Americans do a lot of driving.
According to the latest edition of the American Driving Survey, each Americans spends about 290 hours a year behind the wheel, driving about 10,000 miles. As a nation, Americans drive some 2.5 trillion miles per year.
To put those figures in some perspective, the amount of time the average American spends on the road is equivalent to seven 40-hour weeks at the office. A single motorist would have to drive from the planet Earth to the planet(oid) Pluto and back over 270 times to cover roughly the same number of miles we collectively drive each year. If that motorist were driving at the speed of light because their car has a warp core (we’re sure Tesla is working on it), it would take 2.5 months of non-stop cruising to travel one America’s worth of distance.
Given that we spend so much time in our cars, it is not surprising that Americans spend a lot of money using connected devices to buy things while behind the wheel.
It’s one of the reasons why everyone is working hard to become the software platform that drives – pun intended – that digital drive.
Those engines this week were revving particularly loudly, with both a rumor that turned out to be true and one that a lot of people have wanted to be true for a long time.
Much Ado About Something at Tesla
On the true rumor front, there was the highly watchable and ever quotable Elon Musk, who stopped Wall Street dead in its tracks this week with the announcement that he was considering taking the company he founded – and which was now trading at $420 per share – private.
He broke the news via Twitter, where he also said that he has secured the funding necessary to do it. That tweet came shortly after Financial Times reported that the investment arm of Saudi Arabia has acquired a 3 percent to 5 percent share in Tesla.
Tesla’s stock price immediately dropped on the news, hitting $352.45 at market close on Thursday, though it did bounce up 2 percent in afterhours trading.
The announcement came so far out of left field that Tesla’s investors were initially concerned that the CEO had actually been hacked. Musk dispelled that concern with an email sent to Tesla’s employees on Friday that outlined in more detail why he wishes to take the firm private.
Tesla’s board will meet next week with financial advisors to explore the plan. It is likely, according to CNBC reports, that the board will ask Musk to recuse himself from the talks.
“I think this is the best path forward,” he said. “As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders.”
The Tesla news was the biggest bombshell of the week news-wise, setting off the largest flurry of think pieces about what the move means for the future of cars, public companies and the future of the stock market as a whole.
Flying a bit more under the radar is the increasingly loud chorus of whispers that Apple is going to get into the car business.
The Apple Car – For Real This Time
The Apple Car, the iCar, the Car Pod – it’s been a favored subject of speculation for at least the last half decade, and the latest round of speculation was tipped off by the announcement that Doug Field — ex-Tesla Engineer and Apple’s former VP of Mac hardware engineering — is returning to the Apple family fold. At Tesla, Field had overseen the production of the Model 3.
Apple did confirm that Field is back, but did not offer any specific comments to media about what exactly he will be doing. Rumors indicate that Field will work with Bob Mansfield, a former colleague from their shared time in the Mac hardware business who currently heads up Apple’s “Project Titan” – which many industry observers believe is Apple’s code name for the car project, dating back to 2016.
But reports that Tesla’s head of production is coming back, combined with reports that Apple recently stole one of Waymo self-driving engineers, and then added to the fact that Apple just put in a patent request for an AR-enhanced windshield – it’s all made a lot of Apple watchers wonder if the first trillion-dollar market cap company might be thinking about building its own car after all.
Or … not.
The problem with tea-leaf reading around personnel changes and patents is that they offer a less than clear snapshot of the future. Apple might be building a car, or it might be building a car operating system so that the 38 percent of American smartphone owners who use an Apple product can smoothly transfer their mobile ecosystem of choice directly into their vehicle. They want their consumers talking to Siri, not Alexa or Google Assistant, and using Apple’s App Store and paying at the pump – or for their ordered-ahead coffee – the Apple Pay way.
Of course, Google and Amazon would like the exact same access – because it’s access well worth having by the numbers.
The Spending Future
According to the Bureau of Labor Statistics, the average American expenditure on cars each year – counting purchase costs, fuel, repairs and insurance – was $8,437 in 2016, the last year for which data was available. Assuming the average consumer drives for about 60 years, that’s about $510,000 in a lifetime of driving costs.
And as staggeringly large as that sounds, the amount consumers spend on their cars may in the future be dwarfed by the amount they spend from their cars.
And those consumers aren’t just doing a lot of driving – they are driving a lot of spend. According to the PYMNTS/Visa Digital Drive report, 135 million U.S. adults drive a car to and from work, and drive about $212 billion in commerce while they are doing it.
Forty percent of these commuters spend over $18.7 billion getting their daily caffeine fix, according to the PYMNTS Visa figures, while 54 percent order ahead and pay for food, influencing $47.3 billion in commerce every year.
It’s real money today – and on the road (pardon the pun) to becoming an even bigger business, as consumers are increasingly pumped (we promise it’s the last one) to see their cars become connected, or to become autonomous vehicles that are compatible to commencing commerce directly themselves.
According to the report’s findings, over 75 percent of smartphone users who spend more than 30 minutes in traffic traveling to and from work would order ahead more often if their vehicles were both autonomous and connected; 66 percent of commuters who make mobile order-ahead purchases today would do so more often if in-vehicle commerce was available.
A different PYMNTS report, this one done with GasBuddy, demonstrated more of the same trend – particularly among a demographic group whose annual spend is growing the fastest: Bridge Millennials.
These older millennials – now in their prime spending years between 30 and 40 – prefer to pay with mobile at the pump, and are more likely to venture inside the gas station itself to pick up an item or two if they access the station through a mobile app.
That ability to lure in the customer, incidentally, will be particularly important if the age of the gas fill-up gives way to the electric recharge.
Becoming the ecosystem that the consumer accesses to do all that buying is a very valuable proposition for the player or players that crack the code – though it’s probably far too early to call which one it’s going to be.
If this is a 500-lap race for the future of the automobile, we’ve barely 25 in.
But the rumors about the next 475 or so are sure getting interesting.
Join izo, CFO Dan Steinberg and PYMNTS CEO Karen Webster on Tuesday, August 21, 2018 at 1:00 p.m. (EDT)