CBC is currently running an article “Car dealerships could be out of business within a decade, says report“. They quote a study from RethinkX, an independent think tank in San Francisco. Is this true? Is car culture doomed? First, the study argues for electric cars, though I’m not sure how this means car dealerships would be out of business, since presumably someone will have to sell the electric cars.
Because of their simpler power trains, in the long run, electric cars will be cheaper to operate than their gas powered equivalents… The tipping point will occur once the battery range surpasses 321 kilometers and electric car prices drop below $20,000. Currently, a low-end electric vehicle costs about $30,000. Electric vehicles could last longer than gas power vehicles. Right now, Tesla is offering infinite mileage warranties.
Yet the CBC article goes on to point out that similar optimism that surrounded hybrid vehicles. When they were introduced 17 years ago, the thinking was they would account for half of the cars sold by 2020, but they account for less than one per cent, with sales in the last four years going down. The study is also bullish on ride sharing:
Using transport as a service will be four to 10 times cheaper per mile than buying a new car, and two to four times cheaper than operating an existing paid-off vehicle by 2020. The cost of savings for an average American family is likely to be about $6,000 a year, a substantial increase in disposable income.
While, if this is true, there will surely be those who opt to forgo car ownership, ride sharing is impractical for all but a few living in highly populated areas where ride sharing services are common.
It’s interesting that no mention is made of the biggest thing I see hurting dealerships: the Internet. With Internet pricing, car dealers are forced to sell vehicles with lower profit margins. The Internet also gives easy access to alternatives to new vehicles like Craig’s List and repo sites.
While I agree that ride sharing will cut in to car sales and there will be a transition to electric vehicles, and that companies that don’t make the transition may be left behind, I don’t see any evidence that this will lead to car dealerships disappearing within 7 years, as the study predicts.
As pointed out in the Forbes article Electric Vehicle Subsidies: Environmentally Friendly Or Just Welfare For The Rich?, the actual environmental benefits of electric vehicles are not huge, as long a the electricity they are running on is being generated from fossil fuels. Currently, tax credits in the US are as high as $7,500 federally, with state tax credits up to $5,000. If these incentives are removed–and with Trump’s fiscal conservatism, I’d say it’s a good bet that at least the federal credits will be–the idea that electric vehicles will reach a tipping point any time soon may be less than credible.