Automotive & transport

Power to the people’s car

When Hitler called for a “people’s car”, he got the Volkswagen, founded by Ferdinand Porsche. Porsche’s grandson, Mr Piech is now the CEO of VW and his vision is grand: he wants to be the world’s biggest carmaker by volume by 2018. It’s a far cry from 1993 when he joined, because the company was then overspending, overmanned and inefficient. Last year, VW made profits of $US23.8 million, double the year before, and more than half a million people work for them all round the world.

China is the world’s largest market for cars and VW has an 18% share, its premium cars having particular appeal. Its share in Brazil is even bigger – 22% - and it has 9% of Russia. India is its weakest BRIC market, and its recently failed attempt at partnership with Suzuki will not improve its fortunes there.

One of VW’s strengths is the way it has reduced the number of platforms to serve all its cars, whatever the brand or style, which offers parts-sharing and dramatically lowers the cost of manufacturing. The VW Way, the Economist suggests, is “to be determined, diligent and attentive to detail, with a glint of ruthlessness”. Surprisingly, VW quality ratings in America, according to JD Power, are still well below average.

Perhaps the weakest link for VW is if one of its shared platforms is flawed, or the fact it has so many brands. Perhaps one too many: the SEAT brand lost 225 million euros last year and doesn’t fit the image of a ‘sporty, design-oriented’ brand. Any downturn in China would affect VW and, if the euro shatters, its costs would suddenly be denominated in deutschmarks. Even so, nothing is going to stop the determined (and possibly ruthless) Mr Piech. If you look around, there are a lot of VWs on the road.

Self-driving cars (again)

We have written frequently about self-driving, driverless or automatic cars, and one day they will be on our roads. In America, they already are, thanks to legislation in Florida, California, Arizona, Hawaii and Nevada. But the prohibitive cost of insurance - $US1-3 million – will keep most companies from experimenting with them.

Driverless cars have 64 spinning Velodyne lasers, radars on the bumpers, and a rear view camera, to provide a 3D view of the road (probably better than a human eye). Dangerous though they may sound, driverless cars are actually safer. The annual cost of road accidents in Britain is 1.5 billion pounds, or 28,000 pounds per minute. Ninety percent of the time, it is human error.

Driverless cars offer safety, fuel efficiency and speed – and there will be fewer traffic jams because they communicate with each other (unlike human drivers, who tend to compete with each other). But how will carmakers engineer common sense? How will a car react if a cardboard box falls on the road in front of it? There are numerous subtleties in driving that a computer program cannot easily copy.

These cars should go on sale in the next ten years though this is very dependent on having the legal structure to support it. The next hurdle is getting 32 million people (in Britain) to give up the act of driving as many of them enjoy it, in spite of the traffic. So far it has been a slow and gentle approach – automatic lane-keeping, cruise control, parking aids. Even so, it’s a big jump into the back seat.

Electric cars: too expensive, not enough features

Five years ago, when petrol prices were rising before the GFC, it looked as if electric cars were going to transform motoring. Driving a Toyota Prius was the badge of cool. Worldwide sales of electric cars in 2011 were 84,269, up from nearly 7,000 in 2010. But 2012 has seen a first half figure of 50,000 (0.18% of all sales), suggesting a waning of momentum. The fact remains, buyers have not got over their expectation of low prices and plenty of features.

When buyers are faced with choices, they see the electric cars as overpriced, low performing and less comfortable than other models. They also had ‘range anxiety’ – fear of running out of charge because of insufficient charging infrastructure. Even government subsidies cannot convince them. The cost of a plug-in car is so much more than a regular car that they cannot save enough money on running costs during the life of the car to justify the initial high expense.

For example, a Nissan Leaf costs 26,000 pounds, has a top speed of 90mph and has a range of 100 miles. The fuel cost per mile is 2.9p. This compares to an average price of 14,000 pounds to buy a car. In times of austerity, it makes sense to buy a cheaper car and underweight the future running costs.

