Thoughts about the Automotive Industry – Owner-less

I have been reading a lot lately about a very powerful Global trend that has a major impact on the Automotive Industry. It is what has called “Owner-less”.

In a nutshell, this trend advocates access to products without having to own them. Quite an appealing proposition for many types of products. As describes it:

“For consumers, the appeal is obvious:

• Traditional ownership implies a certain level of responsibility, cost and commitment. Consumers looking for convenience and collecting as many experience as possible want none of these things.

• Fractional ownership and leasing lifestyle businesses offer the possibility of perpetual upgrades to the latest and greatest, the ability to maximize the number and variety of experiences, and allow consumers to access otherwise out-of-reach luxuries.

• Owning bulky, irregularly used items is both expensive and unsustainable, especially in dense urban environments where space is at a premium. With more consumers having mobile access to online systems, it becomes easier to book items whenever and wherever they are needed.”

Now, obviously, this trend has a huge impact on a big-ticket item such as a car. It ticks all three boxes mentioned above. Owning a car:

  • Commits the owner to a certain ownership time and a cost of maintaining that car.
  • It is a barrier to multiple experiences with multiple products and presents a difficult and costly upgrading experience.
  • Space wise, owning a car presents a problem, as it requires additional “storing” space (your parking spot, parking around the city…)

The Automotive industry has gotten away with just selling cars and services because, while solving the transportation need of customers, owning a car represented a social achievement. And it still does in many developing countries. But now that achievements are represented in many other ways, the car makers need to adjust their business models to remain relevant in a World where transportation needs will remain, but the ways to solve that need are multiplying, and they go beyond owning a car. Even in developing markets, they will catch up to new ways of demonstrating achievement faster than the developed World did.

There is plenty of research that states that teens in the US are not interested in driving, let alone, owning a car. Many of their social interactions are now perfectly met by technology (they rather chat than drive to a friend’s house to talk face to face). And for those who still prefer to physically transport themselves from A to B, the alternatives to owning a car are much more relevant: public transport, car pooling, car swapping, sharing, renting…
Bradford Plumer calls it “The End of Automania” in his article in The New Republic.
Jim Motavalli writes about how Gen Y is “not that into driving” in his commentary on BNET and then reflects on ZipCar’s recent poll and how it shows that Millenials prefer texting to driving (although they’ll consider car sharing)
Jack Neff asks himself in AdAge whether it is the Digital Revolution what drives the decline in U.S. car culture

There is a rise in what Rachel Botsman calls “Collaborative Consumerism” that is making all of us much more open to sharing and in ways we never thought of. You can find examples of this in her TED video below.

Specifically, for the car industry, there are many new initiatives that promote pooling, sharing, swapping and renting like ZipCar, GoGet and ZazCar. But also, big brands, having seen the success of these smaller startups are increasingly getting in on the action: Hertz launched their car sharing service Connect back in December 2008, and now Daimler has added Hamburg and Austin, Texas following the successful pilot of their car2go pilot in Ulm (Germany). In July 2010, Peugeot launched its Mu ‘mobility’ service in the UK after successful launches in France, Germany, Italy and Spain. Customers can rent cars, scooters, vans or even bicycles.

So what does a car manufacturer have to do to remain relevant in a World where car ownership is declining? Well, going from a car manufacturer who sells products and services, to a transportation problem solver. The entire business model needs to change so that revenue not only comes from selling cars and service, but from assembling solutions for transportation problems. This is what Professor Ranjay Gulati talks about in his amazing book “(Re)Organizing for Resilience” where he explains how to become a true Customer Focused Organization; the path from selling products and services to assembling complex solutions for specific customer problems (and making a profit out of it)

Yes, it is a huge move, but it is all about survival, resilience and relevance. It is not an option…

Tell me what you think