Ride-Sharing Services In Top Gear: Sedan Coming To A Halt

Sales of sedan will plunge by more than 50% in the United States by 2030, according to global consulting firm KPMG. With the burgeoning of low-cost ride-hailing services, the market for four-door sedans, the symbol of United States’ driving culture, will shrink.

The KPMG report forecasts that ride-sharing services using self-driving vehicles will first be introduced in densely populated urban and suburban markets. KPMG further predicts that by 2030 many families will no more need to own a sedan to get to work or do daily work. Instead, they will hail a ride. The study predicts that sedan sales will nosedive to 2.1 million annually in the United States by 2030 from 5.4 million at present.

Tracking Sedan’s Decline

There are a few discernible trends which indicate strong inclination toward ride sharing. Young people are actually showing less interest in owning a car, especially in cities where ride-sharing services such as Uber and Lyft are available.

In fact, the ride-sharing services are gradually entering into the driving culture of the Americans in a big way. Also, the costs of ride-sharing services are projected to decline, particularly because gas price is not likely to skyrocket, giving further impetus to such services.

Alphabet Inc.’s (NASDAQ:GOOGL) Waymo, General Motors (NYSE:GM) and a few traditional original equipment manufacturers (OEMs) have already started experimenting on driverless ride-sharing services in some select markets. More auto companies are likely to enter this space with time.

Another reason behind this decline is the changing tastes of the Americans from four-door sedans to crossovers and SUVs. According to a report by IHS, sales of crossovers and SUVs actually were higher than that of sedans in 2014.

Bracing Up for the Changes

Be it the change in consumers’ preference or the increased availability of alternative low-cost mode of transportation, the decline in sedan’s sales is evident.

Automakers have already started to reorient their programs and strategies in order to respond to the new situation where the demand for conventional compact and midsize cars has declined, while that of SUVs and pickup trucks have increased.

In the changed situation, Fiat Chrysler Automobiles N.V. (NYSE:FCAU) has opted to pull out from the small and midsize sedan markets in the United States. Japanese auto major Toyota Motor Corp. (NYSE:TM) is also reorienting its production strategies taking into consideration the shifting consumers’ preferences.

Currently, Toyota sports Zacks Rank #1 (Strong Buy). Toyota has an expected long-term growth rate of 6.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.

While Fiat Chrysler carries a Zacks Rank #2 (Buy), Alphabet and General Motors have a Zacks Rank #3 (Hold).

Fiat Chrysler, Alphabet and General Motors have an expected long-term growth rate of 19.1%, 18.4% and 9.2%, respectively.

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