Nightmare On Car Street: The Uber-Effect Photo:

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Tim O'Brien | Dec, 28 2014 | 3 Comments

So, as of its latest capital raising, Uber is now valued at USD$41billion. According to The Wall Street Journal, that valuation – which followed a competitive bidding process between heavy-weight investors – puts it at twice the USD$19.92billion market value of Fiat Chrysler Automobiles NV, for instance.

Now who would have imagined that, and what does it mean?

It means a nightmare for carmakers in developed markets. Not now, but soon.

The rapid spread and enthusiasm for Uber’s internet ride-sharing service, providing “mobility on demand” for its users, signals a change in the way people think about cars.

Why own an asset that sheds 10-15 percent of its value (or more) the day of delivery, and continues to fall until sold for a minor fraction of its purchase and ownership cost?

Why indeed; why not instead share a car? Uber, US-based Zipcar, and here, GoGet, among others, provide alternative ‘personal transport’ models that pairs the convenience and benefits of a car, without “the hassle and expense of owning one” (GoGet’s words).

In Europe, Bloomberg reports that car ownership rates in major cities are plummeting.

And even in the US, that car-obsessed market where the automobile rules supreme, KPMG’s automotive practice reports that fewer than half of families in cities such as Los Angeles, Chicago, Dallas and Philadelphia own two cars.

KPMG projects that “the era of the two-car family will likely decline” thanks, it concludes, to companies like Uber and Zipcar.

These companies, KPMG warns “now provide compelling alternatives to ownership, especially in urban areas”.

It also has a message for car companies that “the argument for owning a car gets weaker by the moment”.

“With the potential shift in ownership demand, OEMs better update their economic models,” KPMG’s whitepaper, ‘Me, My Car, My Life’, warns.

Certainly, if Europe can be considered a model, the shift is already afoot.

According to research published by market intelligence firm Euromonitor International, the number of cars-per-1000 people in Paris has fallen nine percent since 2005; this aligns with an eight percent drop in London.

But in Munich, BMW’s heartland, the number of cars-per-1000 people has fallen by 16 percent over the same period.

Europeans, of course, are generally better served with public transport infrastructure than the US and Australia, and car-sharing (and bike-sharing) systems have a longer history there.

There are also more parking challenges in older European cities and, increasingly, more stringent environmental laws and congestion taxes providing disincentives to car ownership.

Carmakers, of course, have seen their salvation in China and in emerging markets in Africa, the sub-continent and South East Asia. China’s giant market has pulled more than one carmaker from the brink of oblivion.

But how long before a heavily congested and polluted China looks to Europe for a future model for its cities?

Smog in China
Smog in China

In its whitepaper, while recognising the emerging challenge to carmakers coming from those “compelling alternatives” to car ownership, KPMG suggests that the “era of ubiquitous connectivity - the moment when you, your car and your life are one - has arrived”.

“The car is no longer a way to get from point A to point B,” KPMG says. “In fact, it is not just a car; it’s the control centre for our mobile lives.”

All well and good, but if consumers are increasingly satisfied with the ‘control centre’ they hold in their palms, why buy a car at all?

Especially if they can use that ‘control centre’ to easily access the mobility-on-demand that Uber, Zipcar, GoGet, and others with new ideas not yet imagined, would like to show them.

Not now, but surely coming: a nightmare for some.

Tim O’Brien
TMR Managing Editor

MORE: Taiwan The Latest To Crack Down On Uber - Report
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