Car companies don’t want to be plain Jane manufacturers anymore but much more. But they might have missed the bus in a manner of speaking
One of the latest pieces of business jargon to hit the automotive industry is that car companies don’t just make cars anymore. You see, car companies are now “mobility solutions providers”, that is mobility as a service. Which is quite nice other than the fact that right now you pay a lot of money up front to own the product that provides you this mobility. It sits in your driveway, or if you live in Delhi, on a public pavement, depreciating.
It is because of the very fact that while most other large assets you buy, an apartment, jewellery and the like, tend to appreciate in value over time, cars will almost always depreciate. You could buy a rare Italian supercar that could possibly appreciate in value but to do that you will need a million dollars. And then pay the Indian government a million more for the privilege of importing that supercar into India and not driving it.
The fact is that if you buy a bog-standard smallish hatchback for around six lakhs today it will be worth under two lakhs in five years time. And this does not include the costs of maintenance and accident repairs, fuel and the like. So for the privilege of owning a car and driving yourself to office through maddening traffic, you end up paying around Rs 10-12 a km at the bare minimum, and that is if you own a smallish hatchback from Maruti or Hyundai that tend to hold their value relatively well in the second-hand car market.
And the maths is fairly similar across the world, although the stress of driving in America and Europe is nothing compared to dealing with traffic in India. And let us not even start about parking, which is impossible to find in most colonies, or you pay an additional amount for it and then you go shopping to a mall and can’t find a single spot even in Basement level 4. And this is why car companies want to become “solution providers” because young people do not want the stress of owning a car any more.
With apps like Uber globally and other local apps such as Ola in India, Didi in China, Gett in the UK and lyft in the US, you can for the most part find a taxi or shared “ride” fairly easily, although best of luck on weekend nights when you’re drunk and really need a taxi. The point is that these apps and with cities across the world improving public transport, why should you own a car. Talking of public transport, why should anyone drive to Khan Market to get stuck in a quagmire when there is a Metro stationIJ If you can use public transport in london and New York, you can use it in Delhi.
Car companies are realising this. They are realising that some young people rightly don’t see the point of owning a car anymore even if they have the money. Car companies also realise that cars are seen as polluting, a fact not helped by ‘Dieselgate’ and they need to change on that front too. Also cars depreciate and barely get used. You drive a car between home and office and for an occasional long drive. On average, a car gets used for barely a couple of hours every day. Whereas an Uber or Ola driver ends up using his car 10-12 hours a day, which is a far better utilisation of an asset.
So what to doIJ Clearly the only thing to do is to invent some new jargon and become a mobility solutions provider. Sell cars to people who drive using cab apps, also look at shared resources like fractional ownership similar to private jets which can be made possible thanks to ‘Big Data’ and the ‘Cloud’ (sorry more jargon) and thirdly look at autonomous driving, make the car an insulated autonomous robot that runs on renewable energy.
Great. But then you have India. Where I don’t think even the most optimistic person thinks that autonomous cars will work in India thanks to a completely selfish population determined on doing their own thing (which is to ignore traffic rules). This country is nowhere near building the infrastructure required for electric vehicles and has just imposed a ridiculous rate of taxation on hybrids. But yes, Uber and Ola do work for the large part other than the time you really need it to work, but it is improving. And slowly but surely public transport is improving. And with traffic getting worse, why should you own a carIJ It maybe a question to ponder for our mobility solutions providers.