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"The End Of The Suburbs" effect on Tesla demand?

Discussion in 'TSLA Investor Discussions' started by anticitizen13.7, Nov 12, 2013.

  1. anticitizen13.7

    anticitizen13.7 Enemy of the Status Quo

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    All the recent talk of fires are a non-issue as far as I'm concerned, but a larger societal trend has drawn my notice:

    http://hereandnow.wbur.org/2013/11/06/end-of-suburbs


    My general observation is that over the next decade or so, suburbia and exurbia will decline. Younger people generally don't want to live in isolated suburbs. Buying large, expensive houses is also out of the question for younger people who may be struggling financially and cannot afford the double burden of a home and cars.

    I believe that the consequence of this will be lower demand for automobiles over the long run, at least in the United States. This leads me to these questions:

    If automobile demand in the U.S. falls dramatically over the next 10-20+ years, how will this affect demand for Tesla vehicles? What happens if the 2 cars/family norm goes away?

    Will the petrol automobile makers take the hit? Will automobile sharing programs change how people view car ownership?
     
  2. ecarfan

    ecarfan Well-Known Member

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    I think that is a very big "if", but if such a trend does manifest itself I wouldn't worry about Tesla since the company has already demonstrated the capability to make an EV that can fully satisfy the requirements of being a family's "only" car.

    My personal opinion is that the "death of the suburbs" is unlikely given that the American population continues to expand. A more interesting trend is that of the 20-something generation being less interested in car ownership than their predecessors. But I think when Tesla comes out with the Gen III model it will be well positioned to market to the younger generations since they are more receptive to new technology and already live a "touchscreen existence". To them, an internal combustion engine will seem like ancient technology, which of course it is.
     
  3. mershaw2001

    mershaw2001 Member

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    I know it's anecdotal, but I've spent my entire adult life without a car, living in the city and biking around, and I'm so excited about the Gen III that I'd put 5k down to buy one as my first car.
     
  4. uselesslogin

    uselesslogin Enthusiast

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    Well, I would say the long term threat is the same one the whole industry faces. It is level 4 automatic driving. If a company can buy a fleet of highly efficient cars and then get more use out of them through a robo-taxi service then they can charge users far less than what it currently costs to own a car to take care of all their transportation needs. This means less cars will need to be made and the cars that are made will be bought as cheap as possible and will have lower performance requirements.
     
  5. hiroshiy

    hiroshiy Active Member

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    In Tokyo that already happened and most car manufacturers turned to foreign markets...
     
  6. strider

    strider Active Member

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    Once millenials start having kids they'll move to the suburbs just like every other generation. That being said w/ the boomers retiring and more multi-generational households we have plenty of suburban and exurban housing so the drop in new construction is not alarming to me.
     
  7. DaveT

    DaveT Searcher of green pastures

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    The suburbs (at least in southern California) are alive and well.

    The challenge with the urban environment is once people have kids and they need to send them to school, good education in the urban areas is hard to find unless you spend a lot to buy into a good area which is high in demand. This is when people make the flight to the suburbs to get a spacious house they can afford and to be in good school districts without breaking the bank. It's hard to see cities solving the urban education problem at scale any time soon and making good urban education affordable (ie., getting good education to affordable urban areas).
     
  8. RobStark

    RobStark Active Member

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    Less demand for suburban houses mean lower prices.

    If young people of today can't afford cars when they reach middle age America has bigger problems than the automotive sector.

    Japan is a little island with 127m people. America has no where near that population density.

    The automotive market in the USA may not grow as fast as the population but it will almost certainly not shrink.
     
  9. anticitizen13.7

    anticitizen13.7 Enemy of the Status Quo

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    I actually do agree that problems in major cities, specifically crime and poor public schools, will deter many people from moving into dense urban areas. However, I don't think this means that younger people with small children will flock to the far-out suburbs and exurbs like their parents. The article I linked to references older suburbs that are built around main streets. These communities are often walkable because they were built with sidewalks, bike-friendly, and have easy access to public transit stations. It is my general sense that people will flock to these kinds of towns in the next 10-20 years, and that newly built communities will follow this model.

    In such communities, a 1-car household could become the norm. Even if one does not need an automobile to get to work or go to school, a car is still very useful for lugging home lots of groceries, bags of mulch, or other large items. People will still want to go places that are not accessible by rail or bus. I think that automobiles will still play a role, though a reduced one, in the coming decades.

    Level 4 automatic driving referenced earlier in the thread could also change things drastically, although I suspect that some people will always want to own their own car. You can customize your own vehicle and not worry about whether it will be clean to your satisfaction or not.


    Lower prices, yes, but that may not make them very desirable. The inconvenience of having to drive everywhere, combined with the expense of maintaining large lawns, are headaches that many people will not want.

