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In case of an on-demand vehicle revolution car sales will still grow

29 Mar 2016
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In case of an on-demand vehicle revolution car sales will still grow

The advent of Uber and Lyft marked a shift towards on-demand and shared mobility, and promises to require changes of the game for commuters and carmakers. More and more people realize that vehicles have high up-front costs to own and depreciate swiftly, but they aren't necessarily heavily utilized.

The possible on-demand revolution will for sure affect automakers. The analysts acknowledge that the proliferation of on-demand vehicles could ultimately reduce the number of cars on the road in the U.S. by more than 25 million, with population density serving as a key determinant of the size of the on-demand fleet. On demand mobility is likely to be practical and financially attractive in the densest sub-sections of total households in the metropolitan statistical areas that were studied.

An imortant part of the studied sub-segments may find it financially attractive to switch to on-demand autonomous vehicle mobility services. On the other hand, the 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.

In such a way, U.S. sales will nonetheless increase under any scenario, because vehicle scrappage is determined by miles driven. 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. In this case the auto industry will also become less cyclical, as miles traveled, rather than the state of the economy and credit conditions, will drive sales volumes. Moreover, cost deflation in the provision of on-demand vehicle services could also put further upward pressure on aggregate miles traveled due to the established price-sensitivity of consumers.

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