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THE FUTURE

OF MOBILITY

CONTENTS
Introduction

Executive Summary

What This Means for Fleets


and the Leasing Industry

10

Major Themes
Environmental Regulation
Cost Pressure
The Developing Markets
Technology and Connectivity
Rapid Manufacturing and New Materials

11
18
22
29
38

Wildcard Scenarios

43

Conclusions

47

INTRODUCTION
LeasePlan commissioned this report on the
directions that personal mobility is likely to
take from now up to 2023. The report consulted
a wide range of sources in order to identify
the key trends most likely to shape this future.
The report is the first piece of primary research
that supports the activities of the LeasePlan
Fleet Strategy Board.

EXECUTIVE SUMMARY FIVE KEY TRENDS

FIVE KEY TRENDS


Five major trends seem likely to dominate the
developments in the mobility landscape over the
coming decade. While each individual trend may
not represent a significant shift, their overall effect
could revolutionise attitudes to motor vehicles.
This executive summary presents a brief overview
of the five key trends and their implications, these
are explored in greater depth in the main body of
the report.

EXECUTIVE SUMMARY FIVE KEY TRENDS

1. ENVIRONMENTAL
REGULATION
When the EU signed the Kyoto
treaty in 1997, this signaled their
intent to reduce long-term
environmental harm from carbon
emissions. Although the US
and China were not signatories,
manufacturers face collective
pressure to produce cleaner,
more energy-efficient vehicles.
There are obvious synergies with
technological developments around
new propulsion options, new energy
sources, and new ways of using
existing infrastructure.

It is clear that electric vehicles


are set to form a larger proportion
of the vehicle stock, but questions
about where the energy to charge
them will come from, and when they
will become truly competitive with
combustion cars, still linger on.
It is the belief of the EU transport
commission, that, for mid to long
distance travel, the first and last
ten miles of most journeys will
become a feeder solution for
mass-transit systems.

EXECUTIVE SUMMARY FIVE KEY TRENDS

2. COST PRESSURES
The need to recoup increased
environmental costs, at the national
level, combined with peak oil polluter
pays pricing, means that both the
base price of fuel and fuel taxation,
will rise.
There will be indirect costs from
increased congestion, as more road
space is allocated to High Occupancy
Vehicles (HOVs) and Electronic
Vehicles (EVs) and cycle routes. And
fewer new roads are likely to be built,
as planning wisdom sees that they
only encourage more driving until
congestion reverts to the mean.

Technology will alleviate some


of the pain with better real-time
journey planning. The road network
will need to be organised centrally
so that it can be more efficiently
utilised. And, as the speed of the
internet and available bandwidth
increases, the advantages of video
chat may begin to outweigh the
disadvantages of physical movement,
taking some of the pressure off
the road network, as homeworking
becomes more widely accepted
and more practical too.

EXECUTIVE SUMMARY FIVE KEY TRENDS

3. EMERGING MARKETS
Vehicle manufacturers, keen to
service the most lucrative markets
that offer most potential growth, will
continue their shift in focus towards
the BRIC countries Brazil, Russia,
India and China.
Weve already seen manufacturers
such as Mercedes and BMW make
special versions of their vehicles for
these markets and the tastes of the
BRIC countries, particularly China
and Russia, will gradually begin to
influence the cars produced for the
European market. For example,
in response to Chinese and Russian
perception that premium means

large and 4x4, weve seen new,


luxury 4x4s produced by Bentley,
Rolls Royce, Jaguar and Lamborghini.
And, as many Asian cities expand
beyond populations of 10 million,
well see the needs of these
Megacity dwellers shaping
the output of car manufacturers.
China is an exciting market for
automotive brands because it has
no embedded brand perceptions.
Its a blank canvas where
manufacturers can try out new
technologies and brand positions.

EXECUTIVE SUMMARY FIVE KEY TRENDS

4. TECHNOLOGY,
CONNECTIVITY
AND THE CAR
The ways in which consumers,
and their devices, connect to their
vehicles will open up some intriguing
possibilities. Cars will become
appified as their specialist hardware
is co-opted into software running on
the users own phone or tablet. The
cars systems will become a conduit
controlled by these personal devices.
This begs the question; if the unique
differentiators of your car are
defined by your personal device,
how much sense does it make to
own a car, rather than have access
whenever you need it? Consequently,
we could see a shift away from
personal ownership.

The driving process will be made


safer and more efficient, by further
automation: techniques such
as motorway platooning will
see vehicles travel together, in
convoy, by communication with
infrastructure and each other.
A logical progression of this is the
self-driving cars Google, Nissan,
Audi and others are working to
bring to market. But you may
not own one with Googles X,
as a service model, you may
lease access to a cloud of cars
that comes to you on demand.

EXECUTIVE SUMMARY FIVE KEY TRENDS

5. THE IMPACT ON
MANUFACTURING
New manufacturing techniques
like 3D printing will allow faster
turnaround of design concepts,
increased choice of personalisation,
and more niche models to be spun
off the same basic platform. The
lower break-even costs through
scale means more diversity,
personalisation, and product
risks being taken.
New materials will emerge in the
quest for lighter and more efficient
vehicles we spotlight the BMW
i3s carbon fibre reinforced plastic
construction to demonstrate what
this means for ownership and
repair costs.

As personal devices become more


integrated into the sphere occupied
by the car, personalisation will
begin to apply, as much to behaviour
as aesthetics. Manufacturers and
other mobility providers will begin
to offer lifestyle mobility packages,
allowing drivers to swap out for
a different car with specialist
capabilities, greater utility,
or more driving pleasure.

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EXECUTIVE SUMMARY

WHAT THIS MEANS FOR FLEETS


AND THE LEASING INDUSTRY
Arriving at the optimal composition
of a fleet will become more complex,
and choices will need to be made
in the context of extra support
requirements like specialised
recovery solutions, better route
planning and charging services.
The cost structure of running a fleet
will have many new components
and their relative weight will change
significantly. Fleet professionals and
the suppliers that support them will
need to simplify the operational and
administrative challenges and add
value to and enrich the experience
of drivers.

Existing perceptions of manufacturer


brands will be challenged as vehicles
originating from emerging markets
will begin to play more of a part
on fleet lists, particularly where
low cost is paramount.
The increasing convergence of
vehicles, technology and the data
generated by their usage will provide
much greater visibility of and control
over fleets. This combined with
new models of usage gives the
opportunity for genuine service
enhancement by fleet providers.

As the potential for vehicle


personalisation increases, fleet
operators will need to deal with
increasing operational complexity
and driver expectations. Creative
packaging of services that simplify
the experience will be essential.

MAJOR THEMES ENVIRONMENTAL REGULATION

ENVIRONMENTAL
REGULATION
Whenever the future of mobility is discussed,
the environment must be a prime consideration.
Between now and 2050, major climate change
mitigation initiatives will start to bite. At the
same time, a second billion people in emerging
nations will demand western standards of living
and freedom.

