According to a major new report from research and analytics firm IHS Markit, consumers around the world are poised to ditch outright car ownership in favor of mobility as a service.
The report, "Reinventing the Wheel," forecasts that by 2040, vehicle miles traveled will have rocketed to 11 billion a year in China, India, Europe and the US (a 65% increase on today's figures) and will continue to grow with each year that passes. However, at the same time, outright car sales will start falling.
"A great ‘automotive paradox' -- where more travel via car than ever, but fewer cars will be needed by individuals -- will be a defining quality of the new automotive future," said Daniel Yergin, IHS Markit vice chairman, Pulitzer Prize-winner and project chairman. "The shift is just beginning."
Much of this disruption is being caused by companies such as Uber and Lyft. "Ride hailing has the potential to be so disruptive because it is often the most convenient for consumers and can significantly increase access to car transport, particularly in markets with low car ownership rates," said Tom De Vleesschauwer, transport and mobility practice leader, IHS Markit.
But car companies themselves have been quick to spot this change in behavior coming and in recent months have been steadily repositioning themselves as mobility companies rather than simply manufacturers. Since the start of 2017 alone, Audi, Volvo, Cadillac, Bentley, Porsche and Polestar have all rolled out subscription services that enable clients to pay a monthly fee in return for using the car they need, when they need it -- i.e., a GT car for long-distance cruising or a full-sized SUV for a family excursion -- and at the same time have been investing heavily in ride hailing and car sharing services. GM and Jaguar Land Rover both have stakes in Lyft, for example, while Daimler, Mercedes-Benz's parent company, has its own floating car rental and sharing service, car2go that is fast expanding around the globe.
As such, Jim Burkhard, vice president, global energy markets and mobility at IHS Markit believes that: "We could very well be on the cusp of the greatest transformation in personal transportation since the dawn of the automotive age. "
However, some elements of this wholesale change will be slower to mature than others. Those hoping that the electric car is also on the cusp of becoming mainstream may be in for a shock.
For the first time in history, electric car sales accounted for a full 1% of all new vehicle sales globally in 2016, and while this percentage will rise steadily over the coming years as battery technology improves and mainstream companies launch their first mass market electric cars, even by 2040, gasoline and diesel will still be the power source for 62% of new cars on the road, even if many of those vehicles will technically be hybrids, using batteries for better fuel economy or for emission-free driving in inner city areas.
"Many of [oil's] advantages as a fuel, such as its high energy-density, will persist. And the size of the current automotive ecosystem will moderate the pace of change," Burkhard said.
Nevertheless, it still means that over 30% of new cars on the road by 2040 in the territories studied will be of the electric variety. China has already taken a commanding lead in terms of demand for electrification and for building affordable electric cars and it won't be long until the rest of the automotive world catches up, partly because they will want a piece of the country's ever-expanding electric car market (evidenced by a number of joint ventures announced between US/EU car companies and Chinese electric car builders since the beginning of the year).
And even though the report paints a picture of a transport revolution of epic proportions, "There will be much that looks familiar, even in 2040," said De Vleesschauwer. "The majority of new cars sold and miles traveled will be in vehicles purchased for personal use. And a large share of those will have internal combustion engines that run on refined crude products. But the future of automotive transport will be an era defined by multidimensional competition. And the changes that future brings about will be profound and permanent."