What happens when the “Information Age” and the “Sharing Economy” meet up on the road to the future of personal mobility? The era of on-demand mobility is born.
A company like Uber, essentially a software company, started in 2009, can claim Wall Street valuations that exceed that of General Motors, which is one of the world’s largest OEMs and was started in 1908. Add to that the prospects of an age of autonomous driving, and many are imagining a not-too-distant future where we will all be able to “summon” a driverless vehicle that will drive itself to wherever we want, whenever we want. Will personal ownership of cars be relegated to primarily collectors and enthusiasts?
As always, it will take time for the hype and reality to sort itself out, but the discussion of such a future is clearly dominating the industry and the public’s imagination. PwC’s 2015 report, “The Sharing Economy,” suggests that five key sharing sectors of the sharing economy – travel, car sharing, finance, staffing and music – stand to increase in global revenues of about $15 billion in 2015 to about $335 billion in 2025. That translates to more than 35% growth per year.
The PwC report says that “trust, convenience, and a sense of community” are contributing factors behind the sharing economy. More than 44% of U.S. consumers are apparently already familiar with the shared economy, and 19% of the total U.S. adult population has engaged in a sharing economy transaction. An example is Airbnb; it averaged 155,000 guest stays annually in 2015, some 22% more than did Hilton Worldwide.
But this could not be possible were it not for the advances in information technology, particularly mobile devices. It is mobile, digital platforms that are bringing new efficiencies to traditional markets, such as personal mobility, and causing us to rethink the traditional models. Take Morgan Stanley’s research on the economics of this new technology-enabled world of mobility where there are a host of new comers, from Uber to Google and even reportedly, Apple, are to be found. As captured in an Automotive News article of January 13, 2016, referencing a speech given by Adam Jonas of Morgan Stanley:
“Both sides see a $10 trillion industry, about 14 percent of the global economy. But after more than a century of capital-intensive development, traditional auto companies see that as vehicles built, times sales revenue. To the disruptors, the business is $10 trillion miles traveled annually, at a dollar a mile.”
The 100+ year-old model for the car is turned on its head when viewed from this perspective. We buy and own a depreciating capital asset that is used, on the average, about 3-5% of the time. With technology platforms that can efficiently increase the utilization of the assets while increasing access to mobility, it should not be surprising that a new paradigm is emerging.
This new paradigm can cause a start-up company like Uber, which today can claim only a very small percentage of those 10 trillion miles of demand, to justify a steep future growth and revenue plan that leads to market valuation in excess of $60 billion. Its software platform has brought a new efficiency to the market and, perhaps most importantly, addressed a pressing, latent need that was not met with the traditional taxi model.
Not surprisingly, the OEMs are not sitting still, and simply cannot afford to do so. Studies have suggested that as many as 15 cars could be replaced by one shared, on-demand car. As you move from 3-5% fleet utilization and move towards 100%, the math becomes apparent. This seriously threatens future vehicle sales, and OEMs will not allow the mobility services business revenues to be left for others. The investments of GM in Lyft and in its own Maven car-sharing service, along with virtually daily announcements from every other OEM, suggest that the urgency is clear.
The on-demand personal mobility market is not limited to an Uber-type solution. Uber has a growing number of competitors, beginning with Lyft. There is also Zipcar, a pioneer in using advanced technology to make cars available to urban drivers on a short-term basis in the early days of smartphones. The globalizing market includes Car2Go, Fare, Fasten, Wingz, and Didi in China, to name a few. The BlueIndy project in Indianapolis is the brainchild of a French company, Bolloré, which makes its own small electric car in Torino, Italy, and provisions them for on-demand, short urban trips to its subscribers in numerous cities around the world.
A further contributor to this age of shared vehicles is the growing urbanization of our societies. We have gone from one megacity in the 1950s, New York, to more than 23 today, and are track to double that my midcentury if not earlier. To combat emissions, congestion, and parking scarcity, many cities have been turning to sustainable approaches and promoting ride sharing. The C40 Mayors Coalition started by Michael Bloomberg when he was mayor of New York has brought together the 40+ cities around the world that are now promoting such initiatives worldwide and exchanging best practices. Cities and mayors will be an important new force in how the new paradigm in transportation will evolve.
Whatever precise trajectory the future of mobility takes, most believe it will yield significant dividends for society. Consumers will have more choices, and it is likely that personal mobility options could include many lower-cost solutions than offered today. With the eventual advent of driverless vehicles, those who do not have a driver license—for example, because they are too young or too old—will have new options. And, we can be assured the new age of new personal mobility that will be invented by the young engineers of SAE International during their careers will exceed what we can begin to imagine today.