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MAJOR THEMES ENVIRONMENTAL REGULATION

REGULATORY RESPONSE

Given the US and Chinas reluctance


to sign up to Kyoto, the EU is the
only significant governmental body
to have produced an on-the-ground
transport plan to the timescales
involved. The key observation to
note from the report is this principle:
Curbing mobility is not an option.
The EU does not envisage solving
the climate crisis by any means
which would prevent the free flow
of goods and people across the
continent. Mobility currently makes
a direct contribution of 5% of the
continents GDP, and immeasurable
indirect contribution.

IN THE NEXT DECADE

However, this is not to say that the


EU Transport Plan is anything but
highly ambitious: conventional cars
would be banned from cities. The
focus of personal transport would
be around the first and last 10km
of any journey, with cars acting as
feeders to and from high-speed rail
lines. Oil dependency would be
reduced by 60% and relatively few
time-dependent goods would move
by road, with the rest shifted instead
to rail and sea channels.

In the shorter term, the EU sees


transport emissions being cut by
a variety of means. By 2020, 10% of
all mobility fuel consumption should
come from renewable sources.
Initially, the majority of this will come
from biofuels, but in the longer term
population growth across the EU will
put pressure on crop growing space,
with both biofuel and food production
competing for the same land.
Limitations on car use will prevent
some of the more inefficient uses
of fuel. For example, the London
Congestion Charge could be
replicated across European cities
to discourage uneconomical short,
stop-start journeys.

Costs across fuel options will be


normalised by the implementation
of polluter pays taxation policies.
Which means that consumers will
bear the environmental cost of their
travel directly, through taxes, or
indirectly through increased costs
of goods or services.

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MAJOR THEMES ENVIRONMENTAL REGULATION

CASE STUDY LONDON

As one of the EUs most populous


urban centres, London is at the
forefront of developing integrated
mobility networks in the context
of the environmental and human
challenges of the 21st century.
These are some of the highlights
of its current plan: Londons
population is growing faster than
previously predicted, hitting 8.2
million in 2011, some 15 years
ahead of predictions. It may
reach 10 million by 2031 [1].
Crossrail opens in 2018, adding
capacity for 72,000 passenger
journeys per hour across Central
London [2]. The extra capacity
added by Crossrail and all
current tube upgrade projects
will be outstripped by population
growth in around 2031 [1].

Crossrail 2, running from Wimbledon


to Alexandra Palace, could open
by 2030 [1].
With public transport just keeping
pace with population growth, traffic
congestion isnt going away. The
EU predicts the productivity cost
of congestion will increase 50%
in real terms by 2050 [3].
New technologies and political
measures will be required to mitigate
the environmental costs of inefficient
fuel use in congested areas.
As cycling increases in popularity,
due to its environmental and health
benefits, more road space will be
reserved for cycle lanes. Throughtravel, by motor vehicles will also
be discouraged, reducing the average
speed of cars across the capital.

The Congestion Charge is considered


to be a success, which could lead
to larger zones and more granular
charging using Automatic Number
Plate Recognition and/or geolocation.

[1] https://consultations.tfl.gov.uk/crossrail/2/
supporting_documents/Summary%20of%20Option
%20Development.pdf
[2] http://crossrail.co.uk
[3] EU Transport 2050 report

Goods vehicles will be subject to


additional charges and restrictions,
as exemplified by the Low Emissions
Zone, the proposed Safer Lorries
Charging Zone [5], and existing
time restrictions on operations.
Year

2030

2020

2010

6m

7m

8m

9m

Past Prediction
Todays Prediction

10m

Population

[4] http://www.london.gov.uk/media/mayor-pressreleases/2013/03/crossrail-for-the-bike-in-mayor-s913m-cycling-plan
[5] https://www.gov.uk/government/news/dft-andmayor-announce-plans-to-tackle-hgv-safety-andsupport-londons-cycling-revolution

MAJOR THEMES ENVIRONMENTAL REGULATION

HYDROGEN & ELECTRIC CARS

The combustion engine will still


have the lead market share until
at least the mid-2030s. Downsizing,
turbocharging and hybridisation
will keep it relevant through many
rounds of stricter CO2 targets. In fact,
it may be the case that the tipping
point away from petrol and diesel
will come as a result of social rather
than technical or legislative factors:
as oil becomes more difficult to
extract, we could see increased local
opposition to operations, such as
the protests we are currently seeing
against fracking. Sufficient protest
could lead to a change in the social
acceptability of any fossil fuel use,
in the same way that the acceptability
of fur was challenged in the 80s.

In the medium term, a shift to


biofuels is likely. But, as biofuels
share space requirements with food
supplies, and climate change is likely
to place pressure on food supplies,
it is likely that the long-term future
lies in electric propulsion.

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MAJOR THEMES ENVIRONMENTAL REGULATION

ENERGY DENSITY

The key factor to consider when


determining which fuel is likely
replace fossil fuels, for cars of the
future, is that of energy density.
This is the amount of available
energy from a source for a kilogram
of weight or a litre of volume of that
source. When discussing automotive
applications, volume is generally
more applicable, as this has a
greater effect on the form of
the vehicle, than weight.
Fossil fuels are convenient because
they marry a very high energy density
(typically 26 MJ/Litre of petrol) with a
fast recharging ability (a couple
of minutes at the pump).

The best batteries, currently available


for automotive use, approach
2.6 MJ/Litre, and take much longer
to recharge. Whereas hydrogen,
when compressed for use in a
passenger vehicle, has an energy
density of 5.6 MJ/Litre.
What this means is that, all things
being equal, a Hydrogen Fuel Cell
Electric Vehicle (FCEV) requires a
fuel tank that occupies nearly 5
times the volume of a petrol-fuelled
vehicle with the same range.
A Battery Electric Vehicle (BEV)
requires batteries that occupy
10 times the volume of the
petrol vehicles tank.
The race to power vehicles of the
future revolves around one factor:
increasing energy density. And, while
petrol and hydrogen have fixed
energy densities, batteries do not.

BMW ran several rounds of real-world


data gathering on BEVs as part of
the Megacity project which led to
the creation of the i3. They discovered
that, for urban dwellers, a range
of 100 miles with an overnight
charge would be sufficient for
95% of all journeys.
A combination of improved energy
density and fast-charge facilities,
such as Teslas Supercharger
network [1], would cause that number
to converge on 100%. At that point,
the combination of price, energy
density and recharge time would
be such that BEVs become a practical
choice, alongside petrol or diesel.

The question is whether that


happens quickly enough to beat
FCEVs to the same punch. BMW
predicts that by 2020, BEVs and
Electric Range Extender Vehicles
will make up 5-15% of its sales.
However, manufacturers like
Ford, that sell cars in much larger
volumes are likely to struggle to
sell 15% of their vehicles as BEVs.
This is because many of their
customer base would not consider
paying the price premium inherent
in BEVs and FCEVs.
[1] http://www.teslamotors.com/supercharger

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MAJOR THEMES ENVIRONMENTAL REGULATION

ENERGY SOURCES

While the majority opinion appears


to be that hydrogen is the fuel of the
future [1], it is important to understand
that hydrogen differs from fossil
fuels in one key aspect: hydrogen is
not a fuel source, but a reservoir for
conventionally-generated electricity.
While the energy extracted from fossil
fuels is free in the sense that oil
takes less energy to extract than
it releases when burnt, present
production methods mean hydrogen
must be cracked from water in
a process that takes more energy
than can be recouped from the
resulting hydrogen. So hydrogen
can be considered more like a
liquid battery than a fossil fuel.

