Unbundling Car Ownership

Back in 2003, when the iPod was two years old and Apple launched iTunes, a few prescient observers in the music and tech industries saw the writing on the wall. By enabling users to buy one song at a time, Apple underscored the inefficiency of buying an entire album. Music lovers had been unbundling albums for years. (Remember mix tapes? They were the first playlists.) And skipping over lousy songs caused more than a few people to question how much they were paying for all those unloved tunes.

Today, Apple is the biggest company in the universe, and reports suggest they are eyeing another industry that is ripe for disruption: the auto industry. Apple is rumored to have joined Google in the race to develop a self-driving electric car. This has prompted several auto industry executives to offer everything from dire warnings to bold assertions that they have nothing to fear. But it’s unlikely that Apple or Google want to go head-to-head with auto makers in the long, largely unsuccessful tradition of Tesla, DeLorean, Tucker, and others. Instead, they are riding a wave of web- and mobile-enabled technologies that are changing the way people move from point A to point B. Flourishing eBike sharing programs in a dozen cities, Zipcar, Uber and other ride-share services, JustPark (an app that matches drivers with vacant parking spaces) – all serve hyper-connected consumers in large urban areas, where individual car ownership is inefficient and expensive. Summoning a small, self-driving electric car would be faster and more convenient than biking or taking a bus, and it could cost less than owning a car. Users would have more time to work in transit, while gas, insurance, registration, parking, and traffic tickets would go the way of the 8-track tape. In other words, tech companies aren’t going after the car industry; they’re going after the idea of car ownership.

The contentious introduction of Uber to both mature- and developing-market cities shows that navigating the local regulatory environment and dealing with local politics and corruption will be a massive challenge to market entry. The first broad roll-out of this new car usage model will be critical for spurring demand among consumers and opening the minds of city administrators. It would probably have to happen in a city that has orderly traffic conditions, good roads, a weak taxi union, and a progressive, technologically hip leadership. Think Singapore or Dubai. But a more intriguing possibility is one (or more) of the mega-cities in China, where the government has set ambitious goals to reduce air pollution. As the concept of car ownership shifts, opportunities will go to those who consider the entire ecosystem and design for hyper-connected users who are willing to throw their babies out with the transmission fluid.

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