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COVID-19 on brink of ending 6 decades of driving growth in U.S.

Analysts say the severe decline in auto traffic might have a tremendous impact on numerous related industries.

COVID-19 on brink of ending 6 decades of driving growth in U.S.
An empty North Capitol Street is seen near the U.S. Capitol in Washington, D.C., on April 1, after the city issued a stay-home order to limit the spread of the coronavirus. File Photo by Kevin Dietsch/UPI | License Photo

Aug. 3 (UPI) -- COVID-19 has cleared streets around the world for months now, which has drivers in the United States poised to reverse a growth streak that has lasted for more than six decades, experts say.

Similar to the airline industry, the pandemic's impact has severely depressed auto travel, and experts believe it will take some time for traffic to return to pre-outbreak levels.

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At risk is a 60-year streak of uninterrupted growth in "vehicle miles traveled," or VMT, among Americans, according to report last month by industry analysts with the KPMG consulting firm.

In a 19-page report titled, "Automotive's New Reality: Fewer Trips, Fewer Miles, Fewer Cars," analysts concluded the pandemic has greatly accelerated two formerly low-key economic forces that already were driving down driving -- working from home and online shopping.

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The health crisis, the researchers said, has so firmly reinforced those trends that significant and permanent reductions in VMT are on the horizon and could result in profound consequences for the auto industry and other segments of the U.S. economy.

The 110 Harbor Freeway is seen on March 22 near downtown Los Angeles, Calif., at a time when traffic would normally be much heavier. File Photo by Jim Ruymen/UPI
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A prolonged decline in driving, they noted, would lead to lower vehicle sales, closed assembly plants, reduced gasoline consumption and gas taxes, and a decline of aftermarket parts sales. A related industry, auto insurance, is subject to similar effects.

KPMG analysts predicted, in fact, that high levels of telecommuting and shopping online post-COVID-19 will cut driving in the United States by as many as 270 billion miles every year -- 10% fewer than the nearly 3 trillion miles that were driven each year before the pandemic.

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The mileage figure will be calculated in early 2021.

If realized, the decline would translate into 14 million fewer cars on the roads. Also, new car and truck sales would fall by about 1 million vehicles per year with average ownership under two cars per household.

"Before the pandemic, we were very bullish about VMT continuing to go up because not only were Americans driving more themselves, [but they also] were having other people drive them more by pushing a button on ride-sharing apps," KPMG partner and automotive sector head Gary Silberg told UPI.

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"We thought that number was just going to explode," Silberg said.

So it was "stunning," he said, to see miles traveled plunge by 64% in April early during the crisis.

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"We asked ourselves, 'Is this a one-time where we get back to equilibrium?" he said.

"When you look at the numbers and the 3 trillion miles we travel per year, over 700 billion miles of it is us going back and forth to work, while more than 450 billion miles of it is shopping," Silberg said.

"We realized that both commuting and shopping are going to decline in the future -- that is going to be an enduring and profound reality."

To arrive at their figures, KPMG analysts considered an April survey of more than 300 corporate chief financial officers in which three-quarters said they intended to move at least 5% of their on-site workforce to permanently remote positions.

An empty Las Vegas Boulevard, known as "The Strip," is seen on March 29 in Las Vegas during the early days of the coronavirus pandemic. File Photo by James Atoa/UPI

The survey, conducted by business consulting firm Gartner, further found that 42% of the CFOs planned to make between 10% and 20% of their workforce permanently remote.

A number of U.S. companies are making moves to accommodate employees who prefer to work from home -- including Twitter, Shopify and Coinbase, each of which has already announced policy changes that allow their entire force to stay remote permanently.

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The other factor, growing e-commerce, will pare down U.S. driving by between 40 billion and 130 billion miles per year, the KPMG report found.

A loss of 1 million vehicle sales would be a serious blow to the auto industry, which already is struggling, and less driving could make an even greater impact for related aftermarket service providers like mechanics, repair shops and auto insurers.

Silberg said, however, a probable upside exists -- a growing market for the commercial delivery vehicles used by e-commerce retailers like Amazon to deliver their products.

"There's an exploding market for those now," he said. "For instance, Amazon has placed an order for 100,000 all-electric delivery vehicles made by a start-up company called Rivian," he said.

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