'Just as horses were once a status symbol and their pedigree an indicator of the wealth of the owner, cars in the 20th century were more than a mere means of transport. They were a symbol of freedom, a marker of wealth and an object of desire. In the 21st century, the role of the car in our lives is changing.'
Quote from Asset Management for Directors by Dr Monique Beedles
Ride sharing, car sharing, private car hiring, mobility as a service, they are all alternatives to the traditional 'buy a car and house it in your own garage' model. Young people place less importance on owning or even driving a car than they once did. Social status is more likely to be driven by social media likes than by shiny hubcaps.
Even before autonomous cars become commonplace, the car as a consumer item is morphing into something new. Prestige car brands such as Mercedes and Porsche have begun to offer mobility as a service. Instead of buying or leasing a car, customers pay a monthly subscription to access a fully serviced vehicle. The subscription is all inclusive, covering tyres, servicing, insurance and fuel and allowing you to change the car whenever you like. For the customer there is flexibility and convenience and for the manufacturer, there is a predictable income stream, rather than one-off sales.
This model also makes a lot of sense as we look ahead to the near future where electric cars will be the norm. Major countries around the world have already legislated to outlaw fossil fuel driven vehicles. Car manufacturers are responding with an end to research and development of internal combustion technology and transitioning their plants to hybrid and full electric production. Electric cars have fewer moving parts and require less maintenance. The end of the internal combustion engine disrupts the traditional business model of car dealers, who earn a large portion of their income through servicing the vehicles they sell. The design life of an electric car is similar to a human life, negating the need to replace vehicles on a regular basis.
Cars are just one example of a physical asset that is moving from having tangible value, to being part of an ecosystem that creates intangible value. Ultimately, there'll be no need to drive a car at all. I think there'll always be people who want to drive cars just because they love driving, much as there are people who still ride horses even though they're not required for transport. When utility is valued over ownership, the business model changes. My strategic asset value map outlines this transition and its impact on company growth. You can download the white paper here.