If the driverless car revolution isn’t already here, it’s certainly out of the garage at this point. Major players like Tesla and Uber are already rolling out their self-driving technology, with traditional car manufacturers like Mercedes, Toyota, Nissan, and others following suit. Experts estimate there will be 10 million automated cars on the roads by the end of this decade, more than doubling in another fifteen years. It certainly looks like a disruption of the entire idea of driving is already underway
As with any massive cultural change, some stand poised to benefit, while others will fall by the wayside. These are just some of the potential winners and losers in the driverless future.
Winners: Tech Leaders
Let’s get the most undeniable one out of the way. The companies that have taken the point on this technology (Google, Tesla, Uber, and others) will see the greatest benefit from it’s spread. If they can get their autonomous vehicles and their proprietary software on the roads fastest and most effectively, they’ll reap an incredible benefit. Right now, it’s just a matter of time to see who makes the first big splash.
Even though it still might feel like driverless cars aren’t the safest way to get around, the fact is that the incidence of accidents is much lower than people might expect and is getting better every day as the technology is refined and improved. With strict safety protocols in place, it stands to reason that we’ll witness a massive drop in the 3,287 deaths from auto accidents per day that we currently see. Any way you feel about this sea change, this is a massive benefit for all of society.
Those of us who drive to work (an estimated 90% of the American workforce) know the often dull routine of sitting behind the wheel, staring at the rear bumper of the car ahead, wondering if we left the stove on. Consider being able to use that time in any number of ways, getting some work done, reading the morning news, or even taking a power nap while your car gets you to work safely. It’s not a stretch to say commuters might see the greatest everyday life improvement from this revolution.
One group that isn’t often brought up in conversations about disruption are the disabled. People who now are unable to operate cars due to physical limitations may benefit from cars that don’t need much human input to get around. Not every case is the same, of course, but a great many people will potentially be more independent with an automated vehicle.
Unfortunately, there are also a number of negatives to this future. Not everyone stands to gain from this sea change in transportation, and some businesses and industries stand to lose everything.
Losers: Professional Drivers
At the current moment, this looks to be the most devastating outcome of the change to a driverless world. More than 3 million Americans make their living operating trucks, buses, and cars. That’s an enormous proportion of the workforce that is going to disappear completely once automated driving becomes the norm.
The Parking Industry
The words might look strange together, but the parking industry is very real and is estimated to be worth $25 billion in the United States, and €50 million in Western Europe. Once both regions are saturated with automated cars that can drop you off and drive themselves home, the need for publically accessed parking lots will go by the wayside. What is a great advantage for driving consumers will put a number of companies out of business.
A large percentage of many towns and municipalities’ income comes from ticketing unsafe drivers and speed limit violators. Indeed, at least one town has used that money as over three quarters of their general revenue. One estimate put the number collected on traffic violations nationwide at $6.2 billion dollars per year. While drivers will be happy to have these fines out of their lives, smaller towns may be unable to stay afloat without the money they currently get from rule-breaking drivers.
It may sound ghoulish but it’s just a simple fact: insurers depend on accidents to keep themselves in operation. The car insurance industry is based completely around aberrant driving, the kind that will mostly be a thing of the past once cars are driving themselves. Major car insurers might find themselves expanding into different forms of coverage or risk going completely by the wayside in the coming decades.
Passenger-cars are losing the race for most popular automobile on the road as sports utility vehicles continue to hold the lead in 2017. According to Bloomberg, in January and February of this year, only 37.5% of American auto sales were passenger-cars, and when it comes to potential consumers, 49% were considering a SUV for their next purchase. With companies like Toyota and Lamborghini jumping on the SUV bandwagon and ultimately satisfying the needs and tastes of very different types of buyers, it’s clear that in order to stay relevant in a new car lot, companies can’t ignore that SUVs have a mass appeal in America
So what keeps SUVs at the forefront of the market?
- Big Cars are Safer
Thank basic physics and design for this one. If a big car gets into an accident with a small car, the bigger car is more likely to do the damage rather than be on the receiving end of a major repair bill. And if a SUV gets hit from the front, thanks to a larger front end, the car itself will take most of the impact, lessening or even eliminating the blow to its passengers. Fatality statistics from the Insurance Institute for Highway Safety (IIHS) make a compelling argument on behalf of big cars—only 19% of driver deaths in 2015 were in SUVs while 58% were in passenger-cars.
