In this column, we completely ignore quick headlines and trending topics. Instead, we focus on long-term developments in technology, the market and legislation. David Kemps, industry sector banker at ABN AMRO, argues in favour of the ‘refurbished’ car.
Tekst David Kemps
Industry sector banker at ABN AMRO. With 20 years of experience as a business economist, Kemps is the perfect sounding board and sparring partner for major national and multinational companies. He advises various Dutch suppliers to the international car industry regarding strategy development, growth ambitions and investment plans.
These are exciting times for the car industry, a world dominated by shiny metal and roaring engines for decades. Since the overwhelming breakthrough of the electric car – less than six years ago – an avalanche of changes has occurred. Thanks to Elon Musk, everyone now knows how super cool electric cars really are. The zero-emissions vehicle has gone from being alternative to a sexy must-have, the new benchmark. But that’s not all.
Another unstoppable change in the market is the evolution from policy-driven to consumer-driven development and production. Consumers are basing their car-buying decisions less on engine performance and appearance – the classic USPs – but entirely different features. Functionality. User-friendliness. Driving assistance systems. And state-of-the-art navigation and in-car entertainment.
“It is a domino effect in which every change triggers the next change.”
From ownership to usage
But even that’s not all. Car ownership is also changing: consumers are increasingly more interested in usage instead of ownership, such as car sharing and private leasing. We no longer need to own the car, as long as we can use it when we need it. We want hassle-free access to the latest technology, a development that has been going on for several years now. The PBL Netherlands Environmental Assessment Agency and consultancy firms like Deloitte and PwC estimate that, in the year 2015, one in ten cars on Dutch roads was a shared car. By 2030, this number will increase to as many as one in three. Private car leasing is also on the rise. From 2015-2017, the number of private lease contracts in the Netherlands nearly tripled, from 36,000 to 100,000. ABN AMRO expects this number to rise further in coming years.
Significantly shorter life span
It is a domino effect in which every change triggers the next change. Insiders expect that more intensive usage and changing consumer demands will result in vehicles with a significantly shorter service life in the future. At present, private cars are not in use 95 percent of the time and, in the Netherlands, end up being dismantled after eighteen years on average. Share cars are used more intensively, driven no less than 34 percent of the time and, consequently, susceptible to more wear and tear. This, as well as rapid changes in technological innovations, will mean that cars will age much more quickly in the future. Exact figures are not yet available, but it seems reasonable to expect that the average life span of a share car will decrease.
This in turn will result in shorter product life cycles and that will force car manufacturers towards a more circular economy. This is especially true if, due in part to the shift from car ownership to car usage, they are held personally responsible for their products – both during and after the use phase. This can be addressed through modular designs, upgrades and the recycling and upcycling of materials and car parts. A great example of this is the e-Palette from Toyota, introduced at the CES 2018 in mid-January. It is a self-driving car with a modular interior. And, yes, it was introduced at the consumer electronics and consumer technology trade show in Las Vegas and not at the Geneva Motor Show…
Natural raw materials
Circularity, reuse and modularity will be essential concepts in the sector in coming years. Initiatives have been launched for the use of natural raw materials, but they still rarely make it as far as large-scale serial production. And if they do, car manufacturers almost never mention this in their marketing materials. Understandable, in my opinion, since circularity is not yet ‘cool’ to the general public.
But it is not only companies that need to adjust their focus to working towards a circular world; we consumers also need to be willing to view things differently, such as the notion that a new car must be new from top to bottom and from front to back. Why?
Second-hand parts in new cars?
There is already at least one car brand that installs used gearboxes in cars that have just rolled off the production line. Yes, you read right. In other words, fully ‘refurbished’ and with a complete factory warranty. One hundred percent reliable and no one notices the difference. But this makes a huge difference in terms of waste: existing components are given a second lease on life and fewer new parts need to be produced. Obviously, these car manufacturers do not yet mention this too loudly out of concern for public reaction.
Used as quality label
If you give it a little more thought, don’t you think that such recycling is quite clever? I do. As long as it works properly, who cares how old your gearbox is? Mark my words: before you know it, ‘used’ will be a USP, a quality label. Like ‘Made in Germany’, but with ‘10% refurbished parts’. The Leapp car. And that seems to me to be a ‘giant leap’ forward. I can’t wait!