Humanizing Design

A New Kind of Car Utility

A New Kind of Car Utility

A look through the rearview: history of car ownership

The release of the Model T in 1908 gave Americans a new way of looking at the automobile; what was once out of reach became accessible to the middle class, and the automobile was solidified as a symbol of freedom and independence. Additional automakers like Chevrolet soon emerged with a variety of options for car buyers. With personalized features, the utilitarianism of the Model T was no longer enough, and the industry progressively segmented itself by style, performance, and price.

Although specific market segmentation has been an industry standard for decades, consumers today are moving away from their connection to particular makes and models. Instead, the new generation of automobile buyers is viewing cars as “transportation machines.” [1] Millennials, in particular, are shifting back towards the same goal of basic utility that the Model T offered, without actually owning the car to achieve it. Technology is allowing societies to become more connected, improving how efficiently we use our resources and how well we know and trust one another.

An evolving idea of convenience, a cultural shift in identity formation, and technology convergences are all transforming car ownership into more of an option than a necessity, specifically in more dense urban areas.

New decisions are being made when it comes to commuting, and building a deeper understanding and empathy of this new thinking will be key to automotive manufacturers’ success in the future. People’s needs and wants have changed, and it is important to track what these needs are today to better understand where they are headed.

Fewer drivers, fewer buyers

According to Michael Sivak, research professor at the University of Michigan’s Transportation Research Institute, the rates of ownership began dropping two to three years before the latest US recession. He elaborates, thinking “that means something more fundamental is going on” than simply cautious spending during difficult years. [2]

Although Generation Y accounted for 27% of US retail auto sales in 2014, this amount is disproportionate to the generation’s size. When looking at JDPower’s data from a different lens, we see that 47.5 cars per 1,000 Generation Ys were purchased in 2014, versus 67.1 for Generation X and 67.2 for the Baby Boomers. Put in other terms, millennials were about 29% less likely than their preceding Generation X to buy a car in 2014. [3]

Additionally, many millennials aren’t even inclined to get their driver’s license. Instead, when they turn sixteen, they are excited to create an account with Uber. According to another study conducted by Michael Sivak, 46% of 16-year-olds had driver’s licenses in 1983, versus only 28% in 2010.[4] This graphic from his study illustrates this steady decline among all millennials.

 

young_drivers
([4] – NY times)

Without licenses, these millennials are turning to alternatives such as ridesharing and public transportation. This naturally means there are fewer people driving. In his analysis, Doug Short of Advisor Perspectives found that, when adjusted for population growth, the number of miles driven in the United States peaked in 2005 and has dropped steadily since. [2]

An evolving idea of convenience

Convenience has long been highlighted as a big priority for consumers, but what is considered convenient has changed. It used to be that owning your own car was the ultimate convenience. However, there are costs associated with this convenience, such as auto insurance, parking, and vehicle maintenance. Convenience is now thought of as more than just getting where you need to go when you need to get there; it is achieving this without ownership costs and, with ridesharing, without even having to get behind the wheel.

For example, consider the unfortunate event of getting a flat tire. In a personal vehicle, you must have the proper tools and a find a safe enough space to perform the change. Many auto owners have AAA service, but this adds yet another expense and is still not entirely convenient. With carsharing, you can simply park the car, press a button to call service, step out of the car, and walk on your way. Even easier than this in a rideshare situation, where all you do is end the ride and request a new one that will arrive within minutes so you can continue on your way.

Today, all you need to navigate urban areas are a smartphone and a select few applications. Among these applications are ridesharing, carsharing, bikesharing, and public transit tools. With ridesharing, Uber or Lyft, the two industry leaders, can dispatch a car to you immediately, and you can expect your ride within minutes.

The median wait time for Uber in Austin is 3.7 minutes according to Newsweek’s December 2014 article. [6] Car2Go, a carsharing service that allows you to rent Smart cars by the minute, has an application with a reservation function, so you can plan ahead and know exactly where to go for a nearby vehicle.

Austin’s B-Cycle bike-sharing program is one of many across the country, and bike stations are strategically positioned throughout urban areas. They, too, have an application to locate stations and bicycle availability at each one. Public transit organizations have also caught on to the importance of mobile, and it is now a given for them to offer applications as well. For example, Austin’s CapMetro app will help you plan a trip, purchase passes, and notify you of bus arrivals and detours.

Applications like RideScout are combining these options into one interface, where it can recommend optimal combinations of mobility resources. You can now plan out and compare a great amount of transportation options all from your phone. Where these services are available, ditching car ownership is not intimidating. In fact, it opens up a technological ecosystem of options.

transpoort_types

Cost breakdown: the accessibility of alternatives

Based on our parking cost assumptions and car ownership cost estimates from the 2012 Consumer Reports, we can estimate an annual overall cost of $8,675 for mid-level personal car ownership. To put into perspective how much transportation alternatives cost, consider how many other mobility services you could get for this same price. In Austin, Texas, a premium public transit pass costs $744 per year and an annual B-Cycle pass costs $80, leaving $7,851 per year for supplemental ride and car sharing services.

Consider the journey below, which covers a good amount of Austin’s urban area.

across_austin

In addition to their public transit and bikeshare access, an Austinite could take an Uber X across the city about 487 times per year, or 1.33 times per day. Additionally, Uber rides in a more central downtown radius will cost around $6, so one could take more than twice as many rides if not going quite as far.