- We Like Being on High
Call it a return to our most primal instincts. When we can see more of what’s around us, we tend to feel more in control—it’s hard to be caught off guard when we have a high vantage point and can survey our surroundings completely. In the same article for Bloomberg, Mark Wakefield of AlixPartners transportation team explained that people feel unsafe in smaller cars when “dwarfed in the canyons of crossovers and trucks.”
- Their Fanbase is Changing
When you think of SUVs’ target demographic, you probably don’t think of single women. But in reality, from 2010-2015 “mainstream small SUV sales to women rose 34 percent, compared to a 22 percent rise for men,” and “premium small SUVs, though smaller in raw numbers, saw 177 percent growth in sales to women.” As a reference point, 40% of all female car purchasers are unmarried.
- They’re “good enough”
As a 2015 article from Kelley Blue Book says, SUVs are “just good enough.” They can be decently priced (the current average price of a car is around $33,000 and as The Motley Fool proves, there are multiple SUVs that fall way below that price point), fuel efficient, well designed without being conspicuous, and have all the tech add-ons to satisfy your specific needs. Plus, they’re perfect for carrying all your stuff (including kids and pets). That being said, two years later, SUVs have gone from “good enough” to “great.”
- Minivans are Old News
While Chrysler hasn’t given up hope on minivans, debuting a new futuristic model at this year’s CES, sales of the so called “soccer mom” car have been dwindling for years. Even in 2012, Forbes was already reporting on how the crossover had taken over as the official family car. But unlike family cars of the past, these don’t come with the family look. In a list of the Top 12 Family Cars from 2017, SUVs reigned supreme while sedans were knocked off completely for the first year ever. It’s easy to understand why SUVs are so popular among parents—their size alone makes them ideal for a large family. Some 3-row SUVs can fit up to 9 people. That’s enough for an entire volleyball team.
- SUVs are Preparing for the Future
Even SUVs are going to soon be self-driving. Apple is using the Lexus RX450h SUV to test out its new technology as part of “Project Titan.”
Does this mean SUVs will eventually be the car of choice for everyone? Unlikely—passenger-cars of smaller proportions still have their place on the highways and city streets—but it’s inarguable that SUVs aren’t going anywhere anytime soon.
The hybrid car movement has seen a radical transformation in the last two decades. 20 years ago, in 1997, the Toyota Prius launched in Japan as the world’s first commercial hybrid car. Two years later, the car became available in the United States.
But, while hybrids are on the rise, they still only comprise three percent of all the cars on the road today. This is a shame, because they could make a powerful difference, especially if more taxis were hybrid.
A fleet of hybrid taxis in cities and towns across America would be a powerful boon for both the economy and the environment.
Let’s take a closer look and see what hybrid taxis could accomplish.
Understanding the higher cost of hybrid cars
Hybrid cars can save quite a lot of money, but not for everyone. It’s important to dispel fact from fiction when discussing the impact of hybrid cars on our collective wallet.
In fact, hybrid cars can actually be more expensive (even when fuel is factored in) if you only drive 15,000 miles in 5 years. The price tag is often around $4,000 more, so you would fail to consume enough gas to reach the break-even point for fuel costs.
Also, you have to factor in the cost of replacing the battery. This additional maintenance cost can range between $1,000 and $6,000. We can’t overlook these costs when considering the impact of a fleet of hybrid taxis.
Why it makes sense for taxis to be hybrid
On an individual basis, it doesn’t always make good financial sense for everyone to drive a hybrid. However, taxis are another story.
In most major cities, taxis drive upwards of 70,000 miles per year, which means they would hit the break-even point within the first four months of being on the road. And considering taxis typically drive between 400,000 and 500,000 miles over their lifetime, that’s a lot of gas miles saved.
And it gets better. While conventional cars were designed to be more fuel efficient on highways, hybrid cars were meant to be driven in the city and around town. Average gas mileage skyrockets in these areas because of the regenerative braking model. This means that the electric part of the car is charged when you brake. Seeing as though you brake more around town than on the highway (hopefully), hybrid taxi make good financial sense.
There are also some good auxiliary benefits. For instance, hybrids have to gas up less frequently, meaning more time can be spent driving and less waiting at the gas station. Combined with government tax breaks, you can potentially save a good chunk of change.
Some quick math
In 2012, there were 233,900 taxi drivers. So if you figure each of their taxis has a lifetime of 500,000 miles, you’re seeing 117 billion miles driven per taxi on the road.
