From horseless to driverless: the future of the car

A hundred years ago, cities such as London and New York had a major crisis. They were literally drowning under the manure of the thousands of horses that were used for transporting both goods and people. The arrival of the petrol-powered car saved the day, relegating horse-drawn carriages to a mere tourist attraction. Today the automobile industry is facing its own moment of disruption.

The modern car is a magical thing, combining utility, aspiration and exhilaration. After a television and refrigerator, it’s what every new middle-class family aspires to. For the wealthy, a car is the ultimate and most conspicuous status symbol. A car is so much more than a means of getting around. A car is freedom, it is identity and an object of desire. Governments, too, love cars. Automotive companies with their supply chains account for 5% of all manufacturing jobs. This is why the automotive industry is so incredibly important globally. However, five trends are combining to create a major disruption.

First, half the world’s population now lives in cities. Especially in developing countries such as India, the explosion of car ownership is putting a huge strain on both roads and the environment. Air quality, traffic gridlock, shortage of parking and noise pollution is becoming unbearable in many cities, such as Delhi and Bengaluru. Cities and citizens are beginning to push back. City planners are beginning to wake up to the need for vastly better public transportation. Many cities around the world such as Delhi and Mexico City are beginning to use license plate numbers to ration the number of days when cars can be used. European cities are establishing low-emission zones where non-electric cars cannot ply. Citizens in Bengaluru are beginning to protest against the unregulated growth of vehicles. In Beijing, a driver who wants to purchase a car must first enter a lottery and can wait two years before receiving a licence plate. Such restrictions on car use are likely to become more stringent as cities struggle to deal with the exponential increase in the number of vehicles.

The rise of the sharing-economy is another big trend. The success of sharing services like Uber, Ola and BlaBlaCar raise the question of whether it is necessary to even own a car. The convenience, ubiquity and affordability of such services is persuading more and more people to forego driving and even car ownership. Uber is experimenting with carpooling. This promises to make it even less attractive to own a car and may be a real solution to reducing traffic congestion.

The rise of autonomous vehicles or self-driving cars, pioneered by Google and now being emulated by others, poses another challenge. This is no longer science fiction; partially autonomous cars are being sold today by Volvo and Mercedes. Tesla just introduced a software update that enables its cars to park automatically. The potential here is mind-boggling. Zero accidents. Less traffic congestion. Elderly people and people with disabilities who are able to hop into a car. The challenge for car manufacturers is that it requires them to become software companies and take on the likes of Google and Apple or risk seeing their profits erode. There are many unanswered questions around safety, ethics, regulation and liability. And the really big question is whether driverless cars encourage more car ownership or more car sharing.

If these trends were not enough, car manufacturers have to worry about the mindset shift amongst young people who are far more fascinated by smartphones and social media than cars. Sociological studies show that a driving licence and leaping behind a wheel is becoming less important as a rite of passage into adulthood and that among so-called millennials and digital natives, there is less fascination in owning big-ticket items such as cars. This may be particularly true when young people struggle to find well-paying jobs and as urbanization increases. Car companies have to be watchful. Is this really a trend? Is it more a rich-country phenomenon?

Finally, there is the impact of emission standards. Rapidly worsening air quality in our cities will have a huge impact on the technology of cars. Diesel engines, hugely popular for their fuel economy, are out of favour not just in Delhi but in many parts of the world. Car companies are facing a challenge meeting new emission standards affordably, tempting an unspecified number to experiment with defeat devices. The leader in electric cars is Tesla, started by a Silicon Valley entrepreneur. How much longer will it be possible to eke out fuel-efficiency gains from traditional combustion engines? Will the future car be all electric or hybrid and how fast will the mix change? All these questions add profoundly to the uncertainty faced by car companies.

There is no question that cars as we know them will be around for a long time. The real questions are some of these. With some of the most important innovations coming increasingly from technology companies such as Tesla, Google and Uber, what will it take for car companies to retain control of their destiny? At what point will a car become software on wheels? Second, will car companies embrace societal concerns such as air quality and traffic congestion and evolve innovative solutions or will they continue to merely grudgingly comply with regulations and legislation, thereby becoming victims of their own success? Is car ownership nearing a peak? Can the planet afford to have more people own more cars or is there a way to innovatively harness some of these trends to give billions of more people affordable and safe access to the joy and convenience of cars in a much more sustainable way?

Moments of industry disruption pose grave threats, especially to incumbents but they are also windows of opportunity to gain leadership for the next century. The key is to embrace fundamental trends rather than wish them away

(This was first published as an oped in Mint )