A few business failures suggest it is not yet time for electric cars. Think Global, a Norwegian company wanting to make electric city cars, filed for bankruptcy. Its battery supplier and the recipient of a government grant, filed for bankruptcy protection. GM Volt suffered a dent to its reputation when the US probed into the safety of its batteries.

The time for electric cars may come. Or there could simply be a better technology around the corner, such as hydrogen (or even solar). For now, there is still too much market power for the companies producing and distributing oil. Electric doesn’t suit them or, it seems, their customers.

Driving Miss Daisy

Today’s retirees were the first generation to be able to buy and drive a car, so many of them are still driving. In 1975, only 15% of people over 70 had a licence; by 2010, it was 57%. The question is how long these older drivers will be fit to drive and, if not, how new businesses can accommodate their needs for mobility.

In 1995, American statistics found that while the over-70s were only 9% of the population, they were responsible for 14% of traffic and 17% of pedestrian deaths. This is partly because of deterioration in cognitive function, which is the ability to process thoughts and quickly. This is not the case for over-60s, who are the safest on the road and have no more fatal accidents than people half their age.

An American commentator suggested people who live past 70 will outlive their driving years by 7-10 years. This means they could need someone to drive them. At current growth rates, by 2030 there will be 15 million non-drivers over the age of 65. Are we going to see a Driving Miss Daisy era? Interestingly, the Institute of Advanced Motorists says many retirees self-regulate and avoid conditions that might be hazardous, whether dark, rainy or congested. The main problem is that pensioners who are car dependent are likely to be fatter and less fit. In 1995, walking accounted for 35% of trips by those over 70, now it is only 20% of trips.
We imagine this picture is likely to be mirrored by all ages, given that even people who are fit enough, cannot find time to walk to the shop. Walking does not fit the modern pace of life. We suspect cars will continue to be designed for young people, even though older drivers are more likely to be wealthier and buy new cars. Perhaps it is time for a service, like Driving Miss Daisy, which will continue to offer older people the same dignity as driving themselves.

Chinese on a huge road trip

The Chinese want cars and there’s nothing to stop them unless they run out of road. Their car market is the biggest in the world – 18.5 million sold last year, compared to 13.1 million in America. It is also dominated by foreign brands, like Volkswagen, although Chinese carmakers are working hard to catch up. Vehicle ownership per hundred households was 0.9% at the end of 2002, now it’s 18.6%. Compared to 70% ownership in Britain, there is still a long way to go.

Some of the biggest Chinese carmakers are SAIC, Dongfeng, FAW and Changan, and, like the Japanese and South Koreans, have suffered criticism over their design, safety and reliability. They had no ‘design language’. This is changing, as local brands learn from foreign brands what attracts customers, although ironically, customers are attracted to foreign brands for their status. Even so, state planners intend to have three or four large, global carmakers like America and Japan and Chinese brands are beginning to sell in Britain, Australia and America.

The downside of this massive surge in car manufacturing and purchase is the pressure on roads. There are now more than 5 million cars in Beijing and over a million citizens compete in a lottery each month for the right to buy and register a car. The flow of traffic is already choked (remember the 60-mile long traffic jam from Beijing to Inner Mongolia?), but the Chinese are determined to own cars because of the freedom, convenience and status they perceive in owning one.

Although there are 40,000 car rental companies in China, most are small and local. One company, eHi, is the foremost rental company, run by a man who is determined to change the culture of car ownership into a saner, sustainable one. This is a tall order, given that Chinese cities are created around the car and the country is crisscrossed with bridges and motorways, to the detriment of many households and villages.

Public transport, such as high-speed railways, has been troubled with alleged corruption, technical problems and accidents. It seems unable to compete with the passion for cars. eHi recognises that if only it could attract 10% of buyers to rent instead – that would be hundreds of thousands of potential cars taken off the road.

Cars are a potent symbol of success for the owner, but it is incredible that we still have not learned how to mitigate the extraordinary damage they do in the process.