For a conventional taxis, that’s about 4 billion gallons of gas expended, versus only 880 million gallons for a hybrid. At $2.40/gallon, that means potential saving upwards of $7.5 billion on gas expenses.
This could result in cheaper taxi fares, thus yielding more spending power per person (and a stronger economy).
It’s not just about the money. We have to care about Mother Nature as well.
Here’s something to consider. Hybrid cars put out only .75 pounds of gas per mile, compared to more than 1.1 pounds from conventional cars.
If we think about just that in terms of the lifetimes of all the taxis we have now (117 billion miles), it’s the difference of 41 million pounds of gas being emitted into the atmosphere by just the current generation of taxis.
Experts are saying that this is just the beginning. As we see advancements in the hybrid car game, between electrics, hybrids, and other variations, we’re set to cut greenhouse gasses significantly by 2050. Right now, we’re predicting to cut carbon emissions from automobiles by 80 percent by 2050.
What that means holistically is that the United States would be pumping 10 percent less pollution. This is significant because, right now, 17 percent of all greenhouses gasses in the United States comes from automobiles.
Could you imagine a less polluted Los Angeles or New York City?
Good sense, pure and simple
Hybrid taxis could radically transform the economy and the environment, and they’re already starting to. We’re going to be seeing some grand developments over the next three decades, but more government-subsidized initiatives will be needed in the upcoming years in order to push this process along.
According to a 10-year study conducted by the National Highway Traffic Safety Administration (NHTSA), 22 percent of all annual American car accidents are weather-related. That’s over 1.2 million accidents caused by bad weather out of 5.7 million total accidents. Weather-related crashes lead to almost 450,000 injuries and 6,000 deaths per year. Fortunately, simple on-road precautions and regular vehicle maintenance can help prevent accidents and serious injuries caused by inclement weather.
What Weather Conditions Can Cause Accidents?
Snow and ice are obvious weather phenomena that can make driving more difficult and dangerous. But there are numerous other weather events to consider: fog, high winds, rain, and even extreme heat among them.
Like snow and ice, fog and rain can lower visibility and make roads slippery. Heavy rains can also cause flooding, which can damage your vehicle even if you’re not involved in an accident. High winds can fight against your vehicle as it moves forward or can impact it from side to side. Extreme heat can increase the likelihood of a tire blowout and serve as a big drain on your vehicle’s battery.
To avoid accidents in any of these weather conditions, follow the precautions below.
- Be Attentive
While a driver should avoid distractions even while driving in good weather, this is especially true during inclement weather. Driving during inclement weather is more difficult than driving under normal conditions. Therefore, distracted driving during bad weather may lead to missing important details like debris in the road or a stop sign that’s been turned somewhat by high winds. Also, be careful of non-working traffic lights and treat them as four-way stop signs.
- Ensure Visibility
When dealing with snow, make sure to brush or scrape all snow and ice off all your windows before you start driving. Clearing only a small spot on the driver’s side of the windshield is insufficient, as this sort of “peephole driving” limits visibility and can, therefore, lead to accidents. Not only is driving in this manner potentially hazardous, it can also result in tickets in some states.
- Drive Slower
Slippery conditions caused by rain, snow, or ice can cause tires to lose their grip on the road, which can affect your accelerating, braking, and turning. Driving at speeds below 45 miles per hour during inclement weather gives you extra time to react to a possible collision due to slippage. Even if the collision occurs, driving slower will result in less damage to your vehicle and person. Remember, if you start skidding, turn your wheel in the direction of the slide and avoid hitting the brakes.
- Do Not Drive around Barricades
You might know the perfect shortcut on a smaller road to get yourself home sooner, but you should avoid using it if it is barricaded. Officials block off roads during bad weather that can be flooded or feature other dangerous conditions that can cause accidents and other damage to your vehicle and person.
- Maintain Your Vehicle
Proper vehicle maintenance can help you avoid accidents and problems in all kinds of driving conditions. However, if you drive in areas that are prone to snow, rain, or heat, it is especially important to take care of your vehicle so that you are prepared for bad weather.
First, top off your antifreeze, which prevents your vehicle from overheating from outside temperatures or internal processes. Next, install new windshield wipers to make sure you can easily brush off rain and snow while driving. Don’t forget to refill washer fluid as necessary, too.
