The end of car ownership: how would the automotive industry adapt?
We all remember our first car and the excitement and sense of freedom that came with it, even if it wasn’t the smartest or newest model on the road. In later life, if we’re lucky enough to be able to afford a slightly more expensive model, cars can become a status symbol.
But what if this desire to own was replaced instead with a desire for convenience and a pay-as-you-go approach? With a fall in the number of people learning to drive, an increase in the popularity of companies like Uber and the likelihood of autonomous vehicles on our roads not far away, there are fears that we are seeing a shift towards renting, rather than owning, a car.
In many ways, it makes economic sense. It removes the need for the upfront capital investment and later repayments required to purchase a car, along with the on-going burden of running costs, regular servicing and MOTs.
If we do see a fundamental shift in the long held and traditional model of how we own and use cars, it will greatly impact various industry stakeholders. Let’s look at each affected party in turn.
1. Manufacturers and dealerships
Brand loyalty is vital in the car industry, with a focus on keeping the customer happy so that they return time and time again. However, if it is not individuals purchasing vehicles but hire companies then manufacturers and dealerships would need to re-think how they built and secured that brand loyalty and repeat business.
Manufacturers and dealerships would need to focus on targeting hire companies that are on the hunt for value for money, reliability and costs of servicing and operation: a very different beast altogether. Perhaps this movement would see the end of customised leather seats and a move to a more functional approach where cars are built for back seat driver comfort and high mileage.
If this trend hit the manufacturers as hard as suspected, it would alter the focus of the entire supply chain as it looks to support the revised requirements.
2. Second hand sales
If cars are held in fleet ownership and we pay to use vehicles only when needed, it is conceivable we will see an end to, or at least a significant drop off, in the second hand market. After all, why buy a second hand car if you can easily hire a new one when you need it?
Because hire companies would demand a decent return on the investment they make when purchasing vehicles, fleet cars would be subject to higher mileage and wear and tear reducing the likelihood of these vehicles being an attractive option to buyers who want convenience.
3. Finance companies
At present, finance options such as personal loans, individual leasing and hire purchase agreements support the individual ownership model. Often brands have their own captive finance companies to meet this demand and help secure an on-going customer relationship.
However, with a move to a new model of ownership, we would likely see more opportunities for fleet financing and therefore a change in the parties providing finance to the industry. If vehicles were used for car sharing and hire, it would affect the residual asset value and therefore the lending profile and risk.
New opportunities are emerging for finance companies to support the new ownership and usage model, through supporting cashless, secure and instant payment methods for the hire of cars.
4. The insurance market
Currently, car owners in the UK buy insurance for specific vehicles. If we see a shift to hiring cars and using taxi services instead of owning, the question then turns to both if and how individuals secure insurance. Would hire companies arrange for the cover and include costs in the hire price, or would we as individuals need insurance for any vehicle we may use?
Because fleet insurance could not take into account the risk profile of the individual driver, premiums might be higher as the insurers cannot assess their risk profile with the same degree of certainty as they can with individuals with a known claims history.
5. Technology companies
From reservation systems to payment systems, all new ownership models would be underpinned by technology. In the hire market for instance, companies would need to consider how they track vehicles and deal with drop offs and returns in different parts of the country. The opportunities in this market are remarkable.
6. Public transport
As access to cars is becoming easier and cheaper, it is likely that we can expect the demand for public transport to decline.
Maintaining environmental and sustainability commitments are an on-going need, with the aim of ultimately reducing the number of vehicles on the road. As a result, discussions need to take place around the integration of the new model of ownership and the existing public transport infrastructure.
If the process is kept simple, then the two structures combined might actually allow greater mobility at a lower cost. Remote locations would have better access to a wider transport network, and hopefully this would encourage people out of their cars and onto public transport. A long shot perhaps, but maybe some will even get rid of their car altogether.
A seismic shift could happen relatively quickly, changing the automotive industry irrevocably. As well as challenges, this new landscape would present huge opportunities for those who react appropriately. Maybe you can be one of the disrupters in the new market.
Ruth Andrew, Principal Associate at national law firm, Mills & Reeve
Follow @ManufacturingGL and @NellWalkerMG
Ultium Cells LLC/Li-Cycle: Sustainable Battery Manufacturing
Ultium Cells LLC - a joint venture between General Motors and LG Energy Solutions - has announced its latest collaboration with Li-Cycle. Joining forces the two have set ambitions to expand recycling in North America, recycling up to 100% of the scrap materials in battery cell manufacturing
What is Ultium Cells LLC?
Announcing their partnership in December 2019, General Motors (GM) and LG Energy Solutions established Ultium Cells LLC with a mission to “ensure excellence of Battery Cell Manufacturing through implementation of best practices from each company to contribute [to the] expansion of a Zero Emission propulsion on a global scale.”
Who is Li-Cycle?
Founded in 2016, Li-Cycle leverages innovative solutions to address emerging and urgent challenges around the world.
As the use of Lithium-ion rechargeable batteries in automotive, industrial energy storage, and consumer electronic applications rises, Li-Cycle believes that “the world needs improved technology and supply chain innovations to better recycle these batteries, while also meeting the rapidly growing demand for critical and scarce battery-grade materials.”
Why are Ultium Cells LLC and Li-Cycle join forces?
By joining forces to expand the recycling of scrap materials in battery cell manufacturing in North America, the new recycling process will allow Ultium Cells LLC to recycle cobalt, nickel, lithium, graphite, copper, manganese and aluminum.
“95% of these materials can be used in the production of new batteries or for adjacent industries,” says GM, who explains that the new hydrometallurgical process emits 30% less greenhouse gases (GHGs) than traditional processes, minimising the environmental impact. Use of this process will begin later in the year (2021).
"Our combined efforts with Ultium Cells will be instrumental in redirecting battery manufacturing scrap from landfills and returning a substantial amount of valuable battery-grade materials back into the battery supply chain. This partnership is a critical step forward in advancing our proven lithium-ion resource recovery technology as a more sustainable alternative to mining, " said Ajay Kochhar, President, CEO and co-founder of Li-Cycle.
"GM's zero-waste initiative aims to divert more than 90% of its manufacturing waste from landfills and incineration globally by 2025. Now, we're going to work closely with Ultium Cells and Li-Cycle to help the industry get even better use out of the materials,” added Ken Morris, Vice President of Electric and Autonomous Vehicles, GM.
Since 2013, GM has recycled or reused 100% of the battery packs it has received from customers, with most current GM EVs repaired with refurbished packs.
"We strive to make more with less waste and energy expended. This is a crucial step in improving the sustainability of our components and manufacturing processes,” concluded Thomas Gallagher, Chief Operating Officer, Ultium Cells LLC.