The Auto Industry’s Existential Threat

It’s impressive to watch the growth of the global automotive industry. Total production will reach about 84 million vehicles this year, a staggering number. By the end of the decade it could be close to 100 million. That’s a mind-boggling number. But after that, we likely will face a long-term decline in sales. It will threaten the size and scope of the industry as we know it today, and I’m not sure there’s a way to prepare for it.

Several societal and technological developments are converging to force this change. Let’s look at the societal ones first.

We already know many young people today do not aspire to own a car. Heck, they don’t even aspire to get a driver’s license. That’s because it’s difficult for young people to get a decent job these days, a problem we see the world over, even in growing economies. For 20-somethings, buying a car, paying for the insurance, maintaining it and filling the tank every week is beyond their means. That’s a key reason why they’re far more interested in getting the latest smartphone or tablet. They can afford to buy those.

Moreover, an increasing number of young people around the world are moving into cities, where parking spots are hard to find and costly. Instead, they are turning to busses, trains, subways and even bicycles to get around. In big cities, owning a car can be a real hassle.

That’s why car-sharing companies are popping up. They perfectly fill the niche for people who may only need a car for a few hours a week. These programs are proving to be so popular, daily rental companies are getting in on the act. Plus, phone apps now allow you to summon a car whenever you need one. And, thanks to the wired world we live in, peer-to-peer sharing programs on the Internet can cut out the corporate middlemen.

With programs such as Relay Rides, which operates in conjunction with OnStar, you can enter your own private car into a sharing program. Relay Rides says its members can earn up to $1,000 a month sharing their cars. This idea won’t appeal to everyone; there definitely is an important minority who would be interested in way to have their car pay for itself.

I call it an important minority because the impact of car sharing is exponential. A study by the Transportation Research Board finds that every shared car eliminates 15 privately owned cars. Zip Car alone has removed over 150,000 cars from the road. And car sharing is just getting started. Let this play out for another decade and the impact will be significant.

And then there’s the technological disrupter: autonomous cars. While fully autonomous cars are probably a decade away, they will eventually allow households to use one car for the entire family’s needs. The family car will take parents to work, come back home and take the kids to school, and then maybe take Grandma shopping. Whatever. The point is, we won’t need separate cars for every driver in the household.

The futurist Syd Mead predicts that in another decade, financing or leasing a car for years, even though it spends most of its existence parked, will prove to be “a fragile economic model.”

When that happens, what becomes of a global auto industry that’s capacitized to build 100 million vehicles a year? It means gut-wrenching changes, that’s what. The industry will survive this change, but it won’t look like it does today.

John McElroy is editorial director of Blue Sky Productions and producer of “Autoline” for WTVS-Channel 56, Detroit, and “Autoline Daily,” the online video newscast.