    Whatever happens, I think that Tesla will be able to make products that people will want. However, I am keeping an eye on population shifts/trends because I suspect that the automobile industry in general will be in for a nasty shock if the trends I see continue.

    Most people didn't think an electric car could be as awesome as the Model S. The unexpected can and often does happen.
     
  10. jaanton

    jaanton Roadster NA #1026

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    You shouldn't get mixed up between demand and construction. The suburbs are getting poorer.

    Face of US poverty: These days, more poor live in suburbs than in cities - CSMonitor.com

    You can argue demographic shifts but I think this still helps Tesla. We generally believe that EV's will last longer than ICE's, but will people keep them all that time? When Gen III comes along, it will be more affordable and probably have the range needed for suburban life. Model S and X will start being available as used vehicles.

    As an affluent Oaklander, I live that moneyed life in the "urban core." Doesn't stop us from having two cars. We're talking about a third now. And I can and do take public transit when it makes sense. Alternatives are good and the suburbs don't have many when it comes to transportation.

    It's hard to say what the future will bring, but EV's are young enough and Tesla is agile enough and smart enough and has the pulse of the economics that it can adapt even with multi-year ramp ups. I'm convinced that Tesla can adapt faster than legacy auto makers.
     
  11. JohnQ

    JohnQ Active Member

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    The common belief is that young professionals will flock to the cities and close in suburbs for the lifestyle and energy. They can bike to work and, in some cases, public transport is available and convenient. They are comfortable living in a shoebox with 3 buddies to defray the rental cost. But, what if I want to head to the shore from Philly, NY or DC? What about heading up to Napa? Or Burning Man? Until there's a serious commitment to mass transit at a reasonable cost, most people will eventually need cars. There will always be the great exception of those who live their entire lives in an urban core but that really is the exception.

    Regarding Tesla specifically, how many 25 year olds are buying new cars in this price range anyway? I know I didn't buy a new car until I was 28 (on sales commissions) and I kept it for 10 years. My wife bought the next new car (now 10 years old), then I bought the S. Most of my friends didn't buy a new car until they were early 30s. We got by with cheap used cars. Even in DC, with a really good transit system, a car was important. If they had Zip Cars at the time it might have reduced my need for a used car but I'd have to do the math to see if I would really save anything.

    Get married, have a family, think about schools and, all of a sudden, the suburbs look like a better deal. Unless you homestead in a city in need of rejuvenation like Detroit (I grew up there, I can say these things) it's just tough to have enough space. A family of four may not need a 3,800sf house but take a look at what an 1,800sf property costs in a close in suburb with good schools. All of a sudden the farther out suburbs get more attractive. Especially those that are built with the amenities these former urbanites are looking for.

    All this is to say that, at 25, nobody really knows where the hell they'll end up or what types of pressures will be brought to bear that shape decisions. I rode my bike to work at that age. I swore I'd never drive more than 15 minutes to work. When we bought our first house it stretched to nearly 30 minutes. Now it's between 45 and an hour (1:45 when I have to go to Manhattan). And that's a reasonable commute for this area. And, it's that long because I have kids, want to be in a great school district, and would live in a shoebox if I were closer to the office.

    Now, if, as DaveT says, a solution to urban school challenges can be found, then the dynamic changes.
     
  12. RobStark

    RobStark Active Member

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    I much rather have the inconvenience of driving than the inconvenience of living in a shoebox.

    My newly married 28 year old nephew just bought a home in suburban Los Angeles.

    He was a Silver Lake hipster not too long ago.

    It is not the law that you must have a large lawn in the suburbs. New homes get smaller and smaller lawns. Many opting for low maintenance artificial lawns.

    Here in Los Angeles many, like myself, opt for low water low maintenance desert landscape.

    Co-opts, gym fee, shared public space/lawn fees, limited parking are headaches many do not want.

    I knew electric cars like the Model S were the future 20 years ago.

    A greater percentage of people will live in urban settings in the future, it is virtually inevitable.

    But the total number of people living in suburban homes will at least stay at current levels and probably increase. Just not at the rate of urban centers.

    The growth of American automobile sales will continue just not at the rate of the 20th century.

    That is China and India.
     
  13. austinEV

    austinEV Active Member

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    There is another trend to consider, that I think will pop seemingly out of no where and turn this whole issue on it's head. I think the technology for self-driving cars will really arrive. Google probably has the easy 97% now. The hard 3% will come in a few years. Cheap computing power and sensors have made it an engineering problem to solve instead of a sci-fi what-if. Like all revolutionary technologies it will have headwinds and opposition. (easier to do in an EV too, but not a requirement). At first there will be regulations that restrict it but once city planners realize the many benefits they will get behind it. The more self driving cars you put on the roads the more efficient they can potentially become, and I suspect even a smallish percentage, like 15-20% would have an outsized benefit on the overall effeciency of traffic flow. Self driving cars can also self-park themselves in remote lots, easing parking concerns.

