Disruption or revolution?

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With new disruptors and players coming into the auto industry, it looks like we are heading towards a revolution — but are we?


Revolutions are, by their nature, rare events. True turning points in history, or genuine breaks from the past, can’t happen every decade or even every century.

What’s true for nations and civilizations is also true for industries. In the early 20th century, Henry Ford ushered in a well-known and true revolution in mass personal mobility, and the past century has seen a global expansion of vehicle ownership that has changed our world profoundly.

But probably the last true revolution in the car industry was the one that gave birth to it.

Today, many will claim we stand on the cusp of another revolution in the way we move around. Uber, car-sharing apps, and autonomous cars represent nothing less than an existential threat to the old model of mass private vehicle ownership in rich countries like ours, goes the argument.

While each of these genuine innovations is exciting in its own way, and will each change the face of transportation, the revolution they promise is still far in the future.

The fact remains that despite the recent entry of all of these players and more into the personal transportation space, private vehicle ownership remains the norm in rich countries.

In countries still trying to get rich, owning a car remains a powerful status symbol and one that continues to hold sway over more than a billion members of what may be called the global middle class.

Once per capita income hits a certain level in a country, say, $10,000 per year, rates of private vehicle ownership still climb in the same predictable manner they have for all countries in the past century.

Of course, we must avoid lazy assumptions based on the fallacy that things will remain as they are because that’s how they’ve always been. As an industry we cannot bury our heads in the sand pretending these powerful forces do not exist.

However, competition is not revolution, and many of the innovations in the transport sector today touch the traditional car industry only tangentially anyway.

Uber rose from nothing to a multi-billion dollar international behemoth in just a few short years, but is providing more competition to the taxi industry than it is to vehicle manufacturers and dealers.

While Uber is massively popular in the cities in which it is entrenched, it now faces significant regulatory risk to its business model, and threats that its army of drivers may start demanding benefits traditionally associated with employment for a large firm. Both of these have the potential to add greatly to its cost base, undercutting its competitive advantage.

Car-sharing apps may at the margin delay vehicle purchases for certain young and/or lower-income demographics, but have not yet been proven to replace private ownership in any meaningful manner.

What’s more, autonomous cars, which could truly revolutionize transport in the future, are still in their infancy and will have massive regulatory and safety obstacles to overcome before mass adoption will become possible.

Though these vehicles are genuinely exciting for their possible impacts on congestion and urban parking problems, there remains a real risk today that autonomous vehicles will be unable for years or decades to overcome the fundamental safety and technical challenges they face.

For now, revolution in personal transport is more talk than reality. The most potentially revolutionary innovation is vehicles that drive themselves, though while exciting, is still years from being a reality.

Even in some future world with self-driving cars populating urban streets, it is hard to imagine a wholesale divorce from the idea of private vehicle ownership, or a total commoditization of the personal vehicle.

Cars remain a powerful symbol of freedom and prosperity in all corners of the world. This is an idea that won’t be easily upended by clever smartphone apps or futuristic robot vehicles.

While innovation is vital for the long-term survival of the industry and is ever-present, revolution remains a rarity. Confusing the two doesn’t change that.

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