Yahoo Finance Is the threat of “peak car” turning makers of cars into “enablers of mobility”?
Car-makers from around the world met in Detroit this week for the North American Auto Show, unveiling new models (the Corvette Stingray!) and concepts. It’s a time of hope for automakers, with expectations of a 6.8% increase in car salesdespite economic uncertainty in Europe and slow-downs in emerging markets. But what if the post-crisis renaissance in car-making is relatively short-lived? It may be, if we’re approaching “peak car,” the point where the demand for cars starts declining.
Peak car might already be here in some countries. Across the developed world, growth in total vehicle miles travelled has been slowing steadily since the early 2000s, according to the OECD. In the United States, the world’s second-largest auto market after China, that measure peaked in 2007 and has declined since, despite an increasing population:
There are many explanations for this: First, the increasing cost of fossil fuels, insurance, and parking at a time of stagnant wage growth in many advanced countries. Then, there are policy changes reflecting concerns about climate change and pollution, along with “smart growth” attempts to reduce urban sprawl: Subsidies for public transit, attempts to tax carbon usage, and an emphasis on multiple modes of transport. Around the world, people are coming to terms with the cost of a reliance on cars: Just look at Beijing.
Other rationales are social and cultural. The communications technology revolution has made some travel for work and leisure obsolete, and a trend toward urbanization has replaced the flight to the suburbs in some nations. Meanwhile, the idea of the car as a status symbol or right of passage is less evident, reducing their cachet as vessels for conspicuous consumption. These trends are especially evident among young people, which isn’t promising for carmakers of the future.
There’s even something called Marchetti’s Constant at play, the idea that people will only tolerate daily commutes of up to an hour. As population growth has increased congestion, cities that once supported fast car travel now support traffic jams. As two Australian researchers write (pdf), “Peak car use suggests that we are witnessing the end of building cities around cars —at least in the developed world.”
That caveat, “in the developed world,” might offer carmakers some hope; after all, emerging markets are going to be the growth center. While the saturation of cars in the population of places like China and India isn’t as high as in wealthier nations, it’s not clear those markets will support the auto buying patterns of the past. China has already had the world’s longest traffic jam (12 days, 62 miles/100 km) and is coming to grips with its aforementioned pollution problem. Brazil, another major source of auto demand, already has nightmarish traffic jams of its own. And multinational auto companies haven’t had huge success selling in India.
These nations may not be inclined to make the infrastructure investments needed to put more cars on the road after seeing how auto-focused planning has affected developed nations, and is already changing their own countries.
The term car companies use for this is “global gridlock,” and I learned it this summer at a publicity event hosted by Ford, the world’s fifth-largest automaker by volume, in Detroit. Sheryl Connelly, the company’s futurist, walked journalists through a number of the trends mentioned above and explained how they motivated Ford’s transition from an automaker to “enablers of mobility.” (This is Ford’s take on the parable from marketing guru Theodore Levitt, who observed that customers who buy drills “don’t want quarter-inch drills, they want quarter-inch holes”—in other words, a company that keeps its eye on what the customer wants rather than what the company makes can better adapt to a changing world.)
You can get a sense of what Connelly is talking about by watching Ford’s environmentally friendly chairman, Bill Ford, talk at a TED conference in 2011. While the company doesn’t directly address the idea of “peak car,” Connelly pointed out the company’s efforts to engage with the cultural trends: a partnership with ZipCar designed to attract younger people more interested in access than ownership; embracing WiFi cars that integrate with smartphones and an API that developers use to create apps with the car as a platform; developing cars that can communicate with each other and with infrastructure; tools to reduce congestion; and building greener, more efficient cars. Part of the plan is partially automating cars, but the company is not bullish on driverless vehicles along the lines of Google’s experiments. It sees the legal barriers as too high for now, despite the potential.
While some of the initiatives are superficial, the idea is to make it easier for cars to be part of an integrated transit system in the high-population, low-emission urban future.
Other car companies are launching similar initiatives, to a greater or lesser extent, and almost every car company is embracing the need for low-emissions or non-fossil fuel vehicles. But they all may need to think further out of the box if they want to remain industrial giants for another 50 years—let alone another century.
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