Morphing to Mobility

A little over 100 years ago the horseless carriage began to change the landscape. The first paved roads appeared. So did the first traffic lights. Carriage houses for horses were converted into garages for automobiles. Parking structures and parking lots sprouted up across cities. And the spread of suburban sprawl began.

Today, we could be on the verge of seeing much of this undone. Car sharing and ride sharing might mean that we will need fewer vehicles. If people give up buying cars and buy their mobility instead, many homes could convert their garages into additional living space. Shopping centers would no longer need acres of parking lots, assuming we even have shopping centers in a world where drones do most deliveries. And when all cars are connected we may no longer need traffic lights and stop signs.

It’s a tantalizing future, where traffic congestion almost disappears, tailpipe emissions become a thing of the past, and motor vehicle accidents and injuries are virtually eliminated. But before we get there the automotive industry is going to undergo some fundamental changes.

Automakers and suppliers are under enormous pressure today to improve their profit margins. That is almost entirely predicated on boosting their economies of scale. That means they need to make as many vehicles and components as possible to pay for the enormous up-front investments they make.

But with ridesharing or car sharing we may not need as many vehicles. The rule of thumb is that for every car that is shared, 15 other cars can come off the road. Even if only 10% of the population decides to give up owning a car, sales in the U.S. market alone could drop by nearly 2 million vehicles annually. How does an industry that is addicted to scale deal with that?

Conversely, others say that as mobility costs drop more people will take advantage of these services and we’ll actually need more cars in the future. That’s entirely possible. But from a risk management position alone I’d be preparing for a day of fewer car sales, just in case.

More to the point, who is going to end up providing all the autonomous and mobility technology? Right now we see automakers, tech companies, and suppliers all working on it. But they’re largely duplicating one another’s research and development. Each of them wants to be the big winner, dreaming of profit margins they can’t possibly achieve with their core businesses today.

Yet the history of this industry shows that all technologies ultimately get consolidated, merged and sourced from just a handful of suppliers. And then those suppliers get caught up in a race to the bottom for the lowest possible costs. That’s probably going to happen with autonomy and mobility as well.

The move to mobility also has enormous implications for car dealers, automotive repair facilities, automotive insurance companies and even the healthcare industry. As fewer consumers buy cars, as those cars are involved in many fewer accidents, and as injuries and fatalities drop dramatically, the automotive value chain is going to go through enormous disruption.

It’s going to take several decades for this future to fully reveal itself. After all, it will take nearly 25 years just to turn over the fleet of vehicles already on the road today. But the impact will be felt well before that. In fact, it’s already started. Ridesharing services are growing at six times the rate of car sales.

I keep getting the feeling that we’re at the equivalent stage the automotive industry was in back in 1903. Only five years later, by 1908, there was an amazingly impressive improvement in the automobile. And a decade later, by 1913, the world had changed forever.

That’s where I see us headed, with a massive improvement in autonomy and mobility over the next five years and a different world within a decade. Keep your eyes and ears open. There will be once-in-a-lifetime opportunities for those who learn how to take advantage of these changes.