By all accounts, the global automotive industry is on a run. Sales are surging globally. Advances in hybrids, electric vehicles, and even conventional petrol engines are delivering eye-popping mileage gains.
Yet dig a little deeper into sales patterns and it turns out automakers face a worrisome trend. Data suggest that many wealthy economies have hit "peak car," a point of market saturation characterized by an unprecedented deceleration in the growth of car ownership, total miles driven, and annual sales.
In the United States—the cradle of the global automotive industry—the number of miles driven per vehicle has leveled off over the past decade, after a century of upward growth. In Europe and Japan, the story is similar: the distance each vehicle travels has been declining since around 1990. Even for newcomers Brazil, China and India—the world’s fastest growing auto markets—romance with the car may sour quickly as urban jams become the new normal.
The factors behind the peak car conundrum are at once familiar and a little surprising. The first—congestion—is a visceral force, familiar to any driver. The second factor—the web—may be less obvious, but poses a potent drag on growth of new drivers.
Despite decades of road-building, the carrying capacity of roads in wealthy economies, and especially in cities, is maxed out. Drivers are increasingly fed up with the growing toll, in both money and minutes, posed by stubborn congestion and rising gas prices.
Web-powered shopping and socializing also contribute. E-commerce has displaced many shopping trips. Socializing is going virtual, too. Young people are waiting longer to get their licenses, and buying fewer cars than prior generations. For many, social networks such as Facebook have edged out cars as a means to meet peers and expand their horizons.
How much have today’s young adults lost interest in America’s long-standing romance with cars? Zipcar recently surveyed adults aged 18 to over 55, asking them to rank which technology would be most difficult to lose: car, computer, cell phone, or a TV. Among Millenials, those between 18 and 34 years of age, the car looses out to both computers and cell phones. Even among the next older cohort—35 to 44-year-olds—computers come very near to edging out cars as top most priority.
Don’t write off driving just yet. The technologies behind the web can help alleviate the congestion causing the peak car conundrum. By connecting cars directly to the constellation of mobile, cloud, and location technologies that power the web, cars can tap into the sort of intelligent guidance that is already helping travelers to share cars and minimize jams.
In the near future, connected cars will also peed refueling, steer drivers towards open parking spaces and eliminate much of the wasted time and travel that contributes to congestion today.
The potential of this kind of machine-to-machine (M2M) communication is enormous. A recent study by the Carbon War Room concluded that by optimizing the routes of trucks, planes, trains and ships via smart M2M links, global emissions could be cut by some 1.9 gigatons, or roughly two years’ worth of global carbon pollution growth.
Car sharing offers an early example of what’s to come. Though still maturing, these programs have gained fans on all fronts. For consumers, they lower the cost of auto use. Carmakers, meanwhile, are eager to see if car share fleets can help them earn more per vehicle over its lifetime.
City planners like this model, too, because it lowering the number of vehicles on city streets. Car share-pioneer Zipcar estimates that each of its vehicles replaces or avoids the purchase of at least 15 private cars. And investors continue to pile on. Zipcar recently made the headlines when it was acquired by Avis Budget Group. Other big industry players such as Hertz (OnDemand) and Daimler (Car2Go) have also joined the race.
Startups are pushing the car share model into new territory, too. GetAround, for example is one of a handful of car share startups that does away with the need to actually own a fleet of cars. Instead, the company is building technology that matches private car owners with would-be renters.
Car sharing’s success depends as much on behind-the-scenes data services as it does on conveniently located vehicles. In fact, by eliminating the hassles of conventional rentals—such as price shopping, car availability and counter waiting—smart back end systems deliver one of the most well liked aspects of car sharing services. Their success is an early example of how connected cars can deliver mobility while reducing congestion.
Parking services are another frontier of progress. Drivers in search paces are also beginning to benefit from a new generation of connected services. These systems aim to mitigate a common urban problem: during peak hours, a third of neighborhood congestion comes from cars cruising for parking spots. By guiding drivers directly to free spaces, these new services can cut the volume of cruising.
Startups like Parking Panda, SpotHero and BMW-backed ParkAtMyHouse link property owners with drivers via social networks, while managing the transaction data, such as matchmaking, timing, payment collection and insurance. For those who rent out their parking spots, the rewards could be lucrative. By one estimate, drivers in the U.S. spend $30 billion annually on parking services.
Similarly, San Francisco is one of a growing number of cities developing smart parking spots on city streets that sense when they’re open. Mobile app developers are using that data to guide drivers to the nearest spot.
Electric vehicles are a hotspot of connected-car innovation, too. Since EV drivers can’t afford to be stranded with an empty battery, manufacturers are today collaborating with utilities, retailers, charging networks and other key players on software that directs drivers to available chargers at their destination. The apps can also reserve a spot for them, and settle payments for the space, the power, and related services.
As the auto industry and its allies race to develop these services, connected car transactions are growing more complex. Joining automakers, garages and fuel stations, newcomers such as banks, utilities, cell phone companies, mapping services and retailers are also scaling their efforts to connect with vehicles.
Behind the scenes, the need to interlink this expanding ecosystem is growing more urgent. Indeed, for these nascent services to flourish, the connected car community faces a challenge to develop the digital infrastructure necessary to exchange data reliably, quickly, and flexibly.
Fortunately, many of the key technologies are at hand. In the cloud, remote analytics can process the big data volumes necessary to deliver real-time location services to millions of vehicles. Secure wireless links and high-volume transaction processing that can help wirelessly settle complex financial exchanges between vehicles and the grid are ready today.
SAP is working with industry partners to integrate existing technologies and to advance new systems, all in an attempt to ensure that the digital infrastructure is smart and rugged enough to help tomorrow’s connected cars deliver sophisticated services.
This fits into SAP’s greater vision, one where an interconnected world operates more intelligently. It’s a future where mobile devices seamlessly trade information with the cloud, and where powerful analytics analyze these streams to respond to users with ever-more-useful guidance, where it’s needed, just in the nick of time.
That might mean predicative warnings about traffic conditions, or a tip to find an open parking space just as a driver pull’s into her destination, or perhaps a well-timed text about a great deals at a favorite store as you’re driving nearby.
Second, SAP already provides the IT backbone for companies across the automotive, transportation, utilities, oil and gas, retail and public sector market segments. All this will make it easier to connect people, cars, and organizations.
We’ll likely never eliminate the conditions that contribute to the peak-car conundrum. But with smarter, connected cars, the auto industry and its allies may yet prove that the so-called peak is really just a prelude to an era of connected cars that not only cut congestion, but boost the economy, make drivers’ lives a bit easier and help the environment in the process.