Auto Sales are down. Car Manufacturers and in turn Auto Suppliers/Retailers will have to rethink their business models. The gig economy of Uber and Lyft may also change as a result and in turn even the rental business will have to alter their model.
I have zero interest in owning a car and when one of the yokels here said, "Maybe one day." My response, "Son I have had more cars than you could count why would I want a car when I can go places that I don't need one? Yes go to the Grocery - get that delivered - or in turn go to Paris? Tell me which you would do?"
I suggest everyone sit down and realize with Amazon's purchase of Whole Foods I will never need to set foot in a Grocery Store again. I tried Instacart for the first time and the cost involved to have someone bring me my groceries and include the fees and tip is the cost of gas, insurance and time best doing something else. The trade off was worth it.
This is one business that needs change and not just the stuff in the ashtray.
The End of Car Ownership? Report Projects Big-Bang-Style Disruption in 2021
Car and Driver
Will the widespread adoption of autonomous vehicles and electric powertrains send gas prices into a downward spiral, render car ownership obsolete, and cause masses of used cars to be abandoned? These are the outcomes forecast by a controversial, widely discussed paper published earlier this year, predicting what it calls a “Big Bang disruption” triggered by the approval of autonomous vehicles for widespread use on public roads. This is a turning point that the study claims could arrive as soon as 2021 with the introduction of vehicles that, as it defines them,“will drive themselves with no human mechanical input (no pedals or steering wheel).”
Tony Seba, who with James Arbib published the study for their think tank, RethinkX, says its basis is “purely economic”—a distinction that many tech reporters have failed to make. Their study and its jarring vision of the future should serve as a wake-up call to the complacent. It centers around the transition of the personal-vehicle market to a new economy of transportation as a service (TaaS), and it crunches some of the numbers and projects what might happen to the market in a rapid transition.
The study involves many controversial assumptions, the boldest perhaps being the assertion that by 2030, or within 10 years of regulatory approval of autonomous vehicles, 95 percent of U.S. passenger-vehicle miles will be traveled by autonomous electric vehicles and that these will be owned by fleets offering services, not by individuals purchasing them for personal use.
Arbib and Seba, based in London and Silicon Valley, have applied a "technology disruption framework" to consider issues including technology-cost curves, market dynamics, and product and business-model innovation. Seba, a Stanford University economist—and a green-biz keynote speaker—laid out some of this vision in a 2014 book anticipating the decline of the global oil industry, a collapse that he foresees will be spurred by electric cars and renewable energy.
Economically Irresistible to Give Up Car Ownership?
Sheer economics will be at the root of the change, the paper argues. The average American family will be able to save more than $5600 per year by using driverless transport instead of personally owned vehicles (the savings is only $2000 annually compared with a completely paid-off vehicle). These savings, the study argues, will lead to greater consumer spending in general—to a total GDP boost of $1 trillion—while the time freed up from driving could lead to another $1 trillion in productivity gains. All of this would more than offset a $200 billion loss of personal income from jobs for the likes of chauffeurs, taxi drivers, and Lyft contractors.
Uber passenger© Provided by Car and Driver Uber passenger
In cities, the economic revolution that Seba forecasts would mean that such services would offer an unbeatable deal for most households; they could cover their transportation needs for a quarter to half the cost of operating a vehicle they already own, or as little as 10 percent of the cost of purchasing a new car. By 2030, even though individually owned vehicles will comprise 40 percent of vehicles in the United States, they’ll cover only 5 percent of passenger miles, according to the study. The total number of vehicles in the United States would drop to just 44 million from 247 million today, leading to the abandonment of 100 million existing vehicles as economically unviable.
A widespread switch to battery-electric vehicles—another trend that still looks tenuous for the time frame forecast by the study—is seen as essential for this scenario to play out. The projected cost savings are predicated on the arrival of a fleet of autonomous EVs that would be on the move almost continuously whenever they’re not being charged. Vehicles that are part of the TaaS economy will be on task 40 percent of the time. (Currently, independently owned vehicles are unused 96 percent of the time, just sitting in garages, driveways and parking lots.)
