The auto world is in upheaval. It's making great progress on radically new technologies in electric and autonomous vehicles, but that progress is unsteady, and there is lots of uncertainty ahead on regulation, incentives, and tariffs as the second Trump administration takes shape.
In the midst of that upheaval, a key fact often gets overlooked: that much of the industrialized world — the U.S., Europe, Japan, and South Korea — appears to have reached "peak auto." In other words, the total of new car sales has crested and will decline from here, at least for years.
That change, highlighted in a recent report by a global group of auto executives, reflects significant changes in who's driving, how much they're driving, and the age of the cars they're driving.
I think the report is worth a look.
The report, the first issued publicly in the 74-year history of the Global Leadership Conference, is meant to provide a wake-up call for national governments about the inroads being made by Chinese car makers and about recommended policy changes. The report says, for instance, that Chinese companies have a 35% cost advantage on electric vehicles (EVs), largely because of state subsidies both for the car makers and for the inventors and manufacturers of the batteries that are the vehicles' most expensive parts. In terms of all types of vehicle sales, the report cautions:
"Over the last five years, the Detroit Three automakers lost 6.6 points of global market share to Chinese automakers and EV startups.... Japanese automakers have lost 3.4 points of share, the Germans one point, while the Koreans have not lost any. China gained 8.2 points, and the EV startups—mainly Tesla—gained 2.1 points."
But who makes the cars matters less to auto insurers than the declaration of "peak auto." The report says the phenomenon "is particularly worrisome in the U.S., where new car sales are lower than they were a decade ago, even though the population of the country increased by more than 30 million people."
The cresting of new car sales reflects a number of trends. For one, fewer young people feel the need to drive. The Wall Street Journal reports: "The percentage of 19-year-olds [in the U.S.] with a driver’s license dropped steadily from 87% in 1983 to 69% in 2022, according to the most recent data from the Federal Highway Administration." The change reduces the frequency of accidents among inexperienced drivers but also likely means a long-term decline in the number of those who buy personal auto insurance, as they rely on ride-sharing and public transportation, instead.
Miles driven in the U.S. have increased only 5% since 2008, even as the population has grown 13%, again suggesting a long-term decline in the need for auto insurance.
As car prices have climbed, people have been holding on to their vehicles longer. The age of the passenger car fleet in the U.S. has soared from roughly 12 years in 2017 to 14 years in 2024. The change in the composition of the fleet doesn't directly affect the amount of insurance needed but certainly changes what sorts of protection are needed and the kinds of claims that will be made.
If you're half as much of a business process geek as I am, you'll find plenty of other things in the GLC report interesting, maybe even maddening. For instance, it says that U.S. companies are still building expensive features into EVs that only matter in cars with internal combustion engines — including structural supports to dampen the vibrations from the movement of the (now-nonexistent) pistons and sealants to keep (the now-nonexistent) carbon monoxide from leaking into the passenger space through the trunk.
But I really just wanted to note that we've reached "peak auto" and must confront that reality even as we deal with all the other upheaval in the vehicle world.
Cheers,
Paul
P.S. Two other milestones in the auto world reported in the past week:
- A universal EV charger is coming next year. That's a big deal because "range anxiety" and other concerns related to being able to charge have held back adoption. Having access to every EV makers' stations will reduce concerns.
- Waymo just keeps expanding service for its autonomous robotaxis. In this case, it announced that it will start operating in Miami, with plans to have fully autonomous, paid service available by 2026.