The next items require a little more vigilance, but they’ll keep you safe and your vehicle running smoothly. Maintain your tires. A common trick is to stick a penny into the tread head. If you can see President Lincoln’s head, you should invest in new tires with better tread. Also, check your tire pressure monthly by using a pressure gauge you can purchase cheaply at any gas station. Either your vehicle’s owner manual or the driver’s side door frame should have the proper specifications. Finally, change your oil every 3,000 miles or once every three months, whichever comes sooner, and have your car battery tested by a mechanic if it is over three years old.
Relax and Drive Safely
Inclement weather can be dangerous and frightening. But with proper vehicle maintenance and common sense precautions while driving through bad weather, you can help keep yourself, your passengers, and other drivers safe. Be alert but stay calm.
Buying a car can be very challenging. With so many styles, makes, and models to choose from, it can be hard to figure out where to start. The choice has grown even more difficult as SUVs have grown to rival compact cars in popularity, leaving consumers to wonder whether they’re sacrificing something by choosing to buy a smaller vehicle instead of the bigger and seemingly sturdier SUV.
But fear not. While the safety and performance of SUVs have grown over the years, compact cars are still the most popular and better option for affordability, performance, and all the features to make your driving experience safer and more pleasurable.
Below, we outline five specific reasons why buying a compact is the best choice for your wallet and peace of mind.
Compacts Cost Much Less than SUVs
SUVs ride higher above the road than compacts. Raising SUVs higher requires manufacturers to use more materials, which translates into higher purchase costs for consumers. Compacts, on the other hand, cost much less to build, resulting in thousands of dollars’ worth of savings at the dealership. Additionally, compacts are much easier and cheaper to maintain. Their efficient engines and simple but highly effective mechanics ensure fewer breakdowns and require less major regular maintenance. Insuring them also costs less than insuring SUVs.
You Will Pay Less at the Pump, Too
Your vehicle’s size and weight makes a big difference at the gas pump. Because they are smaller and weigh less than SUVs, compacts have smaller fuel tanks, which means you will pay less to fill them up. Moreover, compacts’ lighter weight dispenses with the need for raised suspension, so even though their fuel tanks are smaller, they produce better gas mileage than SUVs. Compacts’ smaller size also contributes to their better efficiency and fuel economy.
Better Safety and Overall Performance
SUVs are by no means unsafe, but features unique to compacts make them the safer and better performing option.
Compacts are low to the ground, meaning their center of gravity is lower, too. This feature gives them better handling and agility and significantly lowers the potential of them rolling over as they round curves and make turns. They also accelerate and brake quicker than SUVs, making it easier to engage an emergency maneuver, which can be the difference between getting into and escaping an accident.
Their wedge-like design and lighter weight also make compacts more aerodynamic than SUVs, creating better high-speed stability. Less wind resistance due to aerodynamics also helps improve fuel economy, giving you an additional way to save money in the long run.
As an added bonus, compacts are also better for the environment because they produce fewer emissions than large vehicles.
Compacts Have All the Tech You Want
It used to be that SUVs came loaded with numerous technological features that made them more attractive than compacts. That has all changed, however. Today, compact cars feature the same or even better tech, from GPS navigation and Bluetooth to backup cameras and accident prevention systems. In fact, more compacts than SUVs made it on PC Magazine’s 2017 list of the best high-tech cars.
Today’s Compacts are Every Bit as Stylish as SUVs
SUVs used to be considered more stylish and sporty, but today’s compacts offer sleek designs and reputations for excellence that SUVs cannot beat. To suit younger and fashionable drivers, many compacts are being designed with personality and style in mind in an effort to make these cars stand out from the rest. Moreover, compacts top the list of best-rated vehicles at a number of car companies. For example, BMW is known for its M3, Mitsubishi for its Lancer, and Subaru for the WRX.
Putting it All Together
In almost every way, compacts are superior to SUVs. Compacts’ stylish, low-weight designs are prone to higher safety, better performance, and maximum fuel economy, saving consumers thousands at the dealership and at the gas pump. In addition, their complement of tech and safety features improves the quality of one’s drive while decreasing the likelihood of a bad accident, all while emitting fewer emissions to damage the environment. Together, these qualities work to ensure that while SUVs will likely remain a popular style, they cannot rival all the benefits of a compact.
Today, it is possible to complete an entire car-buying transaction online without ever leaving one’s home. Not only are the purchased cars delivered to the buyer, but the buyer may return the purchase if he or she is unhappy with it.
With such innovation available at people’s fingertips, traditional brick & mortar dealerships may lose significant amounts of business. However, there are several things dealerships can do to keep up with the changing times and retain their customers.