This means, whether for batteries


or hydrogen, the source of power,
for both BEVs and FCEVs in the
UK at least is mostly generated
by burning fossil fuels. With neither
renewable nor nuclear power gaining
any serious traction in the UK, this
is likely to continue, certainly until
around the 2030 period. Thus, the
true environmental benefits of BEVs
and FCEVs will not be realised until
the grid is significantly greener, or
an alternative method of cracking
hydrogen which does not require
grid energy as an input can be
developed [2]. In the meantime,
offsetting and carbon credits are
likely to gain increased importance
in the consumer market as the reality
of climate change becomes apparent.

[1] http://www.london.gov.uk/media/mayor-pressreleases/2013/03/crossrail-for-the-bike-in-mayor-s913m-cycling-plan
[2] http://www.nsf.gov/news/news_summ.jsp?cntn_
id=110648

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MAJOR THEMES ENVIRONMENTAL REGULATION

WHAT THIS MEANS FOR


THE PRIVATE PURCHASER
In the short and medium term, buying
a BEV will remain an urban, niche
decision, often limited to those who
have a guaranteed parking space,
with charging facilities at their office.
Currently, most owners of EVs already
own a petrol vehicle, although they
prefer to use the EV where possible.
With space limitations on parking in
urban areas, this is a factor that is
likely to limit growth. To get around
this, BMW supports its i3 BEV with
the BMW Access scheme, in which
purchasers can redeem points for
access to conventional BMWs when
needed for longer journeys, or just
when they feel like a change.

WHAT THIS MEANS FOR


A FLEET
Peugeot has also indicated it will
expand its similar scheme when its
own BEVs come to market. Broadly
speaking, schemes of this type
could do a great deal to increase
BEV adoption in urban markets.

Private purchasers and leasees will


make the choice between BEV, FCEV,
Petrol or Diesel according to their
own circumstances, but fleet managers
will have to make the choice on an
aggregate level. In addition to the
traditional factors of cost, reliability
and so on, there will also be a
marketing dimension to the choice
of EVs. However the range limitations
of EVs could cause difficulty for those
industries, such as delivery and home
service, that rely on keeping their
fleets on the road all day.
To combat this, organisations that
make an early shift towards BEVs
in particular, will look for support
services that allow them to manage
the new needs of these fleets.
For example:

Fleet disposition management


to ensure even battery wear on
all vehicles
Fleet disposition management to
ensure that an exhausted vehicle
can be swapped for a charged
one, should the driver need it
Route planning to maximise
range (especially for multi-drop
delivery services)
Specialised recovery solutions
for exhausted vehicles
Driver training
Charging services; installation,
management, and cost optimisation

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MAJOR THEMES COST PRESSURE

COST PRESSURE
Between the rising cost of fuel and increased
taxation, the cost of personal mobility will continue
to rise for the majority of drivers. However, the
perceived value of a car, at purchase, should
increase, as technological progress, appification
and smart manufacturing produces vehicles that
do more, more personally, for the same cost.

The less successful the world is in decarbonising,


the greater will be the oil price increase.
EU Transport 2050 report

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MAJOR THEMES COST PRESSURE

FUEL COSTS

TAXATION

This report will not attempt to


predict the timescale on which
Peak Oil will occur (although,
for the record, BMW works on
the expectation that it will
occur in 2025), but it is clear
that extraction costs, political
volatility and environmental
responsibility taxes will continue
to push fuel prices upwards.

As part of their polluter pays


policies, governments across the
EU have toyed with the concept of
satellite-tracked per-mile taxation.
Should it be implemented, this
could change the face of
motoring dramatically.
Several charging structures are
being considered: journeys could,
for example, be taxed at a falling rate,
where the first few miles are charged
very highly, and beyond that only
at a few pence per mile. This would
encourage drivers not to make short,
more polluting journeys. Alternatively,
different roads could be charged at
different rates, discouraging drivers
from urban centres and other
highly-congested places.
Alternate fuel vehicles currently
receive effective tax subsidies on
VED (Vehicle Exercise Duty) and the
Congestion Charge, but as they

become a larger proportion of the


total vehicle stock, it is likely these
benefits will be eroded. Taxation
levels will more accurately reflect
these vehicles true cost to the
environment by including the
environmental impact during
their manufacture.
In terms of the CO2 equivalent
currently used for calculating tax,
this would be a reduction of roughly
50%. For the Congestion Charge it is
likely that, over the course of several
years, the existing discount for EVs
would decline to zero.
VED rates for combustion engined
vehicles should be expected to
continue rising according to the
CO2 g/km rating.

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MAJOR THEMES COST PRESSURE

PURCHASE PRICE

At present, BEVs are about 10,000


more expensive than an equivalent
combustion vehicle, although
a government grant of 5,000 is
available at purchase which lessens
the sting somewhat. Technological
advances are expected to reduce the
price of batteries. The government
grant may well be reduced in tandem.
(FCEVs remain so expensive relative
to combustion cars that the few on
sale are actually leased direct from
the manufacturer as part of an
extended testing programme).

RUNNING COSTS

In order to close the price gap


between EVs and combustion
vehicles, governments may choose
to increase the existing gas guzzler
tax on the purchase price of largeengined cars.
However, the ability to simplify and
standardise internal data networks,
the falling cost of sustainable
materials and the trend away from
bespoke interfaces to appification,
should mean that the list price of an
average car will, in real terms, stay
about the same (even as the
capabilities of the vehicles improve).

In contrast to the purchase price,


the running costs of vehicles can
be expected to increase. Not least
in terms of the time: routes will
need to be planned more carefully
to maximise range, and minimise
tax and congestion. And new
classes of tax will inevitably
lead to increased administration.
For example, it took several years
for the Congestion Charge to gain
an automatic payment mode.
Companies such as ZipCar that can
offer a service designed to alleviate
the pain of this administration would
have an opportunity to create a
lasting relationship with the customer.

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MAJOR THEMES COST PRESSURE

WHAT DOES THIS


MEAN FOR LEASING?
Increased cost and inconvenience
is a natural driver away from car
ownership in any form. Those who
can do without private mobility,
especially those who live in cities,
will avoid outright ownership, or
a sole-driver lease, as much as
possible. Those who have a specific
need for ownership, whether in cities
or outside, will save money by driving
fewer miles and seeking cheaper fuel
options. To remain competitive,
leasing companies will need to
demonstrate that costs can be
saved relative to outright purchase,
and add value by removing more
of the common frustrations that
accompany motoring.

