Major US-based car manufacturer General Motors is expecting big changes to the automobile industry over the next five years. In an interview published on Sunday, General Motors’ chief executive Mary Barra went on record saying this: “I think it’s pretty big. I’m on the record as saying we are in the midst of seeing more change in the next five years than we’ve seen in the last 50 years.” So, General Motors foresees dramatic changes happening to its industry. But how will it change in the next five years? Barra believes that the changes will revolve around three broad themes. She…
Major US-based car manufacturer General Motors is expecting big changes to the automobile industry over the next five years. In an interview published on Sunday, General Motors’ chief executive Mary Barra went on record saying this:
“I think it’s pretty big. I’m on the record as saying we are in the midst of seeing more change in the next five years than we’ve seen in the last 50 years.”
So, General Motors foresees dramatic changes happening to its industry. But how will it change in the next five years? Barra believes that the changes will revolve around three broad themes. She said:
“When we step back and look at this broadly, we see it all fits together: electric, autonomous, and sharing. People still need to get from point A to point B, and we believe autonomous will be a big part of it.”
General Motors is looking to move beyond its traditional role as a car manufacturer. The firm has invested US$500 million into ride-hailing service Lyft. The goal is to pair General Motors’ own electric vehicle, the Bolt, with self-driving technology that can be utilised on Lyft’s network.
In short, Genera Motors is looking at a future where it might not be a car maker alone.
The drive for change
Singapore’s Ministry of Transport may hold the clue on the impetus behind General Motors’ thinking. The ministry has come out with its vision for a driverless car future in Singapore. Within its vision, this statement was included (emphasis mine):
“10 to 15 years down the road, an AV [autonomous vehicles] might take your children to school, before bringing you to work. Rather than being left unused at the carpark, it could then be routed to drop your parents off at the market.
Such an automated system could enable car-sharing in a wider sense, with a potential to reduce passenger vehicles to a third of current numbers, according to a 2011 MIT study in Singapore.”
If the number of passenger vehicles in Singapore indeed declines to a third of what it is today, other developed countries around the world could see a similar trend. And, this could have an impact on the businesses of car makers, such as General Motors, and vehicle distributors, such as Jardine Cycle & Carriage Ltd (SGX: C07). Less cars could mean less business for them.
There’s still hope
All hope’s not lost just yet. Barra believes that personal car ownership will still have a market for years to come:
“I think we are a long way out from that. I think traditional ownership model will dominate for quite sometime and it will be driven by rational customers making decisions about what’s best for them.
If you look more broadly than the United States there are still whole markets that are emerging where you people are still looking for that freedom that mobility gives them and the ownership.”
Jardine Cycle & Carriage’s directly owned vehicle distribution businesses made up around 22% of its underlying profit in 2015. Vietnam contributed a sizable piece of that 22%.
As the picture in the land transport business environment evolves, it is unclear how the business models will look like in the future. But if we take the word of General Motors’ chief executive, it could be an interesting five years ahead for drivers, commuters, and companies such as Jardine Cycle & Carriage.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn't own shares in any company mentioned.