/ 31 January 2023

Are the days of car ownership numbered?

Webuycars Relaunches The Dome As A "super Showroom" In Joburg
WeBuyCars opens the doors of its new "super-showroom", which was formerly the iconic Ticketpro Dome on December 15, 2021 in Johannesburg, South Africa. The WeBuyCars Dome, which will trade seven days a week, can accommodate more than 1 000 vehicles, and will also house a kids' play area and coffee shop. (Photo by Gallo Images/Papi Morake)

I love my car. It’s sleek. It’s quick. It makes me smile every time I get into it. But it may be one of the last cars I ever own myself, as transport patterns undergo a huge change.

Many studies have predicted that by 2030, hardly anyone in the United States and Europe will own their own car. Instead, most people will use self-driving, electric ride-shares to get around. In Dubai, they may use self-piloting drones. I’m not convinced about the timeline, but I do know this: the world of mobility is changing before our eyes.

South Africa’s vehicle sales volumes have been steadily declining for several years, and that’s unlikely to change. Many younger and urban people don’t want to own cars; they simply want to get from A to B. Others want to own cars but they can’t for various reasons. 

There are about 12 million vehicles on South Africa’s roads. Of those, about 2.4 million are financed and about  three million are insured. Information from TransUnion, a credit bureau that keeps consumer and business data, suggests that fewer than 15% of vehicle finance applications get taken up. About 24 million sales leads are generated each year but the industry sells about 580 000 vehicles, of which 180 000 are new vehicles and 400 000 are used. 

This tells us a couple of things. First, many people are interested in buying a car but can’t do so through a traditional credit application. One way of addressing this is to use alternative data to allow more people to qualify for credit to be able to buy or lease vehicles. 

Although that may get more people into cars, it won’t solve the bigger problem — there is a big market out there that requires  transport but cannot be accommodated. In other words, South Africa doesn’t have a vehicle ownership problem, it has a  transport problem. And although financed vehicles will remain relevant for some time, the real opportunity for the vehicle industry lies in creating alternative modes of transport in line with the global trend.

If we look at  transport as a continuum, with pure ownership on the one side and users on the other, everything in between those two points is  transport as a service — such as leasing, subscription models, e-hailing, taking a plane, car pools, public transportation and ride-sharing.

In Europe and more developed economies, ride-hailing and ride-sharing have become the norm. They’re an emerging trend in South Africa, albeit largely in the major urban centres for now. 

Several factors are driving this service mobility model. One is the boom in subscription models for all types of goods and services. This model offers simplicity and adaptability and is appealing to many people. 

Some people want to avoid the annoyances of car ownership such as maintenance and insurance, while others want to avoid significant outlays and long-term financial commitments. A growing number of car manufacturers are already offering subscription models for their vehicles.

A second driver of mobility as a service is increasing urbanisation. It’s estimated that 55% of the world’s population lives in cities. They don’t need a car; they just need access to transport — and that could include everything from public transport, bicycles and scooters to ride-sharing and carpooling. 

In South Africa, we have all the elements we need for alternative ownership models such as subscriptions. Think affordable, long-term, flexible car hire. We have the demand; a huge number of people want to be mobile. We have the supply; there’s a huge stock of vehicles standing idle at dealerships — and vehicles that don’t move, don’t bring in money. 

That’s why the future of transport — and the vehicle itself — isn’t an electric vehicle. That’s just what drives the vehicle. The future lies in using technology. It lies in providing transport that consumers are looking for. It’s about helping the industry create personalised experiences that meet individual customer needs. 

The future lies in offering tech-savvy consumers the control they want in any car ownership.

Personally, I can’t see myself not owning some sort of vehicle in my lifetime. But, like the vehicle industry, it’s important to be open to change. The industry’s relevance depends on it.

Kriben Reddy is the vice-president of vehicle information solutions at TransUnion Africa.

The views expressed are those of the author and do not necessarily reflect the official policy or position of the Mail & Guardian.