    So this will enable a few things: 1) city dwellers can in fact be empowered to have a convenient auto-taxi meaning even less reason to own a regular car BUT 2) the suburbs suddenly get REAL attractive. Why not live out in the boonies if you can nap in the car? Who cares if your commute is 2 hours if you can just stretch out and catch up on your netflix queue, or work, or write that novel, or play WoW in the back seat. It changes the cost/benefit pretty dramatically. So in the extreme case, lots of people might opt to live in the exurbs, sit on the 405 for 2 hours each way snoozing, with the added benefit that the traffic might actually improve as that trend continues.

    Our actual highways have tons of latent capacity if it weren't for human control systems which aren't efficient. Also means no need for a hyperloop, sorry.
     
  14. richkae

    richkae VIN587

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    First: Shrinking suburbs causing a slowly shrinking market for cars is a very minor concern for the manufacturer with 0.1% of the market that seeks to have 1% of the market. The big players that have big chunks of the market ( 10s of % ) are the ones that need to worry.

    Second: autonomous cars have the ability to shatter the entire car manufacturing ecosystem by reducing the number of cars needed by an order of magnitude. But this will require replacing most of the cars that currently exist. Again the players that need to be worried are the big players. The paradigm shift will make it easier for the new players to capture the new market.

    Third: Even if autonomous cars existed that could travel at 100mph while I snoozed, I would still want a hyperloop. I want to travel 1000mph, not 100mph.
     
  15. neroden

    neroden Happy Model S Owner

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    Look at the 1920s or even earlier. Automobiles were toys of the rich. The top end of the auto market did just fine... it was the bottom end which didn't exist.

    If this happens, Tesla, as a luxury car maker, is in a very good position. Perhaps Tesla will never successfully make "Gen4", the sub-$20,000 car. Does this matter? I say, no.

    The big petrol automakers are heavily invested in the "mass market", and that's where the hit will be, not the higher-end market where Tesla is.

    - - - Updated - - -

    No, they won't. And the immediately previous generation aren't doing so (yes, they're already having kids, yes they're generally staying in the city.)

    I still say this is irrelevant to a luxury carmaker.

    - - - Updated - - -

    It does.

    It'll shrink. The population is likely to shrink too, actually; the US is now unattractive to immigrants.

    The important point for Tesla, again, is that the auto market will shrink *at the bottom of the market*, not at the top.
     
  16. David_Cary

    David_Cary Member

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    It is an absolute certainty that no one can predict the future.

    We have become an extremely polarized country in so many ways. With that, I really do think people see what is going on around them and think that is reflective of the entire country. My father who lives in Berkeley has conversations with people around them and no one seems to no more than a token Republican or two. The younger people there may never own a car and talking to them, you might believe that no young person wants a car or to live in the suburbs.

    Peak Oil concepts would predict the end of the suburbs but EVs change that. The fact is that there is a ton of investment in roads and housing in suburbs.

    Looking at trends during the greatest economic downturn in 80 years might not be predictive of the future. It might be....

    I seriously doubt the US population will shrink. Given the mild climate, relatively unpopulated areas, stable economic system, abundant natural resources -- it is hard to imagine that the US won't continue to grow despite what the future brings. Urban centers can't house that many people easily. Far cheaper to build in the suburbs - and cheap EVs just make living in the suburbs even cheaper.

    Lastly - people naturally like trees. People naturally like to have outdoor spaces without crowds. I do believe most people would prefer to live in a larger house compared to a shoebox. It is all about tradeoffs. I believe the future minimizes the attractiveness of cities - working from home, autonomous EVs etc.
     
  17. ItsNotAboutTheMoney

    ItsNotAboutTheMoney Active Member

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    Driving is boring.
    Internet.

    The end.
     
  18. GenIIIBuyer

    GenIIIBuyer Member

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    The end of the suburbs and especially exurbs has been accelerated by the high cost of gas. I expect that cheaper modes of transport (i.e. EVs) will result in a 'mean reversion' move back out to the suburbs and exurbs.
     
  19. brianman

    brianman Burrito Founder

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    With Tesla I have both.

    1. Drive.
    2. Charge and use internet.
    3. Repeat.

    If they "just" automate the supercharge connect/disconnect (like the superswapping demo), then I don't even need to get out* of the car.

    * Especially if they add additional "release valves" into the seat.
     
  20. callmesam

    callmesam Member

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    Self driving cars and effects on society:

    SelfDrivingMap.png
     

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