Detroit Association of Business Economists 2015 Annual Automotive Outlook
On January 22, 2015, the Detroit Association of Business Economists (DABE) held its annual Automotive Outlook Symposium at the Detroit Branch of the Federal Reserve Bank of Chicago. The event was attended by approximately 50 guests, including DABE members together with other local business leaders, academics, and media representatives. I was among the speakers, as was Peter Sweatman, director of the University of Michigan Transportation Research Institute (UMTRI).
Sweatman was appointed UMTRI director in September 2004. UMTRI was created in 1965 with the main goal of improving vehicle safety and sustainable transportation in the U.S. and around the world. It currently has a staff of 102 full-time researchers, faculty, graduate students, and administrative staff affiliated with the University of Michigan, who have conducted over 1,000 research projects over the years. In its latest endeavor, UMTRI has created a public/private research and development partnership called the Michigan Mobility Transformation Center (MTC). The goal of the MTC is to be in the forefront of research and development of vehicle connectivity. This includes vehicle to vehicle (V2V) and vehicle to infrastructure (V2I) technology. As Sweatman pointed out, it’s not just about transportation but about safe and sustainable personal mobility that transcends just getting from one place to another. The vehicles of the future will free the occupants from many of the hands-on tasks and decision processes that are part of operating a vehicle today. By doing this, it is believed that the driving experience can be transformed into a much safer and more productive and enjoyable experience for the vehicle occupants. The major goal of the initiative is to make vehicles of the future much safer by adding technology that will aid in accidence avoidance. Vehicles will not only be able to communicate with one another, they will also be linked with their surrounding environment. For example, Sweatman explained that the connected vehicle (CV) technology could warn drivers before they reach areas of dangerous weather, poor visibility, or other hazardous road conditions. The vehicle could be programed to respond to these conditions on its own either by adjusting its speed or offering alternative routes or a truly autonomous vehicle could choose to take an alternative route on its own. If the driver were to decide to continue to travel on the perilous road, the CV would inform the driver of any accidents in path ahead immediately giving the driver or the vehicle time to adjust accordingly.
CV technology is in its infancy today, and there is still a lot of research and development to do before it can be implemented. To aid in this work, MTC has adopted a plan in collaboration with the Michigan Department of Transportation (MDOT). The plan has three pillars:
- Ann Arbor Connected Vehicle Test Environment (2014+)
- Southeast Michigan Connected Vehicle Deployment (2015+)
- Ann Arbor Automated Vehicle Field Operational Test (2016+).
Pillar 1 of the connected vehicles (CV) pilot deployment program commenced on August 21, 2012, and included a pilot deployment of 2,836 vehicles— cars, trucks, buses and motorcycles—equipped with wireless communication devices in the Ann Arbor area. This phase ran for six months and was extended for an additional three years by the U.S. Department of Transportation.
Pillar 2 will test the rationality of connected vehicles by implementing a jump from research to regional deployment. It will include 20,000 vehicles together with 500 infrastructure nodes located based on safety and congestion needs and the installation of 5,000 vehicle and pedestrian safety devices. The U.S. has invested approximately $1.0 billion dollars over a ten-year span for this research.
Pillar 3 will include an automated Ann Arbor, where a select group of industry and government partners will work together. This phase will include testing in a simulated city (M City) a $6.5 million 32-acre site located in Ann Arbor near the University of Michigan campus and is scheduled to open in July 2015.
The investment that has taken place so far is likely just the tip of the iceberg in terms of what will be needed to complete a national intelligent transportation system. Sweatman argued that if the needed investment is made to complete a national system, it will not only provide an opportunity for the U.S. to lead the world in developing a CV technical knowledge base, it will also lead to the creation of numerous high-tech jobs in Michigan and throughout the country. For more information on this topic, follow some of the links provided in this article or on the University of Michigan Transportation Research Institute website.
Following Dr. Sweatman’s presentation I gave a short summary of the 2014 light vehicle industry. Here are some of the highlights. There were 16.434 million light vehicles sold in the U.S. in 2014 making it the best year the industry had seen since 2006, when 16.504 million light vehicles were sold. Although job growth has been good in the auto industry, the pace of growth has slowed in conjunction with the slowing pace of growth in sales. As a result, the automotive and parts sector added 41,600 jobs in 2014, down slightly from the peak job growth year of 2012 when the industry added 59,600 jobs. Average hourly earnings of automotive manufacturing workers, which were flat for most of the period following the 2008 recession, grew only slightly in 2014, up just 0.5% when adjusting for inflation. According to data from J.D. Power and Associates, vehicle incentives as a percentage of total vehicle prices rose to 9.1% in 2014, while the average transaction price for a new vehicle grew to an estimated 56.7% of median household income. One of the more controversial developments of 2014 was the number of vehicles recalled. According to data from the National Highway Traffic Safety Administration, vehicle manufacturers recalled almost 64.0 million vehicles in 2014, the most ever reported. And, of course, the biggest story was the reduction in gasoline prices through the year, with the national average for a gallon of regular gasoline falling more than $1.10 from December 2013 to December 2014. This resulted in about $600 per year in fuel cost savings for the average driver. Looking ahead, there will be 16.9 million and 17.0 million light vehicles sold in the U.S. in 2015 and 2016, respectively, according to the Blue Chip Indicators consensus forecast. If you’d like to see more information or to view the entire presentation you may click the DABE Auto Update – January 22, 2015 here.