Retail

Rubber Meets Road In Transportation’s (Digital) ‘New Normal’

Approaching Transportation's Digital New Normal

The future of travel … may look a lot like the past.

With a few digital tweaks.

As we re-open the U.S. economy – whatever that looks like – and as people start to move around again, and to go further than, say, a mile radius from their homesteads … might there be a renaissance for road travel?

It’s not far-fetched to think we’ll see more cars on the road, as individuals and families shun mass transit by planes (where passenger traffic is down more than 90 percent) and trains, especially if a vaccine is not immediately on the horizon.

The shift in how we travel, for business or leisure, has profound implications for how we might find, buy or rent the vehicles themselves.

Certainly the infrastructure is there for the transition.

The U.S. interstate system hearkens back to the 1950s, and if you’re of a certain age, the idea of family vacations from decades past might spark images of luggage, pets, kids and parents all crammed into one space on four wheels.

We’re a little more high-tech now, guided by GPS and the ability to plug the kids in the backseat and tether them to their tablets and a hotspot.

Summer seems a ways off, but if camp is canceled en masse, it’s a fair bet to think that families will be traveling domestically, if only to get out of the house and go where it’s been safe to sightsee or just be outside.

The daily commute, with all of its frustrations and frictions (in the form of traffic, that is), is already being embraced in at least some places where lockdowns are being lifted.

As reported by Bloomberg, in Japan, Germany and elsewhere, people are driving more. Data compiled by Bloomberg show that in Beijing, Shanghai and Guangzhou, morning traffic is at levels higher than what was seen in 2019, and volume on various metro systems is down as much as 53 percent, as measured in Beijing and elsewhere.

Driving seems to have recovered, by way of contrast. In Berlin, as estimated by Apple, public transit use is down 61 percent, while driving has recovered to levels that are 28 percent below previous levels. Here in the States, gasoline demand is rebounding, as seen in some Florida cities that are reopening.

Now, it remains to be seen whether these green shoots will bear fruit. A new wave of coronavirus infections may send us all back to the proverbial four walls to which we’ve become accustomed.

For now, auto sales seem to be rebounding off lows.

In an interview with CNBC, Thomas King, who serves as president of data and analytics at J.D. Power, said that “we are now firmly in a period where we see sales of new vehicles start to recover. We’re still severely depressed in terms of vehicle demand, but the good news is we have turned the corner in terms of the declines.”

Those statements come as Hyundai, Mazda and others noted that sales were down 40 percent or more in the U.S. in April as measured over the previous year, which The Wall Street Journal reported was not as bad as some observers had anticipated.

The rebound comes as other modes of transport explicitly tied to cars are suffering, due to the intense face-to-face interactions of ride-hailing and rentals. Uber and Lyft have reported that core ride-hailing operations saw bookings down as much as 80 percent during the quarter. The lumpiness of that rebound may be a bit uncertain, as those hesitant to share rides (or simply share space with a driver) mull the appeal of owning their own cars to get to and from work if they need to (and, of course, if it’s affordable).

Affordability, of course, is top of mind in an economic climate that at the moment feels uncertain, to put it mildly. But the fact that car sales are rebounding signals a shift in what people view as essential items to own.

Moving Toward Digital

There’s a bit of bifurcation as to how sales are getting done (and where). J.D. Power has reported that 24 states, comprising 44 percent of sales (as measured by 2019’s levels), have allowed brick-and-mortar operations to remain open. The remainder, equating to the majority of sales, comes from states that have allowed only online or remote transactions.

This heralds a shift toward digital means of kicking the tires and buying a car.

And it opens up the road (pun intended) for companies like Vroom, which have a presence in tangible and digital worlds, to capture share of consumers’ minds and wallets.

Consider the fact that Vroom, as noted in this space, is reportedly eyeing an initial public offering (IPO) that could come as early as next month. Vroom has stakes in car dealerships, as well as in the wholesale market and online.

In an interview with Karen Webster, Vroom CEO Paul Hennessy said digital conduits are “effectively deliver[ed] to every state in the country, and we’ve seen demand remain very strong because digital does exactly what consumers need it to at this time: deliver to their driveway … and settle the entire transaction end-to-end in a contact-free way.”

He noted that his concerns do not center on demand. “The only thing I don’t worry about in this new world is having enough supply,” Hennessy told Webster.

The supply side of the equation may be filled nicely, as car rental agencies such as Hertz unload unused or barely used vehicles. Manheim Consulting has reported that wholesale used vehicle prices were off by 11.4 percent month over month in April, indicating that supply to dealers is attractive (and available). That may give some tailwind to digital-only firms and those that offer hybrid models at physical locations and for online shopping.

The stage is set, then, for the rubber to meet the road for car sales done in a contactless, digital-first setting.

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