Navigant Research Blog

Are Automakers the Losers in the Vehicle-Sharing World?

— August 7, 2015

Vehicle sharing is a hot topic in the media. Reports of carsharing services as well as the always popular topic of ride-hailing company Uber and the other companies in that same market, such as Lyft, are on the rise. Vehicle sharing truly is a disruptive force, and it’s helping create a new model for transportation: on-demand mobility. There is an irresistible urge to ask who the winners or losers are in this new landscape, but some assumptions about who is going to be losing are not likely to be proven.

Winners and Losers

One of the most common questions is: Will automakers be the losers thanks to reduced demand for personal vehicles? Navigant Research has projected flattening growth of light duty vehicle (LDV) sales over the long term in certain markets, mainly North America and Europe. But carsharing is a relatively small contributor to this trend. The data on how many personal vehicles are replaced for each vehicle in a carsharing service vary, but estimates from University of California – Berkeley’s Transportation Sustainability Research Center are that each vehicle in a carsharing service replaces four to six new car purchases and postpones up to seven car purchases. Although carsharing memberships have been growing rapidly—Navigant Research estimates that global membership surpassed 3.5 million as of early 2015—the number of vehicles required to serve these members is likely to be well under 100,000. And the impact of these vehicles will be a small percentage of total LDV sales, which Navigant Research estimates will reach 88.8 million in 2015.

Staying in the Game

Automakers are still jumping on the carsharing trend, however.  BMW and Daimler have made the biggest commitments so far, with the DriveNow and car2go services, respectively. These two services alone represent over 1 million of the total global carsharing membership. But Ford, Audi, Toyota, and Renault have all been trialing limited carsharing or other vehicle-sharing services. Carsharing may not cut into their vehicles sales significantly, but the overall vehicle-sharing trend does represent a shift in how people in urban environments—a growing percentage of North Americans and Europeans—expect to get around. By offering vehicle-sharing services, automakers can identify their brand with the new world of on-demand mobility. They can also establish brand identity with the users of vehicle sharing, many of whom will become vehicle owners one day. And, they can secure new revenue streams. The vehicle-sharing market will more likely be something that automakers see as complementary to their existing business, not  a threat, and they may even be more likely to try to cooperate with the business than to resist it.


Could Privacy Concerns Inhibit Smart Mobility?

— July 6, 2015

Smart mobility is a hot topic in the media, among policymakers, and with non-governmental organizations (NGOs) and startups.  The idea that connected technology is opening up new mobility options that are more sustainable and more available is inherently appealing.  Carsharing, rideshare apps, increasingly sophisticated city mobility mapping services, and smart parking services are all part of the connected, on-demand mobility ecosystem that cities are enthusiastically embracing. In the recent report, Urban Mobility in Smart Cities, Navigant Research forecasts that revenue from smart mobility technologies, infrastructure, services, and solutions will reach $5.1 billion in 2015 and rise to $25.1 billion in 2024.

The appeal of smart mobility to cities is clear. With rising urban populations, city officials are facing pressure to ensure they have a range of readily accessible and affordable transportation options to minimize congestion and to control emissions levels. Budget constraints can make this challenging, so cities are looking to less capital-intensive ways to make transportation improvements. Ubiquitous connectivity offers the potential for crowd-sourced data collection, new transportation services like carsharing and ridesharing, and sophisticated traveler information systems that are truly multimodal. But it’s not a sure thing for all of these new offerings.

In the rush to embrace new mobility options, there is the potential to overlook some issues that could generate backlash. Privacy is at the top of this list.

Tracking Your Movements

Privacy concerns are nothing new in the world of big data, but the multitude of new data-gathering methods for transportation can raise privacy concerns among the public. These concerns can revolve around how data is being gather or how it used. For example, New York-based start-up Placemeter has officially launched its new data intelligence platform, which relies on smartphone video recordings in buildings to track pedestrian traffic. Pedestrian movements have been one of the black holes in the city’s pictures of travel patterns, so the service could prove tremendously valuable. It offers much more comprehensive data collection than current tracking methods. But will the public feel squeamish knowing that there are multiple smartphone cameras trained on them? For cities that have comprehensive security camera installations, this may seem more of the same, but it could be a concern in cities that haven’t already made that adjustment. Placemeter’s video data is anonymized, and the videos are discarded, but since pedestrian don’t opt in to being recorded, it could raise some concerns.

Opting In

Opting in is going to be the main way forward for many companies looking to use crowdsourced data. For example, Ford is unveiling a parking app that uses data from its vehicles’ driver assist sensors to track available parking spaces. Ford figures this will be less expensive than installing sensors throughout parking spots. The company has made a commitment to asking its customers to opt in to data-gathering solutions. Similarly, Uber’s new partnership with Starwood Preferred Guest program lets Uber customers opt in to sharing their data with Starwood for points.

However, these new data collection methods also require trusting companies to handle the data appropriately.  Uber was forced to beef up its internal privacy procedures after a couple of scandals involving inappropriate use of its customer data, so similar breaches could also lead to public backlash.

The reality is that many transportation services used today already rely on personal location data, so we’ve already entered this brave new world. But an incident where customer data is accidentally revealed or used inappropriately could spur the public to place more scrutiny on the how data is being collected and how it is being used.


