Apr 17, 2020

Axios Navigate

Hello and welcome back! We're already halfway through April, folks!

  • If you've got tips or feedback, or just want to say hi, send me an email at joann.muller@axios.com.
  • Apologies for last week's glitch that prevented readers from opening the link to Lear's Safe Work Playbook. Try it again here.

Today's Smart Brevity count: 1,565 words, a 6-minute read.

1 big thing: Car buying will never be the same

Illustration: Eniola Odetunde/Axios

The coronavirus is changing how people buy cars and get them serviced — behaviors likely to last long after the pandemic is over.

Why it matters: Confined by stay-at-home orders, people have discovered that getting a new car delivered is as easy as ordering groceries or takeout. Experts say they may never visit a showroom again, with consequences that will reverberate on every Main Street in America.

The big picture: It's already happening in China, where car sales are rebounding and dealers are reporting a sharp rise in virtual-showroom visits, writes ZoZoGo consultant Michael Dunne in Automotive News.

  • Chinese customers can buy a car online from Geely and have it disinfected and delivered to their home.

How it works: In the U.S., consumers already do much of their car-buying research online.

  • Now they can see a dealer's inventory online and build their own financing deal, adjusting payment options, and factoring in the value of a trade-in vehicle or added warranty.
  • Credit approval happens online, too.
  • Companies say a three- or four-hour showroom visit can be compressed into a 15-minute online process, plus another 30 minutes for home delivery.

Car dealers have been cautiously exploring online sales for years, but the economic toll from the health crisis has abruptly shoved them into the digital age.

  • Orange Coast Auto Group owner Jon Gray says business at his Fiat Chrysler dealership in Costa Mesa, California, is down 50% since the pandemic struck, but online sales are picking up steam since he introduced the option a month ago — four months earlier than he'd planned.
  • "Without a doubt when the coronavirus is over, this is going to have legs."

"If there's a silver lining to this crisis, it is the rapid adoption of digital tools and processes" to modernize the car-buying process, says dealer strategy expert Dale Pollak, senior vice president at Cox Automotive.

Yes, but: Not all dealerships will be able to adjust quickly, which will likely lead to consolidation.

  • The advantage could go to large regional dealer groups and publicly traded giants like Auto Nation.
  • Smaller dealers that have thrived for decades on personal relationships polished at the Chamber of Commerce or as sponsors of Little League teams could be squeezed out, says dealer consultant Mark Rikess.
2. Airlines face a long, slow climb

Passenger air travel has plummeted more than 90% as airlines slash flights amid the coronavirus pandemic. Photo: David McNew/Getty Images

Congress' $50 billion rescue package for U.S. airlines will help keep the carriers alive — and their employees on the payroll — until the end of September. After that, the outlook is grim.

What's happening: The airline industry is reeling, with air travel down as much as 95% since the coronavirus stopped Americans in their places in mid-March. Even as a hopeful President Trump begins to prepare for the reopening of the U.S. economy, it will likely be years before airlines bounce back to pre-crisis levels.

Look at what happened after 9/11, notes the Wall Street Journal.

  • U.S. airlines' domestic revenues didn't fully recover until 2004, three years after the terrorist attacks.
  • International flights, hurt by the SARS epidemic in 2003, lagged for almost another year.

Now, economists say we're in for a deep recession, far worse than 9/11 or 2008-2009.

Driving the news: Earlier this week 10 U.S. airlines agreed to terms with the U.S. Treasury to distribute $25 billion in payroll assistance as part of Congress' $2.2 trillion federal stimulus package.

  • Another $25 billion in government loans is available, and some, including American Airlines, intend to apply.
  • Taxpayers could wind up with small stakes in each of the airlines if the Treasury Department exercises equity warrants under terms of the deal.

The government lifeline comes with other strings, too: airlines must maintain service to all of the markets they served before the crisis, even though there are hardly any passengers.

United offered a sobering assessment this week in a letter to employees from CEO Oscar Munoz and President J. Scott Kirby.

What's next: When demand does start to improve, it likely will not bounce back quickly, they said.

  • Lingering health concerns mean people could still be afraid to fly.
  • Not all states and cities are expected to re-open at the same time, and some international travel restrictions will likely remain in place.
  • Large conferences and events will likely remain on hold for a while.
3. An opportunity to build for future mobility

Illustration: Sarah Grillo/Axios

The next round of economic stimulus could include money to rebuild the nation's roads and bridges, similar to the Federal Aid Highway Act of 1956 that put millions of people to work building U.S. interstates.

Why it matters: America's crumbling bridges are in desperate need of repair, it's true. But this is also an opportunity to make sure we have the necessary infrastructure to support tomorrow's transportation needs.

What's needed: In a note to clients, Morgan Stanley analyst Adam Jonas suggests "10 things we gotta get right" in any potential infrastructure-related stimulus plan.

