The movement of people back to urban areas and the onslaught of new transportation options has forced traditional automotive manufacturers to take notice and plan for the future.
While it’s clear that cars will remain a part of the urban landscape for many years to come, automakers like Dearborn-based Ford Motor Co. are preparing for a day when their products have much different uses.
During its media presentations at the 2016 North American International Auto Show last month in Detroit, Ford discussed not only how the company pays attention to these trends to protect its future business, but also detailed how it can help solve some of the issues presented by rapidly growing cities.
“If you think of city traffic all around the world, it’s a mess,” Ford Executive Chairman Bill Ford said during a media event at NAIAS. “We have gridlock in the major cities all around the world. If you believe the futurists, as we go from 7 billion people to 9 billion people, it’s just going to get more and more. Today, it’s an inconvenience. If we don’t fix it, it will affect the economy, the environment and the health and safety of the people who live there.
“The great thing is, we have an amazing opportunity to help solve these issues. So we’re not only embracing the change, we’re intent on leading it.”
Companies such as Ford have good reason to brace for a period of change: Despite years of growth and even record sales in 2015, the automotive industry will start to plateau in the next few years, according to analysts.
“It’s clear to us that there will be a reduction in vehicle sales, which is a notion that is new to the industry and it took about two years for some of the OEMs to get their arms around that,” said Phil Gott, a senior director of long-range planning at IHS Automotive, a Southfield-based research firm.
Gott authored a new mobility study that found more than 60 percent of the global population will live in cities by 2035. Moreover, that shift will occur at a time when people in those cities say there’s already too much traffic.
Those concurrent changes will pose both challenges and opportunities for the automotive industry over the next couple of decades, Gott told MiBiz.
“While vehicle sales will go down, the demand for mobility will not,” he said.
Still, other industry executives question how well the entrenched automakers can adapt to an era of higher demand for mobility and plateauing sales.
“We’ve never done it,” AutoNation Inc. CEO Michael Jackson said during the Automotive News World Congress, according to a report in Automotive News in which he called automakers “clueless” about how to adapt.
“Don’t be in denial. We’ve failed this test every time,” he said.
INVESTING IN MOBILITY
Despite the skepticism of their ability to react, many automotive companies are taking notice of these mobility trends and investing large amounts of capital into new and growing technologies.
For instance, Detroit-based General Motors Inc. has invested heavily in mobile ride-sharing services, hoping to jump on the success of companies such as San Francisco-based Uber Technologies Inc.
In January 2016 alone, GM invested in or acquired parts of at least three different ride-sharing platforms, according to industry reports.
Most notably, the company announced at the Consumer Electronics Show in Las Vegas that it would invest $500 million into San Francisco-based ride-sharing platform Lyft Inc., a leading rival to Uber. The investment is aimed at ramping up implementation of autonomous vehicle development.
“We think our business and personal mobility will change more in the next five years than the last 50,” GM President Dan Ammann said in an interview with Reuters.
Additionally, GM last month launched its car-sharing program Maven with a pilot project in the city of Ann Arbor. With Maven, customers can use an app to locate and access an available car and control its electronics and HVAC — even start the car with their smartphones.
The goal, according to GM, is to provide an “ownership-like experience with the convenience of car-sharing.”
Palo Alto, Calif.-based electric vehicle manufacturer Tesla Motors Inc. also announced in January that it was increasing its driverless car capabilities with the beta launch of Summon, a software that will allow drivers to use their smartphones to bring their vehicles to their location.
“Eventually, your Tesla will be able to drive anywhere across the country to meet you, charging itself along the way,” the company said in a statement. “It will sync with your calendar to know exactly when to arrive.”
But increased demands for mobility will have ripple effects well beyond the automotive industry.
In West Michigan and beyond, commercial and residential real estate developers and urban planners all have vested interests in designing and implementing new strategies for the movement of people.
As the Grand Rapids area has grown, developers increasingly have focused on adding new housing, retail and office options in the downtown central business district and its nearby neighborhoods. That growth has also contributed to the ongoing implementation of GR Forward, an amendment to the city’s Master Plan.
The issues around mobility have certainly been on the minds of executives at Downtown Grand Rapids Inc. (DGRI), the organization tasked with planning and implementing the GR Forward initiative.
“We’re not only trying to balance the different infrastructure we can provide, but also we’re recognizing that there has to be accommodation for all users,” said Bill Kirk, mobility manager for DGRI. “So we still have to figure out ways to accommodate single-occupancy travel. … There’s always going to be people who want to drive their own cars. The whole thing is just about providing as many options as possible and not just saying we need to have a bike-share system because that’s what other cities are doing.”
Current DGRI plans for enhanced mobility include a multitude of new initiatives that range from implementing a bike-sharing program to rerouting the downtown area’s shuttle service to act as more of a circulator and better connect to the city’s various neighborhoods.
“We’re doing it to provide actual options so they can compete with the traditional form of commuting,” Kirk said of the organization’s philosophy on mobility.
Those alternative mobility options soon could become a necessity as fewer people are interested in driving these days. A University of Michigan Transportation Research Institute report released in January found that only 69 percent of 19-year-olds in the U.S. have driver’s licences, down from 87 percent in 1983.
A PLACE FOR THE CAR?
As organizations like DGRI seek to increase the area’s transportation and mobility options, parking concerns and determining how best to accommodate single-occupancy car traffic remains a hot topic, particularly as parking inventory begins to dwindle in the downtown district.
Developers in the central business district frequently cite the area’s surface parking lots — which were built in the 1970s and 1980s as placeholders for future development — as finally serving their intended purpose.
For example, later this spring Orion Construction Inc. will open its mixed-use Arena Place development on a former surface parking lot in the Arena South neighborhood. The developer and general contractor has also proposed a twin-tower project with residential, retail and office space on a surface lot at the corner of Lyon Street and Ottawa Avenue.
While nearly all of the proposed projects in the downtown development pipeline have some form of parking included, drivers have all but exhausted the current supply of parking spaces, according to the Grand Rapids Parking Services website.
The website shows that almost all of the city-owned downtown parking ramps are full during traditional daytime business hours.
The dwindling parking supply and the upfront costs of building new capacity have some of the region’s multifamily residential developers saying that it’s time to embrace new mobility initiatives. They’re pushing city government and others to consider what the city should do to embrace a future when individual car ownership is no longer the norm in urban areas.
“Parking is expensive. It’s very expensive, so no, we don’t want to build it,” Monica Steimle, director of development for Grand Rapids-based 616 Development LLC, said in December for a report in MiBiz. “We’ve spent a ton of time educating people on the other options. We don’t want to have a ton of parking. We’re still a city and neighborhood that needs it. We’re not quite there yet, but we’re getting there. I think people don’t want to use their car.”
Steimle’s views on car ownership in urbanizing areas mirror findings in the IHS study.
According to Gott’s research, global automotive production will top out at approximately 100 million units over the next couple of decades as the industry reaches a saturation point and as consumers explore other options.
While automotive companies will certainly experience challenges in adapting to future mobility trends, the firms that can adapt will find opportunity, Gott said.
“They need to think of urban as not limited by geographic areas or a particular definition of density,” Gott said. “They need to think of urban as a lifestyle.”