Auto industry looks past ownership toward autonomy

Adam Jonas, a New York-based analyst who scrutinizes car companies for investment bank Morgan Stanley, has a chart that he says will “occupy the remainder of my professional life.” The shift toward renting rather than owning expensive assets, combined with the advent of self-driving cars, will transform the auto industry, Jonas says. Here’s his chart:

The bottom left corner describes the state of play ever since Henry Ford’s Model T began rolling off the production line: You buy your own ride from a carmaker, head for the open road whenever you choose and park it in the driveway the rest of the time. The top right shows where Jonas reckons the industry is eventually headed: You’ll order a self-driving vehicle that will pick you up and drop you off while charging you only for the distance you traversed (and without your ever having to worry about when the oil needs changing).

That reality probably still seems somewhat far off, as might the future depicted in the upper left quadrant, in which people own their own self-driving vehicles. But another intermediate stage, Jonas’s bottom right quadrant, just got a small but significant boost. Industry behemoth Ford Motor said today it’s inviting 2,000 Londoners to sign up for its GoDrive car-sharing service, which will offer pay-per-minute one-way car rental in the capital, with guaranteed parking at the chosen destination. Ford reckons car-borrowing will grow by as much as 23 percent in London by 2025, while the global auto-sharing industry will be worth more than $6 billion by the end of this decade. Half of the fleet of 50 cars will be the company’s Ford Focus Electric model.

Bill Ford, heir to the family business and executive chairman of the automaker, told a TED conference in June 2011 that mobility, freedom and progress were the objectives of his great grandfather, not selling cars per se. The prospect of the global car fleet growing fivefold to 4 billion autos by the middle of the century risks creating “global gridlock,” he said:

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When you factor in population growth, it’s clear that the mobility model that we have today simply will not work tomorrow. Frankly, 4 billion clean cars on the road are still 4 billion cars, and a traffic jam with no emissions is still a traffic jam. The solution is not going to be more cars, more roads or a new rail system; it can only be found, I believe, in a global network of interconnected solutions.

Last week, Ford’s investment firm Fontinalis Partners took a stake in U.S. ride-hailing firm Lyft. Lyft’s business model – using technology to match drivers with riders for individual trips – is almost the antithesis of how Ford has made money for a century.

Ford’s GoDrive scheme isn’t the only game in London. Trundle into any London recycling center – as I have done far too frequently in recent weeks (don’t ask how the house renovation is going) – and you’ll see eager spring-cleaning urbanites unloading Zipcars they’ve rented for a single day from the company’s fleet of 1,500 vehicles. Other such ventures include City Car Club, DriveNow and E-Car. Ford, though, is the first major manufacturer to get into the game.

It seems pretty clear that auto ownership, at least in our crowded cities, is going the same way as music or software. Why own racks of compact discs or even MP3s when you can stream tunes into your ears? Why burden your computer hard-drive with programs and data that you can access and run off the cloud?

And if you live in a city center, why have an expensive depreciating asset sitting in its parking place for most of the time if Ford will let you pay just for the road time you need and nothing more? Jonas at Morgan Stanley says it’s “sad that my life can be boiled down to one chart.” I disagree. I find his analysis of the future exciting and liberating, and I can’t wait for the first self-driving rent-by-the-mile car to get approval to start navigating London.

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