Auto manufacturers in the United States have essentially followed the same business model since the first car dealership was opened in 1898. Manufacturers, like General Motors or Ford Motors, sell cars to local dealerships, who then sell to the consumer. While this began as a way for manufacturers to minimize risk and more easily sell over a broad area, US states later began enacting laws to protect local dealerships from the threat that independent auto manufacturers may represent. The majority of states have placed limits over how auto companies can sell to consumers, with the general requirement of maintaining a dealership middleman. Coupled with the immense popularity of automobiles in the country, the United States has a large New Car Dealers industry, generating $910.1 billion in revenue in 2018, making it the fifth-largest NAICS-based industry in the IBISWorld collection—at least for now.
Cars Available as Needed
The mass production and acceptance of self-driving cars may result in an entirely new business model for automobile retail and use. Consumers may not purchase cars in the same way they do now—if they do purchase them at all. If transportation moves to an as-a-service (TaaS) model, also known as mobility-as-a-service, riders will only pay for use of a car as they are using it, forgoing the purchase of new cars altogether and posing a significant threat to the New Car Dealers industry. Under this model, a self-driving car developer like GM, Ford and Tesla—or even Apple and Google—will own and operate a fleet of cars available for riders on an as-needed basis, charging customers by the minute or mile. It is the same model that Uber and Lyft have in place today, but self-driving developments could potentially lower costs for riders since the human-driver component is eliminated. The affordability and convenience of this model may steer people away from owning cars, significantly decreasing demand for new cars and directly affecting the New Car Dealers industry.
Parking Lots and Garages
Less demand for new cars is not only a threat for car dealerships, but for the Parking Lots and Garages industry as well. Companies in this industry generate revenue through renting out parking spaces by the hour, day or month to car owners, and depend on people owning these cars. To this end, IBISWorld estimates a positive correlation between new car sales and revenue growth in this industry, indicating that a higher number of cars on the road boosts revenue for the Parking Lots and Garages industry. But with the implementation of a TaaS model, the outlook for all automobile-related industries could drastically change.
A TaaS model in any auto-related industry may contribute to Americans’ decreased desire to own cars, which would directly undercut performance of the Parking Lots and Garages industry. The remaining cars on the road are also expected to have a significantly higher utilization rate than they currently do. For example, while cars today are parked 95.0% of the time (according to Transportation Advisor Paul Barter), by 2030, cars will have a utilization rate of 50.0%, according to Japanese technology company Fujistu, under the assumption that new transportation services will decrease car ownership. The cars that are on the road will therefore be more active, which will decrease demand for parking. This will reach beyond the Parking Lots and Garages industry, as municipalities that generate revenue through parking meters or parking fines are also expected to feel the effects of self-driving cars and a TaaS model. Though nearly a $10.0 billion industry, the Parking Lots and Garages industry is severely threatened by the rise of autonomous vehicles and a changing automotive business model.
It will be years before fully self-driving cars hit the road for public use, but when they do, a number of industries will be dramatically altered. Those often cited include the Taxi and Limousine Services industry, the Public Transportation industry, the Local Freight Trucking industry and the Long-Distance Freight Trucking industry, where labor is among companies’ most expensive costs. While these industries may see operating conditions improve, other industries, including the New Car Dealers and Parking Lots and Garages industries, may not experience these positive changes.
Should this TaaS model succeed, even if only in urban environments, the negative effects on the New Car Dealers industry and Parking Lots and Garages industry will be severe.
Edited by Emily Lidstone. Designed by Stephanie Conte.
Industry Impact: New Car Dealers; Parking Lots & Garages; Taxi & Limousine Services; Public Transportation; Local Freight Trucking; Long-Distance Freight Trucking
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