Auto dealerships headed for a plunge? Depends on who you believe

Thelma and Louise.

It’s an iconic movie that ends with the duo driving off a cliff.

And that’s where car dealerships – and much of the existing automotive industry – are headed in the next four to seven years, according to an analysis by think tank RethinkX.

In its report, “Rethinking Transportation 2020-2030,” the think tank sees a near-term future with plunging sales to individual owners starting in 2020 and no new individual-owner [IO] car sales from 2024 onward, just fleet sales to transportation service companies such as Uber and Lyft.

080317 IL Auto dealerships headed for a plunge- Depends on who you believe

“Vehicle fleet size will drop by over 80 percent, from 247 million vehicles in 2020 to 44 million in 2030,” the think tank contends in its report, which, at 77 pages, is the length of a short novel. “This could result in total disruption of the car value chain, with car dealers, maintenance and insurance companies suffering almost complete destruction.”

“Just 26 million vehicles will deliver the 5.7 trillion passenger miles traveled via [transportation services] in 2030, with the remaining five percent of miles attributed to IO vehicles.”

And those that already are owned by individuals will “plunge to zero” in value.

Cars worth less than zero?

“The rising cost of maintenance, gasoline and insurance; the cost of storing or taxing worthless vehicles, and the lack of a used car market might mean that prices go to zero or even below,” according to RethinkX. “That is to say, owners may need to pay to dispose of their cars.”

In its report, the think tank said that “97 million [internal combustion engine] vehicles will be left stranded in 2030, representing the surplus that will be in the vehicle stock as consumers move to [transportation services],” and warned that “these vehicles may eventually become entirely unsellable as used IO vehicles supply soars and demand disappears.”

Will this grim scenario happen and the industry drive off the cliff in 2024 as RethinkX envisions?

A nod to mainstream thinking

Mainstream thinking is a bit less dire – which RethinkX concedes in its report – predicting that “vehicle ownership will continue as the principal consumer choice … This is due to a number of reasons, including the belief that ‘we love our cars’ (like we loved our horses).”

Those mainstream analyses overall suggest that the existing fleet of internal combustion engine cars “would take decades to replace, with sales continuing into the 2040s and beyond,” said the think tank. And those analyses “generally see no mass stranding of existing vehicles.”

Mainstream industry forecasts also show that vehicle-ownership disruption as a multi-decade process, RethinkX observed, not as a “shift that would happen quickly and change the business model of the entire industry altogether … that wipes out the existing industry.”

Questioning the grim scenario

But healthy skepticism may be required – and that’s what we found in one stock market analyst.

“It’s always easy for think tanks and other similar organization[s] to throw out estimates for popular ideas in order to attract attention,” he wrote. “But when it’s observably nonsensical, such as in the case of the latest prediction from think tank RethinkX, that within about 13 years ‘self-driving electric cars will dominate the roads,’ it has to be challenged, because some investors might actually take it seriously, and make decisions based upon the faulty premises of the conclusions of the study.”

So, unlike Thelma and Louise, who nosedived into the Grand Canyon, there may be more to this story than meets the eye – and it may have a happier ending.

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