Tesla Has a Bigger Problem Than Elon Musk
So does the entire auto industry. The allure of owning a car is
fading. Young people would rather ride share, and urban planners are rethinking
transportation.
BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH INVESTORS@TULLMAN
The EV competition is heating up,
Tesla's cachet is in the toilet, prices for its current inventory, especially
in China, are being slashed and the company's stock continues to crater. But
Elon doesn't seem to care as he continues to tweak and twiddle with Twitter,
and to allegedly search for its next CEO. The fact that he would even consider
hiring any of his craven and clueless cronies like Jason Calacanis is beyond
sad and demonstrably desperate.
But the Tesla tribulations are really just a sideshow that is
masking the looming and much more serious threat to the auto industry, one
that's been growing for years.
In part, we're seeing the increasing impact of the inescapable
fact that the kids and young adults don't really care about cars anymore. The industry's response has been flaccid--
stuffing more tech gadgets and connectivity into cars to make them appeal to
younger audiences simply isn't getting the job done.
Major demographic shifts toward urban living signal a clear need
to change the utilization of our increasingly dense urban areas, where vast
amounts of real estate are presently wasted for parking, both on the street and
off. There's also the continuing decrease in overall personal driving
preferences; the rising acceptance of basic transportation as a shared service
much like buses, trains, and planes; and the massive growth in inner-city
biking, and even walking. These commuting alternatives are combining to
create greater and greater pressures on the auto industry. Of course, the
latest legislative triumph of lobbyists over logic-- the new federal tax
incentives for EVs in the Inflation Reduction Act -- totally ignores electric
bikes, scooters, and other transportation modalities.
There really isn't much debate about the reasons why even the
coolest cars don't elicit the same kind of excited reactions they did in
previous generations. There are no longer the kinds of emotional ties and other
psychological connections we had to our cars in the old days. No one's identity
(other than a few gangbangers and drag racers) is bound up in their Mustangs or
Beemers. Gen Z's don't connect to, or even understand, that there may be civic
or patriotic elements to vehicle ownership. Millies don't care to see the USA
in their Chevrolets. We don't know the first mechanical or technical thing
about our cars and we're somewhat intimidated by them-; 95% of drivers couldn't
change a tire if their life depended on it. The complexity of the underlying
technologies - where opening your hood may void your warranty - and the
skyrocketing costs of service and maintenance make ownership less and less
attractive.
And apart from the EVs, which have their own environmental and
safety issues, the rest of the fleet on the street is a gas-guzzling,
polluting, and rapidly depreciating set of assets that has become an
unfortunate bundle of costs, responsibilities, and liabilities to be avoided if
at all possible.
Finally, with more than a decade of Uber and Lyft in
their rear-view mirrors, anyone under 25 believes that, for them, the utility
and cost effectiveness of ridesharing and on-demand access beats the daylights
out of ownership. Transportation as a service is a fully embedded part of their
driving DNA. They'd just as soon never own a car if it wasn't job essential or
supplied and fully funded by their employer. This is why fewer and fewer kids
are rushing to the DMV on their 16th birthday. More than 25% of all Gen
Y'ers don't have a driver's license and almost 30% of 19-year-olds aren't
licensed to drive.
If anything, the last two years of COVID angst have just made
things even worse for prospective high school drivers. As they've said for
quite a while now, "if I'm not going anywhere, I certainly don't need to
drive there." Even more to the point, they believe that constant
connectivity over social media makes travel and physical gatherings even more
pointless. With school being largely remote for the last two years, and no
desire to get into any car with a potentially infected instructor and a bunch
of other students, the appetite for driver's ed classes was slim. They didn't,
and they still don't, really mind waiting for wheels.
A much more existential concern for the auto industry has to do
with the intentions of most major urban areas to reduce personal driving in
their downtowns and central business districts; to recapture the millions of
square feet of space presently occupied by low-rise parking garages and the
millions of miles of on-street parking (with three to -four million parking
spots in New York City alone); and to automate and streamline transportation
within those newly limited and reorganized city "hubs" through the
use of electric, autonomous, 24/7 shuttles, robotaxis, buses, conveyors and
other walkway systems. The goal is to make their cities cleaner, less
congested, more efficient and less subject to external natural conditions like
weather. A number of prototypes, many located underground, are already in
operation in places like Las Vegas (where the shuttle vehicles are Teslas, for
the moment) and in parts of Europe.
Personal vehicles will be largely or entirely excluded from
these areas and required to be parked at garages located around the perimeter
of these new vehicle-free zones. Cities are also increasingly abandoning
restrictions and regulations which require developers to construct a minimum
amount of parking spaces for newly constructed buildings. Within the next
decade, as more of the world's population moves into urban areas-; with their
places of employment being closer and more readily accessible by public
transportation-; there will be a further substantial decline in new car
purchases especially by the critical 18-to-34-year-old population of first-time
buyers.
Hybrid work from homes located anywhere, an irreversible shift
which is here to stay for certain, will only add further reasons and arguments
to avoid committing limited financial resources to vehicles likely to sit
parked somewhere more than 90% of their existence. Eventually a horse may
once again be more desirable than a Honda.