  • Electric vehicle charging infrastructure
  • Upgrades to the nation's electrical grid
  • Battery manufacturing
  • Battery recycling
  • Renewable power
  • 5G networks for connected, automated vehicles
  • Hydrogen fuel networks
  • High-speed rail and hyperloop
  • Skyports for flying cars
  • Space launch facilities and spaceports

My thought bubble: We'll be lucky to get even a few of those done. Let's focus on EV charging and vehicle connectivity to start.

4. Hyperloop is a long way off

Photo: Virgin Hyperloop One

Speaking of hyperloop, a new research report says the high-speed travel concept is at least 20 years away from commercialization.

The big picture: Climate change has fueled interest in finding low-carbon alternatives to conventional rail and air travel. Electric hyperloop is one solution, because it operates in a vacuum system that reduces aerodynamic drag, enabling higher speeds and greater energy efficiency.

  • Passengers would ride in levitating pods inside a narrow tube at speeds well above 500 mph.
  • Virgin Hyperloop One explains the technology in this video.

Yes, but: A new report from Lux Research says while the concept is technically feasible, it will require significant development to become cost-effective.

  • "Despite the considerable amount of hype and attention hyperloop has received and the potentially important role it could play in decarbonizing long-range transit, the concept remains more or less unproven, and serious questions remain about its economic feasibility," says Lux Research Senior Analyst Christopher Robinson.

The bottom line, via Lux Research: the first passenger-carrying high-speed hyperloop systems won't begin operation before 2040 at the earliest.

5. Drive-in theaters could make a comeback

The Family Drive-In movie theater in Stephens City, Virginia. Photo: Douglas Graham/CQ Roll Call

Long seen as a mid-century relic, drive-ins are now one of the only public places left to watch movies, my Axios colleague Bryan Walsh writes.

The big picture: Stay-at-home orders are threatening to destroy the already wobbly movie theater business. But the natural social distancing provided by a car has opened an opportunity for America's estimated 300 drive-ins.

With conventional cinemas almost entirely shut because of lockdown orders, movie tickets sales fell by more than 25% in the first quarter compared to 2019. But a handful of drive-in theaters are still open in Texas, Florida and Georgia, and owners report doing strong business catering to customers suffering from cabin fever.

  • Not everyone is so lucky. Drive-in theater owners in New York failed to get a waiver to stay open, and drive-ins are closed here in Michigan, too.

My thought bubble: The stay-at-home orders will eventually be lifted, but social distancing might still be necessary. Come summer, a drive-in movie could be just the ticket.

6. Driving the conversation

Social distance: Ford Is Testing Buzzing Wristbands to Keep Workers Apart (Keith Naughton — Bloomberg)

  • Why it matters: Automakers need to figure out how to practice social distancing when they resume production, perhaps as early as next month. Employees can also expect to have their temperature taken when they arrive for work and will likely wear masks and face shields.

Commute time: Rolling through the pandemic (John Eligon — New York Times)

  • Why it matters: In Detroit, a coronavirus hot spot, many working-class people can't perform their jobs at home on a laptop. Nor do have vehicles to safely get them to the grocery store. And so they ride the bus. A harrowing ride-along tale.

Voyage ahead: Driverless vehicles in the age of novel coronavirus (Megan Rose Dickey — Techcrunch)

  • What they're saying: Voyage CEO Oliver Cameron explains why his company stopped testing its AV shuttles early in the crisis, and how simulation projects run by engineers working from home will keep the company moving forward.
7. What I'm driving

The Lexus RX 350L comes with third-row seating. Photo: Lexus

This week I'm driving the Lexus RX 350L, a stretch version of the luxury carmaker's best-selling RX crossover utility.

Why it matters: Lexus needed to add a third row to the RX to keep up with competitors, but it's probably best to park little kids back there, not grandma or teenagers.

What's new: The 2020 RXL gets rid of Lexus' annoying mouse-like Remote Touch controller on the center console and replaces it with a slightly less awkward touchpad. At least the infotainment system now has touchscreen capability. None of the interfaces are ideal, which is true in most cars today.

  • The RXL starts at $47,300. My loaded version was $63,540, including delivery and handling charges.

Many assisted driving features are standard in the RXL, including more sensitive camera and radar systems that can detect daytime bicyclists as well as pedestrians even in low light.

  • I liked that road signs are clearly displayed in the instrument panel, too.

I had a little more trouble with Lexus' "lane tracing assist" technology, which is designed to keep the vehicle in the center of the lane while using dynamic cruise control.

  • If road markings are not detected, the system is also capable, in certain conditions, of following the car ahead of it.
  • During my drive, it was cloudy, the roads were wet and there were snow flurries. I saw no reason why the system shouldn't work.
  • Still, the car annoyingly slowed down and sped up with each rise or dip in the road, and it frequently latched on to cars in other lanes when the road curved ever so slightly.

My thought bubble: This is why drivers turn off driver-assistance technology that doesn't inspire confidence, defeating its potentially life-saving benefits.