The emergence of new automotive technologies and practices like ride-sharing, on-demand services, and the introduction of autonomous capabilities seems like it would have a diminishing effect on future automotive sales—but studies suggest we may actually see the opposite.
A group of analysts at Deutsche Bank AG have come forward to address what they see as misconceptions about the future impact of these emerging technologies and practices on car use and sales. The general theory seems to be that, if individuals no longer purchase personal vehicles, manufacturers will see a drastic decrease in their sales.
But this misconception fails to take quite a few aspects into consideration; particularly how much more utility these emerging services will be getting out of vehicles which will still need to be supplied by existing manufacturers.
In a report by Bloomberg, the research done by the analysts at Deutsche Bank AG projects a minimal impact on car sales as individuals and companies shift to ride-sharing, on-demand services, and autonomous technologies for personal transportation. From the Bloomberg report:
“On demand mobility is likely to be practical and financially attractive in the densest sub-sections which account for [circa] 31 percent (on average) of total households in the metropolitan statistical areas we studied (13.2 million households, owning 15.5 million vehicles out of the total),” the [Deutsche Bank AG] team writes. “Within these sub-segments, up to 61 percent of households (owning 8 million out of 15 million vehicles) may find it financially attractive to switch to on-demand autonomous vehicle mobility services.”
But this decrease in the number of vehicles on the road will coincide with a much shorter life-cycle for cars because they’ll be utilized much more heavily, on average, than they are now. The life expectancy of an on-demand vehicle is expected to be just three years; this higher rate of turnover of a smaller fleet would see sales volumes rise, according to the analysts.
Think about it; how much do you actually utilize your vehicle compared the the up-front cost you paid and the amount of depreciation you face? The majority of the time of ownership, most people aren’t driving their car. It’s not crazy to expect that, in the near future, more people become comfortable relying on an on-demand or ride-sharing service for mobility over the comparatively costly ownership of a personal vehicle.
More from Bloomberg:
“U.S. sales nonetheless increase under every scenario we’ve examined because vehicle scrappage is determined by miles driven,” they conclude. “Each on-demand vehicle will travel more miles (10 to 20 percent more) than the cumulative six to nine privately owned vehicles that it replaces.”
What the analyst group is suggesting here is that the projected increase in use of ride-sharing and on-demand services will logically see more overlap of use of vehicles between people. This will in turn lead to one car in a ride-sharing or on-demand service fleet replacing approximately six-to-nine personally own vehicles. In turn, these vehicles will see an exponential growth in mileage and wear-and-tear compared to an individually owned vehicle, and thus need to be replaced by new models at a higher frequency.
The analysts predict that the automotive market will correlate more closely with the amount of miles driven by people instead of the current correlation with economic conditions.
This emergence of an automotive market based around ride-sharing, which will only benefit by the increased implementation of autonomous technologies, is not an unpopular idea. Every major traditional automaker has been rapidly shifting focus to new technologies and even started adjusting business strategies.
Mercedes-Benz and BMW are currently planning autonomous fleet services alongside their traditional sales platform. Startups like Faraday Future hope to eliminate personal ownership almost completely with plans to offer only an autonomous on-demand or ride-sharing service from a fleet of company-owned vehicles.
Meanwhile apps like Uber and Lyft have proven to be inexpensive and convenient alternatives to taxis and public transportation networks, and as the market and customer base shifts its focus away from personal ownership, costs for these services to the individual should decrease.
Should this projection become a reality, it’s very important for traditional manufacturers to be ready to have a competitive alternative in the ride-sharing and on-demand markets, and we’re seeing that shift already.
If it all goes according to the projections, they wont have a decrease in sales to worry about.
Of course this study isn’t speaking in absolutes. It does seem to take into account the individuals and industries that could never completely shift away from human-driven vehicles and personal ownership. There’s also the issues of international markets not catching on to the emerging systems and technologies immediately, so a market for individually driven vehicles will remain for decades to come.
Still, for the majority of those reading this, you may not need to own a car in the next ten years. Maybe even five.
Does that mean we’ll lose the “enthusiast” cars we love? Probably not. If Ford’s profits increase thanks to these new services, it creates an even better business case for developing a new Mustang. We’ve seen a similar cause-and-effect scenario with Porsche’s SUV and crossover sales helping to fund the more enthusiast-focused cars it otherwise wouldn’t be able to green-light.
The future may not be so, so bad.