Do cars have a future?

Not a day goes by without a new prediction on the upcoming disruption (ha!) looming over the automotive industry. First Tesla was going to eat their lunch. Then Google, then Apple, then Faraday…

Now it turns out the first mass-market EVs will come from very traditional brands like Renault (with the 41KWh new Zoe) and General Motors (with the 60KWh Opel Ampera-e) both beating Tesla’s Model 3 by months or years.

The switch to electricity is inevitable, the only question mark being when the charging infrastructure will be able to support a re-fueling cadence which will move from “twice a month” to “daily”.

At the same time, the runaway success of micro-rental (I refuse to call them “sharing”) services in urban areas meant owning a car went from “Status symbol” to “Pain in the neck” in the space of a generation.

My question however is slightly different and, maybe, more fundamental:

Why now?

Re-phrased: why are these trends (none really new) driving serious change in the industry today? To answer let’s try to follow the money.

There are two industries who border Automotive shaping the economics of two key aspects of the car lifecycle: Ownership (=>Finance) and Use (=>Energy).


Cars provide an endless source of high-yielding, (relatively) low risk investments over which the Financial Services industry can earn handsome fees, to the point that for many vendors the financial services arm generates the majority of profits.

This investment is relatively low risk because the asset does not get used much meaning its residual value can be accurately predicted: the average car drives 12,000 km per year at a speed of 30 Km/h, which means it sits idle for 95.5% of the time.

Consumers pay for an asset they don’t use.

In consultancy business, this is what it’s called a retainer: a fee that compensates for the convenience of a car that’s waiting for me, completely on demand.


Cars provided the quintessential “money for nothing” energy proposition, as an ICE  wastes as heat as much as 70% of the energy contained in its fuel, so in a way

Consumers pay for energy they don’t use

The waste is so prominent EVs would need to clock 3-4x longer mileages to consume the same amount of energy as their ICE counterparts.

I think what is shaking up the car industry is the elimination of these two giant wastes to the benefit of consumers. Is this reduction large enough to have an impact on the sector?

  • a medium-sized car costs about EUR 300 / month; ignore the night and say real usage is 5%, at stake is €2,500 per year on ownership;
  • the same car uses about 1,200 litres of petrol; if 70% is wasted, at stake is another €1,000 per year on fuel.

Multiply these numbers by the 250M car stock in the EU28 and we’re talking of a phenomenon which could shrink the monetary value of the Automotive industry in Europe by as much as €875B annually.

When you consider that in the EU28 2015 turnovers were:

  • Sales of new cars = €325B
  • Ancillary ownership services (*) = €120B
  • Sales of gasoline = €375B

(*) insurance, maintenance, tires – my estimate.

you have the answer to the original question. Given the size of this income transfer there are a few fairly obvious considerations:

  • it won’t happen overnight
  • it’s unstoppable because once understood, the incentive is just too large to ignore
  • it won’t happen in one fell swoop, but in leaps and bounds as the three giant industries which are involved will jockey to position themselves in such a way as to intercept at least some of that value
  • it has NOTHING to do with the environment, which will benefit but only as an afterthought

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