Advances in digitalization, artifcial intelligence,machine learning, the internet of things (IoT),sensor and camera technology are drivingdramatic change and improvements inautomotive technology. And these advancesare creating a ripple efect throughout theentire automotive ecosystem. Accident avoidance technology, or advanceddriver assistance systems (ADAS), arebeginning to gain good market traction, andthe auto industry is beginning to explore whatthe implications of these are to auto sales, autocare, auto repair, and auto replacement. Layerin car sharing, and autonomous vehicles, andit’s clear that the traditional auto ownershipmodel will change. In 2017 Crash Course we explored marketdynamics through the context of anautomotive claim. With data and technologydriving change into so many aspects of ourlives, this year we will instead look throughthe lens of the full auto ownership life cycle – from auto shopping to purchasethrough vehicle end of life, hoping to providesome visibility into how these will change in the future. We’ll begin with the ‘Buy’ decision, exploringwhy consumers buy vehicles, how theydecide which vehicle to buy, how they payfor the vehicle, how they choose to insurethe vehicle, and how auto industry sales havefared to date and what they may look likein the future. Today’s vehicles have a naturaldepreciation and deterioration cycle thatultimately leads to the need for replacement.Will the replacement of the future involve anew vehicle purchase or something like anautonomous vehicle subscription When the vehicle is acquired, we move intothe ‘Drive’ phase. In this section, we’ll explorehow driving has changed and how it maychange in the future. Will overall miles drivencontinue to grow Who actually will be doingthe driving How might insurance changewhen we consider the change in who iscontrol of the vehicle With the auto industryreeling from numerous years of signifcantvehicle recalls, how does more technologythat now controls the vehicle itself challengeautomakers in the future With the focus on crash avoidance and,ultimately, vehicle autonomy, will auto‘Crash’(es) and fatalities fall And howquickly Early benefts of ADAS have shownmarked improvement to bodily injury claimfrequency and costs. How might this changeinsurance casualty claims Is the ‘Roadto Zero’ a possibility, and when might we get there When the vehicle does crash, and needs‘Repair’, what further changes can we expectin terms of the types of tooling, training, andinvestment required of collision repairers Howwill repair frequency and costs change WithOEM’s taking a more active role in providinginformation on how the vehicle should berepaired, how will that change our industryAnd fnally, if the vehicle cannot be repaired,what does that mean to the consumer andher decision to jump back to the ‘Buy’ start ofthe overall cycleFinally, data and intelligence will continue todrive market developments in each of theseareas. This year our guest authors will providesome thoughts as to how digitalization, data,analytics, and artifcial intelligence (AI) arebringing change to our industry today. “It’s Happening” was our 2017 theme for CrashCourse – and it’s safe to say that our industryendured a good deal of transformationthroughout the year. With the promiseof rapidly advancing technology such asAI, this year we’ll provide our viewpoint “Putting the AI in the Automotive Industry.” So, sit back, and we hope you enjoy this year’sissue of CCC’s Crash Course! executive summary 05 PART 2DRIVE PART 1BUY 25 PART 3 CRASH 57 PART 4 REPAIR 79What Americans Are Buying Today In 2017, over 90 million vehicles were soldglobally.1The United States continues to beone of the single largest markets for vehiclesales. In 2016, a record 17.55 million lightvehicles were sold in the U.S., beating the lastrecord set in 2000.In 2017, auto sales slowedby 1.8 percent to 17.25 million; however, recordaverage new vehicle prices meant a majorityof automakers still considered it a very goodyear (see Figure 1).Most analysts projectauto sales will slow to between 16.5 millionand 16.9 million in 2018, with less pent-updemand, higher interest rates, and decliningused vehicle values driving sales down.Atthe same time, continued growth in the U.S.population, a strong economy and strongemployment, and consumer desire for newauto features such as WiFi and advanceddriver assistance systems (ADAS), will helpbring customers back to the showroom, justat a slower rate than the last three years. Light truck sales achieved a new record –64.5 percent of all new vehicle sales in 2017,as car sales in 2017 fell 11.2 percent while lighttruck sales grew 4.4 percent (see Figure 2). The average new vehicle transaction pricerose 2 percent for the full year (versus 2.5percent in 2015 and 2016), with December2017’s transaction price of $36,113, settinga new high, and largely driven by higher light truck sales (see Figure 3).2Lighttrucks – and full-size pickups in particular-continue to drive a great deal of the proft forautomakers, particularly the U.S. automakers. Proft margins on pickup trucks typicallyare well above 10 percent and can outpacemargins on luxury cars.3With an averageselling price of over $47,000 for full-sizepickups in November 2017 (with upgrades that price can jump to as much as $60,000), it can be argued that pickups are the new luxury segment.4 05 B U Y 7 2018 CCC Information Services Inc. All Rights Reserved.6 2018 CCC Information Services Inc. All Rights Reserved. For example, Fiat-Chrysler droppednumerous small and midsize passenger carsfrom its lineup, to instead focus on JeepSUVs and Ram pickups.5And despite anexpected slowdown in auto sales, in the next10 years an additional 25 million consumersin the U.S. will move into the 35 to 44 agebracket.LMC Automotive predicts many willopt for bigger SUVs as they move to suburbs,potentially driving up sales of midsize SUVsby 16 percent between now and 2022, whilelarge SUVs may jump as much as 25 percent.6 As auto sales slow in the coming years, salesof these more proftable vehicles will be keyas automakers are pressured to maintainproftability while investing billions in newstrategies for self-driving and electric vehicles.7 As the average MSRP of new vehicles hasgrown, so too have concerns regardingafordability.As of Q3 2017, there were over$1.21 trillion in open automotive loans, withan average loan term length of 69 months.8Easier credit allowed more buyers from thesubprime markets to enter the market again,resulting in slightly higher delinquency ratesas the year progressed, particularly amongauto fnance companies that have historicallyoriginated and held more than 70 percent ofsubprime auto loans.9Overall however, theoutstanding loan balance for the subprimesector has remained fairly steady at about24 percent of the overall since 2011.10Andwhile there was some concern that themarket might face an auto fnance bubble,many banks restructured their portfolios andadjusted their auto fnance exposure in 2017.11 Transunion reported declining originationseach quarter between Q2 2016 and Q2 2017,and the slowest growth in overall auto- fnance balances in Q3 2017 since Q3 2012.120.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00 CY1 996CY1997CY1998 CY1 999 CY2 000 CY2 001 CY2 002 CY2 003 CY2 004 CY2 005 CY2 006 CY2 007 CY2 008 CY2 009 CY2 010 CY2 011 CY2 012 CY2 013 CY2 014 CY2 015 CY2 016 CY2 017 CY2 018 E 8,130,945 7,884,601 7,042,140 5,692,432 5,987,531 6,378,508 7,472,518 7,788,973 7,749,432 7,566,668 6,893,078 6,120,774 8,430,044 8,269,351 6,203,578 4,739,077 5,602,313 6,400,377 7,020,574 7,793,163 8,773,231 9,916,173 10,645,974 11,125,098 02,000,0004,000,0006,000,0008,000,00010,000,00012,000,00014,000,00016,000,00018,000,00020,000,000 CY2006 CY2007 CY2008 CY2009 CY2010 CY2011 CY2012 CY2013 CY2014 CY2015 CY2016 CY2017 CarsLight Trucks -2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% $0$5,000$10,000$15,000$20,00