Fewer journeys will not mean less


time spent in the car. Increased
congestion will mean that
opportunities will arise for time
management and working solutions
that take otherwise dead time
in the car into account. Equally,
drivers will seek ways to make
the most of that time through
entertainment or managing
other aspects of their lives.

Vehicle Excise Duty and other


automotive taxation will become
increasingly complex and interlinked
with other aspects of the general
tax code. Providing a service that
simplifies this at source presents
an opportunity to position a car
lease as a tax management benefit.

MAJOR THEMES THE DEVELOPING MARKETS

THE DEVELOPING
MARKETS
In many ways it is the newest markets that offer
car companies the greatest scope for innovation.
Since these markets have few preconceptions about
what the cars they buy should or should not feature.
Even as these markets develop through their early
stages, patterns or tastes (which can be quite
short-lived) emerge, and the motor manufacturers
do their best to cater to them.

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MAJOR THEMES THE DEVELOPING MARKETS

BRIC

Brazil, Russia, India and China (BRIC)


are the four major fastest developing
nations. Of these four, the most
interesting case is China, with its
rapidly growing middle class and
challenges of extreme urbanisation.
The effects of the Chinese market
will increasingly feed back into
older established markets in
significant ways.

India holds massive potential for


market growth but the failure of the
Tata Nano demonstrates that the
market still has yet to pass the
threshold of middle-class growth
that would make it relevant in the
timescale covered by this report.
Brazil remains dominated by locallyassembled vehicles from US and
European mass-market brands like
Chevrolet, Fiat and VW, and
as a result tends to be reactive to
these parent markets at present.
Russia, by its proximity to Europe,
does have some interesting brand
and manufacturing implications for
Europe as a whole and these are
explored further on.

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MAJOR THEMES THE DEVELOPING MARKETS

ALL EYES ON CHINA

However, any analysis of the


automotive market in BRIC must
begin with the China factor. China is
now the worlds largest car market
by volume, having surpassed the US
in 2009 and Europe in 2012. Though
growth is beginning to slow, the
market is still predicted to expand
8-10% year on year [1]. While this shift
notably occurs during a period of
recession and financial stagnation in
the West, China has resoundingly
emerged as the key growth market
for car manufacturers. Both GM and
Toyota are chasing global sales of
10m vehicles for the first time ever
in 2013, with VW close behind [2].
Chinas tastes as a country will
directly affect the kind of products
car manufacturers offer in the rest
of the world; in fact, they already
have. BMWs controversial restyling
programme in the early 2000s,
led by Chris Bangle, was directly

driven by Chinese market tastes


in the then-rapidly growing luxury
car sector. Chinese buyers of luxury
cars demand presence and scale
in their vehicles, and the Bangle
era responded to this with 7
and 5 series models which were far
taller and visually imposing than the
outgoing models. It is notable that
while BMW, Mercedes and Audi sell
ever more standard (and lightly
stretched) executive models in
Asia, back home in Europe all three
manufacturers have introduced
4 door coup models which hark
back to the original remit that the
5 series, E-Class and A6 used to
occupybut now with a lifestyle
proposition that enables them
to be sold at a useful premium.

For premium manufacturers the


emphasis is shifting to large 4x4s,
with BMW preparing an X7 and
Rolls-Royce 4x4, and in Volkswagen
Group the platform of the new Q8
will also underpin the production
versions of the Bentley EXP 9 F and
Lamborghini Urus, and a Q7 coupSUV cross. Jaguar is showing its
C-X17 crossover concept at Frankfurt.
This again is a response to the
Chinese premium markets fixation
on size as a marker of privilege
(along with a Russian preference
for ruggedness and the general
American preference for SUVs). China
will not drive a premium downsizing
trend, but its highly likely that small
premium cars like the BMW 1 Series
and Mercedes A-Class will sell well
as a result of the brand association
to super-premium 4x4s.

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MAJOR THEMES THE DEVELOPING MARKETS

BRAND ACQUISITIONS

Moreover, European brands are


beginning to be directly controlled
by Chinese influence with MG Rover,
Saab and Volvo now all owned by
Chinese interests (along with Jaguar
Land Rover now owned by Indias
Tata). We can expect more
underperforming manufacturers to
shift to China as the Wests economy
continues its uncertain recovery.
While MG Rover and Saab were
bankrupt at the time of purchase,
the economic growth of China means
that more successful brands are now
potential acquisitions.

EXPANDING MIDDLE CLASSES

Volvo, for example, was a strongselling brand and key technical centre
for Ford when it was sold to Chinas
Geely. Volvo is showing two new
concepts at the 2013 Frankfurt motor
show designed to herald a new
direction that will sell in the West
and the East. Other brands that
continue to sell well in Western
markets will soon be affordable
for consumers in the expanding
Chinese economy. Meanwhile MG
and Saab are tentatively returning
to retail operations in Europe.

The centre of gravity in the Chinese


market has now shifted to the middle
classes rather than the super-rich,
and we will begin to see the same
kinds of product trends affecting
mass market vehicles. For example,
PSA Peugeot-Citreons new brand
strategy sees Peugeot moving
upmarket to challenge VW in the
European market. Meanwhile
Citron, which is a larger player
in China, will split its range between
semi-premium DS vehicles and
low-cost C vehicles, the latter being
specifically designed according
to the tastes of China and other
emerging markets.

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MAJOR THEMES THE DEVELOPING MARKETS

MARKET EXPECTATIONS

Buyers in China are not subject to


the same embedded expectations
as those in Western markets. Users
are far more likely to have owned
a smartphone as their first middleclass technological investment prior
to a car purchase, so there is an
automatic assumption that the car
will take advantage of the phones
capabilities. Equally, China presents
a much clearer opportunity for
alternate propulsion methods to
take hold. Not only are there fewer
preconceived notions about range,
cost and prestige, but new charging
or hydrogen distribution networks
can be built more easily as part of
the rapid urbanisation of the country.

A further way in which market


expectations differ throughout BRIC
is that although the markets have
very strong recognition of certain
brands (especially super-premium
brands), in the middle market there
is less distinction between what we
in the west consider to be established
and challenger brands. While in
Europe we may remember when,
for example, Korean manufacturers
had to be positioned as a low-cost
option in order to gain a foothold,
these brands have arrived in BRIC
with competitive mid-market
propositions from day one.
Additionally, companies like VW and
Citron target low-cost markets with
designs that have been superseded
in the West (at least 3 generations
of VW Passat remain on sale under
different names) which means that

the quality proposition of VW is


stretched compared to a brand like
Hyundai, which comes to market
with only its current, modern and
capable product roster. This offers
the opportunity for challenger
brands to make a prestige leap
by coming to market with the
right product and proposition.

27

MAJOR THEMES THE DEVELOPING MARKETS

EXPANSION INTO
EUROPEAN MARKET

SOLUTIONS FOR
MEGACITIES

Towards the end of the period


we cover here, native Chinese
manufacturers may begin to make
inroads into Western markets
(though this has of course been
predicted before). One can look
at the turnaround in Hyundai/Kia
to realise exactly how quickly
a product transformation of the
type required can be effected once
the strategic will and funding are
put in place [3]. It is likely that this
influx from the Chinese manufacturers
will initially come in the form
of a foothold in low-cost small
commercial vehicles and extend
into passenger cars in the
following decade.

