Uber's Going To Bulldoze Another Cozy Business: Auto Dealers

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Taxi unions aren't the only government-protected industry that ride-hailing companies are overhauling. Auto dealerships are also indirectly feeling the heat, in part because American teens are taking a pass on their driver’s license.

Getting a license was once an established rite of passage in American culture. But over the last 30 years, the number of 16-year-olds with driver’s licenses has plummeted roughly 40%, according to 2012 research by University of Michigan researcher Michael Sivak published in the journal Traffic Injury Prevention.

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Auto dealers benefit from state government regulations that ban car manufacturers from directly selling to consumers. Though some dealerships only sell one brand of vehicle, they are still independently operated, making them costly middlemen between consumers and carmakers.

Another Reason To Hate Car Salesmen

Tesla, for instance, was recently banned from selling directly to consumers in West Virginia, where auto dealers have lobbied the local government to protect their salesmen from competition.

But the next generation of Americans has little interest in learning how to drive, and even less interest in car ownership. And, if they do learn to drive, it’s more likely they’ll only need to rent a car for a day, rather than own it for a regular commute.

“I kept pushing my son, saying ‘Don’t you want to learn how to drive?’ and he’d say, ‘Maybe, but not right now,’ ” entrepreneur Eric Golden told the New York Times' Nick Bilton. “Then it occurred to me: Why am I pushing him so hard? An Uber is going to be so much safer than a 16-year-old behind the wheel.”

For decades, the teenage desire for a license has waned. Now, with Uber, parents also have less of an incentive to encourage ownership, given the convenience and (more importantly) safety of ride-hailing services.

And Maybe To Pity Them, Too

This is bad news for auto dealers. As individual car buying declines, so does the need for auto dealers and their army of salesman. Even those who need to drive a car, either for a weekend trip or to work for Uber, will most likely rent.

San Francisco startup Breeze, for instance, rents out cars to Uber drivers for a daily fee. Many Uber drivers don’t actually need to own a car; a recent study found that 81% of Uber drivers are part-time. Many just drive to supplement their income in between jobs or while attending college.

Car rental companies have little need for auto dealers. They don’t need to haggle over prices while hopping between salesmen surrounded by flashy advertising. Rental services know what they want in a car and buy in bulk. So while total auto sales may not decline, the need for salesmen likely will.

Lead photo by John Martinez Pavliga