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More Drivers, More Cars, More Deaths

by Roger Lanctot | Jul 11, 2015

A growing coterie of auto industry experts is forecasting an autopocalypse* of declining vehicle sales as driverless cars increase the usage rate of the existing fleet and young people steer clear of car ownership. These futurists (some of whom participated in the Keefe, Buyette & Woods Insurance Roundtable in Chicago this past week) laugh at the auto industry’s blindness to what they see as an obviously bleak future for the automobile. They also foresee an end to auto insurance.

These soothsayers foresee nothing less than massive auto plant closings and an insurance-less future in a driverless world.

Driverless cars, according to these nattering nabobs, will enable the current 4% usage rate of cars (which sit in parking lots and garages most of the time) to rise to 8% usage as owners dispatch their vehicles driverlessly from destination to destination for shared use – negating the need for second or third cars. It’s a beautiful and compelling dream, but that is all it is. The reality is that driverless cars will stimulate vehicle ownership and use – putting even more cars on the road and rolling off assembly lines.

Driverless cars will not idle auto assembly lines. Vehicle usage will indeed rise with the use of driverless technology, which will alter vehicle ownership models, but people will still need to get around and driverless cars will simply enable yet another vehicle-based alternative for moving people.

Driverless cars will also enable those incapable of driving to return to the ranks of independent car users, while luring back those capable of driving but who hate to drive. So, look for MORE not LESS cars on the road.

In fact, driverless cars will enable more widespread and frequent use of cars since the passengers in these cars will be able to be productive or entertained while they travel. Of course, there will also be all the seemingly pointless trips driverless cars will take to reposition themselves for subsequent users. People who might previously have avoided time wasting drives will now see driving as productive time allowing them to seamlessly work or play while moving about.

This will indeed increase the usage rate of existing vehicles but this, in turn, will accelerate the depreciation and shorten the useful life of those vehicles, stimulating replacement sales at a more rapid pace. The implications of these trends were made clear in a presentation given at the KBW Insurance Roundtable event by an executive from CCC Information Services, an insurance claims management service provider.

The CCCIS executive succinctly summarized the previous prevailing post-recession market scenario characterized by declining vehicle sales, declining usage, declining fatalities and declining accident rates – all related to the economic downturn. She then turned to the economy’s current pattern of recovery characterized by rising vehicle sales (to pre-recession levels) along with a significant uptick in vehicle miles driven, accidents and fatalities – including a 13% increase in the Q1 2015 fatality rate.

As alarming or encouraging as these figures may be, the CCCIS executive noted that the more important prevailing trend impacting auto industry sales and vehicle use is demographic in nature. People aged 55 or older buy the most vehicles and this age segment has seen the greatest growth from 2007 to present.

The CCCIS executive noted a 94% increase in vehicle sales to buyers aged 70-74 years while the 30-39-year-old segment saw only a 13% increase. In other words, while young people may be deferring vehicle purchases, their hesitation is more than overwhelmed by the buying binge of older vehicle consumers.

As for the end of car insurance, barring a widespread mandating of safety systems, demand for car insurance will continue to grow unabated. Removing the nut from behind the wheel of driverless cars is expected, by many, to reduce accidents and fatalities – something the industry might actually welcome given the current trajectory of accident and fatality rates and claims.

The CCCIS executive pointed out that cars have a growing array of standard technology equipment (and sophisticated and expensive lightweight materials) which is making them more expensive to repair and replace – just as a growing number of very old cars (16+ years) being held onto by consumers are being totaled. So the cost of insurance claims is increasing among both the newest and the oldest vehicles on the road.

(http://tinyurl.com/npzuokl - "Claim Frequency and Costs Rise Again" - Susanna Gotsch, CCCIS)

The picture is fairly clear that vehicle sales will continue to grow even as cars continue to last longer. But the extended life of cars is due, at least in part, to diminished use. Driverless car technology will eventually enable new ownership models which, in turn, will facilitate higher vehicle usage rates.

Higher usage rates for cars will increase wear and tear and shorten operational lifespans – stimulating demand. Driverless cars may replace some driven cars, but the majority of driverless cars will represent incremental vehicle volume and intensified use of cars for a growing variety of purposes – moving both people and goods.

It is clear that consumers have yet to find an alternative to the car for getting around – whether they own the car or borrow it. The population of car owners is growing – older consumers are the most important source of vehicle demand and the population is aging.

Whether driverless cars arrive in significant numbers in 5, 10 or 20 years, they are unlikely to crowd out “driven” cars for decades to come. More importantly, though, they will increase interest in and demand for cars – increasing the size of the automobile market, the number of cars on the road and the usage rate of cars.

And don’t cancel your car insurance policy just yet. More cars and more driving still equals more fatalities.

*Apologies to Andrew (@Autopocalypse) Poliak.

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  1. David Bailey | Jul 14, 2015
    "Driverless car technology will eventually enable new ownership models which, in turn, will facilitate higher vehicle usage rates." Largely agree roger but the shift in the nature of the vehicle owner will be the significant change that vehicle manufacturers have to face and this may well have very significant onward effects to the industry landscape.