The future of car sales/resale

Investment Analysis Clubs Macro Economic Trends and Risks
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We’ve been hearing a lot about how expensive used vehicles are. There are so many stories of people who bought a new vehicle just a few years ago and recently sold it for more than what they originally paid.

I can’t help but wonder if this is one last hurrah for the traditional gasoline-powered vehicle that has dominated the roads for multiple generations. Gasoline-powered vehicles are on the way to obsolescence due to advancements in autonomous vehicles and due to regulations that will restrict and eventually ban the sale of brand new gasoline-powered cars. Place your bets on which will replace the horseless carriage first. Will it be the gasless carriage or the driverless carriage? (NOTE: I’m assuming that all driverless carriages will be gasless as well.)

While the regualation allows people to keep driving their pre-existing gasoline-powered vehicles and to buy and sell them in the used market, the writing is on the wall. The number of gasoline-powered vehicles on the road will decline due to attrition from collisions, natural disasters, rust damage, excess wear and tear, dead transmissions, dead engines, dead electrical systems, etc. This means reduced demand for parts, which will prompt parts manufacturers to cut back or cease production of many parts. This will make it harder for the owners of gasoline-powered vehicles to get them repaired, and that will send more cars towards the Highway in the Sky. This problem has always affected old vehicles in the past, but the trend will be accelerated. The slower-selling vehicles will be affected first, but it will take longer for the top-selling and more widely-owned vehicles to become obsolete. Thus, I’d expect Mitsubishis to be affected more quickly than Honda Civics and Toyota Corollas. I’d also expect many gas-powered cars to end up south of the Mason-Dixon line, in Appalachia, or in the sparsely populated Great Plains, Rocky Mountains, and Intermountain West. I’d expect it to take longer to justify the investment in charging stations in these places. (How many people in northwestern South Dakota own an electric vehicle? There’s a spot there that’s over 100 miles from the nearest McDonald’s.)

Given the above implications, why buy a brand new gasoline-powered vehicle? Once the current vehicle shortages get corrected, this trend will matter, new vehicle sales will drop, and new gasoline-powered vehicles will depreciate rapidly. Leasing a vehicle will become much more expensive when the leasing companies reduce their estimates of the projected resale values. I expect many people to keep their gasoline-powered vehicles longer or buy a used vehicle to tide themselves over for a few years while waiting for the electric vehicle ownership experience to improve. (This involves more charging stations, cheaper purchase prices, better range, etc.)

When the driverless carriage takes over, this will be the final nail in the coffin of today’s gasoline-powered cars. This will also be bad news for the resale values of the gasless-but-not-driverless carriages.

Of course, I expect that a few gasoline-powered vehicles to be collectible. Examples include Mustangs, Camaros, and the Dodge Challenger with the 707-horsepower HellCat engine. These are special vehicles and are NOT bought for practical reasons.

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Gasoline-powered vehicles are on the way to obsolescence due to advancements in autonomous vehicles and due to regulations that will restrict and eventually ban the sale of brand new gasoline-powered cars.

I understand why regulations would result in fewer sales. Why does the technology of autonomous driving have to be restricted to EVs?

DB2

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Why does the technology of autonomous driving have to be restricted to EVs?

When ICE cars do it, it KILLS THE PLANET! :innocent:

The Captain

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Why does the technology of autonomous driving have to be restricted to EVs?
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When ICE cars do it, it KILLS THE PLANET!

Apocalyptic exaggerations aside, autonomous driving AI and battery drivetrains appear to be two quite different technologies. Why are they sometimes conflated?

Autonomous semis and heavy equipment have been mentioned a number of times on this board. They don’t seem to be electric vehicles.

DB2

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Why are they sometimes conflated?

Lazy thinking. Since Tesla is most notably associated with autonomous driving, they must go hand in glove. Or is that the other way around? Since autonomous driving is most notably associated with Tesla, they must go hand in glove.

Or it could be that it does not make sense to sink new money into a dying breed of transportation. Just milk it while it lasts.

The Captain

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Why does the technology of autonomous driving have to be restricted to EVs?

The thinking is that AV technology benefits from having big batteries (the AI package and sensors draw a lot of power) and having direct electronic control and monitoring over most of the car’s systems. Since electric vehicles already have more of that, they would have an advantage over ICE vehicles in being adapted to AV. Thus, if AV really starts becoming a mainstream part of automobiles, it will further marginalize ICE cars, since those cars aren’t well-suited to being equipped with AV systems.