Broader demographic trends will


have a powerful effect on Chinas
motoring needs. China is experiencing
a rapid migration of population from
the countryside to urban areas,
meaning that it is becoming the
first country having to deal with
the notion of designing megacities
(defined as urban areas with
populations in excess of 10 million)
essentially from the ground up. The
EU currently has only two megacities
in the form of Greater London and
Paris, and with population growth
trends in the EU it is unlikely that
many more will join them before
2050. The solutions China finds for
its megacities will influence urban
landscapes throughout the world.

This will include smarter traffic


management to prevent congestion,
APIs that allow for smarter journey
planning, and new solutions in the
area of communal transport, whether
that be traditional public transport or
something more closely resembling
a car-sharing club on a citywide
scale. Some of the possibilities for
this latter option will be explored
in other areas of this report. However
cities will also be likely to take their
cue from Songdo in South Korea [4],
where the city is structured so that
every citizen has the option to walk
to work. Such radical restructuring
of the city proposition could not
occur in Europe, but on smaller
scales such as neighbourhood
replanning, the principles may
well be influential.

28

MAJOR THEMES THE DEVELOPING MARKETS

WHAT DOES THIS


MEAN FOR LEASING?
China and Russia (and later Brazil
and India) could present a disruptive
opportunity for leasing companies
who are able to understand the
market and present a compelling
alternative to outright ownership.
Chinese manufacturers looking
to get a foothold in the European
market will be eager to move
vehicles to organisations that
can give them volume and profile.
Initially it will be easier to place
these vehicles in extremely TCO
(Total Cost of Ownership) sensitive
sectors such as commercial fleets,
but this may mean finding
a way to reassure those clients
that untested total lifetime costs
will not exceed expectations.

In Europe, cars that meet the


markets embedded expectations
of desirability will increasingly be
shifted to higher-grossing premium
placement, matching consumer
mood as the economy begins
to pick up again. This may offer
opportunities to add premium
services to leasing agreements,
or use premium positioning
of existing benefits as a zerocost value add.
Chinese auto manufacturers seeking
greater understanding of new markets
may be keen purchasers of
anonymous, aggregated driver
data of the type a telematics-enabled
leasing company would have to offer.

[1] h
 ttp://www.carnewschina.com/2013/01/10/
china-buys-more-cars-than-europe-for-the-firsttime/
[2] http://www.autonews.com/apps/pbcs.dll/
article?AID=/20130730/OEM01/130739984/
toyota-production-to-top-10-million-vehicles-thisyear-report-says#axzz2dRaKv8sP, CAR Magazine
September 2013

[3] Ben Oliver, Car Magazine September 2013


[4] http://www.bbc.co.uk/news/technology-23757738

29

MAJOR THEMES TECHNOLOGY AND CONNECTIVITY

TECHNOLOGY AND
CONNECTIVITY
Since 2007, a quiet revolution has been underway.
The bulk of our most personal interactions
with technology have shifted away from fixed
environments such as a PC at a desk to the personal
sphere, first with smartphones providing a pervasive
bubble of connectivity, and latterly with tablets
taking over many of the functions that a laptop
would previously serve.
Steve Jobs described this world as a place where PCs
became analogous to trucks, performing specialised
tasks for professional users, and tablets took over
the car role of day-to-day interactions with the
internet. With this in mind, the key themes of the
coming decade are those of pervasive connectivity,
software and services that support our lives, and the
expansion of the new superpowers these devices
give us into whatever environments surround us.

There are no airplanes, only computers that


fly. There are no cars, only computers we sit
in. There are no hearing aids, only computers
we put in our ears.
Cory Doctorow

MAJOR THEMES TECHNOLOGY AND CONNECTIVITY

APPIFICATION

An accompanying trend is that of the


appification of what had previously
been distinct products [1]. For
example, the standalone TomTom
GPS unit is rapidly being made
obosolete by cheaper smartphone
apps which provide the same
capabilities. While the dedicated
hardware may be able to acquire
a satellite signal faster and hold
onto it better, the performance
of mobile hardware is good
enough for most users.

It is this aspect of good enough


for a far cheaper price that drives
appification. In fact as an app can
be supported by commercial models
other than outright purchase, the
choice for a user may be expensive
hardware or a completely free app.

30

31

MAJOR THEMES TECHNOLOGY AND CONNECTIVITY

EXAMPLES IN ACTION

GPS is the first and most obvious


example of this occurring in the
automotive sphere, but as our lives
are increasingly expected to connect
to the cloud, more and more features
that currently live on the car platform
will migrate to the users own devices.
Volvo for instance, has recently
embedded a Spotify app into its
in-car platform. But Spotify is one
of many options for consumers
who want to stream music, and
may already have a relationship with
Rdio, iTunes Match, Google Music,
Amazon or any of a hundred other
providers. They have direct access to
these services via their smartphone,
without needing a second mobile
data subscription. So the pressure
from consumers will be for the cars
ICE (In Car Entertainment) to become
a dumb pipe for those services. iOS
and Android, and Microsofts Devices
division (Nokia as-was) will both

soon offer a mode in which the cars


touchscreen simply offers access to a
paired phone, and the phones apps
and services drive the required
functionality [2]. Once that happens
for entertainment and GPS, it is quite
easy to see a path where all of the
cars user-accessible functions are
appified in the same way, although
the need for cross-manufacturer APIs
would push this further into the
future. Fords Open XC endeavour
demonstrates some early progress
in this area [3].

There are start-ups already working


on this vision. Like the CarK now
platform that aims to provide the
ability to write apps on a third-party
platform that plugs into the OBDII
port and interfaces with the vehicles
CANBus internal network [4].
Manufacturer-backed schemes will
naturally be more elegantly integrated.

32

MAJOR THEMES TECHNOLOGY AND CONNECTIVITY

NEW INTERACTIONS

Interacting with a device while


driving a moving vehicle is a
particularly challenging proposition.
Drivers have limited capacity for
extra attention, and touchscreens
as they currently exist lack the
important haptic qualities of physical
controls: touchscreens must be
looked at to be interacted with.
A variety of solutions exist: BMW
has the iDrive controller which is
now, despite teething problems,
successful; Audi has introduced a
touchpad on which gestures can be
drawn; Jaguar and others offer voice
control of some functions. Future
vehicles are likely to continue to
use a mix of options as brands
see the cabin experience as a key
differentiator. Although there will be
some common metaphors, there will
not be any industry-wide standard
within the timeframe of this report.

However, one very clear inference


from the current generation of
mobile devices such as the iPhone 5s
and Moto X is that voice will play an
ever-larger part in the way drivers
interact with their cars. Apples Siri
Eyes-free mode is targeted for
manufacturer support in 2014 and
offers a specific mode of Siri in which
it responds to the driver only in voice
and without visual feedback. For
now, the limited functions that Siri
can operate in a car mean that
manufacturers will cede those
interactions to Apple. However
at some point manufacturers will
realise that these voice interactions
and responses will have a significant
effect on the drivers perception
of the cars personality. Minis
50th anniversary specials had some
limited development in this
direction [4.1], but as voice recognition
and server-backed response systems

become more sophisticated this


channel will be a more important
aspect of prompting an emotional
bond to the car.

