Tag: The Globestrategy blog

Last week, the Society of Motor Manufacturers and Traders (SMMT) recorded its consecutive annual decrease in car ownership in more than 100 years even as the number of cars on the road rose by 0.4%. New car sales are skewed towards sales of Electric cars (EV)-which recorded a spectacular 71% growth, but on the whole the car industry is in trouble.

The industry itself is seeing a massive disruption from several VUCA driven forces forcing customers to hold on buying new cars. The average age of the UK passenger car fleet has risen to over 12 years partly due to an alignment of the pandemic induced VUCA pause on buying new cars to a number of forces, converging on the Industry. Philip Nothard  defines this VUCA as “new vehicle production problems, primarily caused by semiconductor shortages and coronavirus restrictions, disrupted the wholesale and retail vehicle markets”.

An Increase in new technologies and government led disruptive cycles have created ripples through established car consumption and manufacturing cycles which make cars extinct. Some of these disruptive VUCA forces are :

(a) A move towards electrified powertrains to support the development of sustainability mobility ecosystems that help cities . While laudable as a shift towards mitigating some of the effects caused by our use of cars, one must remember that electrified powertrains have been around for as long as the internal combustion engine. In 1835, Thomas Davenport had demonstrated first practical electric vehicle ever to be conceived and a number of electric car companies were born. The Electric Vehicle Company consortium who wanted us to use electric cars as early as 1899 when Daimler started building racing cars using  internal-combustion engines. But then, electric powertrains lost to the Internal combustion engine! For over a century, Governments, fossil fuel companies, global economic inequalities and the complicity of regulators failing to check emissions from the internal combustion engines while simultaneously and vigorously defending its inclusion as a primary locomotive force, contributed to climate change.

But this is changing now, to the chagrin of the established car ecosystem.

Electric cars now dominate mainstream automobile narratives in this decade, as governments worldwide, use it now as a buzz word. Electric cars and climate change are synonymously linked to deflect history’s painful lessons in sustaining and abetting the abuse of the earth. We use non- electrified automobile locomotion as a whipping post on which our collective sin of using cars are to be flagellated and expunged. Governments use this narrative to smooth over a century’s apathy. Not having the right, efficient government policies which may have tackled the pollution and emissions caused by cars is been driven under the carpet as cars are seen as an impediment to climate change mitigation. The case of Birmingham trying to forget history is a moot point here.

The tensions in the Industry are rising as governments push through a new frenzied narrative to decarbonize the planet by killing off legacy car power trains. This decarbonisation narrative is particularly dangerous for the car as it sits at the centre of a climate influenced maelstrom of politically sensitive lifestyle interventions. These lifestyle interventions come at great economic costs to Car ecosystems. Car companies are increasing their R&D spend on EVs as they innovate to survive in a new world. Even icons like the Lamborghin Aventador V12s or the Lotus Evora GT have lost the race to live as internal combustion vehicles(ICVs). In a world where transition to a low carbon economy is key, car manufacturers have to face a new financial risk of having to manage their responses to climate change or else see a major creditworthiness disaster. Car manufacturers also need to hedge their best on EVs as other competing technologies like bioethanol and hydrogen mature. Economic costs have already seen a flurry of mergers and consolidations in the industry due to electrified powertrains.

Other major challenges include emission pricing and carbon tax on cars, spend on Carbon Dioxide Removal (CDR) technologies, a fall in all in the global market for internal combustion vehicles(ICVs) coupled with the cost of retooling factories for EV car production and the the national interest of Governments worldwide to concentrate economic activity with a 15-minute city.

But then electric car companies are not the panacea as claimed and have also failed; Fiskers (2013) spectacularly burning through $2bn before failing, Faraday Future, Dyson, Bright Automotive, AMP, Aptera, Coda, Detroit Electric, LeEco…. the list goes on and on. Electric cars will further the legacy of ICVs if we don’t have build enough, low cost and accessible charging infrastructure. In addition, there are claims that electric power trains are not fully renewable as “Lithium, nickel and cobalt are the three major components in rechargeable batteries that are, by definition, nonrenewable resources”. A global shortage of semiconductor chips compounds the shift towards electric cars.

(b) New consumer behavioural patterns have come into play. Cars are no longer been seen as lifestyle statements and climate change is staring us right in the face. An outbreak of equine influenza in North America in October 1872 caused a major shift from the horse as primary source of mobility to ICVs. In 2019, a similar pandemic caused by Covid 19 and subsequent global lockdowns, have forced a rethink on the use of the car.

