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The Death Of Cars Has Been Exaggerated

Jon LeSage

South Korea’s largest automaker, Hyundai, has joined ranks with other major global makers — becoming a "smart mobility solutions provider" rather than a manufacturer and seller of its vehicle portfolio.

But the primary function of these companies as builders of cars, trucks, SUVs, and vans, won’t be going away anytime soon.

Hyundai Motor promotes itself as a world-leading smart mobility solutions provider that will be able to offer solutions through its cutting-edge technologies and solutions. That will offer customers “quality time and empower them to pursue their passions at full throttle,” the company said — and has been depicting it in a new global brand campaign called #BecauseofYou.   

The first of these TV commercials was filmed in downtown Amsterdam during the morning rush hour. Viewers see a female worker trapped in heavy city traffic, unable to get to work on time. Her crisis becomes instantly transformed when she steps out of her Hyundai Nexo fuel-cell SUV and hops onto a Hyundai electric scooter — solving the “last mile” dilemma becoming common in cities around the world with booming populations, and getting to her office on time.

General Motors, Ford, Volkswagen, BMW, Toyota, and Honda can't say enough about their changing identities — and the Peugeot S.A. and Fiat Chrysler Automobiles merger was done to build a new global leader in "sustainable mobility."

It's as if auto sales as we know it today will dramatically drop over the next decade.

PSA and FCAs’ October 31 announcement starts with that message, then shifts into the economic reasons the merger is taking place. Combining the two companies would create the 4th largest global OEM in terms of annual unit sales, which will be 8.7 million vehicles. High-profit margins can be achieved based on FCA’s strength in North America and Latin America and Groupe PSA’s in Europe. The groups’ respective brand strengths will be maximized — Luxury, Premium, Mainstream Passenger Car, SUV and Trucks & Light Commercial – but Electric Vehicles weren’t included.

Former FCA chief Sergio Marchionne, who died last year at 66 from complications of a shoulder surgery, had spent much of his career in recent years working on merging the Italian automaker with another global giant. 

New vehicle sales have indeed been down over the past year, but that trend will soon turn around and the automotive industry will return to full health.

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A McKinsey report forecasts global new vehicle sales will be at 2 percent annual growth rate by 2030. Consumers are buying a lot of new vehicles, many times for the first time ever.

China, India, Brazil, and a few other countries with emerging economies, are expected to see economic growth return with consumers moving to growing metro regions with strong job demand and more need for transportation beyond metro trains and buses.

Other studies by IHS Markit, Bank of America and Merrill Lynch, and AutoForecast Solutions, predict a return to growth in new vehicle sales worldwide.

One of the theories shared by a number of futurists and forecasters is that electric vehicle sales will be the sole technology sold in new vehicles in several countries by 2030. Norway, Germany, France, China, Costa Rica, South Korea, the UK, Japan, Spain, Taiwan, Portugal, Netherlands, Israel, India, Denmark, and Ireland have proposed a ban on fossil-fuel-powered vehicles. These are at the proposal stage, with England being the only country solidifying its aims — through a “net-zero” mandate that would cut emissions 80 percent by 2050 compared to 1990 levels. Prime Minister Boris Johnson is supporting the net-zero emissions mandate.

But the UK is just one market in a massive global industry.

Global new vehicle sales are expected to come in at about 80 million units this year. Germany’s Center for Automotive Research (CAR) predicts that in 2022 sales will rise back to 84 million. Global plug-in electric vehicle deliveries reached 2.1 million units for 2018, 2.4 percent of the world’s overall 86 million units sold last year.

Let’s say new vehicle sales reach 100 million by 2030 — EV sales will have to increase at unrealistically high percentages over the next decade to come anywhere near beating new vehicles sold that will be powered by gasoline and diesel.

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One of the assumptions made by those predicting the demise of traditional internal-combustion engine vehicles is that Millennials (about 23 to 38 years old in 2019) will be the tipping point. Around the world, these consumers broke open barriers by waiting longer to buy their first car — and becoming rabid fans and riders with Uber, Lyft, Didi, Zipcar, and other mobility service brands. But when it comes to buying cars, Millennials are becoming a lot like previous generations, and are even keeping the vehicles longer.  

Generation Z — teenagers through age 23 — are still a bit young to determine what sort of economic impact they’ll be having on car sales and other markets. A recent survey study by Allison+Partners suggests that changing definitions of transportation and an influx of new mobility solutions are paving the way for mobility services to take off and new vehicle sales to decline — with Gen Z leading the way. They see cars as yet another appliance they’ll need to have access to someday that ranks up there with smartphones and gaming machines like the Xbox.

In the study, Gen Zers said autonomous vehicles make a lot of sense, and 60 percent of them believe they’ll be using self-driving cars by 2030. Owning their own prestigious car — whether that be a Tesla or a Lexus — doesn’t matter as much, or make as much sense to them.

Coming of age as the global recession finished up, and smartphones became the new norm, had a great impact on their perceptions and attitudes. The Allison+Partners study concluded that Gen Z will be the first generation in large numbers to get rides from Waymo, Maven, Uber, Lyft, and the next iteration of offerings from Tesla, Volvo, Audi, BMW, Toyota, Honda, and other makers rolling out new options in connectivity, automation, electrification, and safety — along with mobility services of their own.

Mobility won’t be taking over by 2030, with new vehicle sales continuing to see growth in global markets — and concerns over safety and reliability that will take several years to be alleviated, especially for autonomous vehicles. But Gen Z and following generations could be the actual tipping point decades from now.

By Jon Le Sage for Oilprice.com

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