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Woes of Megacity Driving Signal Dawn of ‘Peak Car’ Era

Woes of Megacity Driving Signal Dawn of ‘Peak Car’ Era thumbnail

The world that Henry Ford put on wheels is poised for a stall.

In the globe’s growing megacities, pollution and gridlock are putting a damper on driving. In India, some commuters are leaving their cars at home to avoid traffic snarls and long prowls for parking. More young Americans are forgoing the dream of auto ownership for public transport, bikes and vehicle-sharing. Cars on the road are lasting longer than ever.

All of that may herald a new era for an auto industry weaned on a century of global growth. The world will reach “Peak Car” — a point at which annual global sales growth will top out — in the next decade, several auto-industry analysts predict. Researcher IHS Automotive, for one, sees annual sales cresting at 100 million within that time.

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.

Megatrend Reckoning

No one is predicting that car sales will suddenly fall off or that today’s car companies are now dinosaurs. What the 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 LLP. “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.

Brown Haze

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 each other in a bid to keep traffic from jamming. General Motors Co. (GM)’s EN-V autonomous two-seater, a vehicle engineered jointly with Segway Inc. 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.”

Global Gridlock

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 Corp. 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.

No Licenses

More young people also 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 Inc. and ride-booking service Uber Technologies Inc., that appeal to a new generation of drivers disinterested in carmakers’ high-cost products.

Totaled Honda

In Germany, which remains Europe’s top auto market more than two decades after sales peaked there, Daimler AG (DAI) and Bayerische Motoren Werke AG (BMW) 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.

In the U.S., Art Ortiz joined the ranks of carless commuters more than a year ago, when he totaled his 2003 Honda Element.

The 38-year-old Dallas dog trainer and dog walker mostly uses a commuter bicycle and a transit pass. When he needs a car, about four times a week, he gets a ride with his girlfriend or uses a pay service like the one from Lyft Inc., a smartphone application that summons private cars for hire.

“I didn’t really feel the need to have a car,” said Ortiz, whose years of auto ownership date to the Nissan Sentra he had as a 16-year-old. “A car was just a waste of money.”

Driverless Commute

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, Connecticut. 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.

Concept Vehicles

At the Tokyo auto show last year, Toyota Motor Corp. (7203) unveiled concepts for three-wheeled vehicles that communicate with each other in dense urban settings. GM and Ford Motor Co. (F) 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, Michigan-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?”

Unsold Cars

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, Michigan-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.

That coming boom in autonomous cars has created an opening for technology companies that view mobility differently than automakers do. Google (GOOG) Inc. has logged hundreds of thousands of miles road-testing its own driverless cars, according to the study by Ann Arbor, Michigan-based CAR.

“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.”

Mumbai Crawl

The need for a new form of mobility is evident in Mumbai, whose 12 million people are squeezed into 603 square kilometers, or about 230 square miles. Just 14 percent of trips are by personal car while more than half the commuters cram into 2,900 passenger trains that carry 7.6 million people in the city each day, according to a report by Mumbai Railway Vikas Corp. Another 23 percent ride buses and 9 percent use a public taxi or motorized rickshaw.

Kavita Bhatt, 31, takes a taxi to work in Mumbai because it’s easier and cheaper than crawling through traffic at 3 miles per hour in the car she owns.

“Commuting is a pain any way you look at it,” said Bhatt, an executive at a research company. “I drive to work once in a while, but it’s impossible to find parking.”

She drives mostly on weekends, when traffic is more manageable, in the new Hyundai Grand i10 hatchback that she shares with her father.

‘40 Percent Ego’

Even so, many emerging-market consumers yearn for auto ownership because it is an important marker of the transition from poverty to the middle class, said Steve Polzin, director of the Transit Research Program at the University of South Florida in Tampa.

“If the resources are there, people cherish mobility — we can’t underestimate the importance of that,” Polzin said. “A car is 60 percent mobility and 40 percent ego.”

In China, only 44 out of each 1,000 residents own a vehicle — compared with 423 in 1,000 in the U.S., according to the World Bank — and people like Shanghai native Michelle Ding are set on becoming the first in their families to own a car.

No Parking

“When your economic means hit a certain level, it makes sense,” said Ding, a 28-year-old who currently commutes an hour each way to her job as a project supervisor for a commercial developer. Driving to work will cut her commute time in half, she said.

