Whenever a decision needs to be made, it’s good to have options. In recent years, consumers and commuters have had the freedom to choose between more modes of transportation than ever before. It’s difficult to fathom that the same thumb used to hitchhike in years gone by can now tap a smartphone and hail a ride. Yet, that is the new reality. The relatively new options of car sharing and e-hailing (colloquially known as “taking an Uber”) will play a large role in the future of transportation, according to a report from the McKinsey consulting firm.
The McKinsey report believes that new vehicle sales will increase from 70 million in 2010 to 125 million by 2025. There will be a change, however, in how those new vehicles will be utilized. The report suggests that to accommodate the growth of cities, there will be four major technological trends that will shape the future of transportation: in-vehicle connectivity, electric vehicles, car sharing, and self-driving cars. While some of the predictions are years away, some are already a viable option.
At one time, it seemed as if there were only three modes of transportation: drive a car, take the bus, or hail a cab. The rise of car sharing and e-hailing has begun to change the status-quo of transportation. Nearly 1 million people take an Uber daily and the company has expanded to 53 countries. Lyft, Uber’s rival in e-hailing, is available in about 65 cities and was recently valued at $2.5 billion. While e-hailing offers advantages for riders, for many it does not make economic sense as a replacement for a vehicle. If a commuter traveled 10,700 miles in San Francisco, the cost of doing so by e-hailing rides would cost approximately twice as much as financing a new car, and three times as much as financing a used car.
Along with e-hailing, car sharing has begun to transform the transportation industry. There are approximately 1.6 million people with car sharing memberships in the United States. An indicator of the power of car sharing is the involvement of established automakers in the car sharing movement. Daimler, which is the parent company of Mercedes-Benz, is involved with Car2Go, while BMW and Audi have also been testing the waters. Car sharing offers benefits to city dwellers with fewer miles to travel, but like e-hailing, can get very expensive very quickly. Also, various other challenges with this concept have emerged, such as parking the vehicles in major cities.
A major takeaway from the McKinsey study is that “individual vehicle ownership is not going to disappear.” Automotive News believes that while the economic merits of these new modes can be debated, it ignores the emotional aspect for the consumer. There is uncertainty if people will warm up to the idea of not owning a vehicle. Americans have displayed an enduring love of vehicles and personal ownership still remains the most convenient option available.
Several things become clear upon reviewing the McKinsey report. As the population continues to increase, innovative modes of transportation will be needed to keep roads less congested, carbon emissions down, and transportation affordable and sensible. While there are promising options on the horizon, the focus in the interim should still be on individual vehicle ownership, which is not going anywhere anytime soon. With used-vehicle prices at an all-time high, e-hailing and car sharing makes financial sense for some, but is not a one-size-fit-all solution. More focus on affordable and fuel-efficient vehicles are what is needed to build a bridge to the future of ever-changing transportation needs.