowy cabal explanation may not be as whacky as it seems though, maintaining the electric vehicle’s current 60% adoption curve could precipitate a global economic meltdown by displacing the oil demand of up to two million barrels per day.
Atlas Plugged
However electric cars are simpler to manufacture as they require roughly a third of the parts of an internal combustion engine model. They are surprisingly modular (it’s easier to fit in computer chips when you don’t have to worry about the engine melting it). This has set the stage for big tech companies and car manufacturers to bleed into each other (gross image, but yeah).
Hydraulics Autonomous
Your car is on a 6-step journey to self-discovery. Sadly your car is probably just at level 2 for now. The speed with which it ascends these levels will depend on who wins the race to autonomy. The people involved in making cars for a living are a cautious bunch with low margins so expect to see a push for incremental change. Tech industry upstarts like the Alphabet spin-off Waymo have the luxury of diving straight into full-autonomy moonshots without destroying their own value-chain.
Your Car Is Stupidly Expensive
Developing a new car from scratch is a nightmare. Big car manufacturers have this down to an art and it still sets them back at least $1 billion per new model. This creates huge barriers to market entry. When you look at the margins across the supply chain you might just wonder where innovation actually comes from. The value chain is shifting towards software leaving many car manufacturers scrambling to attract top tech talent to work within 20th century companies. This is behind the recent explosion in car tech investment, gathering around $847 million in investment in 2016, up from $409 million in 2015.
The development costs for new cars also puts the recent spate of acquisitions into context: GM’s acquisition of Cruise (raised $18.8 million but valued at $1 billion) highlights how car makers are repositioning themselves to become ride sharers. It also bought a $500 million stake in Lyft — aiming to introduce self driving Bolt taxis by 2017.
Minds Of Metal
Manufacturers have perfected the bent-steel body as well as the global supply chains that bring them together. Now the mind is being developed as a network of high resolution maps, compact processors, sensors and AI that they will use to make sense of their environment. The high cost of components have come down with LiDAR, for example sliding down from $75,000 to $250/unit. Costly sensors and lack of real-world test data form a series of bottlenecks. Will our car AIs be able to adapt to local driving customs as well as local weather conditions? In lieu of real life road data will our cars train themselves on Grandtheft Auto? I kind of hope so.
Declaring Independence
Waymo’s latest autonomous car tests show human intervention decreasing even as the driverless miles travelled tops 3 million. At what point will the human element of the car become the most dangerous part of the car? Toyota had initially declared never, considering human drivers to be the “ultimate in sensor fusion”. Other car makers like Ford consider it dangerous to force split-second decisions onto a distracted human co-pilot, planning to do away with steering wheels entirely.
Pimp My Ride
The need to own a car is challenged by the rise of mobility-as-a-service. Autonomous mobility-as-a-service threatens the concept of car ownership entirely. The question boils down to this, if all cars are feasibly yours, aren’t they all? Yet companies like Tesla have invested heavily in the idea of ownership continuing to be a thing. In line with their “Master Plan, part deux” they have launched a platform to allow people to rent out their cars, arguing that cars should be an asset rather than a cost.
Big car manufacturers like GM have hedged their bets and have secured a possible endgame in providing cars for private robo-taxi fleets. Autonomy and ownership has wide-ranging implications in terms of congestion (old people and kids can drive too),
Which Countries For New Cars?
There are 50 key urban epicentres from which the fully driverless future will probably emanate out from like Chicago, Singapore, London. Home to over 500 million people, the differing geography and regulatory environment of these dense but affluent cities will define the speed of diffusion of new patterns of mobility. Instead of just one meteor wiping out the traditional car as we know it in a single blow, the world will be rocked by various smaller impacts. These urban centres will have differing incentives and forms of autonomous transportation and individual mobility. Several futures of mobility will coexist at the same time.
