Compliance expert busts the myth of autonomous, connected, electric, and shared vehicles supplanting the traditional American driving experience.
There have been many bold predictions of the future made by consultants regarding the state of vehicle ownership and use:
- People will no longer be driving or owning cars.
- The next car you own may be your last.
- Car dealers will cease to exist by 2024.
These predictions sound similar to the one made by author and futurist David Rorvik in 1970: “By the mid-1980s, automated autos, noiseless pneumatic subways, and luxury liner hovercraft will have radically restructured our surface mobility.”
These predictions are as accurate as the one made about vacuum cleaners by Alex Lewyt, president of the Lewyt Vacuum Co., in 1955: “Nuclear-powered vacuum cleaners will probably be a reality in 10 years.”
However, the great physicist Niels Bohr said it best: “Prediction is very difficult, especially if it’s about the future.”
And the prediction that the car industry will radically change in the very near future is mythical. Considering the issues of safety, legal liability, preferences for ownership by generation (including millennials), savings in time and money, convenience, and other factors, the love affair of the public with the personal automobile will continue for quite some time.
The prediction that autonomous, connected, electric, and shared vehicles will soon be supplanting the present industry is a pure fairy tale.
The brave new world of these intrepid prognosticators is that American consumers will depend upon vehicles summoned by cellphone, which are pooled in a fleet of self-driving and fully electrically powered vehicles (or some other drive source, but certainly not the internal combustion engine). For example, Mr. Smith pays a monthly fee to belong to the Connecto Transport Group and needs to travel to work. Whether he summons the vehicle by phone or the ride is prescheduled, the vehicle appears at his residence. He may be riding with other passengers or alone, depending upon his membership level. When Mr. Smith has to travel for errands, he may summon a different type of vehicle on weekends or in the evening depending upon his needs.
The Connecto Transport Group is similar to other such organizations as it has a pool of vehicles totally owned by Connecto. Connecto has purchased them directly from manufacturers such as Ford and Honda. Once again, they are 100% electric, or some other non-gasoline driven vehicle, and 100% autonomous. Connecto cooperates with other similar companies so that its members are never inconvenienced when a Connecto vehicle isn’t available. Other companies such as Clan Transport or Phylum Transport will provide their vehicles in those circumstances.
What this business model is prescribing is a world where no one owns a vehicle. All vehicles are shared in pools, connected to one another by a computer grid, are autonomous (i.e., no human driver is required), are powered in some new way, and motor about without human error. There are no accidents or fatalities. The number of vehicles on the road is reduced substantially. No one needs to ever own a vehicle.
But these facts will not be in evidence soon. Here are seven reasons the family car will remain in American garages for the foreseeable future:
American drivers experience one accident per 165,000 miles driven, which means that approximately every 10 years, one will experience some type of vehicle mishap. It is a further remarkable statistic that there were only 12.5 deaths per 1 billion vehicle miles traveled in 2016 in the U.S. Any death is one too many, but this remains a compelling fact.
In other words, what these statistics demonstrate is that the average American consumer is a very safe driver. It is estimated that in 2018 drivers will suffer 40,000 fatalities while amassing over 3.2 trillion miles on the roadways. About 54% of these deaths are attributed to intoxication, distraction, or fatigue, which is all avoidable. It is very safe to presently drive a vehicle and vehicular deaths can be reduced substantially by altering our behaviors. Vehicles are also well-designed to prevent serious injuries to consumers.
It would be expected that technology could produce extremely safe results as well, but to believe that autonomous vehicles will be immune from accidents or fatalities is wishful thinking.
Anyone who has ever owned a computer knows that there are malfunctions in both the hardware and software. Moreover, routine wear, road deterioration, bad weather, and even hacking could produce all sorts of accidents in autonomous vehicles. In rural America, for example, there remain even dirt roads. How will autonomous vehicles function in those conditions?
Attorneys are excellent at finding deep pockets to sue. Lawsuits with multimillion-dollar damages cascade into insurance-related conflicts with defendants seeking refuge from liability. Autonomous vehicles will be extremely expensive to insure as they will be in accidents. Who will be liable and to what degree remain unanswered legal questions.
Preferences for Ownership by Generation
A recent program on one of the cable stations addressed AI or artificial intelligence as it related to various consumer products and needs. The host of the program made one of the most absurd observations I’ve heard in many years. He said that his 7-year-old son is excited by the prospect of never having to own a car. His son is in a very small minority.
The overall population by an 89% to 11% margin prefers to own their own vehicles. The other 11% would prefer to totally depend upon ridesharing.
Even among millennials, 81% of this population segment prefers owning their vehicles with 19% selecting ridesharing.
Savings in Time and Money
Consumers complain about time while waiting in line at fast food restaurants. Will consumers complain about waiting for transportation? Of course they will. But if the savings is sufficient would the wait be worth it? If each ride requires a six-minute wait, a reasonable estimate, the savings will amount to only $9.44 per hour of savings based upon the National Automobile Dealer Association (NADA)’s data. However, according to this same study, consumers value their time at the rate of $50 per hour and would expect that amount in savings.
Vehicles on the Road
Vehicles are quite durable and have long useful lives. In some cases, vehicles can last for 20 years or more. The average age of a vehicle being driven today is over 11 years. There are over 263,000,000 vehicles on the road. Many of these vehicles are fully paid off and their owners plan on driving them until the cost of maintenance is prohibitive. If all manufacturing of personally owned vehicles was discontinued in 2018, it would take many years for this fleet of vehicles to wear out.
It is a rare event when using an Uber is more convenient than driving one’s personally owned vehicle. There certainly may be a parking advantage. But from the NADA study, 93% of the respondents said that cars provide freedom whereas only 7% opined that cars are a bother.
Enjoyment of Driving
Advertisers have been heralding the excitement of driving vehicles since the internal combustion engine was invented. Torque, horsepower, suspension systems, and so forth are commonly featured as reasons to purchase a vehicle as there is a pleasure in driving a car and controlling one’s speed and destination. Will consumers wish to no longer enjoy this freedom and control?
Of course, the government could change this calculus. Through taxation, tax credits, high-occupancy vehicle (HOV) lanes, preferred parking for electric vehicles, and other incentives and mandates, the government could force this brave new world upon the American public.
However, many years ago, Japan attempted to corral the public into only using public transportation. It built one of the finest mass transportation systems in the world. As a corollary, Japan also did not spend a great deal of money on the road system. However, these two deterrents did not prevent Japanese consumers from purchasing cars. Public policy doesn’t always yield the desired end.
Disruptive alternative transportation possibilities may eventually supplant the family car. But it will take quite some time for this to happen. Dealers, agents, and F&I product providers and administrators should rejoice. And so should regulators who can look forward to many more years of overseeing the vehicle world. Because they will still be in business for years, dealers will need to continue to comply with the requirements of the law. Traditional compliance also has a rosy future for government regulators and the private bar. Rejoice all, and govern yourselves accordingly.
Author’s note: This column drew heavily from an excellent presentation given by Andrew Koblenz, general counsel and executive vice president of legal and regulatory affairs for the NADA. The association commissioned a large-scale research project that included consumer focus groups and a national survey about the future of personal transportation. Its findings are intriguing. Many of the statistics and percentages in this article came from this study.