Twilight of the automobile

In Germany, which remains Europe's top auto market more than two decades after sales peaked there, Daimler and BMW woo non-owners with programs that let people rent cars by the minute, such as these Smart micro hybrid drive vehicles sit ready for dispatch to Daimler'sCar2go rental service in Ulm, Germany.
In Germany, which remains Europe's top auto market more than two decades after sales peaked there, Daimler and BMW woo non-owners with programs that let people rent cars by the minute, such as these Smart micro hybrid drive vehicles sit ready for dispatch to Daimler'sCar2go rental service in Ulm, Germany.

Analysts say congestion, fuel prices, tight parking and young people's growing disdain for driving will see global car sales peak and then start
to decline within a decade.

Southfield, Mich. - The world that Henry Ford put on wheels is poised to stall.

Several auto-industry analysts predict "Peak Car," a point at which annual global sales growth will top out, in the next decade, Researcher IHS Automotive, for one, sees annual sales cresting at 100 million within that time.

Pollution and gridlock are putting a damper on driving in the globe's growing megacities. More young Americans are opting for public transport, bikes and vehicle-sharing. Cars on the road are lasting longer than ever. In India, some commuters leave their cars at home to avoid traffic and long prowls for parking.

All of that may herald a new era for an auto industry weaned on a century of global growth.

Peak Car is at odds with the ambitious expansion plans of global automakers, which IHS says are gearing up to produce more than 120 million vehicles by 2016 - almost 50 percent more than last year's worldwide sales mark of 82 million. The dynamic also threatens the business plans of parts producers, suppliers of raw material and oil companies.

Driving this upheaval is a rapidly emerging reality: The vehicle that ushered in an unparalleled era of personal mobility in the last century is, in many cases, no longer the most convenient conveyance, particularly as more of the world's population migrates to big cities.

No one is predicting that car sales will suddenly fall off or that today's car companies are now dinosaurs. What experts do see is a reckoning for car companies, which may have to adapt to a world with less car-buying and more car-sharing, more cars that drive themselves and fewer hot rodders on the highway.

"The key question is: Do you sell cars or do you sell mobility?" said Tim Ryan, New York-based vice chairman of markets and strategy for consultant PricewaterhouseCoopers. "If you ignore these megatrends, you run the risk of becoming irrelevant."

There's a counterargument to predictions that sales could peak: Chinese consumers continue to have a voracious appetite for automobiles, as more of the country's 1.3 billion people climb the economic ladder and many demand the freedom and status a car conveys. China helped drive global auto sales up 46 percent since 2000, and in 2009 the country surpassed the U.S. as the world's largest auto market. Chinese consumers bought 22 million vehicles last year, a mark that automakers and analysts forecast will hit 30 million by 2020.

At the same time, China is struggling with urban gridlock and growing pollution that has created a brown haze over big cities such as Shanghai and Beijing. The pollution problem spurred the country's leaders to put restrictions on car licensing to slow auto sales.

Many automakers are preparing for changing markets with cars that can be shared, or speak to one another in a bid to keep traffic from jamming. General Motors' EN-V autonomous two-seater, a vehicle engineered jointly with Segway that can detect and avoid obstacles, is being tested in Tianjin, China.

"We have looked at the urbanization trend very closely," said Jim Cain, a spokesman for Detroit-based GM. "It's driven experiments like our EN-V program in China and our involvement in services like car sharing."

The case for growing gridlock has been presented by PricewaterhouseCoopers, among others. Today, half the world lives in urban areas. Over the next decade, there will be a 25 percent to 50 percent increase in urban dwelling, as about 1 billion people move into cities, according to PwC.

In 25 years, there will be 9 billion people living in urban areas- more than the entire population of the Earth today. If they are all driving cars, gridlock could block the path of food, water and emergency medical treatment in urban areas, said PwC's Ryan.

"People won't stand for spending 25 percent of their life commuting," Ryan said. "The way they will get around will be different."

The desire for mobility isn't decreasing any more than the demand for information is abating just because fewer people read newspapers today. As with news, what's changing is the delivery system.

In the U.S., 44 percent of people would prefer to live in a city with automated "driverless" cars that would reduce congestion, according to a new survey from Intel. Already in the U.S., where automotive ownership has long seemed a birthright, almost one in 10 households don't have a car, up 5.7 percent over the last five years.