Adapt to the changing times. “The market economy will prevail and market forces will adjust the price. It’s not whether dealers welcome it or not, it’s whether they’re willing to adjust with the times,” says Max Zanan, co-founder and CEO of IDDS Group, an auto dealership consultant.
The times have brought about two companies that threaten to cause a major disruption to new-car dealerships’ used car sales, which make up a healthy portion of these dealerships’ profits.
The first is Beepi.com, an online peer-to-peer marketplace. It acts in a similar fashion to companies like eBay or Airbnb by functioning as a facilitator for private-party deals. However, also like eBay and Airbnb, it adds inspections and warranties to make sure the buyer is treated fairly. These warranties come at a slight cost—the difference between the price the seller lists and the buyer sees—and that’s how the company makes its profit.
Vroom.com is the second threat. Unlike Beepi, Vroom itself is the seller, having its own inventory of used cars. It also takes buyer trade-ins. However, unlike a traditional brick & mortar dealership, Vroom does not have a physical lot potential buyers can walk through. The viewings and purchases are completed entirely online and the cars are delivered to the buyers. The test drive essentially occurs after delivery because the buyer may return the car if there is something wrong with it.
Zanan advises clients to adapt to these online companies by changing their sales tactics to include similar services. One of Chrysler’s largest dealerships in the Northeast is among Zanan’s clients and has heeded his advice. The dealership now guarantees a test drive and delivers a car to a potential buyer located within a 20-mile radius of the dealership within 45 minutes.
Retrain sales staff. Changing sales tactics is an important first step, but Zanan advises that an overall shift in sales practices is the best way to compete with online auto sellers. As sales staff are the individuals who are most steeped in sales practices, they should be retrained to approach auto sales from today’s perspective.
“Certain sales tactics that were effective yesterday might not be successful in [today’s] environment. It’s not limited to a particular generation – everyone uses technology,” Zanan says.
Part of the retraining should include instructing sales people to let go of haggling in favor of straight prices.
“No-haggle” pricing may be the way of the future. In 2015, Lexus began to experiment with “no-haggle” pricing at 12 of its dealerships spread throughout the United States. The goal of the experiment, according to Jeff Bracken, Lexus’ Group’s vice president and general manager, was to “further elevate transaction transparency and customer care.”
The experiment was not revolutionary, as General Motors’ failed Saturn brand had tried it before. However, Saturn’s failure was not due to its fixed pricing scheme, but—as suggested by strong sales of Mini and Tesla cars at fixed prices—its undesirable product.
Lexus’ experiment worked. Once customers got used to the sales model, they left Lexus’ Omaha, Nebraska dealership without feeling like they were cheated. This is because customers came to the dealership knowing exactly what their chosen car cost. If they left the dealership and came back another day, the price remained the same. Thus, they were relieved of the pressure to negotiate—something that is especially beneficial because most people are not great negotiators—and they did not have to wonder if they could have actually purchased the vehicle for less than they did. Although one customer was dissatisfied with the no-haggle policy because he felt he was a great negotiator, the dealership made 40 sales between implementation of the program on June 1, 2016 and mid-July of the same year.
Tesla Motors is known for focusing on how to use cleaner, more sustainable energy for automobiles. As an independent electric vehicle (EV) company, producing cars that excel in both performance and sustainability is not an easy feat. With the intelligence and drive of CEO, Elon Musk at the helm, Tesla has been hard to compete with. Competitors often seem to miss the mark when going up against Tesla’s various EV models. Delivering a fully electric vehicle that still pulls out all the stops in terms of performance and utility has yet to be mastered by anyone besides Tesla. However, car companies big and small are making a valiant effort.
Tesla, America’s Breakthrough Car Company
Tesla, founded in 2003, officially became a car company when its first production vehicle, the Roadster, was unveiled to the public in 2006. Two years later, Elon Musk became the CEO of the company. By 2010, Tesla became the first American car company to go public since Ford did in 1956. While Tesla is a widely talked about company, it is relatively small, producing a limited volume of cars. Within a four year period, between 2008 and 2012, Tesla sold only 2,250 Roadster models, and has shipped a total of 100,000 cars over the course of its lifetime. Compare that to the U.S auto industry, who sold 17 million cars in 2015. Luxury automakers, including BMW, Lexus, and Mercedes, sold more than 340,000 cars each in 2015 according to Motor Authority.
