Have We Already Reached ‘Peak Car’?
Economic trends point to a future where car ownership is but one of many mobility options. Are we ready?
About a year ago, Robert Farrington, an entrepreneur in San Diego, made a bold decision. He sold his car, which he used to commute to his job for years, and switched to ride-hailing apps exclusively as a means of daily transportation. As the founder of a personal finance website for college students, Farrington had been obsessed with thinking about ways to get his monthly costs down. He calculated that the cost of owning his car — a 10-year-old workhorse that had clocked over 100,000 miles — was nearly $300 per month and rising, with costly repairs on the horizon. After the switch, Farrington says he spends roughly $100 per month between Uber and Lyft, and estimates a $2,400 windfall over the course of the first year of his experiment.
Farrington benefits from a flexible work schedule and a second family car that he and his wife use to ferry around their small children, making his decision to ditch his personal vehicle far less burdensome than it would be for a single-car household. For the 90 percent of Americans who drive every day, the thought of giving up the convenience of an on-demand personal vehicle is simply too difficult logistically to imagine.
But there’s mounting evidence that this is changing; that we may have already reached “peak car” in the U.S. This theory drives STRATIM’s mission to build software for managing the future of transportation logistics, when car ownership is but one mobility option.
In the mid-to-late aughts, several trends took place that laid the groundwork for the peak car theory. In 2007, just before the global recession took root, vehicle miles traveled (VMT) in the U.S began to plateau, before falling as the economy stalled out. Meanwhile, total distance driven per capita had already peaked in 2004 and vehicle ownership rates, both by person and by household, had reached an apex in 2006. In 2008, another startling statistic: for the first time in a generation, less than half of eligible teenage drivers had a driver’s license (10 years prior, it was two-thirds). In fact, researchers found that in every segment of the populace except for those 70-and-older, the percentage of people with a driver’s license peaked in 2008.
Meanwhile, a regular parlor game on Wall Street has been the debate over whether the downturn in auto sales has been cyclical or the beginning of a more permanent decline. Industry watchers and insiders tend to fall in one of two camps:
Economic factors — access to credit, gas prices, consumer sentiment — drive automotive trends. Auto sales and VMT are coincident indicators and will continue to move with broader economic upturns and downturns.
But the other camp, of which STRATIM considers itself a member, see the data as part of a larger sea change that includes the convergence of certain cultural, societal and technological factors that are already starting to transform the future of mobility.
Nearly 30 years ago, a pair of researchers at Oxford, in a study on the long-term trends of car use, wrote the following:
“Some new product could hit the market which would make the car redundant in the psychological sense. It is hard to imagine what this could be… Some computing product (probably portable) could maybe be produced which would cater for power, or freedom desires, although it does not seem at all likely at the moment.”
While Steve Jobs was still 17 years away from unveiling the iPhone, the authors recognized something that had been taken for granted for the entirety of the post-war era: that the car as a symbol of autonomy, freedom and connection — driving as a rite of passage — could be supplanted by technology, even if it was unclear what that technology would be.
They were probably more prescient than they could have ever imagined.
The data for the youngest would-be drivers is particularly striking, and the decrease in teen drivers corresponds directly to the explosion of smartphones over the past decade.
Mitchell Moss, the director of New York University’s Rudin Center for Transportation Policy and Management, puts it this way: “There is a clear cultural shift happening, where the barometer of autonomy especially for young people has gone from the car to the phone.”
“Kids are growing up gaining mobility through their devices,” he said. “For their parents, the freedom of mobility was access to their first car. A car got you instant autonomy. We’re seeing that way of thinking begin to erode.”
Access to personal vehicles will continue to be especially crucial in suburban and rural areas, although Moss predicts that as ride-hailing apps continue to permeate the market, electric vehicles and their infrastructure come down in cost and, eventually, autonomous driving become a reality, this attitude will change even for those who are currently most dependent on the car in their garage.
Moss’ predictions are circumspect by comparison. OPEC, in last year’s World Oil Outlook, projected nearly 140 million fewer cars on the road in 2040 than it did two years ago. And some visionary business veterans believe the entire automotive industry is on an accelerated change curve.
Last year, Bob Lutz, the former chairman of GM, wrote in Automotive News about what he sees as the endgame for personal mobility, and it is nothing short of radical: autonomous “modules” with no driver control, zipping along at up to 150 m.p.h. on autonomous-exclusive freeways, depositing passengers at their destinations before picking up new ones — a sort of combination vehicle-rail model, where legacy carmakers may still build the modules, but they are owned by, operated by, and branded as Uber, Lyft, Google or Amazon.
Consumers “don’t trust traditional automakers” to make safe autonomous vehicles, Lutz wrote, but he posited they would trust tech giants, particularly if the first stage of deployment was via large established fleet owners like FedEx, UPS and the Postal Service. (Lutz was opining before the fatal Uber AV crash in March that rattled the industry.)
Once a tipping point of 20 to 30 percent of fully autonomous vehicles is reached, a drastic drop in accidents would force lawmakers’ hands in driving human-operated vehicles off the roads, according to the theory. Lutz believes this will happen within 20 years, and that may be cautious. An analysis from the Silicon Valley think tank RethinkX, starts bluntly:
“By 2030 … 95% of all U.S. passenger miles will be be served by Transport-as-a-Service (TaaS) providers who will own and operate fleets of autonomous electric vehicles providing passengers with higher levels of service, faster rides and vastly increased safety at a cost up to 10 times cheaper than today’s individually owned (IO) vehicles.”
The report goes on to predict that the average American family will save $5,600 per year on transportation costs under the TaaS model, which would translate to a national average wage increase of 10 percent. That would be the largest infusion of consumer spending in history, amounting to one trillion dollars a year.
Of course, for the legacy automobile industry — from Detroit assembly lines to suburban dealerships — this new normal would raise some existential questions. Those questions are what is driving STRATIM to develop pioneering products to help fleet owners maintain and manage their fleets for new, expanded and not-even-yet-thought-of uses. Shmulik Fishman, STRATIM’s co-founder and COO, said the industry’s future is in large fleet ownership.
“The peak car theory may very well be true with regard to personal ownership, but cars are still going to be the principal way people get around for the foreseeable future,” according to Fishman.
“The demands and options for mobility are increasing, not diminishing. That leaves us with a huge opportunity to streamline the way in which fleet owners can take advantage of these changing norms around vehicle ownership.”
So whether the auto sales, miles driven and driver’s license data tells us that the peak is here or that it’s coming, legacy businesses must begin the process of rethinking how they will compete in a market that could resemble nothing like the one that has existed more or less unchanged since the first Model T rolled off the line more than 100 years ago.
“We’ve redefined ownership in the past,” said Moss, the NYU transportation expert. “Look at the leasing model. These things are constantly evolving. I don’t think we’re done evolving yet on mobility.”
With reporting by Carlo Versano in New York.