Car ownership — the number of cars per household — in the United States is on the rise. This fact flies in the face of the idea that, in the next few years, urban dwellers will be keen to give up personal vehicle ownership and replace the car in their garage with an on-demand car service subscription.
- Car ownership in on the rise amongst Americans
- The average user is using new mobility solutions as a complement to their car, not a replacement
- According to survey data, most Americans have extremely unrealistic expectations of car replacement solutions
- Both ride-hail providers and car manufacturers are benefiting from current trends
When studying the future of mobility, which will be dominated by automated driving and electrification, some analysts conclude that car ownership will go the way of the polar bear. They deduce this from wagering that it’ll be cheaper and easier to subscribe to a mobility service.
If you talk to drivers, though, most abhor the idea of trading in their car keys for an app-based mobility service.
So to see who is right, the mobility soothsayers or the consumers themselves, I called Mike Ramsey, senior research analysis at Gartner, for his data-based insight into the future of car ownership.
Before we try to paint a realistic picture of the future in relation to car ownership versus mobility service, let us first break down the concept itself.
The general consensus from companies investing in mobility — from Uber to Ford — is that, in the coming years, consumers will opt to buy into a mobility service instead of purchasing a vehicle.
Why would someone want to give up owning a car? Well, the argument against vehicle ownership is pretty persuasive. Cost is a big component.
According to Kelley Blue Book, the average retail transaction price for a passenger vehicle in January 2019 was $37,149. Not only is there the upfront cost of purchasing a vehicle, once you have it, you have to shell out money to garage, fuel, insure, maintain and — outside a warranty period — repair it. This can add up quickly.
Then there’s the factor to consider that the average vehicle sits unused 90% of its life. You only use it a few hours each day — at most. So, why are you paying for a thing that you barely use? Then there’s the issue that a car can only get you so far. Ignoring folks who have a parking spot next to their front door and another one next to their work, there’s the matter of getting door to door. Some commuters have to drive to a train station, ride a train, and then walk to get to their destination — if not engage in more steps than that.
This is where a mobility service comes in. It would handle all the logistics for you. An on-demand car (be it autonomous or driven by a person) would arrive at your door and take you to the train. The train access fees are included in the mobility service app. So too, is the e-bicycle at the other train station that you’d ride to the front door of your office. That e-bike is owned by your mobility service (or your mobility service offers access to another company’s e-bicycle as a part of its mobility subscription package).
The reverse process — or any number of combinations — would be utilized to get you home in the evenings.
The Vehicle Ownership dilemma
Given that a mobility service is much more diverse in its transportation offerings and a more robust option for getting from door to door than, say, simply buying a Ford Escape, it is realistic to assume that, if a mobility service were similarly priced per month (or less) to vehicle ownership, people would choose it over buying a car. Turns out, that’s not the case.
Mike Ramsey of Gartner did a study in 2017 of American and German consumers. He found that 47% of respondents would not consider replacing their car with on-demand car services even if they get 75% cost savings. Think about that. Even if you were to reduce people’s personal transportation costs down to one quarter of what it is today, nearly half of those people still would not consider giving up their car.
Equally shocking is how people responded when asked, if they were to give up owning a car, how quickly they’d expect an on-demand car service to arrive. The largest group — 38% — said less than 10 minutes. 18% said less than five minutes. People are so impulsive and so attached to their cars that even if you were to cut costs by three quarters and deliver a car to them at any location, at any time, in 12 minutes, they’d still rather incur car ownership.
Surely, automakers and other mobility service providers have similar data. For car brands, this must be heartening. For brands like Uber, it must give them pause. Well, at least for a minute or two.
With the rise of ride-hailing apps like Uber and Lyft, people aren’t giving up vehicle ownership either. In fact, they are supplanting walking and using public transportation with ridesharing. So both Ford and Uber are winning in the current mobility scheme.
More Cars, More Urbanity
If you’ve read reports about mobility and the death of car ownership over the last few years, you likely have noticed that some authors posit — almost gleefully — that the car business as we know it is about to face a horrible, horrible death. In the short-term, it doesn’t seem that way — so long as consumers have anything to say about it.
Rather, as mobility services rise in popularity and prevalence, we’re simply going to see more cars on the road. It’s clear people aren’t going to forego owning a car. Rather, they’re just going to invest more of their income into mobility in addition to car ownership.
If Uber or Ford Pass (Ford’s mobility app) is expected to pick you up in 10 minutes or less, there are going to have to be a lot more cars on the road. With more cars on the road, carbon dioxide emissions go up. Regulations, then, will force more vehicles to become electrified. Plus, we’ll see the numbers of personal urban mobility options like e-scooters on the streets grow.
At the same time, more people will move into increasingly dense urban cities. This will slowly force the hand of the market. Eventually, owning a car in a city and mobility services will grow in breadth and convenience. This will push some people away from owning a car. However, I don’t see it happening for a while — at least not in the U.S.
I used to be one of those reporters, expecting the death of car ownership in the next decade. I had an eye-opening experience a few years ago. One of my then-colleagues was a new mom. She and I were talking about autonomous car ride hailing and never owning a car. She looked at me and said: “There’s no way I’m going to pull my daughter’s stuff in and out of a new robotaxi every morning. There’s no way.”
That’s what did it for me. That got me rethinking the whole humanity of the matter. No argument about lowering CO2 emissions with electrification or reducing traffic deaths with automation is going to work if it means our lives become harder or worse. Hopefully brands keep that in mind and can engineer some humanity into the future of mobility.