Peak Auto

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For this newsletter, Peak Auto is the year that the greatest number of cars are still on the road globally.  The year following will be a decline.  This decline will continue for years, if not decades.

In a recent column on this, I suggested that this year might be 2040.  This of course is at least five, if not 10 years after Peak Oil.    All of the dynamics discussed in that column will play a role in Peak Auto, but there will be two additional trends that will truly trigger Peak Auto in the 2030s:

-the embracing of EVs by the global auto market from now to 2035

-the rapid increase in global sales of autonomous vehicles in the 2030s

Over the past year, I have written numerous columns about the future of the EV market. Here they are, in chronological order [you can skip now if you have read them, or come back to them later].

https://evolutionshift.substack.com/p/historical-disruption-in-the-automobile

https://evolutionshift.substack.com/p/the-near-term-future-of-evs-in-america

https://evolutionshift.substack.com/p/a-forecast-for-what-the-us-ev-market

https://evolutionshift.substack.com/p/how-evs-will-change-our-entire-transportation

https://evolutionshift.substack.com/p/an-automotive-conference-about-the

EV market growth

As several of the above-linked columns have stated, the sales of EVs have grown dramatically in the last few years.  As this has occurred, the market has moved from 100% Tesla to 60% Tesla to now a figure of 50 - 55%.  Tesla was the only manufacturer of EVs, and now most automotive companies have produced EV models and have joined the market.

The hockey stick of EV sales will start in 2025 as all global automotive brands will have at least one model coming to market.  This will of course, present an explosion of choice and thus competition, which will trigger price reductions.

In the next five years, the EV market will move from a perception of expensive vehicles for those who can afford them to one of lower price and mainstream.  This is the path that all new technologies go through.  The high initial cost to a narrow market that can afford it or wants to display its wealth to a more mainstream market when scale and innovation drive down the price.  Always happens.  In the case of the automotive industry, it will take longer as the average starting price was much higher than the first flat-screen TV, PC, laptop or VCR.  The EV will be price competitive to ICE cars by the end of the 2020s.

In addition, a fully developed used car marketplace for EVs has yet to exist.  This is important to remember for consumer acceptance, as 70-80% of annual auto sales are used cars.  A cheaper, bigger market by far.  The development of this marketplace will put downward pressure on prices for first-time buyers.

If you can accept my forecast that, in the 2030 model year, 70% of all new car sales will be EVs, this opens a view to consumer acceptance.  First, at least half of that sales volume will be price-competitive to comparable ICE vehicles, which is the largest current impediment to sales.  Second, the used EV market will start out with higher prices than ICE cars, but that will fade in the second half of the decade as potential buyers see that the EV is the future and ICE is not.  As charging stations replace gas stations, this will become the new perceived current reality.

This is the first stage to set up the autonomous vehicle market.  First, all Autonomous Vehicles [AVs] will be EVs.  Second, there will not be the double challenge of moving from ICE to AV as the move from ICE to EV will be market-accepted.  Now to the reason that there will be a Peak Auto year.

Autonomous Vehicles and Market Growth

The more common name for autonomous vehicles is driverless cars.  This is one of those big concepts that is hard to embrace, as there have never been sales of cars that don’t need a driver.  Ever.

What have we learned in over a century of cars driven by humans?  That the human is the weakest link.  There is no such thing as a drunk car, only drunk drivers.  Accidents are caused by the driver, not the car.  Yes, there can be mechanical failure or bad weather conditions, but usually, an accident is caused by the driver, not the engine or the tires.

So, the elimination of the driver is one of the strongest benefits of the autonomous vehicle.  Safer roads

The other big benefit of autonomous vehicles is that it will cut the number of cars on the road.  Why?  Well, depending on the source, research suggests that Americans drive the car they own from 4-10% of the time they own the car.  The rest of the time it is parked.  The car is usually the second biggest purchase a family will make after purchasing a home.  Would you buy a home that you might only use for 5%.  Of course not!

As I wrote in one of the columns linked above:

“I go along with other people who have studied the future reality of autonomous vehicles and think that they will lead to fewer cars on the road.  The key statistic you need to know is that Americans drive their cars – depending on the source- from 5-10% of the time.  The rest of the time, they are parked somewhere.  Think about that.  The second biggest investment most households make after the purchase of a home is a car.  Would you buy a house for a primary residence if you knew that you would live in it only 10% of the time?  Of course not!  But you buy a car that is used only 10% of the time.

I recently moved from a single-home community of 103 houses.  Each one had at least a two-car garage and some had three-car garages.  My guess is that there were some 200 vehicles in the community.    In a future of autonomous vehicles, this number might drop down to some 25-30 going 22 hours a day [two hours to charge two times at a charging station]  Even if the number went up to 50 cars as some folks will keep their EVs and not rent/use AVs that represents at least a 50% fewer drop in cars on the road.”

When will sales of AVs start?  It will start in the last few years of the 2020s.  From this small volume, AV sales will grow to be a significant double-digit part of total sales by the second half of the 2030s.

Other Dynamics

A big factor in the automotive market is the climate crisis.  A cliched image of climate is CO2 exhaust coming out of a tailpipe.  That is bad, Low MPG is bad.  Hybrid and EV is good.  Biking, electric bikes, ride-sharing are all on the upswing as people try to live more sustainably.  This leads to households having fewer cars. 

This will be a new trend that will reverse the trend to multiple cars per household which has been the story for the last 60 years.  In 1960 roughly 2% of US households had three vehicles.  In 2020 that was 20%.  Of course the percentage of households of singles has increased dramatically since the last century so that will further power fewer cars per household.

When will Peak Auto occur?  2040, give or take a couple of years