AAA, Ford, Toyota, BMW: All See A Future With Fewer Cars
What world is this? A representative from AAA said Wednesday he wants to see fewer cars on the road, and executives from three major automobile manufacturers conceded that's inevitable.
The auto executives all work in divisions the carmakers have set up to help them transition to a very different market from the one in which they have flourished.
"The horse is out of the barn now, thanks to successes from the pioneering car sharing companies," said Powell Kinney of Toyota Connected. "I don’t see things going back to individual ownership, I think we’re going to see maybe some fluctuation, but we’re not going to see a drive back towards everybody owning their own car, which means someone like Toyota has to change from selling an individual ownership to selling capacity."
BMW's Peter Dempster said car companies are becoming less product centered and more user centered. In a few years, he said, BMW expects to make more money selling minutes in its 7-Series cars than it makes from selling 7-Series cars.
"Working in the auto industry for ten years, it seems the key performance indicators within the sector are changing, When I started it was about volume sales," said Dempster, who works on strategy and market development for ReachNow, BMW's car-sharing unit. "And startlingly enough it’s really now about sales of mobility, things like minutes of mobility."
John Kwant, a vice president for City Solutions at Ford, related some personal research that may explain the change:
"My own survey that I do in my household—I have a 19- and a 17-year-old, and I polled them over the last three years and I would say: You get to keep one thing, what do you keep, do you keep your drivers license or do you keep your smart phone? And the smart phone wins every time, because it’s a connection if somebody needs a ride; they can do everything they need to do; the driver’s license is not what they need."
In a world where carmakers retain ownership of their cars and just sell minutes, the American Automobile Association has to reinvent itself too. The 115-year-old federation of motor clubs has built its business on insurance and roadside service. But Cars are so smart these days that AAA locksmiths are going the way of the Maytag repair man, so well built that there's less need for AAA tow trucks, so unlikely to crash once they're autonomous that there's much less need for insurance.
"So an association that’s really driven by revenue generated by insurance and helping people, you know, these cars are getting safer, it’s a great thing it’s fantastic, and I’m really happy to see private vehicle ownership start to plummet, and we need to accelerate that for the environmental, social and general lifestyle needs," said Dermot Hilkisch, the head of new markets for GIG Car Share, a project of A3Ventures, AAA's innovation lab.
So AAA is doing the same thing the automakers are doing: moving into car sharing. "We’re focused on staying in this space, doing what we’ve always been doing, but doing it in new ways," he said.
The world where this conversation happened was the National Shared Mobility Summit in Chicago, where more than 600 industry leaders, technologists, government officials and activists gathered to prepare for an anticipated tsunami of change in the transportation sector. Driven by information technology, the sharing economy, and the need to respond to climate change, the tsunami is on a collision course with the tradition of individual vehicle ownership.
None of the companies are fleeing from automobiles entirely because there's still money to be made. Fewer shared cars will be needed, but they'll be used more often, so replacement will be more frequent.
"The thing that will change is the velocity of replacement," Ford's Kwant said. "So now, a private-owned vehicle, given all the improvements that we’ve made quality-wise, lasts ten years or longer. In a shared-use urban environment you could see that falling to half or a third of that depending on the number of miles that are logged."
The carmakers want to provide those replacements—"We have to make sure we maintain market share for those (shared) cars, and that's going to be the majority of cars on the road," Toyota's Kinney said—but they're also vying for a share of the minutes consumers will be buying in shared vehicles.
"Morgan Stanley has told us that the global car market is worth $2 trillion," said Sabrina Sussman, the manager of public partnerships for Zipcar, the company credited with launching this revolution 18 years ago. "But they've also told us that the global personal transport market is worth $10 trillion."