Tag: Auto Industry

Ride Hailing: Will We Continue to Uber and Lyft, or Will We Start to “VW?”

Volkswagen’s $300 million investment in ride hailing service Gett is not exactly earth shattering news these days for the automotive industry. But what did catch our eye was what Volkswagen said,

Ride-hailing will be at the center of our new ‘mobility on-demand’ business, which we are building as the second pillar alongside the classic automobile business.

“Second pillar.” Let that sink in a second. The first pillar, we assume, is the design, manufacture and sale of vehicles of every kind. But that second pillar is a service industry. For now that service includes people driving cars. What happens when we no longer need the drivers because the cars are autonomous?

ride hailing Gett VWOf course, Gett drivers will have the opportunity to buy Volkswagens at “attractive terms” – all the better to put more Volkswagens on the road. And, of course, this is not the first relationship of its kind. GM and Lyft already have a partnership going on. Uber is leasing Toyotas to drivers.

With autonomous vehicles coming, with every OEM partnering with a ride hailing/sharing company, and in a world where Uber attracts $3.5 billion (with a “B”) investment from the Saudi Public Investment Fund, it might be worth asking whether some day we will not go to the “Toyota” dealer to buy a car, but, instead, to the Uber dealer – presuming we buy a car at all. In just a few years, Uber has obtained a valuation that may exceed GM and many others. Based on all that information, maybe Volkswagen should refer to its new service industry venture as the “First pillar.”

Article By Jeffrey A. Soble of Foley & Lardner LLP

© 2016 Foley & Lardner LLP

Auto Industry Record Breaking Sales Close Out 2015

The automotive industry ended 2015 with a bang, breaking the record with nearly 17.5 million sales of cars and light trucks. This tops the previous record of 17.35 million cars in 2000. In all, American consumers spent $570 billion on new cars. This is a significant comeback from the low of 10.4 million cars consumers purchased in 2009.

business people connecting

Trucks, SUVs, and crossover vehicles had the strongest overall sales in 2015, with an increase in 13% over 2014. The Ford F-150 remained the top selling vehicle in the US. The industry also saw a significant increase in leasing, totaling 29% of new retail sales. Merely 10 years ago, leases accounted for only 16.6% of new retail sales.

As we previously noted on the blog, low fuel prices and easier access to credit, among other factors, drove sales over the past year. Gas prices should remain low in the near term, and although interest rates are slowly increasing, analysts expect a continued upward trend with 2016 predicted to be another record year in the auto industry.

Article By Lauren M. Loew of Foley & Lardner LLP

© 2015 Foley & Lardner LLP

Autonomous Driving Means Big Bucks For Everyone

New insights from McKinsey & Company demonstrate one common theme: the more autonomous vehicles take over the world, the more money saved and the more revenue earned by almost everyone. McKinsey interviewed over 30 industry experts around the world and came up with Ten Ways Autonomous Driving Could Redefine the Automotive World. Interestingly, they are all cash positive.

How will we all make money? Here is just a partial list according to McKinsey:

  • Labor cost savings. These are already being seen in mining and farming applications today. In those areas, autonomous vehicles can work in closed, private environments without the general safety concerns of the open road. As McKinsey notes, look for construction and warehousing sectors to adopt next.

  • Uber has disrupted the taxi business. Investors just might salivate at the chance to back a similar company – with no concerns about drivers at all.

  • Auto insurance may be totally different. If everyone owns an autonomous vehicle, traditional coverage for liability for accidents will no longer need to be a primary concern. Manufacturers of autonomous vehicles though will need significantly more coverage. Who bears this cost, and who gets the cost savings on insurance will be an interesting question.

  • Supply chain logistics will surely be more efficient with autonomous vehicles. This will also lead to flexibility, which surely will lead to cost savings.

  • Productivity. What is your commute time? Do you drive? For all people that drive to/from work, autonomous vehicles will free up substantial time during the day. During this time, more work can be done. Of course, for those who do not work, digital media revenues could explode as people seek ever more entertainment on their phones. How much time? McKinsey put the global number of saved commuting time at over one billion (billion!) hours. One billion hours of work, or, watching cat videos.

  • Decreased accidents = decreased costs. McKinsey cites that roadway crashes cost the US economy $212 billion in 2012. Cutting that even in half is a huge savings.

Autonomous vehicles are coming. Their impact is still speculative. But there is no doubt that when they do finally arrive, one generation will suddenly find itself thinking that the idea of driving your own car is impossible to fathom.

ARTICLE BY Jeffrey A. Soble of Foley & Lardner LLP
© 2015 Foley & Lardner LLP