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Monday, 12 November 2018

Urbanization, car ownership, and house ownership

My 2 November 2018 blog, "SnappCar, a car ridesharing platform" caught quite some attention. Interestingly, the FT article below, underlines my blog's conclusion: "Cars are finally becoming what they have always been: a (transport) commodity."

The trend of less car ownership started in the USA several years ago. I suppose the reasons were - and still are - a combination of (i) high student loans, (ii) (youth) unemployment and/or low starter income, (iii) high city car parking rates, and (iv) cost-friendly peer-to-peer ridesharing platforms, like Uber or SnappCar.

The title of a January 2017 study also suggests this: "Millennials and car ownership: Less money, fewer cars". For similar articles, please see: Forbes-2017, Matador-2018, Pymnts-2018PCMag-2018Wharton University-2017. Somewhat different conclusions were drawn by: Business Insider-2016, and CNBC-2017.

I think, feel and believe that urbanization, car ownership, and house ownership are (strongly) linked. Urbanization is driving up real estate prices following the availability of (well-paid) jobs. Not being able to own a house (eg, Vox-2018), makes some people become an urban nomad
"A small but diverse section of society that lives and works in an urban area, yet does not rent, own or otherwise reside permanently in any one location."
In his 2005 book, "The High Cost of Free Parking", UCLA urban planning professor Donald Shoup argued "that free parking has contributed to auto dependence, rapid urban sprawl, extravagant energy use, and a host of other problems. Planners mandate free parking to alleviate congestion but end up distorting transportation choices, debasing urban design, damaging the economy, and degrading the environment." (source). 

The introduction of autonomous self-driving cars allows for remote parking facilities. Such vehicles would come to you in the right place at the right time. However, it would also break the emotional "bond" between man and machine. Everything suggests that - for most people - a vehicle will become a transport commodity.

The above would cause a (strong) consolidation amongst premium-priced car manufacturers, similar to the 1980's reorganisation and 1990's acquisition of premium Swiss watch brands at The Swatch Group.

We should, however, always remember Levi Strauss1980s famous slogan: Quality never goes out of style.

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FT title: Memo to car UK car industry: Brexit isn’t your biggest problem



FT subtitle: The risk for the industry is that car ownership is losing its appeal for young urban residents
"They were whistling to stay cheerful at the Society of Motor Manufacturers this week. Look at the boom in electric cars! See how the fall in registrations is so much less than earlier in the year! Never mind that the UK government’s war on diesel is devastating sales of what, we were told a few short years ago, was the most responsible form of locomotion.

That was then, this is now, and saving carbon dioxide emissions is deemed less important than cutting particulates, so local authorities are hiking the cost of diesel parking permits, and the motor trade is being forced into a gut-wrenching U-turn. 

Even the above-average car salesman could be forgiven for feeling confused. The surge in electric sales may owe as much to beating the cut in government subsidy as to any real enthusiasm for them, since diesels which comply with the latest EU emissions rules are at least as green as an electric car. Oh, and then the prime minister goes and freezes the duty on road fuel. 

Confusion might help explain why the distributors are so unloved, selling on around eight times earnings. The low ratings suggest that something more fundamental than government fiddling with the rules is going on. A shiny new motor used to be a near-universal aspiration, but the twenty-something generation is falling out of love with the car. Today’s young city-dweller may not even bother to pass the driving test, especially if that makes him the “designated driver” for his mates. 

With Uber and its lookalikes at the end of your mobile, car sharing and clever new forms of short-term rental becoming increasingly commonplace, it makes little sense to pay for a pile of gently rotting metal that you hardly dare use for fear of losing your precious parking place. 

If this is ominous for the distributors, it is toxic for the manufacturers. They must bear the vast cost of developing electric vehicles just as the world may be approaching peak car. Even BMW, the car company that others want to emulate, this week reported static sales and halved margins in its latest quarter, as development costs weighed on profits. It’s not an industry for the thoughtful investor."

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