Foreign Direct Investment in Latin America and the Caribbean 2017

130 Chapter II Economic Commission for Latin America and the Caribbean (ECLAC)
new technologies is being matched by alternatives such as shared mobility and
electric vehicles, which could mitigate the congestion and pollution in large cities.
This scenario will favour cleaner transport systems based on electric vehicles,
while discouraging the ownership and use of private cars. These measures
would optimize shared mobility and expand public transport (McKinsey &
Company, 2016).
The preferences and interests of potential buyers are changing radically. Consumers’
“loyalty” to individual brands is weakening, and automobiles are increasingly valued
as a means of transport. This trend seems to be exacerbated among the inhabitants of
large cities in developed countries, where car ownership is starting to lose importance
in their preferences. This is reinforced by growing problems of affordability, especially
among younger generations. Vehicle ownership is becoming less attractive for millennials,
since it is a costly and underused asset that quickly depreciates (BCG, 2016a). This is
likely to increase the number of people who would prefer to pay to drive alone only
when they need to.
These changes in consumption patterns are unlikely to radically change the size
of the market, but they will change how much the consumer is willing to pay for a
vehicle. 26 In recent years, the automotive industry has seen major quality improvements
across the board, which have narrowed the gap between mass-consumption and luxury
products. This trend, coupled with the increased demands of consumers, has allowed
sophisticated components to become standard features of the new models in more
economical demand segments.
The emergence of automobile transport service platforms has had disruptive effects
in sectors with a long history, and has generated fierce opposition from taxi drivers
wherever they operate. Founded in 2009 and a pioneer in the sharing economy, Uber has
become the most valuable start-up enterprise in the world, with a market capitalization
of over US$ 70 billion. The Uber application can be used in more than 60 countries and in
425 cities around the world. The firm’s high valuation is based on its ambitious objectives:
to use autonomous vehicles and thus make trips in Uber cheap and convenient, with
the ultimate aim of consumers completely renouncing car ownership (The Economist,
2016a). In a short time, many technology companies, including Lyft, Curb, China’s Didi
Chuxing and Cabify, have started to emulate Uber’s business model.
The manufacturers are starting to adapt to this new reality. Taking advantage of the
proliferation of connectivity, many are seeking to diversify and reinvent themselves to
evolve from vehicle assemblers to mobility companies (The Economist, 2016b). In recent
months, some of the largest manufacturers have turned their attention to ride-hailing
services (chauffeur-driven car reservation through a smartphone app) and car sharing:
• General Motors invested US$ 500 million in Lyft —Uber’s main competitor in the
United States, with a market value of US$ 5.5 billion— to develop an ride-hail
service with autonomous cars (Bloomberg, 2016c).
• Volkswagen announced a US$ 300 million investment in Gett, an Israeli firm
that is very popular in Europe, in an agreement that envisages expansion in
the United States, where it acquired the private transport service Juno for
US$ 250 million (Fortune, 2017d).
• Toyota made a small investment in Uber and a strategic investment in United
States-based Getaround car sharing enterprise, to develop a mobility services
platform and a smart key box that makes it possible to open or close doors and
start the engine with a mobile phone.
26
Shared transport services could reduce automobile demand by about 550,000 units and cause a net revenue loss of US$ 7.4 billion
for automakers (BCG, 2016b).