19.06.2018

The Perfect Storm

Seven factors causing a paradigm shift in the mobility ecosystem

 

Let’s say that if the main players in the mobility ecosystem have been waiting for all of the following factors to come together before undertaking significant changes, now would be the time to start doing so.

 

In fact, after studying the mobility ecosystem for the past few decades, and seeing where it is now by participating in the Movin’On conference, we would say there are seven significant factors that are creating the perfect storm. And these key factors are all happening at this very moment.

 

1- Traffic

Traffic is at a point where it has become unsustainable in most of the world’s big cities. The situation is terrible, and more highways, wider streets and more bridges don’t seem to help fix the problem. Most available data shows that every year people spend more time stuck in their cars. This only leads to more urban sprawl, accentuating the problem rather than solving it.

 

Yet, in many cities, drivers still use their cars every day to go to work, enduring the pains of gridlock, wasted time and high costs. In Montreal alone, 1.5 million people sit behind their wheel every morning.

 

2- Environmental impact

The use of private cars all over the world causes a huge amount of global pollution. Research shows that motor vehicles indirectly cause the deaths of millions of people (7 million) every year, resulting in major consequences on world health and the global economy.

 

3- Safety issues

In the United States, 40,000 people died in motor vehicle accidents in 2017. That’s the equivalent of two Boeing 747s crashing every week of the year. This is a problem not only in the U.S. but in many other places in the world. Authorities are increasingly seeing this issue less as unavoidable, and more a situation that can be addressed by adding safety features to vehicles and designing cities more around people and less around cars. Original equipment manufacturers (OEMs), governments and cities are now starting to take action.

 

4- Rethinking the idea of car ownership

More and more data shows that the traditional model of car ownership makes less and less sense. Cars are expensive to buy and own. They sit idly approximately 95% of the time. And having access to only one vehicle suits fewer people, mostly because their needs and habits change over time. Consumers are increasingly looking at car usership instead of car ownership.

 

5- New technology

Powertrain technology is changing fast. Electric motors powered by batteries or fuel cells are becoming more sophisticated and lighter, with longer autonomy and faster recharging capabilities. But the best is yet to come and it seems we are on the verge of seeing major improvements that could make these alternative powertrains more appealing to the greater public.

 

Keep in mind that a combustion engine is approximately 30% efficient, as opposed to an electric engine which is 97% efficient. Not to mention that an electric motor has approximately 25 moving parts, while a combustion engine has about 1,500, making electric engine maintenance very cheap and much simpler.

 

Autonomous cars are also coming soon. Some levels of autonomy are already available and level 5 autonomy is a clear objective for most OEMs in the near future. Autonomous vehicles will significantly change our relationship with cars, the way we own them and the way we use them.

 

6- Cost of infrastructure

Most American cities were developed and built around motor vehicle domination. As a result, the cost of infrastructure maintenance and development for cars and trucks is phenomenal.

 

Adding infrastructure doesn’t seem to settle traffic issues in the short term. Problems re-emerge shortly after new highways and bridges are built. Clearly, more and more people are questioning these types of investments and considering other options such as public transit, car and bike sharing, etc.

 

7- Old school vs. Silicon Valley/disrupters

Not long ago, OEMs and dealerships had a monopoly on car business innovations and the selling process: powertrains, autonomy, sales, leasing, etc.

 

Nowadays, it seems there’s always a small business or start-up catering to changing consumer demands, the consumer experience, need fulfilment, the buying process, car ownership, efficiency, etc. Where OEMs and dealerships are too slow to respond to a rapidly evolving environment, small, nimble and sometimes highly sophisticated entrepreneurs will jump in to fill the gap and seize the business opportunity to satisfy early adopters and, ultimately, the more mainstream customers.

 

And then … the storm

BBR Commuter thinks these seven factors are about to create a perfect storm. While everything isn’t happening at the same speed and at the same time, we feel it’s inevitable that major change is about to come and that the path to change will involve all or some of these seven elements.

 

While we cannot predict the future with great accuracy, we can nevertheless say that more cars with combustion engines and more roads and highways are clearly not the solution, and this, in itself, will have huge impacts on how we buy cars, which cars we buy, and how we own and use them. This will have major consequences for car OEMs and dealerships.

 

Dealerships may well be impacted the most. Electric cars will require little maintenance. With barely any moving parts, the vehicles will have few parts that need replacing, such as tires and brakes, and require minimal maintenance on drivetrain and suspension. Gone are the regular oil changes and replacements of spark plugs, exhaust systems, radiators, valves, pistons, etc. This will have a massive impact on the current parts and services business model of most OEMs and dealerships.

 

Autonomous cars will most likely not be owned by private individuals, but by fleet operators that will offer ride sharing and hailing. This will most certainly call for less units on the road and more kilometres per unit.

 

In a nutshell, mobility is about to change in a dramatic way. We know what’s coming, we just don’t know when. It will likely be sooner than we think. Some players in the mobility ecosystem will be change agents, while others will be negatively affected to varying extents. Guess who the winners will be?

 

Learn more about our mobility practice ; BBR Commuter.