The surge in demand for personal transportation vehicles (PTVs) has been surprising to many, although we at SVR have been tracking the market and alerting readers of this column and subscribers to our syndicated reports that consumer perception of the lowly “golf cart” had dramatically changed during the COVID period and post-COVID to the present.
A recent article in the online journal, FastCompany (11/2/22), entitled Why car companies should fear the golf-cart, draws upon Harvard professor, Clay Christensen’s analysis of disruptive products. It was in Christensen’s book, The Innovator’s Dilemma (1994) that the term “disruptive” was used to characterize surprising new products that subsequently challenged the entrenched market leaders.
“Good enough” becomes better than most
The paradigm developed by Christensen was the following: A startup company introduces a new product to the market which differs from the products of the currently dominant companies in that it features lower performance but also a lower price. The product is “good enough” for a segment of the market which is quite price sensitive.
The example is given of NetFlix, which started small with compact disc offerings delivered through mail. Attracting a small but profitable market enabled the company to invest in and develop streaming technology, the end result of which was to force the previously dominant company, Blockbuster, out of business.
Other examples of the mouse that roared
When you think about it, the Netflix case is hardly unique. For example think about IBM and the desktop computer. The dominant mainframe company in its time, IBM quickly became the dominant in the desktop market—only to be dethroned by Dell, HP, and others as processing power and storage capacity increased exponentially. In fact, the mainframe market in business applications was altogether destroyed. (Joseph Schumpeter’s description of capitalism’s process of “creative destruction”.)
In the early post war period, when the Japanese began to export automobiles to the U.S., they specifically targeted the second car market with relatively cheap, low performing vehicles. Detroit scoffed at these “tin cans on wheels”. In fact, the Big Three was lucky to survive and did so only by emulating the Japanese product which had evolved to become the better performing, more reliable product.
Will the PTV follow the disruptive product pattern?
It is hard to imagine that the PTV will displace the on-road, on-highway vehicles in the manner NetFlix took over the home movie market from Blockbuster, or, for that matter, the way in which mainframes were pushed out of the business market by desktops. There are limitations:
PTV limitations in comparison to conventional automobiles
- As long as the purpose of a trip remains within 10 miles from point A to point B and back, the PTV is adequate, but beyond this distance, a new generation of batteries (at a reasonable price) will need to be available;
- Not all driving conditions are equal; which is to say that hilly terrains, cold climates, and rainy environments mitigate against PTV use, compared to conventional vehicles;
- Urban and suburban road networks are often not well-adapted (or public officials are unwilling to provide for adaptation) to slower moving PTVs;
- Public road use should encourage needed proactive safety features, such blind spot warnings and forward moving collision avoidance (automatic braking and warnings), which are not yet available on current generation PTVs.
In contrast to these kinds of current limitations there are similarities to cases of disruptive innovations, such as cited above.
The case for PTVs as classic disruptive players in the mobility market
Despite the limitations outlined above, the PTV, in the following capacities, could potentially displace conventional automobiles to a significant degree:
- For short distance tasks, errands, and commutes the PTV is ideal, providing personal transportation, and load capacity at a low cost of operation;
- Purchase price is at least one-half to one-third of the average price of a new automobile;
- PTVs are being systematically upgraded, as a competitive component of the market, with many automotive-type accessory features;
- Passive safety features have become a standard aspect of PTVs, with proactive safety systems on the way.
Most importantly, from a consumer perspective, the PTV is no longer a “mere” golf car and has morphed into something cool. There is little question that the PTV has attracted the initial market segment of early, price sensitive adapters. In other words, the initial stage of the Christensen model is in place.
The further question is, how much further can the PTV market develop to become a truly disruptive phenomenon? This gets into an analysis of micromobility and the market environment in which it has taken root.
Complexity of the micromobility market
Where does the PTV fit in the micromobility market? Right now micromobility is associated mainly with two-wheeled vehicles, such as mopeds, ebikes, low-powered scooters, and motorized skateboards. The use of these vehicles has caught on in urban centers on a global scale.
Micromobility popularity has not escaped push back in many instances, however, as urban transportation officials grapple with sidewalk clutter, pedestrian complaints, and mounting number of accidents. In addition, micromobility has not fared especially well in small to mid-sized communities. Micromobility company, Bird, recently announced a mass withdrawal from small to midsized urban markets: https://www.smartcitiesdive.com/news/bird-micromobility-exiting-markets-2022/634471/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202022-10-19%20Smart%20Cities%20Dive%20Newsletter%20%5Bissue:45371%5D&utm_term=Smart%20Cities%20Dive
Briefly, the company, “…suggested market conditions and a lack of supportive regulatory frameworks in some locations were insurmountable.” Some reasons for the market assessment are likely to be:
- Distances may be stretched out, as compared with densely populated environments;
- Small towns and cities could be further back on the transition wheel compared to big cities;
- Lack of versatility in use; e.g., no storage space, lack of weatherproof enclosures;
- Use confined to a younger demographic (the case for big cities as well).
Golf car-type vehicles: A step beyond micromobility
A recent newsletter from the McKinsey Center for Future Mobility put the golf car-type vehicles (principally in our lexicon the PTV) in what their analysts term the minimobility market: https://www.mckinsey.com/features/mckinsey-center-for-future-mobility/mckinsey-on-urban-mobility/minimobility-the-next-big-thing-in-urban-mobility.
The article cites the conveniences and operational advantages of the PTV over the two-wheeled cousins in micromobility; namely side-by-side, multi-passenger seating options, creature comforts, weather protection, etc. Advantages compared to conventional vehicles include smaller parking spaces and low cost of operation.
Perhaps the most important upgrade the PTV offers over the micromobility universe (actually not mentioned in the McKinsey article) is that it appeals to a much broader age demographic. Two-wheeled balancing acts (yes, exaggerating) are not the cup of tea for the over 50 age group. At the same time the PTV appeals to a younger set as well.
PTV outlook—major market gains on the way
In its preliminary research for SVR’s 12th major analysis of the golf car market, all indications are that recent low double-digit growth will continue in the short to midterm outlook and blossom into a sustainable, mainstream market in the United States, which could well number over one million units in the decade ahead.
Excitement in the market is palpable, and to finish this article, here is a link to a compendium of stories and videos featuring PTVs on public roads. Note that many of the communities mentioned are beach towns. Also note that almost 40% of the U.S. population lives in coastal communities.
