Demotorizing: What Happens When Young People Don't Care About Cars?
By 2025, Asia will lead the auto manufacturing world, cars will be crammed with communications and networking technology, the developed world won't have enough engineers to keep up, and -- most alarmingly for the established automakers -- kids will quit caring about cars.
These are among the findings in a recently published study from Roland Berger Strategy Consultants. The firm calls that last trend "demotorizing," but it could just as easily have tagged it "demoralizing." What should have carmakers worrying is that it isn't just prevalent in the developed world -- you can also see it in metropolitan environments in the developing world, such as Shanghai.
For now, the desire to own a car is rising in China's most cosmopolitan city, but Roland Berger predicts that trend will soon reverse. In fact, the automobile is now referred to as a "mobility concept," pitted against other flavors of mobility, such as car sharing and public transportation.
The ironies abound
Shanghai is in a hurry to catch up with cities like Berlin, London, Tokyo and New York, where young people are emotionally disengaged from cars. So it isn't surprising that Shanghai will become less car-centric. What is weird is that China -- not to mention the rest of Asia -- is poised to become the biggest producer of cars the world has ever seen. By 2025, China will have more than twice the sales and automotive production of the other so-called "BRIC" (Brazil-Russia-China-India) countries combined.
The obvious question: Will China be producing personal mobility, i.e. cars, or will it be manufacturing "transportation" -- vehicles designed to be shared, or integrated with mass transit, or whatever else a more sustainable future demands of us? A collapse in car ownership in the wealthy parts of the world has profound implications for the future leaders in carmaking.
What the big car companies think
Car ownership is extremely important to the world's big automakers. That's largely because owning a car means, in most cases, taking out a car loan, which creates serious profits for automakers that lend people money to buy their product. Companies like General Motors (GM) want to export this established Western tradition -- debt for mobility -- to the developing world. GM in particular wants to use China as a low-cost manufacturing center to build cars cheaply for export to booming markets, like Latin America.
Let me unpack all this. Worldwide, young people don't want to buy cars, but they want technologically enhanced access to constant mobility, some of which will have to be provided by the carmakers of 2025. The biggest new auto market, China, is being affected by this youth trend almost as fast as the developed world. Major automakers are shifting production to China, but they are hampered by their established business model, which is predicated on people owning cars, rather than just using them.
Did I mention the small cars?
The study also highlights the importance of small cars by 2025 -- they have by far the most dramatic growth curve, driven by the fact that small cars are no longer being seen as money-losing afterthoughts, but rather as "shrunken" larger cars. But the reality is that small cars never generate the profits that large cars, trucks, and SUVs do, so automakers are looking at a future in which they'll have to squeeze greater efficiencies out of their supply chains to survive.
The study brings to mind the hoary old cautionary tale of the railroads at the turn of the 19th century: They thought they were in the railroad business, not the transportation business. Carmakers are currently not even really in the transportation business. They're in the car ownership business. Global trends are now pointed toward what I'll call "de-ownership."
By 2025, there will be more need for transportation than ever. But most of the world may not be parking it in their garages and borrowing money to pay for it. And may never have much of a desire to.
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Photo: Wikimedia Commons