Can we just get real here for a minute? Our streets and highways are never going to be populated by a significant number of driverless cars. Any more than our lives are going to be enriched by attentive robots exhibiting artificial intelligence. We are no closer to deploying fleets of driverless cars now than we were to having a flying car in every garage, as the illustrated predictions in Popular Mechanics and the like insisted through the 50s and 60s. And 70s and 80s. (I should have warned you about the disorientation a sudden dose of realism can have; sit down and breath into a paper bag, it will pass.)
The deafening hype we are hearing about driverless cars is the sound of an entire industry trying to administer mouth-to-mouth resuscitation to itself. Everything we hear about the auto industry is good (“2016 U.S.Auto Sales Set New High Record”) because everything we hear comes from the auto industry. And yet its healthy glow is beginning to take on the ghastly sheen of a dead mackerel.
Ever since President Obama saved the auto industry from meltdown in 2008 (yes, he did, you can look it up) it has been the leading light of American industrial activity. Sales bottomed out at fewer than 10 million units in 2009, but have risen steadily since, to an all time high of 17.5 million units, in 2016. What could be wrong with this picture?
Couple of things. First, these sales were accomplished by offering low- and no-interest loans, low- and no-down-payment loans, then extending the length of the loans to lower the payments still more. The average term of a car loan is now five and a half years, with six- and seven-year loans ever more frequent. Still this wasn’t enough. To get the numbers they wanted they had to start making loans to less and less credit-worthy buyers. Before long, in order to keep the big wheel turning, lenders were bundling car loans and securitizing them for more cash to lend to sub-prime borrowers. The sales were booked. The loans were booked (with everyone involved collecting their commissions in cash). But the cars haven’t been paid for yet, and now the default rates are in the stratosphere. According to MarketWatch:
The number of subprime auto loans sinking into delinquency hit their highest level since 2010 in the third quarter, with roughly 6 million individuals at least 90 days late on their payments. It’s behavior much like that seen in the months heading into the 2007-2009 recession, according to data from Federal Reserve Bank of New York researchers. “The worsening in the delinquency rate of subprime auto loans is pronounced, with a notable increase during the past few years,” the researchers…said Wednesday.
Nobody could have seen that coming.
Another thing. When the factories ship cars and trucks to the dealers, to sit on lots for no one knows how long, they count them as “sold” even though the dealer has the right to return them. At the end of 2016, a banner year for “sales,” an all-time high of almost four million cars were sitting on dealer lots unsold.
So despite the glossy paint on its exterior, the auto industry is rapidly rusting out from within, and desperately needs its Next Big Thing to appear NOW. Hybrids were it for a while, but gas prices went down and huge SUVs rule the road again. Electric plug-ins? Naw. See the fate of the hybrid. But self-driving cars? Now you got some buzz, man. This could be it.
But desperation generates its own buzz. The makers of computers and cell phones and tablets have all been seeking the Next Big Thing with equal desperation for years. A few years ago it was The Smart Watch. Drum roll!!! Fanfare!!! Launch!!! Nobody bought ‘em. Remember Google Glass? Gone. Virtual reality is currently having its 15-minute audition. The Samsung Galaxy Note 7? Crashed and burned. Literally.
None of these products came to market in response to a need people had. You know, like when they invented the fly swatter. These were things that engineers and marketers believed the general public could be enticed to buy. And that used to work, back when we had a middle class in America with money to spare. Then, you could make a go of pet rocks with the right advertising campaign.
But driverless cars? Let’s try one though experiment. It’s a couple years from now, and you call an Uber car, and when it pulls to the curb and waits for you to get in, there is no one in the car, and there are no controls in the car. Are you going to get in?