More young people aren't pursuing drivers' licenses, once a rite of passage. In 2010, 69.5 percent of 19-year-olds in the U.S. had a driver's license, down from 87.3 percent in 1983, said Michael Sivak, director of sustainable worldwide transportation at the University of Michigan Transportation Research Institute in Ann Arbor.

Better-built cars are damping demand for new ones: The average age of autos on the road today has reached a record 11.4 years, according to researcher R.L. Polk & Co.

The shift also is being fueled by changing attitudes on oil consumption for environmental, political and economic reasons. Alternatives to auto ownership are emerging, such as ride-sharing company Zipcar and ride-booking service Uber Technologies, that appeal to a new generation of drivers disinterested in carmakers' high-cost products.

In Germany, which remains Europe's top auto market more than two decades after sales peaked there, Daimler and Bayerische Motoren Werke have tried to woo non-owners with programs that let people rent cars by the minute. This month, Daimler started letting some users of its Car2Go service pick up a Mercedes-Benz B-Class hatchback in Berlin and drop it off in Hamburg, or the reverse.

Ultimately, urban dwellers will order a ride to work on their phones, get picked up by a driverless car and whisk through traffic controlled by satellites and sensors that get them to the office safely and quickly, said Thilo Koslowski, auto analyst for researcher Gartner Inc. of Stamford, Conn. U.S. regulators said this month they've begun working on rules to let vehicles communicate via wireless chips while on the road.

For the world's automakers and suppliers, that means making cars won't be enough anymore, Ryan said. They have to transform into transportation-service providers that cater to consumers who don't want the hassle and expense of owning a car and instead just want to rent one that comes when summoned, he said.

Many are laying the groundwork. Preparing for driverless cars and vehicles that talk to each other makes up a significant portion of the $100 billion the global auto industry spends on research and development, according to a study last month by the Center for Automotive Research, or CAR. Automakers, who guard the specifics of their R&D budgets, wouldn't reveal to CAR exactly how much they're spending on autonomous autos.

At the Tokyo auto show last year, Toyota unveiled concepts for three-wheeled vehicles that communicate with each other in dense urban settings. GM and Ford are part of a U.S. program testing the ability of 3,000 vehicles to communicate among themselves and with objects such as traffic lights and roadside sensors.

Ford Executive Chairman Bill Ford, great-grandson of founder Henry Ford, in 2009 formed Fontinalis Partners to invest in mobility technology such as bike-sharing service Zagster and ParkMe parking-assistance software.

"We're going to have these megacities and they are going to have lots of infrastructure issues, not just transportation, but clean water and food distribution," Ford said in a July 2011 interview, outlining issues the Dearborn, Mich.-based company said this month it's continuing to examine. "If you look at every auto company's business plan and extrapolate it out over the next 10 years, it certainly didn't take me long to start asking the question: Where will all those cars and trucks go?"

One answer: For every vehicle that is used in a car-sharing fleet, automakers will lose 32 vehicle sales, according to a study this month by AlixPartners.

The Southfield-based consulting firm, which advised GM on its bankruptcy, estimates that car-sharing has cost makers 500,000 vehicle purchases since 2006. Self-driving "autonomous" cars will be the "killer app" that enables car- sharing companies to blossom, AlixPartners said. By 2020, it said, 4 million Americans will car-share, up from 1 million now.

"The auto manufacturers may need to have a different generation of senior executives and CEOs because today's generation gets more excited about the sheet metal of a production car versus the bits and bytes," Gartner's Koslowski said. "If the industry doesn't work fast enough, the Googles and Apples of the world will fill the void."

America's century-long love affair with the car is cooling. The number of households without a car grew to 9.2 percent in 2012, from 8.7 percent in 2007, said Sivak of the University of Michigan. In New York, Washington, Boston, Philadelphia, San Francisco and Baltimore, more than 30 percent of households were carless, according to U.S. Census data. In 21 of America's 30 largest cities, carless households grew from 2007 to 2012, Sivak found.

Young people are three times more likely than older generations to abandon their vehicle if costs increase, according to Deloitte's 2014 Global Automotive Consumer Study.


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