Despite its small size, Tesla doesn’t need to be a mass-producing car company to remain successful. Tesla ranked in the top 20 on Fast Company’s Most Innovative Companies of 2015 list for “pushing the limits of affordable battery power.” The company also ranked number one on Forbes’ World’s Most Innovative Companies list due to its “innovation premium,” with the expectation that Tesla will continue to develop profitable growth.
How Tesla Differs From Other Car Manufacturers
While Tesla did not invent the electric car, it does operate off a business model that is successful in bringing electric cars to the automotive market. Tesla differs in many ways from other car manufacturers. When Tesla got its start, it did not mass produce an affordable car. Instead, it developed a competitive, gasoline alternative luxury sports car. Rather than selling its vehicles through third party dealerships, Tesla sells directly to the consumer, creating a unique buying experience for the customer.
The company also has its own network of Supercharger stations where people can take their Tesla to charge up. Elon Musk believes that providing this convenience, and making them readily available, will truly help electric cars to catch on. The company’s mission to increase the availability of sustainable transportation excels with the introduction of its first energy product, Powerwall Home Battery, which stores solar energy at home.
Additionally, Tesla employs ‘Tesla Rangers,’ or mobile technicians, that are available to service a Tesla model from the customer’s home. Depending on the situation, a technician may not be necessary with the Model S. Technicians have the ability to fix certain issues remotely.
The Race to Keep Up With Tesla
While Tesla has been at the forefront of the electric vehicle industry for quite some time now, many other major car manufacturers are trying to keep up, especially once Tesla’s Model 3 was unveiled offering high volume at an affordable price. Chevy’s 2017 Bolt, offering a 200 mile range and an acceleration of 0-60 in less than 7 seconds competes with Tesla’s Model 3, which offers a 200 mile range and an acceleration of 0-60 seconds in less than 6 seconds. While the Bolt entered the market sooner than the Model 3, it lacks on providing drivers with a fast-charging infrastructure, which can be a deterrent to cross-country travelers. Other major manufacturers have introduced their own versions of the electric vehicle including Hyundai’s Ioniq EV, Nissan Leaf, BMW i3, Kia Soul EV, and Ford Focus EV.
Most notably, what could be Tesla’s biggest competition is Jaguar’s I-PACE, introduced at the 2016 Los Angeles Auto Show. Set to enter the market in 2018, Jaguar’s I-PACE is rumored to exceed the performance of Tesla. With a dramatic design, all wheel drive, and two electric motors, and an acceleration of 0-60 in four seconds, the I-PACE truly will give Tesla a run for its money.
Beyond major car companies, many startups have been impressed with Tesla’s success and have developed interest in the electric vehicle industry. Companies such as Faraday Future and Renovo Motors are among the startups with electric vehicles on their radars. Elon Musk has been able to keep Tesla alive, but several instances were touch and go for the company. It will be interesting to see if these EV startups have what it takes to keep up with Tesla.
Although the U.S. presidential election initially left people surprised at Donald Trump’s unexpected victory and worried about how it would impact the economy, economic confidence quickly returned to the U.S. market, contributing to the auto industry selling vehicles at a rapid pace in November. In fact, thanks to its November numbers, the U.S. auto industry has an unexpected chance to set a new record for yearly sales.
According to Autodata, U.S. auto sales increased by 3.7 percent in November 2016 compared to the same month last year. If taken on an annualized basis, this increase will amount to 17.87 million units sold, which, if December sales stay on track, will break 2015’s sales record of 17.47 million units. Originally, sales growth projections for November ranged from Edmunds’ 2.7 percent to Kelly Blue Book’s 4.2 percent.
“After one of the most contentious elections in the U.S., certainly in my lifetime, the question was what effect may that have on consumer confidence?” said Bob Carter, Toyota’s senior vice president of U.S. automotive operations. “Well, from my perspective, when you look at the strength of November — particularly what took place for us, and I assume the entire industry over the Thanksgiving holiday — consumer confidence is just fine.”
Consumer confidence increased thanks to record stock highs, solid employment, the availability of credit, and a healthy housing market post-election. However, Thanksgiving weekend also had a measurable effect on November’s output.
According to Mark LaNeve, Ford Motors’ U.S. sales chief, “Black Friday has become one of the cornerstone selling events in automotive now.”
Mr. LaNeve’s comments were confirmed by data from TrueCar. Discounts as a share of vehicle price rose 13 percent above last year’s. Industry wide, incentives averaged $3,475 per vehicle this year. Although these incentives are expected to cut into profits as automakers strive to maintain or increase their market share, November 2016 was still very lucrative for the U.S. auto industry.