South Korea Looks to Jump-Start Its PEV Market

— June 10, 2015

South Korea has evidently tired of being a laggard when it comes to plug-in electric vehicle (PEV) adoption. Total PEV sales in 2014 were 850, well under one-tenth of 1% of the country’s 2014 light duty vehicle (LDV) sales. Compare this to its neighbor Japan, which had around 33,000 PEV sales in 2014. While that is still less than 1% of all LDV sales, Japan had around 110,000 PEVs in use as of the end of 2014, compared to around 1,800 in South Korea.

South Korea is now looking to jump-start the PEV market, announcing major investments in charging infrastructure and promoting technologies that can make PEV charging as easy as possible.

It’s somewhat surprising that South Korea’s PEV market has been slow to develop given the country’s reputation as a high-tech center and, more significantly, its strength in the lithium battery market. The lack of truly market-competitive PEVs has been a key factor. The Kia Soul electric vehicle (EV) was introduced in 2014 and quickly shot to the top of the PEV sales figures for South Korea. This year is expected to see the Hyundai plug-in hybrid go on sale, so Navigant Research expects faster sales growth of PEVs in South Korea. But a potential roadblock will be the difficulty of home charging in a country where much of the population lives in multi-unit dwellings.

Removing the Roadblocks

The government in South Korea’s largest city, Seoul, is looking to remove this roadblock with an innovative plan to support 100,000 new charging locations. As of the end of 2014, Navigant Research estimates there were fewer than 100 public stations in Seoul and around 700 to 800 privately owned stations.  So, at first glance, installing 100,000 stations seems challenging indeed, but the stations will really be standard 220 outlets, where a portable charger can be plugged in. South Korean company Powercube manufactures the chargers, which reportedly cost under $1,000 and can be equipped with an RFID reader that will allow Powercube to track the user’s electricity consumption.  The EV driver will be billed directly by Powercube. The RFID reader also transmits the time of the charging session, which suggests that the driver can take advantage of time-of-use rates.

The city government is looking to secure parking spots in garages and apartment complexes where drivers will have ready access to an outlet to plug in. The chargers, called  EV-Line, only charge at 3.3 kW/hour, so they won’t be especially fast chargers. This could hinder interest, if the drivers knows it will take up to 8 hours for a full recharge, and could also cause problems with drivers unable to access an outlet as an EV occupies the designated parking spot for many hours. The program seems to be a way to address the charging problem without the massive investment that would be required to install large numbers of Level 2 public chargers, which cost $2,500 and up and have significant installation costs, as well.

Making the Commitment to the PEV Market

South Korean company Kodi is also jumping in to the low cost charging market. The company is set to release a 3.3 kW mobile charger, the MTC, that will also use a standard 220V outlet and be made available for under $1,000. Drivers will be able to manage the charger through their smartphones, which will also allow them to be billed for electricity used.   Other initiatives include POSCO ICT’s commitment to installing its charging stations in hotels and across South Korea and telecom company KT Corporation’s pilot program to re-purpose unused telephone boxes into charging stations.  South Korea is showing a real commitment to making PEV ownership more attractive and significantly moving the needle on PEV sales.


Incentives for EVs Continue to Drive the Market

— June 5, 2015

Can cleantech incentives be too successful?

This is a question that Norway is grappling with as the country considers dropping its generous electric vehicle (EV) subsidies. EV drivers in the county receive a number of benefits, including free parking and bus lane access, but the biggest by far are the tax exemptions. Since taxes in Norway can double the price of a conventional car, an EV without sales tax suddenly becomes much more affordable. One study estimated that total subsidies for EVs in Norway equated to around $8,200 per car per year. And they’ve worked. Norway has the highest EV adoption rate in the world. Navigant Research has estimated that battery electric vehicles were around 13% of the country’s annual light duty vehicle sales in 2014.

Evidence suggests these incentives are important drivers in other markets, as well. In the United States, HOV lane access has been strongly correlated to demand for hybrids and EVs in markets like the Washington, D.C. area and California, where traffic delays are legendary. Georgia has seen a significant uptick in EV sales since implementing an EV tax break—one that the state is now considering ending.

One complaint made against these incentives is that they are essentially subsidizing the rich, or at least the well-off. And there is some truth to this. A $100,000 Tesla S is certainly a car out of reach for most households. Even mainstream EVs like the Nissan LEAF, while affordable, represents a significant premium over the price of a comparable car. The same complaint can be made for most clean energy subsidies, whether for solar, wind, or fuel cells: initial adoption is likely in the higher income brackets.

Why Governments Still See Subsidies as Useful

However, subsidies are very often the carrot to the government stick of regulatory mandates. In the United States, automakers are facing increasingly tough fuel economy and greenhouse gas emissions targets. By model year 2025, passenger vehicles in the United States will be required to meet an estimated combined average fuel economy of 54.5 mpg. As Navigant Research found in its Automotive Fuel Efficiency Technologies report, these standards cannot be fully met simply by the downsizing of internal combustion engines and the introduction of stop-start or hybrid capability. EV sales will be a necessary component to meeting these standards. Add to this the zero emissions vehicle mandates set by California and adopted by 9 other states, and the government is in essence requiring the sale of EVs.

EV sales have seen steady growth since 2010, and are poised to see faster growth. However, even with the introduction of more models, they will still be offered a price premium that will keep them at a niche sales level. In its Electric Vehicle Market Forecasts report, Navigant Research projected global PEV sales would rise from under 2% of annual light duty vehicle sales in major markets like North America and Western Europe to around 4-5% in 2023.

Even with cheaper and longer range EVs coming to market, the price premium can keep these cars from reaching the sales level needed to meet these standards without some incentives; these will continue to be necessary for the next decade.


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