Here's Why Uber Could Actually Drive Up Car Sales

Many believe car sharing services will hurt overall sales in the automotive industry, but that might not be the case.

With car sharing services like Uber on the rise and self-driving cars being developed at a rapid pace, the automotive industry is changing in a way where not everyone has to own their own car. Analysts at Deutsche Bank AG believe there are misconceptions about the effects of car sharing services, especially their impact on sales volumes. “The consensus view is that auto sales will decline, and that this will be negative for U.S. original equipment manufacturers,” writes Deutsche Bank’s team led by Rod Lache. “We believe that the consensus view may be wrong.”

Interestingly enough, the analysts do acknowledge that on-demand vehicles will ultimately reduce the number of cars on the road in the U.S. by more than 25 million. The thing is, this decrease in the number of vehicles on the road will coincide with a much shorter life cycle for cars, because they will be used much more than they typically are now.

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The report expects that life expectancy of an on-demand vehicle will be just three years, resulting in a higher rate of turnover for a smaller fleet that would result in an actual rise in sales volume. “U.S. sales nonetheless increase under every scenario we’ve examined because vehicle scrappage is determined by miles driven,” Deutsche Bank analysts conclude. “Each on-demand vehicle will travel more miles (10 to 20 percent more) than the cumulative six to nine privately owned vehicles that it replaces.”

The increase in mileage is attributed to “empty legs,” the distance on-demand vehicles travel without a passenger. The analysts believe that nearly half of the miles uberX drivers travel in New York City are without a passenger.

[Source: Bloomberg]