Data from the Center’s Future of Transportation project tells us that car ownership in the U.S. has already peaked and will erode slowly but inexorably over the next few years until the widespread diffusion of self-driving cars. At that point, the erosion will resemble a landslide.
A few numbers illustrate the larger phenomenon: even slight exposure to point-to-point, dedicated-car alternatives (Lyft, Uber, Car2Go) doubles Americans’ willingness to consider giving up their cars. Across the entire U.S. population that consideration went from 20% to 40%; it’s even higher for younger Americans aged 18 to 44.
Get-a-Ride Services (GARS) make giving up a dedicated car thinkable in a new way, mostly by virtue of being cheap (translation: massively subsidized in the case of Lyft and Uber) with drop-dead easy-to-use smartphone apps. No GARS company has licked the revenue model yet (least of all Lyft and Uber as they gallop towards premature IPOs), but their arrival in the public consciousness has started to transform personal transportation decisions from high-consideration purchases to low-consideration transactions. But this won’t last.
Particularly in the self-driving era, transportation will most likely mature away from serial transactions into subscription models. Each Transportation on Demand company will hope that riders use them exclusively, but riders may juggle subscriptions the way people juggle different premium cable and streaming video services today or belong to different airline frequent flier programs. Loyalty is unlikely.
The iPhone versus Android model
We can use smartphone adoption and preference as a proxy for how transportation will look in the future. Apple’s iPhone has staked out luxury brand territory for itself, and its hardware plus iOS software revenue model makes it the most profitable smart phone by far. However, Google’s Android operating system dominates by being in more smartphones from more manufacturers. Last year, Apple sold roughly 209 million iPhones. The rest of the top 5 smartphone manufacturers, all Android, sold roughly 734 million units—or 350% more than Apple. (This is according to Statista.)
Transportation on Demand subscriptions will look similar: a large chunk of the population will choose a slightly nicer, luxury subscription brand (Apple) because those folks can afford it and/or because it is an identity marker. A much, much larger part of the population will go slightly down market (Android) because it’s cheaper, just as reliable, and that’s now how these other folks choose to build their identities.
All this leads to the question I posed in the title of this column…
Who might still need a car dedicated to her or his own use in the future?
One answer is, “people who need to schlep a lot of stuff.”
The use case for most rides today and in the future is, “get my body and whatever I’m carrying where it needs to go.” Those people willnot need dedicated cars. They’ll zip around in autonomous small one- or-two-person pods that either platoon up into recombinant virtual trains or make short hops to public transit. They may never sit in the same vehicle twice.
The riders who will need dedicated cars (whether human-driven or self-driving) are the people who have more to haul than fits in a purse, briefcase, or backpack.
Here are some examples:
- Parents of babies and young children. Although the kids are little, the car seats, diaper bags, iPads, toys and extra layers of clothes would make it a pain in the neck to start every ride with a fresh car.
- People who work with tools, like plumbers, electricians, locksmiths, gardeners, painters, handymen… people who need to bring their tools to wherever they are working that day.
- A new population of salespeople carrying goods for on-demand shopping where some sort of consultation is needed or desired. These interactions go beyond mere delivery—think “Next-Gen Avon Ladies.”
- Another new population of service people and professionals who come to the client rather than vice versa. As I’ve discussed in previous newsletters, 20% of Americans would have a dentist or doctor appointment in a self-driving car, and 25% of Americans would sleep in a self-driving car with a comfy bed rather than use a hotel.
We already see the seeds of this change in how the OEMs are retreating from four-door sedans in favor of SUVs.
For families, the day the youngest child graduates from a car seat or booster may also be the day the family turns in the SUV in favor of a set of subscriptions that gets everybody where they need to go, on-demand, cheap, and autonomous.
2/21/19