MAJOR THEMES TECHNOLOGY AND CONNECTIVITY

THE INTERNET OF THINGS

Although the users interaction


surface will increasingly be their
own device, and the car may
piggyback the connection when
an app is in play, the car will retain
a cellular data connection of its
own. This will allow the user (and
the manufacturer, service agent and
possibly government) to remotely
interact with the car - starting the
heating system on a cold day to clear
ice from the windscreen, identifying
itself in a crowded car park and
guiding the user back to it, reporting
its service status to the dealership
to trigger customer contact,
for example.

As the Internet of Things begins


to connect physical objects to
the cloud, cars will become a firstclass player in this new world.

33

34

MAJOR THEMES TECHNOLOGY AND CONNECTIVITY

THE VALUE OF DATA

Naturally with this access to the


vehicles systems flowing in one
direction, a torrent of useful data will
flow in the other, through the
phones data connection and out into
the cloud. Cisco estimates that the
savings and revenue from this flow
of data could add up to $1,400 per
year [5]. This flow of data is not
unique to the car. As the cost of
connectivity hardware and services
decreases, we will see many more
sources of data being aggregated in
the cloud. On a small scale, we can
see the trend for personal
quantification with devices like
the Nike+ Fuel Band allowing people
to track their daily activity, plot it
against time and compare
to others. For a vehicle, this means
the ability to interact with connected
objects around it in the real world
and in the cloud.

There are three classes of vehiclecentric communication:


1. V2V is inter-vehicle communication
cars will be able to relay weather,
congestion and road surface
conditions, match speed so they
can be platooned together
and driven automatically on
motorways, and alert each
other to avoid accidents.
2. V2I is vehicle-to-infrastructure
communication, in which cars
can communicate with the fabric
of roads and smart cities to route
around roadworks, co-ordinate
journeys to make the best use
of congested facilities,
communicate hazards to the driver
and, possibly, tax by the mile.

3. Finally V2X is the principle of


the vehicle communicating with
anything, using either a dedicated
local radio frequency or connecting
via the internet. This could be
something as simple as automatic
mileage transmission for a
company driver, up to emergent
uses such as new location-based
social applications. However,
for all three of these classes the
assumption should be that some
endpoint within the system will
connect to the internet, and huge
volumes of data relating to traffic,
rather than individual cars, will be
available for analysis. For the
authorities this will mean more
granular control over traffic in real
time and better assumptions when
planning infrastructure

upgrades. For third parties this will


mean new business possibilities will
emerge in managing and analysing
this data, in building services which
consume and react to it, and in
using it to understand the situation
on the ground when developing
new products.

35

MAJOR THEMES TECHNOLOGY AND CONNECTIVITY

MORE ACCURATE POSITION


AND SPEED DATA

THE CAR IN THE CLOUD

GPS will be joined by fully-operational


networks of Russian GLONASS and
EU GALILEO satellites, offering
potential location resolution down
to an accuracy of 10cm (or better
with a subscription). At this level
of granularity, geolocation becomes
useful for more than just navigation
purposes cars will be able to tell
when they are being parked across
two parking spaces, or driven too
fast into a tight corner.

Increasingly, ownership of a car will


mean ownership of a virtual object
and its attendant services and
applications, but it may not
necessarily mean ownership of a
physical object. For urban dwellers,
services like ZipCar currently offer
timeshare ownership of a car, but
cannot solve some of the pains of
motoring such as urban parking,
congestion or the need to actually
drive the car. However, motor
manufacturers and tech companies
are looking at possible solutions.
GM and Toyota have both exhibited
single-person mobility pods which
are self-driving on their own
segregated road network. GM said
of its En-V model, it might not be
something you own. Larger, more
traditional vehicles will exhibit
similar swarming behaviours.

Volvo and the EUs SARTRE project


envisages platoons of vehicles on
motorways, all driven automatically
by a professional driver in a lead
vehicle. The cars in the platoon are
able to drive with reduced space
between them, improving
aerodynamic efficiency and reclaiming
space. Beyond this semi-autonomy,
entirely self-driving cars are being
developed by Google, Audi, Nissan,
Stanford University and others.

36

MAJOR THEMES TECHNOLOGY AND CONNECTIVITY

THE CAR AS A CLOUD

Google recently claimed its selfdriving cars may only be 3-5 years
from market [6]. It is unlikely that a
company like Google, with its native
understanding of mass resource
management and network effects
and its advertising-driven revenue
model, would release a product like
this into the market with a traditional
purchase model. It is not
unimaginable that users will
subscribe to a cloud of cars
model where a car is guaranteed
to arrive within minutes when
called, and be ready-tailored to
the users preferences when it does
arrive. The user can then drive or be
driven to their destination, at which
point the car disappears to serve
the next user, removing any need
for parking. This kind of network
management could also provide

OBJECTS OF DESIRE

enough surplus vehicles at any time


to ensure that a service operated by
electric vehicles could always have
enough out-of-service charging time
without compromising the service.

As millenials come of age, we


can see the above trends begin
to come to fruition. In the US, teens
increasingly see a smartphone as
their object of desire, rather than
a car [7]. Where cars once symbolised
freedom and independence and acted
as a social hub, those functions are
now served and amplified through
the internet. As these teens grow
into adults with differing needs, it is
likely to be a race as to whether the
need for independent mobility shifts
further into life, or new digital
solutions arise to obviate it further.
The need to physically move people
from A to B will never go away, but
the expectation that the most
efficient way to serve that need
is to own one car per person may.

People who choose not to


own a car will still have access to
personal mobility through cloud
ownership where a car is available
on demand. Through interaction with
devices and personal data stored in
a cloud, these cars will demonstrate
a level of personalisation which
is somewhere between that
of a taxi and ones own car.
However, this does not mean that
private car ownership is going away
certainly not outside urban areas.
Instead, manufacturers will leverage
new technologies to make the
ownership experience more
personal and customer-centric
than ever before.

37

MAJOR THEMES TECHNOLOGY AND CONNECTIVITY

WHAT DOES THIS


MEAN FOR LEASING?
As vehicles and technology converge,
it becomes equally likely that
disruption will come from technical
organisations as from automotive
organisations. Equally it becomes
clear that non-technical companies
wishing to stay relevant will
increasingly need to engage
in technical development to
meet user expectations.
New attitudes towards non-traditional
ownership of and access to vehicles
will open up a third option beyond
purchase and leasing. Leasing
organisations that choose not to
participate directly in this model
may still have a part to play
in fleet supply, management
and maintenance.

