Over the past decade or so, the technology industry has transformed many things we used to buy as physical products into digital services we subscribe to or access on a pay-per-use basis. Think about how we have moved from buying CDs towards paying a monthly subscription to use Spotify, or the shift from DVDs to Netflix.
Could cars be the next part of everyday life to be transformed from a physical product into an on-demand service? Some technologists and economists predict that the privately-owned car will go the way of the horse and buggy within in a decade. In their view, only motor enthusiasts and the rich will one day own personal cars, which they will use for leisure rather than transportation.
One study in the US, for example, forecasts that private car ownership will fall by as much 80% by 2030 and that using electric ride-shares will be four to 10 times cheaper than buying a new car by 2021. The researchers foresee a world where communal, autonomous (self-driving) electric cars owned by cities or ride-sharing companies offer a safe, efficient and flexible personal transportation system.
We’re already at the beginning of this revolution, with ride-hailing services like Uber and Taxify already potentially cheaper for some people than owning a car. Car sharing services such as Zipcar – which enables you to subscribe by the month and then hire a car by the hour – and Turo – an Airbnb-like service that matches car owners with car renters – have also started to pop up around the world.
MyTreasury.co.za crunched the basic numbers and found using Uber could be more cost-effective on a per-kilometre basis for people in Johannesburg, Cape Town and Durban who travel less than 50 kilometres a day. The reason for this is that you pay only for the distance you travel, without the costs of car ownership such as maintenance, insurance, financing, licences and depreciation.
One also needs to add in the lifestyle costs. How much of your time do you spend stuck in traffic or looking for parking? What if you could be making calls and working on your computer during your commute instead of sitting at the wheel?
The end of the parking lot?
The authors of the US study I cited earlier believe that the effect of shared ride-hailing will completely change how cities work in the years to come. Not only will it be more efficient to increase the utilisation of vehicles by sharing them, it will also reduce the amount of space we currently use for parking in cities where real-estate is expensive and in short supply.
What’s more, autonomous vehicles should be safer since their software will not make mistakes, drive recklessly or get behind the wheel after a beer too many after a long lunch on Friday. In theory, a shift to shared, driverless cars should also improve traffic flow by reducing the stop-start rhythm of human driving.
As great as that all sounds, shared, driverless vehicles are most likely further in the future than the more optimistic forecasts suggest. While the technology is advancing fast, it may take longer to change human behaviour. For many of us in the middle classes, a car is more than a way to get from point A to point B. It is also a status symbol, a fashion statement and an emblem of personal freedom.
This is why car ownership remains stubbornly high even in European and Asian cities with cheap, reliable public transport and bans on, or congestion charges for, private cars in their centres. The transition will be even slower in a country like South Africa. The taxi industry, unions and government will resist the job losses; autonomous vehicles are probably also not ready to navigate the unpredictable drivers of Jozi’s mean streets.
Transforming car ownership
Still, the rise of on-demand technology is already affecting many aspects of the car ownership experience. Our data at Naked indicates that a surprisingly small percentage – just over 21% – of our customers opt for car hire as part of their insurance cover. We suspect the reason for this is that many of our customers choose to save on their premiums knowing that they can Uber for a while if something happens to their car.
Car insurance itself is also turning into an on-demand service, powered by artificial intelligence and algorithms, just like ride-hailing services. For example, Naked’s CoverPause allows customers to switch their accident cover off when they are not using their vehicle for a while.
You can save around half of your insurance premium on the days that you are not driving. Simply press one button on the app to downgrade your cover. If you want to drive again, you can switch back to full cover with one click. In future, we can also expect to see car insurance pricing models, such as paying for each kilometre you drive, to become more common.
So, while car ownership and car insurance are likely to be a part of your life for some years to come, connected technology will change your experience in remarkable ways. Today, buying and switching insurance from your phone is as quick and easy as registering for Uber and hailing your first ride.