Like flight shame, we are awakening to the very real possibility of car shaming. It only takes a social media storm before we all get sucked into avoiding the use of cars and choosing slower modes of travel like biking as major life style changes. And its happening. Car manufacturers including BMW, Ford, Honda, Jaguar Land Rover and McLaren have failed to stop a ban on the sale of pure internal combustion engine cars from 2040 to 2030 while cities like Oslo and Madrid are forcing us to choose between cars and public transport. Our collective use of public transport has picked up significantly alongside increased consumption on shared modes of transport (especially micromobility services.

Another change has hit the use of a car. Car brands, particularly luxury cars have acted as status symbols for the buyer, delivering a higher perceived value for  buyers looking to maximize their investment and also created an aura of exclusivity for its owners through effective brand management. But in 2021, after 2 years of lockdown, visiting a car showroom has lost its appeal to many consumers; Digital interactions are now the new norm and customer experience is trumping luxury as more people want a “new tech-led, data-rich, electric vehicle instead of mere luxury cars.

(c) A car-less future is feasible for many of us, but risks becoming a nightmare to manufacturers. Laura McCamy’s post on embracing a car-less life is appealing to a generation that in in tune with climate change , saving money and staying fit through pedalling.

Car parking costs is another major incentive to go car-less. As early as 2005, UCLA professor Donald Shoup brought out an understated aspect of owning a car ,- Cars remain parked for over 92% of time. How amazing that our collective experience of the automobile and its position in society, revolves around a small amount of time, when a car is actually useful to its owner! It’s the con of the century that we cannot see how big, parking a car plays in the true cost of car ownership? The RAC estimated in 2012 that car parking had contributed to the loss of over 7 million front gardens . This report also tells us that in 2012, “the average car is parked at home for 80% of the time, parked elsewhere for 16% of the time and is only on the move for 4% of the time”

Car parking however is highly contested ;Governments derive a huge revenue boost from the business of parking yet must try and . In the UK, the RAC estimates that “Councils in England made a combined surplus (profit) of £891 million from parking in 2019-20” while globally the business of parking had grown annually at 11% with total revenues of US$4.23 billion. Yet car parking is driving governments away from its its commitment to managing climate emergency. Some recent contrarian  components of a UK government led, balanced transport strategy is incentivising the shift away from individual car ownership and making walking, cycling and public transport more attractive. Parking levies, a National Planning Policy Framework (NPPF)  and the Road to Zero policy paper are some examples.

Finally Cars are dying. Manufacturers killed off car brands that were no longer viable. In 2022, Honda’s Acura RLX (or the Honda legend in some markets) was put down having sold only 1019 cars in 2019 from a hey day of selling over 70K cars annually. Honda also culled the Honda Clarity in both hybrid and fully electric versions. Other brands that died in 2021 were the Alfa Romeo 4C that may have been a victim of a new step parent’s love. This year, BMW killed off its I3 electric car- a victim of  its limited EV range while Polestar 1 joined the list of also ran EVs. Even Rolls Royce has joined the killing spree removing the Dawn and the Wraith.

It’s time to take the slow road now, pedalling our way to the brave new world. Until of course we decide to change our collective narrative and forgo the shame of using cars. Remember how glorified diesel was twenty years back? Perhaps the car ecosystem will decide someday in the future that a clunky, vibration centred, rubber burning, fumes blenching car, is still the way forward. Maybe the industry will save cars by offsetting car emissions through liquefying carbon and recycling it.

One is comforted by a recent news that even the Dodo has made a comeback after been wiped out in the 17th century.

This post will be continuously updated.

Data sources:
1. https://www.hotcars.com/defunct-car-manufacturers-we-hope-will-make-a-comeback/
2. https://stacker.com/stories/5360/50-car-companies-no-longer-exist
3.https://www.autocar.co.uk/car-news/industry/remembering-britains-failed-car-companies-picture-special
4. https://en.wikipedia.org/wiki/List_of_automobile_manufacturers_of_Europe
5. https://www.spglobal.com/marketintelligence/en/news-insights/blog/climate-change-reshapes-the-automobile-sector
6.https://www.weforum.org/agenda/2021/07/electric-cars-batteries-fossil-fuel/
7.https://www.motor1.com/features/297044/discontinued-cars-trucks-suvs-20189/