If this Austinite instead prefers a carsharing service, they could cover this same distance about 785 times per year, or just over twice per day.

The premium buses, with wifi onboard and real-time updates, will also take you across town in 41 minutes, according to Google’s estimate.

This breakdown shows that, for the same annual cost as car ownership, an urban dweller has plenty of flexibility for getting around. One likely would not need as many car and ridesharing trips as this budget allows, leaving them with savings in their pocket, too.

Diminishing role of car ownership to forming personal identity

Technology is not only increasing transportation options and efficiency; it is also reinventing how millennials define themselves. Social media has established itself as the primary outlet for millennial expression, and this generation’s portrayal of their life experiences carries more weight than how they get around town.

This shift in identity focus is correlated to a shift in priorities. Mimi Sheller, a sociology professor at Drexel University and director of its Mobilities Research and Policy Center, explains that “millennials don’t value cars and car ownership, they value technology — they care about what kinds of devices you own.” [2]  Darren Ross of Fast Company puts this into perspective: “The tech gadget is their most prized possession, and has a much higher value to a College Millennial Consumer [CMC] than transportation or owning a car. Think about it: while CMCs are likely to share a car and a ride, there’s no way they would ever share their phone.” [7]

As a result, automotive manufacturers should start looking at their car as a gadget that enables a better commuting experience. For example, Ford recently connected its Microsoft SYNC technology with Domino’s Pizza Ordering application to make it possible to order your favorite pizza while in your car by simply saying “Place My Easy Order”.

Further reducing cars’ impact on identity formation is the increasing quality from lower-end manufacturers. A wide range of car companies are converging on fuel efficiency, dependability, style, and in-car technology. Body styles are being designed in similar ways, and interiors don’t feel so different. Both a Kia and a Mercedes have Bluetooth technology, and dashboard interfaces are relatively similar in capabilities. What were once differentiators have become standards, building less excitement around the features of luxury cars. Manufacturers must now nurture their brands, but with car status adding less to one’s identity than in the past, high-end manufacturers will have a more difficult time making car ownership a desirable dream for the next generation of buyers.

cost_breakdown

Market outlook

The changing transportation climate is forcing auto manufacturers to re-think their offerings and marketing strategies. For example, Honda, along with Mercedes and Ford, has begun positioning itself as not just an automaker, but a “mobility company.”

In conceptualizing the next generation of vehicles, Honda is keeping rideshare drivers in mind: “Uber drivers might want vehicles that are big enough to hold passengers, fuel efficient and require no downtime in the service shop, so we need to be aware of that, and that might impact design,” explains Jay Joseph, assistant VP in the product regulatory office for American Honda Motor Co. [8]

General Motors has also caught on, offering Uber Preferred Dealerships where customers who drive for the rideshare company receive discounts on GM vehicles. With this movement towards a shared economy of vehicles, many millennials’ primary exposure to automobiles will be based on what their Uber or Lyft drivers choose to purchase. Marketing to this group of drivers is a new, yet invaluable strategy.

Looking even further ahead, Bill Ford, executive chairman of the Ford Motor Company, is planning for when personal automobile ownership is impractical or undesirable. He suggested forming a partnership with the telecommunications industry to create cities in which “pedestrian, bicycle, private cars, commercial and public transportation traffic are woven into a connected network to save time, conserve resources, lower emissions and improve safety.” [2]

Perhaps this is leading toward a future state where individuals rarely own cars and rely on Uber-like fleet services of self-driving automobiles. The journey of interaction between an individual and self-driving car certainly will be a one-of-a-kind experience. The car will need to provide more information to help the person being transported feel safe and secure. Beyond self-driving cars, there are opportunities for remote control vehicles to enter the market, use cases for which will become more clear with time.

These companies are now starting to look at the car owning experience and thinking about the ways cars provide utility to our lives. By doing this, they are creating new systems and thinking about specific ways cars help people get around.

For example, looking past personal ownership, manufacturers are beginning to explore the business travelers segment. The rental car industry has its fair share of inconveniences as well, and as consumers are coming to expect more, companies like Silvercar are stepping in to deliver.

Instead of taking a shuttle from the terminal to a rental car office, waiting in a long line, and then getting a surprise vehicle, you can now have a standardized rental waiting for you in the lot. Silvercar will have a silver Audi A4 waiting for you, which you can get in and out of by just scanning your phone on the windshield. No lines, no keys, no hassle.

Uber has also caught on to the opportunities with business travelers, and Uber for Business is in beta as of June 2015. With this offering, businesses can set location, time, and destination parameters on trips for employees to take on the company’s tab.

As attitudes about transportation transform, so will the automotive industry. The key for the involved players is to identify what markets will still be viable once personal ownership is no longer relevant on a larger scale. Then, once these markets are identified, the next question will be ‘how can technology experiences continue to improve these people’s lives?’ This is a question that Handsome’s research and design strategists are constantly asking with their Human-Centered approach, and we hope to contribute to some of these future solutions.
Sources:

[1] 2015 Auto Industry Trends (PWC insights)
[2] The End of Car Culture
[3] Young People Are Buying Fewer Cars
[4] For Some Teenagers, 16 Candles Mean It’s Time to Join Uber
[5] Cost of Car Ownership (August 2012)
[6] Here’s How Long it Takes to get an Uber Across US Cities
[7] Millenials Don’t Care About Owning Cars and Car Makers Can’t Figure Out Why
[8] Automakers Warm to the Era of Ridesharing

 

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