It is clear to those who are not in denial that we are on the cusp of a watershed moment in personal transportation. In Europe, electric vehicle sales are showing the kind of growth that, despite relatively small numbers so far, will mean much bigger market share in just a few years. But electrification is not the only change taking place. Could car ownership itself be as much under threat as the internal combustion engine?
Owning a car is not the most efficient form of transport in a city like New York.
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Younger people have been driving less for a few years now and buying fewer cars. There has also been a global shift towards city dwelling that shows no signs of abating. In 2018, the UN revealed that 55% of the world’s population lived in urban areas, projected to rise to 68% by 2050. City dwellers have quite different transportation needs compared to rural inhabitants. The sheer mass of people in a city makes communal public transportation much more cost effective, whereas in spread out rural areas you are better off with your own vehicle if you don’t want to be waiting hours for that one bus a day.
Cities are also starting to introduce charges for using personal vehicles, with extra fees on the top for more polluting vehicles, such as London’s Ultra Low Emission Zone or Bristol’s Clean Air Zone. Allied to this, UK cities are adding lanes for cyclists, with varied reception from local inhabitants, which incentivize bikes while increasing traffic jams. There are lots of US cities where car ownership has been more of a hindrance than a benefit for years, with very little value for daily travel, only for occasional journeys out of town. If you live in Manhattan, for example, the need for a car is minimal, and actually more of a liability.
This doesn’t mean that cars are likely to die out, though. With around 1.4 billion of them in the world and 60 million of them newly added or replaced every year, our global addiction to personal vehicular transportation will take ages to change, if it ever can in countries where automobiles are identified with freedom, such as the USA. But our need to own one all the time is diminishing. The advent of autonomous taxis, which are already in commercial use in China, could make on-demand ride hailing even easier than the likes of Uber and Lyft have already made it.
Autonomous taxis could make it even less necessary to own a car in a city.
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Electric vehicles also throw a further complication into the mix. As evangelical as EV early adopters might be, most mainstream car buyers are reticent about switching over from the familiarity of internal combustion engines. The idea of committing to an unknown new technology with an expensive purchase is unsurprisingly a bigger concern than just buying the latest incremental update from a trusted manufacturer. New cars are usually the second most expensive item to buy after a home, so no small investment.
There are specialist companies focusing specifically on leasing electric vehicles, such as UK energy company Octopus’s Octopus EV and WeVee. But these are primarily traditional leasing companies that specialize in knowing about electric vehicles and the different needs of EV ownership. The financial arrangmeents are still essentially the same as with ICE vehicles, although the expanded salary sacrifice options for EVs in the UK provide some novel ways of paying to go electric.
EV subscription company Onto takes an even more novel approach. Instead of committing to a traditional lease contract with a fixed term in years and sizeable lump sump payments at beginning and end, the Onto subscription is just for a month at a time. “Drivers want more flexibility and convenience by paying monthly but without long-term personal finance contracts or the hassle of arranging insurance, servicing, or repairs,” says Rob Jolly, co-founder and CEO of Onto. The subscription also includes a certain number of miles with free access to some of the most extensive public charging networks in the UK.
The Volvo XC40 Recharge Twin AWD is also available by subscription.
James Morris
Onto isn’t the only company offering a subscription service. Elmodrive offers a similar package, but with a much smaller range of cars available and without the simple monthly renewals and flexibility Onto offers. The minimum rental from Elmodrive is three months and you need to give 30 days’ notice for cancellation. Interestingly, Citroen is also offering its innovative Ami via a monthly subscription through Free2Move in Paris. Volvo offers the XC40 Recharge Twin AWD via a subscription service called Care by Volvo. This has an option to have a 90-day cancellation period, although it’s more expensive than if you commit to a full three years. JLR has a similar service called Pivotal for subscribing to the I-Pace.
Either way, the old model of buying a car outright, either in cash or via some form of loan, is under threat. Of course, people like to own things so owning cars won’t completely die out. But for a lot of people, particularly those living in cities, it will make less and less sense to do so. For them, subscribing to an EV when they need it, or hailing a self-driving EV for occasional impromptu journeys, could soon be the new normal.