Ding, who is researching Volkswagen models online, said she may have trouble finding parking near her apartment. “I’ll make sure I find a way,” she said. Meanwhile, 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. They also have a greater desire to live in a neighborhood where everything is in walking distance and to use car-sharing and car-pooling, Deloitte found.

U.S. Peak

“The likelihood is pretty good that we have reached the peak per person or per household” in the U.S., said Sivak, who has produced five studies on the topic. “We have fewer vehicles and we drive each of them less.”

Some of the decline in vehicle ownership in the U.S. can be attributed to the 18-month recession that ended in June 2009 and the relatively slow recovery since, Polzin said. As people regain wealth, he said, some of those trends will reverse.

Tanya Loh, 35, went carless and hasn’t looked back. Loh, who works at an e-commerce startup in San Francisco’s Dogpatch neighborhood, ditched her 2006 Volkswagen Jetta TDI diesel a year ago after she realized the city had more convenient transportation options.

“I’m not anti-car,” said Loh, who grew up in the suburbs of car-crazy Los Angeles and learned to drive a manual transmission at 16. “It was about efficiency and about optimizing the time that I have.”

Used Vespa

Loh’s “wheels” now: a Dutch bicycle and a used Vespa motor scooter. She has a pass for the San Francisco transit system. She also uses smartphone applications from Uber, Lyft and Flywheel Software Inc. to summon private cars for hire and taxis, as well as the City CarShare service. Loh says she has cut her monthly transportation costs in half. She also gains efficiency by working on the bus, she said, without having to worry about her safety or parking.

The solution for avoiding global gridlock may come from an as-of-yet unforeseen technology, said Eric Morris, an assistant professor of city and regional planning at Clemson University in South Carolina whose research looks at future innovations and lessons from the past.

In 1898, at the world’s first international urban planning conference, many attendees predicted that manure left behind by horses pulling coaches and wagons would soon pile up to New York City’s third-story windows, he said.

Goodbye, Horses

What the attendees didn’t predict was the impact of a technology that had been invented more than a decade earlier. By 1912, cars outnumbered horses. By 1920, the internal combustion engine had replaced oats-fueled horse power altogether, Morris said.

That long-ago urban-planning conference still speaks to the greatest challenge in this emerging new era of mobility — persuading auto-obsessed consumers they will no longer need their own set of wheels.

“It’s really pretty hard to go to somebody and say ‘Can you imagine a day will come when you won’t need a car?’” said Phil Gott, senior director of long range planning at IHS in Lexington, Massachusetts. “Because the obvious answer is ‘What, are you nuts? I’ll always need a car.’ But in fact, people are moving into the cities and doing with fewer cars and in some cases with no cars.”

bloomberg



9 Comments on "Woes of Megacity Driving Signal Dawn of ‘Peak Car’ Era"

  1. Davy, Hermann, MO on Mon, 24th Feb 2014 12:51 pm 

    Cars are the primary reason we are where we are with overpopulation, depletion, and ecosystem damage. You must admit fossil transportation has allowed all other adverse issues. You are not green period if you use an automobile. The business plans of the auto industry are a suicide pact for depletion and climate instability. Peak car is reducing quality of life. Peak car has allowed us to overshoot our carrying capacity. From a systematic point of view the automobile production is one of the most highly complex and intensive processes known to modern man with only agriculture being more disruptive. This activity, do to long distribution connections of dispersed production, will be unstable and will be one of the first industries to fail in the upcoming power down in the descending energy gradient. This industry from a systematic financial perspective is one of those too big to fail business segments. The financial system fails with the world wide failure of this industry. The financial system cannot cope with a shut down due to feedbacks to most other industries and financial markets. The local support system has been constructed around the automobile. Many if not all local support systems will be severely affected by curtailed automobile use. Even if an area is not very reliant on autos its indirect support is. We are again in a predicament. Automobile use and production must be curtailed and severely reduced. Yet, this very reduction of use and production will systematically destroy our financial system and local support system. We are on an unsustainable path to multiple ecosystem damaging trends. We have created a brittle systematic situation that is on the path of failure and that failure will bring down BAU. You can’t manage DE growth in this all important BAU sector. The unintended results create multiple reinforcing contagions. I have no answers other than this can continue a few more years just like the manipulation of the financial system. I can assure you when the BAU sector fails so will BAU. The bright spot is it will be a boon to salvage strategies in a post modern world!

  2. Makati1 on Mon, 24th Feb 2014 2:03 pm 

    People are moving into the death traps called cities and the author believes that will last? BS!