That might not turn out to be the case. Mercedes is planning to bring to market the first Level 3 autonomy system next year, and it’s offering the package in both the electric and ICE versions of the S-Class:

https://electrek.co/2022/07/22/mercedes-drive-pilot-review/

GM’s Level 2 Super Cruise is also available on both ICE and EV models. Tesla’s Level 2 system only comes on EV’s, but obviously that’s not a good indicator of whether that’s a necessary outcome.

Albaby

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Given the above implications, why buy a brand new gasoline-powered vehicle?

Because there is not a reasonably priced EV for the type of vehicle you want.

PSU

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That might not turn out to be the case.

For the life of me I can’t see why it would be be the case. There are already ICE cars with adaptive cruise control. There are ICE cars with automatic emergency braking. There are ICE cars with lane following. Some of those features have already become standard on some models. All of those things require sensors, actuators, chips, rudimentary AI, and of course electricity.

I don’t buy the argument that EV’s have “more electricity” or that there is some barrier to ICE cars making as many electrons as they want/need; surely a 400hp engine can keep up with the “chip/board” requirements needed to accomplish the task.

Is it “harder” to do with an ICE? Perhaps, maybe probably. So what? It’s a non-issue until the cost differential becomes huge; people already buy cars from $20k to $70k based largely on style, comfort, and status; I find no reason why a modest cost difference would change the game to a meaningful enough degree that would doom one over the other.

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Why does the technology of autonomous driving have to be restricted to EVs?

Given that gasoline-powered vehicles are on the way out and given the bigger than expected obstacles to making level 4 autonomous vehicles available to the masses, I doubt that there will be level 4 gasoline-powered vehicles for the masses.

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Of course, I expect that a few gasoline-powered vehicles to be collectible. Examples include Mustangs, Camaros, and the Dodge Challenger with the 707-horsepower HellCat engine. These are special vehicles and are NOT bought for practical reasons.

Looking far into the future, there are likely to be few gas stations. Owning a muscle car will be like owning a collector’s camera, where film is pretty much obsolete or an item which uses an out-of-production sized battery or a PC which used 8" floppy disks (or 5.25" or 3.5" for that mater).

Sure there are some turntables for vinal still being produced, but that is way different from the infrastructure required to bring whale oil to your car.

Jeff

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Jeff:“Looking far into the future, there are likely to be few gas stations. Owning a muscle car will be like owning a collector’s camera, where film is pretty much obsolete or an item which uses an out-of-production sized battery or a PC which used 8” floppy disks (or 5.25" or 3.5" for that mater)."

Most ICE cars (and likely EVs) last 15 to 20 years - maybe 20-25 years down south without the road salt and crud. So buying an ICE car today (and 90% of new cars will be ICE) will mean lots of gas and spare parts sold in the future.

You can still buy parts for a Model T Ford. Made over 100 years ago.

https://www.modeltford.com/

As long as there are 100 million ICE cars around, there will be service and parts available.

Now in 2050, it might be different, but even then I doubt ALL construction equipment, fire engines, ambulances, farm equipment, will be ‘obsolete’ and out of service.

t

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Given that gasoline-powered vehicles are on the way out and given the bigger than expected obstacles to making level 4 autonomous vehicles available to the masses, I doubt that there will be level 4 gasoline-powered vehicles for the masses.

I think the major factors will be time and durability.

I agree that it might be many, many years before we get to Level 4 being available ‘for the masses’. It may even be long enough that there aren’t any/many gasoline-powered vehicles being sold at all at that point. But keep in mind that we’re still many years away from EV’s being the majority of new cars sold in Europe, which is the furthest along of the major car markets in converting from ICE to EV - and adoption may start to slow as we run into production constraints on battery production.

But I think the more important factor will be durability. I suspect that Level 4 vehicles will come to the masses mostly through fleets of vehicles operating as (and designed to be) robotaxis - TaaS - and not as cars privately owned by individuals (sorry, Tesla). They’ll pile on the miles very fast (100K or more per year) and if they’re EV’s they’ll face discharge/recharge cycles that aren’t currently being experienced by privately owned EV’s - probably twice a day, every day. If then-current EV batteries can handle that without shortening their useful life materially, then they’re an obvious choice for Level 4 adoption. But if they can’t, we might see gasoline vehicles be the primary choice.

Albaby

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Sure there are some turntables for vinal still being produced…

www.aei.org/carpe-diem/animated-chart-of-the-day-recorded-mu…
“…the remarkable resurgence of vinyl record sales in the first half of 2021, which have exceeded the market share of CDs for the first time in both 2020 (5.4% vs. 4%) and 2021 (6.6% vs. 2.9%). The 6.6% format share for vinyl records in the first half of this year was the higher share for LPs since 1988.”

