Is Peak Car the metric for us too?

The theory of Peak Oil, advanced by geoscientist Marion King Hubbert, postulated that there would be a maximum level reached for global oil extraction. After the peak, he said, based on depletion of reserves, humankind will have to resign itself to reduction in availability of that natural resource and augment our energy feedstock with other sources.

This peaking was expected in this past decade. Critics have argued that such alarmist theories do not take into account constant human endeavour and innovations and point to the subsequent exploitation of new shale gas reserves that have provided a new lease of life for fossil fuels. However, it seems immature to deal with such an important topic with a binary black or white position. Saner minds will argue that we will need to continue to shepherd our natural resources carefully and efficiently even while we must further invest in newer and cleaner energy sources. Lately we have seen analysts coin the phrase – Peak Car. The facts are as follows. Total global vehicle sales climbed from a level of 66 million units in 2009 to a level of about 82 million units in 2013. India contributed about 3 million to that total. Their postulation is that by the next decade, global vehicle sales will breach 100 million units and by then will face several factors that will cause this figure to have peaked.

So what are these factors? Urbanisation for one. By definition, today, over half of the global population live in urban centres and by 2030, this is expected to be between 65 and 70 per cent. According to McKinsey Global Institute, already in 2007, the top 100 megacities contributed 38 per cent of global GDP and the pace of urbanisation is accelerating. Such densities of population and economic activity leave little room for personal transportation. Megacities will need a combination of public and private transportation modes with efficient and fair pricing of the various options. Such pricing initiatives, as in London and Singapore have altered how mobility is managed in those cities.

This summer, both Paris and Beijing have resorted to vehicle restrictions based on licence plates – a fraction of registered vehicles is banned each day. In these cases, the motivation stemmed not from congestion, but rather atmospheric pollution. Respirable suspended particle matter attributed to vehicle exhaust emissions had breached allowable levels on certain summer days. The fact that this is already happening in China, a country with very low levels of private vehicle ownership (by global standards), and still in growth phase, is significant.

Third, the Gen-Y generation, used to being constantly connected, are increasingly finding driving to be a distraction. In most developed nations, this generation has gone past the phase of awe of personal vehicle ownership. Hence in places like the US and Japan, there is a drop in the percentage of young adults who possess or use their driver’s licence. Furthermore, for those infrequent occasions when a car would be needed, services like ZipCar and Car2Go offer convenient temporary solutions.

So does this spell doom for the passenger car industry? Not necessarily. One cannot underestimate the important sense of independence provided by personal transportation no matter whether one is in New York, Paris, Shanghai or Chennai. Hence these evidences must be treated as another timely reminder for the auto industry to pay heed to strategic shifts in demand patterns and innovate accordingly. These innovations are expected to lead to greater degrees of autonomous vehicle capability, allowing more productive use of time for the occupants. Electric Vehicles (classified as Zero Emission Vehicles) and Hybrids represented by innovative products like Nissan’s Leaf, Tesla’s Model-S, Toyota’s Prius or BMW’s i3 will go a long way to offer cleaner mobility. Safety will be augmented by advances not only in vehicle systems but also vehicle to vehicle communication. Occupant productivity will be enhanced by the breadth of telematics and infotainment offerings. The role of the car as a node in the internet of things will facilitate car-sharing services in a world where shared assets are more efficiently leveraged. And new products will blend intelligent product features with the way they fit into the connected business-system framework. As with the Peak Oil debate, the Peak Car debate will not be solved by arguing whether we must zig or zag – it will be solved by how we see the future and intelligently steer the course. The singular factor responsible for the success of the human race through its evolution has been adaptability. The auto industry must and will adapt to the new future.

(The author is an auto industry leader with perspectives gained from working in the US, Europe and Asia.)