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Customer LoginsVideo: Urban mobility and its impact on the automotive industry
Half the world's population lives in cities. Space constraints will inhibit future urban dwellers from owning cars. Automakers must plan for this reality.
Interview Transcript
We now have over half the world's population living in cities. By 2035, according to the U.N., there'll be 2 billion more people on the face of the earth. All of them will be in cities So if the market is to grow, it will grow from demand in the urban areas. If people, habits, lifestyles, the plan and design of the cities themselves are such that people need fewer cars, then the market isn't going to grow as it had been expected to. And there will be new opportunities because those people will still need to get around. They just won't own their car.
They may share it. They may use a different kind of vehicle. And they'll use also different forms of vehicles for delivery of urban goods. The whole issue of urban mobility is a real challenge to the industry. The strategists that we've talked to find great disagreement, even amongst themselves, and amongst the people who're their customers internal in the organization, as to how important is this change. How disruptive is it and when will it occur?
And it's important to get a broad range of points of view. The value of a forecast is really to understand the cause and effect relationships. And that's where we come in. That's what we're trying to do is to have our own independent view of these factors.
What's the outlook for the future autos market at a city level?
At the city level, the demand for vehicles is going to vary a lot from city to city, region to region. In the U.S. and Europe a typical city has vehicles of 5- to 600 vehicles per thousand people.
In Asia, the outlook is going to be about a third of that. Actually is to be expected. And the reason is that the number of people per square mile in a European or western city is only about 1/4 that of a typical large Asian city. So there just plain ole isn't enough room for as many cars per person in the growth markets. And that is a factor that had not yet been previously taken into account.
How does new vehicle market demand compare with production capacity?
We as an industry have planned for growth of the market as it has always gone. In other words, going up to 5-, 600 cars per thousand people - even in the cities. With that not happening, the demand, as we see it, is going to level off at about 100 maybe 105 million units a year shortly after 2020 and stay there. And we've already got either in place or planned capacity of over 120 million units a year. So we've actually got an about 100 manufacturing plants, either in place or planned.
The challenge is that they're - may not be - in the right place. So we've actually got to de-capacitize in some markets and increase capacity in others. All in a market that's not going to grow that much.
What are the urban-specific opportunities and trends in vehicle technology?
The forward plan is that we're working with - understand that the gap in the market that we've talked about has to be filled somehow. Those people still need to move around. It just may not be with vehicles that they own personally. So there's car-sharing programs, new business models, to get the vehicles in their hands.
And if you stretch the time frame out a little bit, there's real opportunities for autonomous vehicles to act as personal public transport, addressing the last mile challenge. Also as commercial delivery vehicles. And we've heard announcements that they'll be out - at least technically feasible as market trials - within 10 years. Commercial viability we expect to happen around the 2030 time frame.
What insights do strategists need to map out future product, production and technological development?
Real challenge that the urban planners - and as well as the corporate planners, product planners, and even capacity planners at the automakers - find is that an understanding of the real outcome of the different changes in lifestyles that we see today in the urban areas. And some people think they're a fad. Others understand that it's going to be a disruptive situation but they don't understand the possible ramifications and what that really means. But the sum total is that we're not just talking about a change in market demand. We're talking about fundamental changes and opportunities to provide personal mobility.
In the short-term, it's really about planning for plant capacity, not over-capacitizing in markets that may level off or even be in decline. In the longer-term, what you see is a lot of different nations wanting to have their own automotive industry. So you see a lot more competitors and a lot less organic growth.
So what you're really seeing is a change in the competitive landscape. Growth in the revenues of existing companies is going to come from conquest sales rather than taking advantage of the natural growth in markets long term. And then, of course, there's the new opportunities created by the changes in lifestyle and the changes in urban mobility that we talked about earlier.
Phil Gott Senior Director, Long Range Planning, IHS Automotive