DB2
There will be approximately 40 million vinyl records sold this year

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Why are they sometimes conflated?

Well, for starters implementing on ICE would be complicated by the low torque at low speed and the need for a transmission. So, it is unlikely that a unit well trained on an EV would work without further investment on an ICE.

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Given the above implications, why buy a brand new gasoline-powered vehicle?

Because there is not a reasonably priced EV for the type of vehicle you want.

…because you live in an apartment and don’t have easy access to a charger, like 43 million other Americans.

…because you live in a house but your garage is full so you have to park outside, like a bazillion other Americans.

…because you use your car daily for work and frequently drive over 100 miles per day, and don’t want to chance forgetting to plug in one night.

…because you live in an area of the country where the charger infrastructure is inadequate, and your local politics dictate that it will remain so for some time.

…because you are a one car family and your teenager can’t be trusted to plug it in when he returns home.

…because you live in a city with on-street parking and there are no convenient overnight chargers there, like millions of people.

…because your brother in law had one and it burned his garage down.

…because your house needs a panel upgrade before you can put a charger in the garage.

Given that gasoline-powered vehicles are on the way out

It’s so cute when you say this. Next year ICE cars will outsell EV’s by what? 30 to 1? The ratio will change over time, but it will be a LONG time, if ever, that ICE cars disappear.

(California is a largely horizontal state with a few infrastructure issues. Move to the East, where most population resides, and you find a lot of vertical living and really difficult issues facing changing to an all electric infrastructure.)

Try not to get to enamored of new technology. Remember when there was going to be no more paper because of email? Remember when the networks were going to be out of business because of satellite TV? Remember when the railroads were dead because of trucks? Remember when nobody would smoke anymore because of Juul? Remember when…

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Well, for starters implementing on ICE would be complicated by the low torque at low speed and the need for a transmission.

You need to keep up with technology. Engineers have come up with the engineering marvel known as the automatic transmission. It changes gears without the driver having to depress a clutch and move a lever to select a different gear. It can even get started from a standstill without stalling the engine!

They’re absolutely amazing! They have the potential to change the task of driving forever! People who are incapable of walking and chewing gum at the same time will now be able to drive a car smoothly, without jerking around or grinding gears.

Seriously, in a modern car the engine and transmission have exactly two inputs from the driver. The driver can select from Park, Reverse, Neutral, and Drive. While in drive, they can often manually select a higher or lower gear. Those are just electronic switches. And to move forward, the driver presses on an electronic input device that lets the driver choose to accelerate slowly or quickly or anything in between.

Replacing these inputs to come from an AI instead of a driver is a trivial process.

Training the AI to make good choices in these selections is the hard part.

–Peter

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Well, for starters implementing on ICE would be complicated by the low torque at low speed and the need for a transmission.

You need to keep up with technology. Engineers have come up with the engineering marvel known as the automatic transmission. It changes gears without the driver having to depress a clutch and move a lever to select a different gear. It can even get started from a standstill without stalling the engine!

Completely agree. Off the shelf, modern ICEs are pretty whiz bang. And as a SWAG, I’m going to say ICEs will have significant market penetration for two decades. If engineers can solve the major problems with self-driving, then solving the problems with self-driving with ICEs will be trivial.

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There are and will be accidents with self driving cars.

No one wants the liability.

There is no legal framework for assessing the liability. There will be nothing labeled as ‘self driving’ until the laws are on the books defending the car companies.

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There are and will be accidents with self driving cars.

No one wants the liability.

There is no legal framework for assessing the liability. There will be nothing labeled as ‘self driving’ until the laws are on the books defending the car companies.

You keep saying that, but it’s not true.

If there’s an accident with a self-driving car that is caused by the self-driving car, under our current laws the manufacturer of the car would be liable. This is no different than if any other aspect of a vehicle that was under the manufacturer’s control were to cause an accident - whether the brakes failing, the adaptive cruise control malfunctioning, the lane assist failing, etc. We have a well-developed body of law that allocates liability for accidents to the party whose actions caused the accident. And if it’s the car, and not the driver, that causes the accident then the manufacturer is liable.

Albaby

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You keep saying that, but it’s not true.

If there’s an accident with a self-driving car that is caused by the self-driving car, under our current laws the manufacturer of the car would be liable.

Al,

You are right but you are making that up. Meaning the car company would be seen as making a faulty product as you are saying. There are no laws saying specifically that self driving cars are the liability of the manufacture in an accident.

As I am saying nothing will be labeled a self driving car. They are here already. You are refusing to see that. My nephew out of MIT is correct it is available here and now. Yes there are accidents. The law is not in place as I am saying to shield the manufacturers…the label wont be applied.