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Car Sales Will Stop Growing, Eventually

Car Sales Will Stop Growing, Eventually

Ever since the horseless carriage first chugged onto the scene, car sales have gone up every year, except during recessions and wars. As every country hits a given standard of living, it inevitably joins the “car club.” One of the strongest aspirations of almost every human is to own an automobile. Or at least that was the case until recently.

Today, we see a new generation of youngsters who increasingly are uninterested in owning or driving a vehicle. In the U.S., the percentage of teenagers who don’t have a driver’s license is the highest it’s been in nearly three generations. In most cases, they simply can’t afford a new car and the insurance costs that go with it. So they’re tuning out what is beyond their reach and turning instead to what they can acquire.

Thanks to the Internet, wireless technology and social media, we can now connect with almost anyone, anytime, anywhere. The instant connectivity we enjoy today allows us to virtually transport ourselves right in front of the people with whom we want to communicate. And we can have almost any product shipped right to our front door. Ergo, we no longer need to use an automobile as much as we once did.

But this has not eliminated the need for cars. And so entrepreneurs are rushing to fill the void for people who don’t want cars but still need one. Companies such as Zipcar now offer automobile rentals by the hour. It’s no coincidence that the cities where it has found the greatest number of customers are college towns. There these companies find eager customers who may only need a car for one or two hours a week. Ford is intrigued enough that it signed a deal to provide Zipcar with vehicles for college towns. After start-up and initiation fees, a regular Zipcar customer can use a car for about $7 an hour. It’s far cheaper than taking a taxi.

Zipcar’s success is spawning a growing number of imitators in Europe. In the U.S., several of the large daily rental companies, such as Hertz and Avis, already offer the same kind of service. Even BMW is experimenting with its own “On Demand” hourly rentals out of a dealership in New York City.

Most interesting is GM’s OnStar, which has teamed up with a company called Relay Rides. They allow the owner of any OnStar-equipped car to join the service for a fee and then start earning an income with their vehicle, instead of parking it at work or home for hours on end. Each car owner gets a $1 million insurance policy. Every car user gets a $300,000 policy.

That takes worries about liability and damage out of the equation. Users locate the car they want with their cell phone, use that same phone to call Relay Rides, provide their PIN, and via satellite OnStar unlocks the car where they find the keys inside.

Other individual entrepreneurs are posting their cars-for-rent on Craig’s List, demonstrating that with the proper risk tolerance almost anyone can get in on this blossoming business.

My bet is that most people will choose not to rent their cars. Including me. I don’t want to find that someone spilled a milkshake on the console or some kid threw up on the back seat. But more than a few people will want to make money with their car.

In another decade or so fully autonomous cars will become available. At that point, we’ll have truly on-demand rides where a simple phone call will bring a vehicle right to where we’re standing. And even if it is not rented out, one autonomous car will fulfill the needs of an entire household.

It can take dad to work, come back to take the kids to school, and then return again so mom can go shopping. Or maybe it takes mom to work so dad can go shopping. Whatever. The point is, we’ll no longer need a car for everyone with a driver’s license. In the not too distant future, one car could replace three or four. Maybe more.

And this is going to have a dramatic impact on car sales. I used to believe that population growth would lead to ever higher levels of production. Not anymore. We’ll still see growth as other developing nations join the “car club”, but after that we’ll hit a plateau. Sometime, probably late in the next decade, we’re going to hit the point where car sales stop growing.

John McElroy is editorial director of Blue Sky Productions and producer of “Autoline” for WTVS-Channel 56, Detroit, and “Autoline Daily,” the online video newscast. 

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