    I live in one of those crowded cities and even though only 2% of Filipinos own a car, you can walk faster than traffic at peak driving times. Here a 3 lane street can become 4 lanes or even 5 if the cars can get past each other, sometimes with only inches to spare. I will take a taxi to Immigration tomorrow and it could take me from 20 to 35 minutes to go 3 1/2 miles. It will cost me about $4 US each way. I would not own a car or drive here for any amount of pay. Nor would I ride a bicycle or motor bike.

    Cars are fast becoming too expensive to own as incomes shrink and other real necessities get more and more expensive. Yes, the car manufacturers ARE dinosaurs, soon to become extinct, along with their consumers.

  3. rollin on Mon, 24th Feb 2014 2:15 pm 

    Traffic jams? No big deal, here are some photos from the 1920’s.
    https://www.google.com/search?q=1920's+traffic+jam&rls=com.microsoft:en-US:IE-Address&tbm=isch&tbo=u&source=univ&sa=X&ei=D1ELU9zrBeifyQGvo4G4Dg&ved=0CCcQsAQ&biw=1024&bih=629&dpr=1

    The problem is old and always happens, then more roads are built, then more cars, then more …. Finally as fuel gets scarce and more expensive the reverse will happen.

  4. Hugh on Mon, 24th Feb 2014 2:40 pm 

    Hermann: I think you mean ‘systemic’ where you’ve been using ‘systematic’.

  5. Northwest Resident on Mon, 24th Feb 2014 3:41 pm 

    1.3 billion Chinese people climbing the economic ladder and demanding the “freedom and status a car conveys” is a very worrisome thing to contemplate.

    Imagine all of the earth being processed to get the raw materials for all those cars, all of the oil and energy required to drive the machines that extract the raw materials, all of the ships burning mega-tons of fuel to transport the raw materials, all of the trucks and trains delivering the raw materials to factories for processing into cars, all the thousands of worker bees driving their own cars or taking public transportation to get to the factory to work on building those cars, all the coal and NG required to power those factories, all the CO2 pumped into the atmosphere…

    The amount of energy and resources sucked from planet earth to support the “private automobile industry” combined with the volumes of CO2 released into the atmosphere is enormous, and the top #1 reason we have wasted a majority of our oil and fossil fuels and ruined our climate at the same time — all so we can enjoy the “freedom and status a car conveys”.

    Dear Henry Ford — I wish you would have invented public transportation instead of private individual cars. Your cars ended up wasting planet earth.

  6. Davey on Mon, 24th Feb 2014 3:59 pm 

    @hugh sorry I can think but cannot spell and write a proper sentence My eyes are getting bad and I must have pre-dementia because I feel like sometimes I have no mind. If you are young gettin old is not for sissies. I imagine that was a spell check deal

  7. Northwest Resident on Mon, 24th Feb 2014 5:42 pm 

    Hugh — Davy’s tendency toward self-deprecating sarcasm aside, it has become apparent to many of us here at peakoil dot com that Davy’s mind moves much faster than his fingers can type, leading to what scientific experts have classified as “brain farts.” I, myself do not have this problem, because my training in my early years as a pianist enabled me to become an extremely fast and accurate typist, leading to the opposite problem that Davey suffers from — my fingers definitely type faster than my mind can move, resulting in long run-on sentences, overly verbose paragraphs and pompous dissertations that have little or no bearing on the article being commented on. Oh, and sometimes I misspell too, everybody does here, not because they’re stupid but because we’re just trying to get our posts out there as fast as possible while doing other more important things at the same time — like, working for a living in my case.

  8. Sheila Chambers on Tue, 25th Feb 2014 1:48 am 

    I would certainly not want to be carless when another hurricane hits the east coast, remember Louisiana & Katrina? Those without cars were stuck in the floods for days. Those who didn’t leave early were stuck in traffic.
    Those overpopulated cities are sitting ducks in a disaster, no water, no heat, no lights,no security.
    Where I live there is no public transit, you have to have a car. I use my small car as little as possible & combine trips when I do.
    I do wish the auto industry would put out a small, light vehicle that has some carrying capacity. The smart car is nice but where do you put the groceries?
    I don’t want to move to a city because your trapped in a disaster, the air is dirty, it’s noisy, dangerous & crowded.

    I have no children so I did not contribute to our overpopulation like so many others of my generation.
    I consider misspelling a problem of how english is spelled – irrationally!

  9. Davy, Hermann, MO on Tue, 25th Feb 2014 1:56 am 

    Sheila, nice to meet you. You are the first woman I have met on this message board!

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