Turning an eye to the United States, travel writer Robert D. Kaplan once noted that people in the gleaming St. Louis office towers are far more culturally and economically connected to their counterparts in Berlin or Shanghai than to the people just across the Mississippi River. The world is not flat, but it is connected in strange ways.
This trend is increasingly true in the automotive industry, especially when it comes to connected cars. As markets in developing nations open up, automakers should look at trends based on regional units, not based on countries. Cities and suburban areas in the same country will have different needs. Understanding these shifting connections will help OEMs forge their way into a new territory.
Ride Sharing Services in London
For years, London has been trying to ease its traffic and congestion, going so far as to institute a ‘congestion charge’ for people driving during rush hour. What has finally made a difference are ride-sharing and car-hailing services, as an increasing number of young Londoners opt out of vehicle ownership? It is estimated that there are 25,000 fewer cars in London thanks to these types of services. Before Uber was banned in London, the company had 15,000 drivers on the road within just two years of its launch. The Uber app downloads spiked by 850%. London is not alone. The same trend can be seen in major cities across the United States. Uber estimates that it will take a million cars off the road in New York City alone. The Transportation Research Center has found that:
- The percentage of U.S. households without a car is at 9.2%, up from 8.7% in 2007.
- The percentage of households without a car has increased in 21 of the 30 largest U.S. cities over the past nine years.
- In six of those 30 cities, at least 30% of households are without a car; 56.5% of New York’s population does not own one.
In short, major cities are progressively reducing the number of cars on the road, a trend that seems poised to spread across the globe. As places like Shanghai, Mumbai, and Lagos begin to grapple with the future of urban development, they will look to ride-sharing services like Uber and Lyft for convenient transport options.
Understanding Future Markets in a Multi-Level World
When GM announced a partnership with Lyft in 2016, it was clear that they were already planning for a future where there will be fewer cars in urban areas and the cars that do exist will be different. There is a good chance that they will belong to an autonomous fleet, owned by businesses that run them on the Uber/Lyft model, or managed by governments, or even operated by the OEMs themselves.
This model is now being discussed for regions as diverse as economic powerhouses like China and developing nations like Nigeria or Uganda. The former is looking to decrease traffic and pollution; the latter are dealing with car ownership circumscribed by economic opportunity. Self-driving cars and connected technology, which can transform cities in the United States and Europe, can do the same thing around the globe as well. There is not one ‘China market’ for cars. There are lots of China markets, and demand in Shanghai or Beijing or Guangzhou will easily match that of Chicago or London more than the sub-urban provinces of the same country. This is why it is important for OEMs to understand how different markets are connected. More than 50% of the human population now lives in urban areas — this number still excludes billions of people. Even Nigeria, with some of the other fastest-growing cities on the planet, has an urban population under 50%.
That means that there are still many markets that need to be catered to in ways that are both increasingly atomized and uniquely global. Being able to provide cars that are designed for each environment, whether it is the city streets of London or the suburbs of Iowa, will require technology that keeps services flexible and adaptive. The technological flexibility that can target the right cars in the right areas and provide updates without the need for a recall will contribute to the efficiency of this model.
The world is undergoing an enormous transformation – politically, economically and technologically. Cities and the surrounding suburban areas are now more connected to counterparts across the globe than to each other. OEMs should be able to adapt to this changing reality and with the right technology, they can lead the way.
As the auto industry is changed by technological and economic currents, OEMs and Tier-1 manufacturers will need to partner with technological specialists to thrive in the era of the software defined car. Movimento’s expertise is rooted in our background as an automotive company. This has allowed us to create the technological platform that underpins the future of the software driven and self-driven car. Connect with us today to learn more about how we can work together.