On Monday, Google made an announcement……..most of its 200,000 full time and contract employees would continue to “Work From Home” (WTF) until at least next summer. Google is the first to announce such an extended time frame. Most other high tech firms have implemented work from until at least January 2021. Google’s action will likely force those companies to reconsider their work from home policies as well.
(Note: A neighbor works for a major insurance company in IT. He too has been told that at the earliest, he would be working from home till the end of the year. When things begin to return to normal, it will likely be one day a week in the office and four days at home.)
Work from home had already become a common feature in the new economy. More and more professionals had been on WFH schedules at least part time and many were full time. Since Covid-19, the number has increased significantly with entire companies going WFH after the shutdown orders.
KPMG International , a research company, has looked at the effects that Covid has had upon the vehicle usage in America. KMPG found that in April 2020, shelter at home directives and WFH caused Americans to drive 64% less miles, an unprecedented decline in travel. Less driving is expected to become more and more normal though not at that decreased level.
KMPG has tried to extrapolate what can be expected in the future concerning Post Covid driving habits. Head of Global Automotive Practice Gary Silberg stated in an interview,
“People buy a car to get to and from work and because shopping is a very important part of their lives. If two of the primary missions that the American public buys a car for are going to reduce in demand, we know that’s going to have an adverse impact on auto sales. It’s just like gravity.”
KMPG has projected that:
- Work from home and online shopping will reduce driving in the U.S. by up to 270 billion miles a year. This represents a 10% permanent reduction in miles driven each year.
- Work From Home will reduce work commuting, with 14 million cars taken off the roads.
- Families will drop in vehicle ownership from 1.97 per family to 1.77 vehicles per household.
- Auto sales could drop to a low of 13 million from 17 million for 2020.
- New car sales after 2020 will decline by approximately 1 million vehicles yearly average.
- Auto repair shops will decline in number from the reduced miles traveled and fewer repairs needed.
- Oil and gas demand will drop significantly
Societal Changes Affecting the Auto Industry
The Covid crisis is not solely responsible for the changes occurring in the auto industry. For years now, America has been experiencing societal changes that have been accelerated by Covid. The changes have been affecting American habits in driving.
Online shopping had already become more and more popular over the last few years. Brick and mortar stores found online a great way to reduce inventory costs, employment costs and fixed costs like buildings and rents. They were able to offer shoppers more products with the convenience of shopping at home.
Aging Boomers are also having profound effects upon the auto industry. Boomers have no more need for two vehicles the older they get. Nor do they buy cars as often. Their reduced driving miles means that cars last longer.
Online grocery shopping is becoming more and more popular with Covid. Go online, order groceries and pay, and then wait for a personal delivery of the food. It makes the stress of grocery shopping far less.
Autos have become much more expensive to the point that many people cannot afford more than one. Lower income people are forced to purchase used cars instead of new vehicles off the assembly. With insurance rates, they are inclined to have fewer cars than those families with a greater income.
Other Impacts of Work From Home
As we go forward, we can expect that WFH will affect other areas of the economy as well.
WFH is going to result in companies downsizing their “office space” needs. Reducing office space will increase profits from decreased rent payments. It will also begin to crash the already hurting commercial real estate market.
Air travel will continue to be greatly restrained from the after effects of Covid. Firms are learning that they can have meetings through Zoom and other virtual apps. Reduced needs to travel to offices far away.
Mass transit will suffer as well from post Covid and WFH. Ridership will be down across the board.
Hotel room occupancy will fall without business travel. Restaurants will suffer another hit because people will be eating at home instead of not going out to lunch or the business travel.
Auto rentals will fall significantly.