Despite this constant-use scenario, the study projects that vehicle lifetimes will extend to 500,000 miles (and 1 million miles by 2030)—a controversial assumption on its own—so the cost of nearly everything related to operations, including maintenance, depreciation, and insurance, would be reduced, while the transition to electric will save energy with each mile.
Another bold prediction in the study that goes along with the transition to autonomous EVs: a 90 percent drop in demand for oil related to passenger road transport by 2030. The authors project a 5 percent annual decrease in oil demand beginning in 2021 due to the electrification of the trucking industry. And the study extrapolates some of these U.S. trends to the world at large—another major leap—anticipating only a four-year time lag before autonomous vehicles pass their tipping point in other key markets.
If Oil Is Cheaper Than Bottled Water Now . . .
The economists expect that, in the scenario they anticipate, some types of oil extraction could become nonviable, too. Global oil demand would fall from about 100 million barrels a day in 2020 to 70 million a day in 2030, and prices would plummet. “The effects of such a dramatic decrease will ripple through the whole value chain, causing systemic disruption from oil fields to pipelines to refineries,” the authors argue. This could lead to the abandonment of large-scale pipeline projects and other high-cost oil-extraction methods such as offshore drilling and fracking.
Although that might sound like a bright future to environmentalists, what it suggests for the vehicle market and the auto and oil industries isn’t so rosy. People would stop buying new cars. Then, as production and sales declined, plants would close, and the car industry would lose its economies of scale. This in turn would lead to higher vehicle costs, accelerating the trend as the cost advantage for using TaaS widens.
Autonomous electric vehicles will be highly modularized, the report anticipates, and cheaper to assemble. “The death spiral of the [internal combustion engine] car industry will thus go into high gear,” the study declares.
Ford Focus Electric© Provided by Car and Driver Ford Focus Electric
These authors issue one of the most bullish projections yet for the death of the internal-combustion engine. Other sources are more conservative on the growth of EVs. Last month, Morgan Stanley reported that it expects electric vehicles will make up about 16 percent of all vehicles sold globally by 2030 and that EVs won't outsell ICE vehicles until 2040. The most recent forecast from BP takes an even more conservative tack, anticipating that the global fleet of vehicles will double from 0.9 billion in 2015 to 1.8 billion in 2035. During that time, it’s projecting that the number of electric cars will grow from about 1.2 million to 100 million—which would still make up just over 5 percent of the total fleet.
Far-Fetched or Alarming?
If the RethinkX forecast sounds fantastical and far-fetched, it likely is. Yet the auto industry does face some harsh realities. According to a Federal Reserve paper published last year (and drawing from J.D. Power data), new-vehicle purchases by Americans in age groups 16 to 34, 35 to 49, and 50 to 54 all dropped significantly from 2000 to 2015, when the market as a whole had mostly bounced back from the recession. There were especially noteworthy drops in the 35-to-49-year-old range, while those aged 55 and older were the only group to show a boost. Yet these authors declared: “Our results suggest the decline in the per-capita rate of new-vehicle purchases since 2007 more likely reflects economic factors than permanent shifts in tastes and preferences for vehicle ownership.”
While that statement may seem blissfully out of touch to, well, anyone too young to get into the AARP, virtually every other estimate falls into a conservative middle ground between Seba's ideas of cataclysmic disruption and the Fed's business-as-usual nonchalance.
On Which We Can All Agree: Industry on the Verge of Big Change
Seba’s paper, and all the buzz around it, probably should be understood more as a thought experiment than a prophecy. It outlines a fringe scenario that could happen if the tech world and the auto industry merged in an impossibly smooth way.
There is one especially rapid shift already underway within the industry—that of some automakers reformulating themselves around mobility services. They see that the future isn’t in traditional manufacturing but (just as with our smartphones) in the platforms, operating systems, and services that go along with autonomy. We’ll be spending more time in cars in 2030, the study anticipates, so there’ll be more room for revenue in that. And automakers who have a whole service ecosystem—not just a product—stand a chance to thrive.
If automakers don’t take control of the value of personal transportation—the shared mobility and connectivity services and the user experience—they’re going to end up subservient to the Ubers and Lyfts of the future.