General Motors’ total sales increased by 10.2 percent in November. It experienced an 8 percent gain in retail vehicles, which generate more profit than sales to fleet customers. All four of GM’s U.S. brands experienced increased sales, with Chevrolet up 8.1 percent, GMC up 14.1 percent, Cadillac up 14.5 percent, and Buick up 16.1 percent. As a result, the company is now ahead of its planned pace for selling its 2016 model-year inventory, which is an indicator of profitability to come.
Increased consumer confidence, in turn, has not only led to increased sales but also to increased purchases of GM and Ford stock, breaking from the pattern of the relative lack of excitement about both companies’ shares in recent years. The price of GM shares rose by 5.5 percent to close at $36.43. Ford’s share price rose by 3.9 percent to close at $12.43.
Like GM, Ford experienced a strong month as its sales increased by 5.1 percent, with retail sales increasing by 10 percent. Sales of its Lincoln brand, known for luxury, rose 19.1 percent.
November’s sales increase not only benefited U.S. automakers, but foreign ones as well. Volkswagen Group’s flagship brand’s gains of 24.2 percent were so strong that the company broke a monthly sales losing streak that started back in 2015 when its emissions scandal made headlines. Toyota Motor, Nissan, and Honda Motor also reported increases in U.S. sales of 4.3 percent, 7.5 percent, and 6.5 percent, respectively, compared to the same time last year. Toyota sold 197,645 vehicles, Nissan 115,136, and Honda 122,924.
One U.S. automaker that did not experience growth in November was Fiat Chrysler. Its sales fell by 14.3 percent, with retail sales dropping by 2 percent. Most notably, it experienced a 42 percent decline in fleet sales, but the company suggests that this reflects its effort to cut less lucrative sales to rental car companies.
Finally, another noteworthy statistic from the month is that sales of crossovers, pickup trucks, and sport-utility vehicles continued to rise at the expense of cars, whose sales declines. Nissan’s sales of crossovers, trucks, and SUVs rose by 22.2 percent for the month, but its sales of cars fell by 5.5 percent. Toyota experienced a 6.2 percent decline in car sales, but sales of the rest of its vehicles increased by 14.7 percent.
There is good news for the U.S. auto industry. According to the National Automobile Dealers Association’s (NADA) annual forecast, issued in early November, new vehicle sales in the U.S. are on track to stay above 17 million units for a third consecutive year in 2017.
Steven Szakaly, NADA’s chief economist, predicted 2017 sales of 17.1 million vehicles, down from the expected 17.4 million by the end of 2016. Basing his prediction on expected U.S. economic growth, continued low gas prices, and the fading repercussions from the surprise election of Donald J. Trump as the next U.S. president, Mr. Szakaly is confident that the U.S. auto industry will remain steady even if it no longer continues the six-year growth trend it has exhibited since the Great Recession.
“We are headed toward a stable market for U.S. auto sales, not a growing market,” he said. “The industry has achieved record sales and pent-up demand is effectively spent,” he added, referring to 2015’s sales record of 17.47 new vehicles and pent-up demand generated during the worst of the economic times of 2009 and 2010.
Mr. Szakaly also noted the potential for a second half 2017 sales surge to 17.3 or even 17.4 million vehicles if benefits from Trump’s promised deregulation hit quickly. However, industry leaders will not be able to gauge whether a surge will happen until they achieve a clearer picture of what 2017 will likely look like, which will not happen until February or March.
NADA’s projections follow those that Bank of America Merrill Lynch made back in May 2016, but fall far short of the bank’s original expectations. Bank of America Merrill Lynch’s analysis predicted that car sales would grow to 18 million by 2018, shattering all previous records. However, industry leaders have noted a plateau in car sales which began in early summer and solidified in August 2016.
For instance, in August General Motors noted a 3 percent decline in its annualized rate of sales compared to the same month in 2015. The auto industry as a whole fared even worse, suffering a 4 percent decline over August 2015. The downward trend continued into October, though GM reported only a 1.7 percent decline that month. Near-record incentives and discounts in November were unable to reverse the trend. Despite an average discount of $3,886 per new vehicle, a 15 percent increase over last November’s offered discount, retail auto sales are expected to decline by 2 percent over last November’s levels.
