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Automakers Focus on Tough Road Ahead

Automakers Focus on Tough Road Ahead
Electric Car at New York International Auto Show (AP) 

George Will By Thursday, 24 March 2016 08:17 AM EDT Current | Bio | Archive

If Mark Fields' theory is correct, his industry faces novel challenges. His theory about the changing role of driving in Americans' lives is one reason Ford Motor Co. now describes itself as an "automotive and mobility company."

Fields, Ford's CEO, remembers a time when, on the day a teenager became old enough for a driver's license, he or she made an early morning beeline to get it. Many still do, but increasing numbers are less ardent about the machine that made modern America.

In 2014, only 76.7 percent of people 20 to 24 years old had driver's licenses, down from 91.8 percent in 1983.

Until recently, Fields says, driving meant the freedom to go out and connect with friends. Now, texting teens squinting at their devices' screens "don't have to move to stay connected."

And given car-use entities like Zipcar and ride-sharing services like Uber, young people do not have to buy a car in order to move.

American automakers sold a record 17.5 million vehicles last year, assisted by low gas prices, low interest rates (the average new-car loan is for more than 65 months and the average amount financed is almost $28,000), and a record-high average age (11.4 years) of the cars and light trucks on America's roads.

But although interest rates will not forever be so low, and although the Federal Reserve Bank of New York estimates that any one percentage point increase in interest rates could decrease vehicle sales 12 percent, Fields sees a $3.1 trillion opportunity.

The world's core vehicle business (cars, trucks, financing, parts and service) is a $2.3 trillion industry, of which Ford's share is 6 percent. But there is a $5.4 trillion sector of emerging opportunities for automakers to meld their businesses with other businesses.

Automakers can, he thinks, prosper, perhaps even selling fewer cars, while providing what Fields describes as "mobility beyond our traditional definition." Such mobility can involve the mundane, such as electric bicycles.

Or the exotic, such as self-driving cars that go far beyond automatic parallel parking to driverless delivery of children to soccer practices or seniors to medical appointments, using sophisticated algorithms and urban mapping.

Car ownership among young adults is declining and vehicle miles driven per American in 2012 were 6.4 percent lower than in 2004, and no higher than in 1997.

Time was, children raced on their balloon-tire bikes to car dealerships to experience the excitement of new models. It may someday be that way in emerging markets such as India, where Ford has 2.6 percent of the automobile market — still an infant market — in a country of 1.3 billion people.

Ford's latest entry in the luxury field, the redesigned Lincoln Continental, was built with an eye to China, where Beijing now has more billionaires than does New York City.

Fields — whose company's best-selling product is the F-Series pickup truck, many of whose purchasers have an almost erotic relationship with it — believes that an automobile is "still an emotional purchase."

But purchasers who once cared about chrome are now more emotional about technology add-ons that maintain drivers' connectivity with their homes, offices and friends.

So far, even the market for electrified vehicles is sluggish.

In 2008, the 12 such vehicles had 2.3 percent market share.

In 2015, the 60 different hybrids, plug-in hybrids and fully electric vehicles had a market share of 2.7 percent. History, however, teaches that automobiles can suddenly floor history's accelerator.

In the lobby of the headquarters of Fields' "automotive and mobility" company sits one of Henry Ford's Model T's, arguably history's most transformative machine. Manufactured from 1908 to 1927, during which span its inflation-adjusted price fell about 80 percent, it launched the automobile age.

Hitherto, people had moved only as far and fast as hooves, sails and then rails could move them. In a historical blink, the automobile emancipated humanity from what has been called "the tyranny of distance."

And from the loneliness of rural life, and the health hazards posed by the mountains of manure and rivers of urine from urban horses. American households with automobiles went from essentially zero in 1900 to 93 percent in 1929.

Automakers' coming technological wizardry will not have such sweeping effects on how life is lived. But like the smartphone in your pocket or purse, which you lived without until about a decade ago and now cannot imagine living without, future automotive and other mobility innovations will, in the modern manner, quickly change from unanticipated to indispensable.

George F. Will is one of today's most recognized writers, with more than 450 newspapers, a Newsweek column, and his appearances as a political commentator on Fox news. Read more reports from George Will — Click Here Now.


© Washington Post Writers Group.

The world's core vehicle business (cars, trucks, financing, parts and service) is a $2.3 trillion industry. But there is a $5.4 trillion sector of emerging opportunities for automakers to meld their businesses with other businesses.
Ford, Uber, Zipcar
Thursday, 24 March 2016 08:17 AM
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