An opportunity exists at the nexus


of vehicle data and owner data to:
Gain extra value from aggregation
and use of generated data
Offer drivers differentiators
and value-adds through
the technological platform
Offer fleet managers more visibility
and control over their vehicles

[1] T
 he Appification Of Everything Will Transform The
Worlds 360 Million Web Sites Forbes
http://www.forbes.com/sites/
anthonykosner/2012/12/16/forecast-2013-theappification-of-everything-will-turn-the-web-intoan-app-o-verse/2/
[2] Nokia unveils its connected car platform:
Here Auto Tech News and Analysis
http://gigaom.com/2013/08/30/nokia-unveils-itsconnected-car-platform-here-auto/

[3] How tech nerds will write the next generation


of car apps | TechHive
[4] http://translogic.aolautos.com/2013/08/12/
in-detail-carknow-car-hacking/
http://www.techhive.com/article/2046512/
how-tech-nerds-will-write-the-next-generation-ofcar-apps.html
[4.1] http://www.greencarreports.com/
news/1044317_the-50th-anniversary-talkingmini-cooper-in-dealerships-now

[5] Big data from a car is worth $1,400 a year,


Cisco exec says
http://www.autonews.com/apps/pbcs.dll/
article?AID=/20130805/OEM06/130809928

[6] Google sees self-driving cars in 3-5 years;


Washington, insurers not so sure Autoblog
http://www.autoblog.com/2013/02/08/google-seesself-driving-cars-in-3-5-years-washington-insurers/

[7] http://bits.blogs.nytimes.com/2011/11/20/ateenage-question-a-car-or-a-smartphone/?_r=0

MAJOR THEMES RAPID MANUFACTURING


AND NEW MATERIALS

RAPID MANUFACTURING
AND NEW MATERIALS
As the need for greater efficiency bites, cars will
increasingly be built from weight-saving materials
other than steel and glass. BMWs recently
launched i3 makes extensive use of Carbon Fibre
Reinforced Plastic for both bodywork and structural
applications. BMW claims that its designed-in
reparability means CFRP will be no more expensive
to repair than a steel component [1], but there will
be a natural ramp-up time for dealerships to
acquire the experience and equipment required,
and it is unclear what possibilities there will be for
out-of-network repairs. The i3 is a premium small
hatchback, but the technology will filter down
rapidly. Ford is already exploring ways of reducing
CFRP production costs [2].

38

39

MAJOR THEMES RAPID MANUFACTURING


AND NEW MATERIALS

MODEL PROLIFERATION

The modular platforms which


underlie these CFRP bodies will allow
much greater variation in the kinds
of vehicles that are built on top. Fiat
and VW have managed to massively
decrease the break-even volume
of a particular model by spinning
many models off the same platform
and component set. However new
propulsion and manufacturing models
will increase this efficiency further.
In common with many emerging
electric vehicle architectures, GMs
2003 Hy-Wire concept sits upon a
skateboard platform containing
the batteries, propulsion, suspension
and so on, and have a passenger
module on top which the passengers
occupy. A single skateboard platform
can underpin many types of vehicle
with the development cost of only
the individual passenger modules.

RAPID PRODUCTION START-UP


BY OUT-OF-SECTOR COMPETITORS
GM even envisaged that the life
module could be changed at a
dealership from a sensible saloon
during the working week to a sleek
sports car at the weekend. This lower
development cost to extend a range
means that we will see an explosion
of niche vehicles designed to more
accurately target every conceivable
consumer sector.

Hand in hand with this new style


of engineering, Gordon Murray
has begun to licence his iStream
manufacturing process which takes
this modular, platform-based
construction as the seed for a faster,
cheaper and more flexible method
of vehicle manufacturing [3.1]. Murray
envisages that the majority of
licensee companies will not already
be in the automotive manufacturing
sector for instance, Sony or Nike
may take the opportunity to compete
in the automotive market, adding
their own differentiators along the
way as Swatch attempted to do
with the original conception of Smart.

40

MAJOR THEMES RAPID MANUFACTURING


AND NEW MATERIALS

LESSENING USE
OF PLASTICS

SPOTLIGHT: BMW i3

Increasing oil costs and carbon


accounting may mean that the use
of plastics is lessened. Bamboo, as
a lightweight material and good way
of removing carbon from the
environment, is frequently suggested
as an alternative material for interior
surfaces, including fabrics [4].
As more of the vehicle interface
moves to reconfigurable forms
such as touchscreens, simpler
dash architectures will enable
further weight savings.

BMWs i3, known in development


as the Megacity Vehicle, is the most
comprehensive re-architecting of the
car currently available. Unlike Nissans
Leaf, which is built on an existing
combustion car platform, or even the
Tesla model S which uses a bespoke
but conventional platform, it has
been designed from the ground up
to maximise the new opportunities
of an electric architecture.

Carbon Fibre Reinforced Plastic


platform offers lighter weight
and greater rigidity than steel
If a damaged section of CFRP
needs to be replaced, it can be
cut out at marked safe points
and a replacement module can
be patched in

Life/Drive architecture: Like GMs


Hy-Wire concept, the i3 is split
between a skateboard floor Drive
module containing the batteries,
suspension, crash structures and
propulsion modules, and the upper
Life module with passenger
volume and external body panels

Buyers get credit with BMW Access


scheme, allowing them to swap
their i3 for a combustion-engine
BMW for longer journeys or just
for fun

BMW ConnectedDrive app helps


drivers find public charging points
to alleviate range anxiety

 BMW expects 5 to 15% of its sales


to be EVs and EREVs by 2020

Satnav can plot energy-efficient


routes and recalculate expected
range based on terrain

41

MAJOR THEMES RAPID MANUFACTURING


AND NEW MATERIALS

BUILT AROUND
THE CUSTOMER

RAPID MODEL TURNOVER

The upshot of these innovations is


that those who choose to own a car
in 2023 will own cars that are more
intensely personalised than ever
before. Personalisation will take the
form not just of colour and graphics,
but body styles, bespoke panels,
and even in the way the car drives
and reacts to commands.

As the cost of model proliferation


falls, car manufacturers may
re-energise markets by following
the smartphone model of making
significant upgrades to their core
lines each year, hoping to push
image-conscious consumers down
to a 2- or even 1-year renewal cycle.
This would naturally be accompanied
by new lease-like forms of financing,
and require some solution in the
form of fleet disposal to ensure that
general resale values remain high.
Solutions developed in the era of
GMs planned obsolesence may be
relevant again.

42

MAJOR THEMES RAPID MANUFACTURING


AND NEW MATERIALS

WHAT DOES THIS


MEAN FOR LEASING?

Consumers will expect the same


level of personalised design,
behaviour and services from their
leasing companies that they will
expect from the purchase experience.
Leasing companies Quote and Order
(Q&O) process will need to support
an explosion of model bases and
optional extras. However, as the
experience of owning a car outright
increasingly comes with the
expectation of a package of services
attached, leasing companies will
have an opportunity to outcompete
manufacturers on the service offering.
Customers will need reassurance
that adopting vehicles built from
new materials will not impact
repair or maintenance costs.

