By Thaiha Nguyen

For the first time since the advent of the internal combustion engine, a complete transformation in car transport is under way. Instead of personally owned, gasoline-powered, human-driven vehicles, we are transitioning to electric-powered

and driverless vehicles, paid for by the trip or subscription schemes.

Car ownership as a condition of prosperity dates back to Henry Ford and his dream to build a car “so low in price that no man making a good salary will be unable to own one”. In the US alone, 212 million licensed drivers now own

252 million vehicles, driving 3.2 trillion miles a year and burning more than 180 billion gallons of fuel.

But clocking up those miles is a horrendously inefficient business. Over 95 per cent of cars sold in the US run on gasoline but less than 30% of that energy is translated into motion, with the rest used to power headlights and radios or wasted on heat.

Worse still, automobiles sit unused about 95% of the time. Parked end-to-end, Earth’s cars would encircle our planet nearly 100 times, with towns and cities devoting valuable real estate to car parks and garages at the expense of green space, schools and hospitals.

Traffic congestion is a global disaster given more than half the world’s population lives in cities, while the World Health Organisation estimates car crashes kill 1.35 million people a year.

Henry Ford’s dream has become a burden and the car industry is now one of the most disruptable businesses on earth.

While GM and Chrysler went bankrupt and Ford narrowly avoided the same fate in the period coinciding with the financial crisis, a handful of outsiders started to challenge the incumbents’ dominance by converging new technology with innovative business models.

Google gathered the brightest minds and launched its self-driving project.

Upstart Tesla delivered its first Roadster in 2008. And shortly afterwards, Uber and Lyft established a vast market for ride-sharing.

Now, a decade since these seeds were planted, we are seeing the emergence of a new mobility ecosystem shaped by four trends.

Firstly, the shared use of a vehicle allows users to access transportation on demand.

The most common form of shared mobility is ride hailing, operated by companies like Uber and Lyft. But shared mobility goes beyond cars and encompasses ‘micromobility’, a rising trend of bike and scooter sharing. This could enhance transportation accessibility, reduce driving and decrease vehicle ownership.

Electric vehicles (EVs) first emerged in the mid-19th century, and the electric engine was the preferred propulsion system for motor vehicles until surpassed by the internal combustion engine, which has ruled for almost a century.

In the 21st century, EVs have seen a resurgence due to technological developments in battery technology, an increased focus on renewable energy and various government incentives.

Autonomous vehicles (AVs) are driverless vehicles capable of sensing their environment and moving safely with little or no human input.

They are equipped with a variety of sensors, such as radars, pulsed laser beams to detect distance and depth, and cameras operating as ‘eyes’. Advanced computing systems then interpret sensory information to navigate, avoid obstacles and drive safely.

Finally, urban transportation systems that move people by air are being developed in response to traffic congestion and ballooning urban populations.

A new generation of aircraft called electric vertical take-off and landing vehicles (eVTOLs) hold the promise of replacing driving around cities, saving man-hours by reducing trips by road to short hops by air.

The vehicles are designed to take off and land vertically in small areas, be powered by electric engines and to operate on demand like ride-hailing services.

While uncertainty abounds, particularly about the speed of transition, it seems unlikely these trends will be stalled or reversed.

Like the sectors of retail, entertainment, finance and healthcare, transportation is on the brink of being disrupted by the digital technology revolution.

Thaiha Nguyen is an investment manager at Baillie Gifford.