Nevertheless, expected economic growth in 2017 will keep sales levels away from dramatic plummets. U.S. gross domestic product is projected to grow by 2.0 percent in 2017 and 2018, up from this year’s 1.6 percent growth. Manufacturing is expected to outpace the general economy by growing by 3 percent in 2017, outperforming this year’s 2.6 percent expansion. Furthermore, the U.S. economy is expected to add between 150,000 and 180,000 new jobs per month next year. These factors all increase consumer confidence, which makes it more likely that people will spend money on a big purchase like a new vehicle.
Although new vehicle sales in 2017 will not break records, auto dealers are likely to enjoy increased sales of used vehicles. NADA expects that new-car dealers will sell 15.3 million used light vehicles in 2017, a 200,000-unit increase from expected 2016 year-end sales. Mr. Szakaly calculated that, at this rate, franchised car dealers will facilitate three out of every eight 2017 used car transactions. He expects the total number of used car transactions to hit 40 million next year.
However, used vehicle values will fall in 2017. According to Jonathan Banks, vice president of vehicle analysis and analytics at J.D. Power, larger supplies of off-lease vehicles are expected to return to dealerships next year, lowering used vehicle prices from record levels. These declines will follow the 3.7 percent decline in used vehicle value over the first 10 months of 2016.
On the other hand, though, Mr. Szakaly expects growth in the sales of light trucks, which will offset declines in soft car sales and raise the average vehicle transaction price. The key is to keep prices from rising too high so as to not disincentivize purchasing. Mr.Szakaly is also optimistic that President Trump will spur an auto industry boom by relaxing vehicle economy standards.
Powered by smartphone applications, the sharing economy has dramatically changed the way people work, travel, and go about their day-to-day lives. With the advent of services such as Uber and Airbnb, owners of underutilized assets like automobiles and dwellings can share them with 80 million worldwide users for monetary and non-monetary benefits. According to an estimate by The Economist, the sharing economy’s value will reach approximately $264 billion by the end of 2030.
Ride-sharing companies like Uber and Lyft, which connect customers to affordably-priced drivers with just a few button taps, have transformed themselves from startups to multibillion-dollar companies that are disrupting the car industry. Presently, car dealerships are feeling the brunt of the disruption as ride-sharing has reduced car sales and will continue to do so by an estimated 1.2 million units by 2021. But the disruption will soon move beyond car dealerships and affect car manufacturers, too.
In a video for L2 Daily, Professor Sundararajan of New York University’s Stern School of Business, author of The Sharing Economy, notes that the effects of Uber and Lyft on car dealerships are only the first of three phases of a “massive disruption that is going to completely reshape [the car industry] over the next 20 years.” In phase two, people will use ride-sharing technologies to order partially autonomous cars, which self-drive but allow for a human driver to take the wheel in case of an emergency. Thanks to research and tests by Google, who joins Apple, Inc. in striving to enter the ride-sharing market, by phase three, cars will be fully autonomous with no pedals or steering wheel for a human driver to use.
The key element of the disruption is the shift in the public’s mindset from buying a car to buying transportation from point A to point B on an as-needed basis.
Dr. Sundararajan predicts that car industry profits will be made from selling products in the digital economy rather than the physical one. Although companies like Ford and Volvo are already developing digital technologies akin to Uber or Lyft, the biggest challenge for automotive companies will be to get consumers who trust them for the integrity and safety of their physical products—the cars that they make—to trust their digital user interfaces for ride-sharing. People already trust Uber and Lyft, and, as cars become fully self-driving, they are likely to trust Google or Apple software more than software created by any one auto company.
However, the outlook for the auto industry may not be as grim as some suggest. Recognizing that that ongoing income streams can substitute for lost profits from decreased car sales, some big automakers have partnered with ride-sharing services. Earlier this year, Toyota bought a small stake in Uber and agreed to supply its drivers with leased vehicles. The partnership was announced soon after Volkswagen invested $300 million in Tel Aviv-based Uber rival Gett and General Motors invested $500 million in Lyft, the United States’ second-largest ride-sharing service. GM also started leasing cars to Lyft drivers in Chicago, and its president, Dan Ammann, joined Lyft’s board of directors.
Automakers are also competing with Google and Apple to create their own fully autonomous cars. In August, Ford announced plans to put fully self-driving cars on the road by 2021. They will first be used by ride-sharing services, and will eventually go on sale to the general public. Similarly, BMW also plans to create an autonomous fleet of vehicles by 2021. In addition to its investment in Lyft, GM bought Cruise Automation, an autonomous car startup, in order to create a fleet of driverless Lyft taxis.