Car Makers Likely To Take New Technology Challenges In Stride.
“23% would consider giving up their vehicle ownership if they had access to an on-demand autonomous vehicles”
There has never been a shortage of forward thinkers predicting how the auto industry will be turned upside down 10 years from now. Auto manufacturers would be getting nervous about their collective futures if some of the current destructive theories turn out to be true. But if history is anything to go by, they can probably keep calm and carry on.
Back in the 1930s experts told us that in 10 years time, we would be flying around in our cars. The electric car has been 10 years away for some time now, although that technology does seem to be mounting a credible attack. Now we are told that it will be normal, in 10 years time, to summon an autonomous car using our smart phones. This will arrive, almost instantaneously, in the form of a computer-controlled, electric-powered pod with no human driver.
We will need to call up a car – a sedan, SUV, pickup truck or sports car, depending on our mood and the time of year – because in 10 years we won’t own them anymore, the theory goes. And on the way to this brave new world, our automotive habits are in for a shakeup. We will all come to recognise that owning a car is a ridiculous expense because for perhaps 90 per cent of the time it is sitting unused and depreciating. So we will organise local group car ownership, or enrol in car clubs, or rent out our wheels to cover expenses.
These new visions of mobility are also the result of changing economic circumstances. Because of chronic youth unemployment, many young people have given up on the idea of owning cars. Many others find the economic squeeze has made it difficult for them to own cars. This has been misinterpreted by many as reflecting a falling out of love with the idea of the car, its gift of independence and its power to reflect achievement and taste. When and if the economic good times return, this passion will certainly be renewed. But there’s no denying that these are more than just new, fashionable ideas about to fizzle out. The question is, which ones have serious chance of success.
Uber is busily engaged on a global venture to recruit citizens to provide taxi-like services in their own cars, at the behest of smart phones. Its partner Google is also preparing to become a thorn in the side of auto manufacturers with its autonomous car, although it’s not clear yet what form this will take. Imagine what a bargain deal Uber could offer you if it eliminated the expense of drivers by replacing them with computers with some help from Google? And new ideas about car use abound. FlightCar offers vacationers the chance for free airport parking while they are away if they offer their car up for rental. If your car is rented out, you might return home with extra cash in your pocket, not a bill.
Thilo Koslowski, Vice-president and Automotive Practise Leader at Gartner believes that Americans can’t wait to embrace new ways of getting around.
“Gartner research has shown that in the U.S., 23 per cent of vehicle owners would consider giving up their vehicle ownership if they had access to an on-demand transportation service using autonomous vehicles. That’s almost a quarter of the population,” Santa Clara, California-based Koslowski said.
Uber is setting the pace.
“We have to get the technology right first of course. Uber is taking off in places like New York, Boston, San Francisco. Already there’s a lot of customers. It’s not just a taxi service. It is trying to create a premium experience for people with clean cars and maybe even a driver greeting you with white gloves on,” Koslowski said.
Morgan Stanley auto analyst Adam Jonas jumped to attention when it was announced that Carnegie Mellon University Robotics Institute in Pittsburgh was cooperating with Uber to produce a fleet of autonomous taxis. Jonas said the idea that ride sharing companies might seek to manufacture vehicles themselves had been on his long-distance radar, but this development was about five years earlier than he’d expected.
“We now see the formation of new industry players challenging the concept of robotics, artificial intelligence and machine learning in vehicular mobility. The journey to the end of human driving may take a generation to play out and will no doubt meet any number of impediments, but we believe the process has already begun,” Jonas said in a report.
“Computers just drive better than people and a ubiquity of connected cars can drastically change consumer usage patterns, ultimately obviating the need for the vast majority of individual vehicle ownership,” Jonas said.
Will the big, established auto manufacturers be blind-sided by these revolutionary developments?
Gartner’s Koslowski doesn’t think so, although he worries that the current high level of car sales in the U.S. might lead to some complacency.
Eat their lunch
“The (the manufacturers) should not get too comfortable with vehicle sales at this high level. This change might happen overnight. The territory is shifting. The disruptors are trying to eat their lunch. But I’m confident they will change their ways to cope with this. A couple of years ago I wasn’t so sure; now I’m sure they can. They need to offer all kinds of new value proposition alternatives to classic vehicle ownership though. Consumers will be able to choose from multiple options, buying is not the only choice,” Koslowski said.
Not everyone believes a big shakeup is imminent.
“I’m sceptical about this sort of analysis. People’s idea of the future car has never come off. If so, we’d be flying in them by now. You can’t really extrapolate today into the future because so many other things come from left field; things nobody thought of,” said Garel Rhys, emeritus professor of Motor Industry Economics and director for Automotive Industry Research at the Cardiff Business School.
Rhys didn’t think there would be much enthusiasm from the public for renting out their cars.
“That runs counter to the normal trend of consumer preference – security of use, possession, the pleasure in owning something. Would people leave their car at the airport and be happy to have it rented out? They’d worry about what things would be damaged, what state (of cleanliness) would it be in, how many extra miles were driven? It’s true that some people rent out their houses when they go on holiday, but not many. Like everything, at the margins these things will happen, but not the great majority. They would want to keep control of their assets,” Rhys said.
“I’m not saying it’s impossible, but I don’t think it’s the way to go. I’m frankly very skeptical about it,” he said.
10 year wait
Professor David Bailey from the Aston Business School in Britain’s Midlands expects autonomous vehicles to revolutionize transport, but not for perhaps 10 years.
“Autonomous cars will raise questions about whether we need to own cars in cities. Meanwhile, more car sharing and firms like Uber will move into the market. None of this will be much of a threat for maybe five years down the line, but then it will become a bigger issue with new entrants to challenge traditional manufacturers. It might be Tesla or Google, we don’t know how destructive they will be but there will be destructors,” Bailey said.
He also thinks the traditional manufacturers will ride out the storm.
“Will Google make its own cars, or get existing manufacturers to make them, or license technology to manufacturers. There’s lots of potentially different scenarios In the short term, there’s no great threat, but in the long run the incumbents must get to grips with this,” Bailey said.
Gartner’s Koslowski is confident that the auto industry will not only survive all this turmoil, but thrive.
“In the next five to 10 years we will see more changes in the auto industry and mobility than in the previous 100 years. But autonomous vehicle will mean more cars on the road and great benefits because new groups of consumers will become involved, like the elderly and disabled who are currently excluded. This will mean more cars initially and they will be used more,” Koslowski said.
“I strongly believe that the importance of the automobile will grow going forward, it won’t be diminished but become much stronger,” he said.