I love my car. It is elegant. It’s fast. It makes me smile every time I get into it. But it may be one of the last cars you own as transportation patterns go through a big shift.
Many studies have predicted that by 2030, almost no one in the United States and Europe will own their own car. Instead, most people will use electric and autonomous rideshares to get around. In Dubai, they can use self-driving drones. I’m not convinced of the timeline, but I do know this: the world of mobility is changing before our eyes.
South African vehicle sales volumes have been in steady decline for several years, and that is unlikely to change. Many young and urban people do not want to have their own car; they just want to get from A to B. Others want to own cars but can’t for various reasons.
There are around 12 million vehicles on the roads of South Africa. Of these, some 2.4 million are financed and some three million are insured. Data from TransUnion, a credit bureau that stores consumer and business data, suggests that fewer than 15% of vehicle finance applications are accepted. About 24 million sales leads are generated each year, but the industry sells about 580,000 vehicles, of which 180,000 are new vehicles and 400,000 are used.
This tells us a couple of things. First, many people are interested in buying a car but are unable to do so through a traditional credit application. One way to address this is to use alternate data to allow more people to qualify for credit to buy or lease vehicles.
While that may draw more people into cars, it won’t solve the bigger problem: There’s a huge market out there that requires transportation but can’t accommodate it. In other words, South Africa doesn’t have a car ownership problem, it has a transportation problem. And while financed vehicles will remain relevant for some time, the real opportunity for the auto industry lies in creating alternative modes of transport in line with global trends.
If we consider transportation as a continuum, with pure ownership on one side and users on the other, everything in between is transportation as a service, such as leasing, subscription models, e-hailing, taking a plane, car swimming pools, public transport and shared rides.
In Europe and in more developed economies, shared rides and shared rides have become the norm. They are an emerging trend in South Africa, although largely in major urban centers for now.
Several factors are driving this service mobility model. One is the rise of subscription models for all kinds of goods and services. This model offers simplicity and adaptability and is attractive to many people.
Some people want to avoid the hassles of car ownership, such as maintenance and insurance, while others want to avoid significant out-of-pocket costs and long-term financial commitments. A growing number of car manufacturers already offer subscription models for their vehicles.
A second driver of mobility as a service is the increase in urbanization. It is estimated that 55% of the world population lives in cities. They don’t need a car; they just need access to transportation, and that could include everything from public transportation, bikes, and scooters to rideshares and carpools.
In South Africa, we have all the elements we need for alternative ownership models, such as subscriptions. Think affordable, flexible and long-term car rental. We have the demand; a lot of people want to be mobile. We have the supply; There are a lot of idle vehicles at dealerships, and vehicles that don’t move don’t make money.
That’s why the future of transportation, and the vehicle itself, is not an electric vehicle. That is just what drives the vehicle. The future is in the use of technology. It’s about providing the transportation consumers are looking for. It’s about helping the industry create personalized experiences that meet the individual needs of customers.
The future is in giving tech-savvy consumers the control they want in any car ownership.
Personally, I can’t see myself without some type of vehicle in my life. But, like the auto industry, it’s important to be open to change. The relevance of the industry depends on it.
Kriben Reddy is Vice President of Vehicle Information Solutions at TransUnion Africa.
Opinions expressed are those of the author and do not necessarily reflect official policy or the position of the mail and guardian.
