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Ahead of the Curve Auto Supplier Blog

November 10, 2015

The end of vehicle ownership, as we know it

Profound changes are on the horizon for the automotive industry.

In the first session of the Original Equipment Suppliers Association (OESA) Annual Conference in Detroit, OESA President and CEO Julie Fream asked Dan Ammann, President of GM, about perspectives on several issues, including financial sustainability and the global marketplace, but when asked “What is a good supplier?,” it becomes clear that the game will change, and those businesses with a total focus on the customer will survive.
 
“The traditional owner/driver model will change,” he explains. “Millennials aren’t anti-cars, but they are anti hassle.” The convenience versus burden of owning a car is tipped by insurance, maintenance and availability. Consider the fact that cars are idle 94 percent of the time. How much sense does it make to own, insure and maintain a significant asset with such limited use? Some of the implications of this changing attitude towards vehicle ownership are evident by the rapid popularity of Uber. So where does the supplier fit into this? “We want to partner with suppliers on reducing cost and advancing technology, but more importantly we want to look forward to understand the future model and the focus on the customer because the customer is the center of everything that we do. The challenge we all face is looking out to the future, and we can’t do it alone. The solutions being used today won’t work tomorrow.”
 
“Let’s Drive New York City” is a project where GM provides fleets of vehicles to large apartment/condominium complexes. The vehicles are available to the building tenants whenever they need them, as part of their housing rent or lease. The deal is further sweetened by partnering with public parking facilities throughout the region to include free parking. Of course the parking isn’t really free, but it’s built into the housing rent or lease. With this project, two major objections to millennials are overcome: cost of ownership and parking convenience.
 
Does this mean there will be a decline in vehicle manufacturing? Not necessarily. Fleet vehicles have a shorter life cycle as drivers pay for and expect current models that are in excellent condition. While the number of vehicles per capita may decline, the turn over or churn of vehicles in fleets will be more rapid. Also consider that a vehicle that is used by multiple drivers isn’t going to be idle 94 percent of the time. This brings us back to the supplier, again, to partner in the design and production of vehicles that will be driven more, with more wear and tear by operators, and without compromising expectations of quality and convenience. If anything, expectations may increase, as car-sharing drivers do not need to be concerned with routine maintenance and repairs. All they’ll expect is that a car will be available when needed, and in tip top condition.
 
Increasingly rapid life cycles and rising standards of vehicle performance will undoubtedly create greater expectations of suppliers. It’s critical that suppliers partner with OEMs to embrace the new model of vehicle ownership, as those who successfully anticipate and adapt will prevail.

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