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Is Our Great Love Affair With The Car Over?

Is one of the greatest love affairs of the past 100 years coming to an end?

I’m talking, of course, about the relationship between a motorist and his automobile. Profound shifts in consumer sentiment and the economics of transportation are changing the way drivers view not just their vehicles, but the concept of transportation itself. The new reality will provide substantial opportunities for companies – especially startups – that embrace the future, just as they will challenge established businesses that stubbornly cling to the status quo.

Since the days of Henry Ford, who made the Model T affordable for almost everyone, drivers have typically owned (or later, leased) their personal vehicles. People loved their cars, and automakers created sophisticated strategies to keep consumers happy for decades as they moved up the ladder from entry models up to luxury brands.

Today, a confluence of events is starting to change all that. Industry research indicates that younger people don't value vehicle ownership like their older (over thirty) brothers and sisters or their parents do.

It’s no accident that many of these younger folks are leading an urbanization movement, the exact opposite of the stampede to the suburbs that characterized their parents’ and grandparents’ generations. In the city, younger drivers today see cars as an underutilized, expensive and hard to keep asset.

Even in suburban and rural areas, young people often have a desire to live environmentally sustainable lives, and increasingly take a dim view of owning gas- or diesel-powered cars.

And the car simply isn’t the must-have toy for today’s young adults in the same way that it was for previous generations. Men and women in their twenties are much more attached to the hot, new electronic gadgets than they are to a hot, new car.

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But people still have to get around.

According to research published in a new IBM Institute for Business Value study, Advancing Mobility, The New Frontier of Smarter Transportation, a number of visionaries in the transportation field are looking to meet nascent demand by pioneering the concept of comprehensive “mobility services.”

Focusing on urban areas, these subscription-based services provide advice as well as innovative transportation alternatives that can either replace, enhance or extend consumers’ use of their personal vehicle.

Examples on the horizon include:

“Occasional-use” vehicles. Ever try to squeeze a huge package from the store – a new TV, for example – into your economy-sized car? So have a lot of people. That’s the problem of relying on the cars that you own for all your needs – you’re locked into the form factors. Several companies are starting to experiment with services that let consumers access a portfolio of temporary use vehicles – a pickup truck when you need to haul debris to the dump, a minivan when you’re taking a road trip with the family or a luxury ride for that special anniversary dinner.

This service will be far more flexible than a traditional car rental. Rental fleets are more positioned toward business customers than consumers looking to supplement their existing vehicle. In most urban areas, fleets don’t provide the variety of vehicles that consumer would want and their daily rate model doesn’t appeal to those who want a vehicle for a short time.

Transaction-based, peer-to-peer sharing of vehicles, rides and parking. Like subletting your apartment or renting out your vacation house when you’re not there, services that enable you to rent out your car or parking space will enable you to derive financial gain from assets that would otherwise be unused. For providers, it’s a capital-free way to generate revenue from mobility services.

Improved access to public and other transportation modes. Technology advances in recent years – including roadway sensors and predictive analytics – are enabling transportation planners to ponder the creation of a true transportation system – rather than just a bunch of disparate parts. Such a system will tie together all modes of transportation – private vehicles, buses, trains, and so on -- enabling individuals to quickly determine the best way to get from point A to point B. For example, software on your smartphone will instantly tell you the optimum mobility mix – based on your preferences – to use for a meeting in a nearby city. Services for the entire trip might include public transportation, a temporary-use car, and a reserved parking spot at your destination.

For these services to be successful, it is essential that consumers be able to quickly and seamlessly access them. So they will be completely integrated into the digital tethers that we all rely on – smartphones, laptops, kiosks, and so on.

Who will profit from all this coming change? For automakers, mobility services represent both an opportunity and a challenge. For more than a century, the automobile companies have been producers of products. While the move to a new services-based business models will be difficult, these companies are well positioned to succeed. After all, they control the basic transportation platform, the car, which will remain important. They have dealerships already in place that understand local needs. And their captive finance organizations can help enable a new approach founded on relationships.

But they need to move fast, because nimble competitors – from startups to established companies in other industries (retailers and utilities, for example) – will not wait.

If they don’t act, carmakers are likely to become mere suppliers of hardware to services providers, which in turn will take over the relationship with the customer.

Regardless of who ends up offering these services, travelers everywhere will be better off as transportation becomes far more flexible, efficient and faster.

Kal Gyimesi is the Industrial Sector Lead for the IBM Institute for Business Value .