Out-of-sector brands that enter


the automotive market via new
manufacturing methods will seek
distribution models that disrupt
the existing market. This presents
both a potential challenge and an
opportunity for leasing companies.
As leased vehicles are tailored more
and more towards the taste of an
individual customer, sell-on values
may be impacted as one persons
dream car may be anothers ugly
mess. Options for mitigating this
include not giving customers
complete freedom at the Q&O stage,
including a reversion charge along
the same lines as the current fair
wear and tear charges, or developing
bespoke personalisation solutions
that can be reversed at low cost,
along the lines of vinyl wraps.

[1] N
 ew BMW i3 can its carbon-fibre panels
be repaired?
http://paultan.org/2013/08/06/new-bmw-i3-can-itscarbon-fibre-panels-be-repaired/

[2] Ford working on mass-market carbon fiber


components to save weight, improve
efficiency Autoblog
http://www.autoblog.com/2012/10/12/ford-workingon-mass-market-carbon-fiber-components-to-saveweig/
[3] Ford Develops Advanced Technology to
Revolutionize Prototyping, Per ... Press Release
http://corporate.ford.com/news-center/pressreleases-detail/pr-ford-develops-advancedtechnology-38244
[3.1] http://www.gordonmurraydesign.com/
istream.php

[4] http://www.usatoday.com/story/money/
cars/2013/06/27/wood-fisker-bmw-ram-lexus-gses/2413611/

43

WILDCARD
SCENARIOS

44

WILDCARD SCENARIOS

RAPID ENVIRONMENTAL CHANGE

UK ENERGY CRUNCH

A serious environmental disaster


(eg. a Super-Katrina destroying
an Eastern Seaboard US city) may
result in a hard shift towards severe
environmental restrictions, with
consequential knock-on effects
for first world manufacturing.

In 2015, several coal-fired electricity


generating facilities in the UK will fall
below emissions standards and be
decommissioned. The UKs generating
surplus will fall from 15% today to
4%, with a consequent rise in costs
and uncertainty of supply. With no
clear path to replacement for this
lost capacity, this could be a longterm situation which colours public
opinion of Electronic Vehicles and
Plug-In Hybrid Electric Vehicles for
a generation.

45

WILDCARD SCENARIOS

HARD SHIFT TO ASIA

LIMITATION OF
MINERAL SUPPLY

If the Chinese economy continues


to grow during a depression in the
West, then naturally there will be
a hard economic and product
development shift towards the East.
This would cause a hastening of
some of the effects we discuss in
the BRIC major theme.

Certain battery and electronic


components in modern vehicles
(and personal devices) rely on the
supply of rare-earth minerals from
countries which are prone to
instability. A destabilising event
such as a war or natural disaster
could disrupt supply long-term, or
encourage a new wave of economic
empire building to secure supply
of these minerals. Equally, public
opinion may be coloured by the
adoption of campaigning platforms
against the exploitation of these
resources, for example by Greenpeace.

46

WILDCARD SCENARIOS

ENERGY DENSITY
BREAKTHROUGH

ALTERNATE ECONOMIC
RECOVERY SCENARIOS

At present, the best (and most


expensive) battery technologies
allow an energy density of around
1/10 that of petrol, at a much greater
cost than a comparable petrol
vehicle. However, there are several
promising new battery technologies
claimed to be close to market.
These promise energy densities
up to 1/4 that of petrol, often with
greatly decreased recharging time
and lower production cost. Should
one of these technologies disrupt
the market, it could result in
increased pure EV up take
against existing predictions.

At present, a steady recovery from


2008s financial collapse, lasting up
to a decade is predicted. However,
if recovery is faster than expected it
may presage a return to 2000s-style
conspicuous consumption, or on the
other hand a further depression
would cause severe problems, in
particular for European manufacturers
who continue to find their domestic
market shrinking.

47

CONCLUSIONS

WHO WILL THE


DISRUPTORS BE?
For the leasing market, incumbents will be
increasingly pressured by holistic solutions from
the manufacturers themselves. The BMW i3, sold
with BMW Access, BMW ConnectedDrive and a
subscription to a public charging service, is one
example of the kind of integrated solution that
manufacturers will offer. BMW is ahead of the
curve but by no means unique.

In future, there wont be just one automobile, but


a variety of different forms of mobility.
Audi
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48

CONCLUSIONS

WHO WILL THE


DISRUPTORS BE?
However, for the automotive market
in general, there is a clear desire
from Silicon Valley to be the disruptor.
Googles self-driving car project
clearly indicates a will to challenge
the notion of car ownership, and
if they were to acquire one of the
emerging EV manufacturers such
as Tesla, their 3-5 year go-to-market
time would not look unrealistic.
The modularity of non-combustion
vehicles and the emergence of new
manufacturing systems will present
an opportunity for any player to
become an automotive manufacturer
on scales commensurate with the
power of any existing brand they
own. Hence a major disruptor could
be Sony, Nike, or even Apple.
These disruptors will bring with
them new distribution channels
and ownership models.

Car-share ownership is a clear


challenger to the traditional leasing
model. The increased ability to make
a vehicle react to an individual
drivers preferences will mean the
sole ownership experience of leasing
will be less of a differentiator from
the car sharing providers. As many
of these providers emerged as digital
native entities, they have a greater
embedded understanding of the
online world and network effects.
An intimate and implicit understanding
of these effects will be vital for any
organisation wanting to play in an
increasingly connected marketplace.

One serious disrupting influence


will be governmental regulation.
To meet the EUs 2050 transport
targets, infrastructure development
needs to be reshaped in the next few
years. At some point governments
will be forced to choose between
missing those targets and pushing
harder to get people out of
combustion cars and into EVs and
public transport. This will probably
not come until the 2030s but one or
more of the wildcard scenarios could
have an accelerative effect.

49

AND FINALLY...
We are clearly closing in on the
end of the internal combustion era,
but reports of the death of the petrol
car have clearly been exaggerated.
Within the timescales covered by this
report, the combustion engine will
continue to command no less than
85% of the new-purchase market,
and a commensurately larger
portion of total vehicle stock.
However, drivers will pay handsomely
to own and drive those vehicles, and
will spend longer sitting in traffic in
them. As a result, cars will act as a
fourth space distinct from home,
work and public spaces, where
owners are entertained, express
themselves and get things done.

To make the most efficient use


of the entire transport network,
it will be truly integrated with the
internet, allowing smart cross-modal
journey planning, real-time route
comparisons, and post-facto analysis
to refine and improve in future.
As the 2020s arrive, cars will begin
to operate independent of their
owners, coming when called and
finding their own parking spaces.
The notion of ownership will mean
access to services and networks
that enhance the experience of
owning the car, up to and including
allowing the car to be swapped
for other purposes such as moving
house or enjoying a weekend away
in a convertible.

The information, materials and opinions contained in


this report are for general information purposes only.
They are not intended to constitute legal or other
professional advice, and should not be relied
on or treated as a substitute for specific advice
relevant to particular circumstances. LeasePlan UK
Limited does not accept any responsibility for any
loss which may arise from reliance on information
or materials in this report.