Hi you! I have not even met you yet – I
have heard you gurgle over the phone and I know your name is
George. I am writing to you about an industry in which I have spent
my professional life. In that time it has changed out of all
recognition.
Before you can drive – if that is what it is called
by the time you are old enough to sit behind the controls of a
shiny cash-guzzler in 2026 – it will have changed as much
again.
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But spare the indulgence for a first time
grandfather and let me write a few lines about the last four
decades in a changing industry.
When I joined the motor industry, the government
levied purchase tax on almost everything, including cars. It also
had the ‘Control of Hiring Orders’ on contract hire, which meant a
company paid nine months’ rental in advance – yet the leasing
industry still took off. Government tried to use the motor industry
as a tool of economic management; little more than 10 years before
that, the United Kingdom’s motor industry was the world’s largest
vehicle exporter.
I have seen the industry through four recessions
and a historic burst of double-digit inflation. Inflation was
different; companies were working at full pressure yet some still
went broke because they failed to adjust to a new business
model.
The secret was to abandon hire, get out of cash,
buy your vehicles, spread repayments as much as you could – and
then sell the used vehicle at an inflated money price. Used cars
could fetch amazing prices – in inflated money. The problem could
be having enough cash to buy the next vehicle – or even the
deposit.
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By GlobalDataToday the industry, indeed the country, is in a
poor state. We are short of money; I remember when we were short of
cars. I fear this government has not saved for a rainy day
(something I hope you will learn to do), and it has had to borrow
eye-watering amounts. You will probably still be paying for their
profligacy when you start work. Don’t blame me – I didn’t vote for
it.
The government has had the Bank of England invent a
new scheme called ‘quantitative easing’ – similar to what you will
doubtless be doing in your nappies for the next year or so.
So where might the motor industry and in particular
the vehicle finance industry move over the next decades before you,
or more likely your father, acquire your first car?
Global warming – hopefully not global cooking –
will be even more important than it is now, and will affect the way
and what you drive. I wonder if, by the time you come to drive, you
will even be allowed to own your own car?
Or will you simply pick one up from the local
rental point? I could see you having an electronic swipe – your
identity card – and once identified and shown to be in credit,
choosing the most suitable car for the day and returning it when
you have finished. You would be billed automatically.
Why own a depreciating asset? Hiring a car would
leave you to make best use of any money you earn that the
government does not take in tax to pay for the naughty noughties –
assuming you can get a job.
If you are fortunate enough by then to have any
savings, I am not sure how the rules of interest and usury will
work, even assuming we have moved back to paying a return on
money.
But will cars still exist almost as we know them
today? I have been looking at the shape of things to come with
electric cars – by the time you come to drive, petrol and diesel
cars will be as scarce as electric cars today.
Of course by then mankind may have broken away from
the ‘car fetish’ and be using electric bicycles, powered
skateboards or those dreadful gyroscopic platforms – even walking.
If the planet goes that route the choice may still be hire or buy
but you can bet your bottom euro there will be a tax on electricity
or miles driven to replace the tax on hydrocarbons.
But what of the motor finance industry – will that
still exist?
I am sure it will, but not as we know it! If we all
rent our mobility needs rather than own a depreciating asset, we
will have a new mass rental industry – how will that be funded and
managed?
Will there be one mega rental company, or many? But
what will happen to all those used vehicles, skateboards and
bicycles? Will they go to second users – tier two renters – or sold
to ‘private buyers’? Will there be a mega scrappage scheme?
George – you have joined the planet at a time of
rapid change – I can’t blame you for that! Welcome to this mad, mad
world – and the human race.
Granddad.
Professor Peter N C Cooke, KPMG Professor of
Automotive Management, University of Buckingham
