Get outta my dreams, get into my car
Treasurer Joe Hockey has been much in the news recently with his enthusiasm for the concept of the driverless car. First he raised the possibility that driverless cars – which are still concept vehicles being piloted by the likes of Google – could help commuters driving from the NSW Central Coast to Sydney be more productive.
Then at the Canberra release last week of the Intergenerational Report into life in Australia in 2055, he was again talking about their potential. Citing Institute of Engineers research, he was quoted as saying, “About 70 per cent of the world’s cars will be driverless by 2040. They are already being mass produced.”
Mr Hockey is right on the money when he points to a revolution in the automotive market. A recent KPMG global report, Me, My Car, My Life, shows just how things are already changing. Our report concludes that ‘the era of ubiquitous connectivity – the moment when you, your car and your life are one – has arrived.’
For those who prefer to watch a four minute video than read a report, just look on YouTube and you’ll get a crystal-ball glimpse of how we see it. It depicts a day in the life of a woman whose car drives her to work (and picks her up afterwards), helps sort through emails, schedules calendar events and facilitates a video conference with her husband. Sounds like a sci-fi movie? In fact, much of the technology we see is already being pioneered.
As autonomous driving and connectivity technology continues to filter into the mainstream, our basic notions about mobility will completely change. It will revolutionise the way we think about and use cars – no longer viewed as a means to get from point A to point B, but rather a control centre for our mobile lives.
Even in advance of driverless cars on our roads, there is huge upheaval in the automotive sector. Every aspect of the automotive business is changing; from how cars are designed, produced and built, to how they are marketed and sold, to the underlying economics. Not since the first automotive revolution has there been such massive innovation and displacement of the status quo, and we will see new players surge forth, some old players reinvent themselves and others left behind.
And this is being driven (excuse the pun) by consumer desires, which are increasingly shaping the technology in our new cars. There are so many new choices for different demographic needs and desires that are affordable and flexible. The industry is moving to a model of demand driving supply and not the other way around.
For a start, the era of the two-car family will likely decline. In fact, the argument for owning a car gets weaker by the moment. Spending approximately $30k for an asset that loses 11 per cent of its value the minute you drive it off the lot is questionable economics. Mobility-on-demand companies like Uber and Zipcar now provide compelling alternatives to ownership, especially in urban areas.
Manufacturers will need to look north to the new markets in Asia. History teaches that when people make it into the middle-class, they go shopping for cars and in China and India hundreds of millions of people are now in that category.
The other key issue is complexity. Some high-end cars now have more lines of code than fighter jets, and the complexity is wreaking havoc production costs and new product launches. Vehicle recalls are at a record high, and customers are complaining about the design and usability of in-vehicle infotainment. The value of a car now resides in software and electronics – and how well they work together.
Who knows what our lives will be like in 2055. But one thing is for sure – the automotive sector will have changed more than most by then.
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