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5 industries Affected by Driverless Tech

June 12, 2018 0 Comments

Autonomous vehicles (AVs) are among the most highly anticipated and exciting tech in the automotive industry, and companies are racing to develop a safe and reliable AV to bring to market. If AVs live up to futurist expectations, they’ll have far-reaching effects on our everyday lives and those of various industries.

So which industries can expect the most disruption?

Auto Manufacturers

This is a given, though the exact effect of AVs on traditional automakers can’t be known; it depends on the speed and extent which consumers accept AVs as the norm, as well as how fast auto manufacturers can develop and incorporate the technology.

General Motors has already made acquisitions to “beef up” its autonomous pipeline, including self-driving start-up Cruise Automation and LiDAR manufacturer Strobe. The automaker has further plans to deploy an AV ridesharing service as early as next year, and it’s making considerable progress in the race to self-driving vehicles.

Ford is also moving forward with plans to deploy AVs in Miami for testing, as well as a goal of having fully autonomous vehicles in operation by 2021.

Still, auto manufacturers could find themselves among the losers due to two factors:

  • With cheaper and more convenient ridesharing options, consumers may opt out of car ownership.
  • Automakers will have to fight for market share with more players as tech companies entire the market.

It’s not a guarantee; some tech companies like Alphabet have said they’ll leave the car manufacturing to the automakers, focusing on the AV tech instead. Alphabet partnered up with Chrysler to develop a ridesharing service that could hit the streets this year, and Uber has partnered up with Volvo, Toyota, and Daimler.

Tesla remains a “legitimate competitor” to the Big Three, and there are rumors Apple is developing its own electric vehicle (EV), which could lead to autonomous driving later down the road.

As AVs become more common, “fewer American city dwellers are likely to own their own vehicles as it will, in theory, be so easy to hail one from an autonomous ridesharing service.”

To be fair, the rate at which Americans will give up car ownership may be exaggerated; for some, owning a car can be an emotional thing, and most are used to the current model of ownership. There’s no guarantee the switch will be easy or quick.

AVs will alleviate traffic, parking, and car ownership, and will likely be more attractive than other forms of transportation. Auto manufacturers need not despair, however; it “should be a boon for car-makers as they can either operate their own self-driving ridesharing fleets or sell vehicles to other operators if individual car ownership declines.”

Auto Insurance

Currently, the American auto insurance market is worth $200 billion, but Americans will have less need for it if AVs reduce the number of car accidents.

90 percent of accidents are estimated to be caused in part by human error; if you remove the human from the equation, the burden for carrying insurance shifts to the fleet owner (in the case of ridesharing) or the manufacturer.

The accounting firm KPMG predicts the auto insurance market will shrink 70 percent by 2050, losing $137 billion in value.

“If they’re safer, there’s less in the way of insurance costs, [and] that brings down premiums significantly,” Warren Buffett said to CNBC. (Buffett’s Berkshire Hathaway conglomerate owns GEICO and other insurance companies.)

Other insurers like Progressive and Allstate may suffer if the accident rate goes down, as insurance prices are based in part on those rates. Prices may fall with the accident rates, especially because the insurance market is competitive as it fights for drivers’ business.

Ridesharing and Taxis

Ever since ridesharing hit the market, taxis lost the monopoly in cities and taxi medallions dropped in value. Medallion Financial shares are down nearly three-quarters since 2013, and the price of New York taxi medallions went from $1 million (2013) to $200,000 (2017).

That doesn’t mean ridesharing services are safe from the effects of AVs: with the current ridesharing model, the driver and their car account for roughly 75 percent of the ride cost. Getting rid of the driver will make ridesharing services significantly cheaper, expanding the market.

Uber and Lyft are currently leading the pack, thanks in part to brand recognition, but their top spots are not infallible. If the companies’ greatest strengths are the thousands of employed drivers, they could be in trouble once drivers are rendered obsolete.

On the other hand, both companies are “jockeying” for positions in the new AV market, partnering with auto manufacturers and striving to develop their own AV tech. Uber acquired Otto, an AV-tech company that makes retrofitting kits (allowing drivers to turn conventional vehicles into self-driving ones).

While Uber and Lyft have brand recognition, auto manufacturers may have the edge when it comes to pricing. They’re able to build their own vehicles and run the ridesharing service without any outside company involvement, meaning it wouldn’t have to split revenue with drivers and vehicle owners.

Regardless, the ridesharing market is going to get more competitive; for now the advantage lies with the ridesharing services, but we’ll see what happens as AVs hit the roads.

Gas Stations and Convenience Stores

As technology advances, AVs may reach a point where they can fill themselves up at the pump (or be filled by a gas station attendant). Additionally, EVs are on the rise, meaning gas stations may be slowly phased out as charging stations take precedence. Plus, charging and gas stations may move away from the corner of the street and out of the way where real estate is cheaper.

Couple that with lower vehicle ownership and the responsibility falls to the manufacturer or fleet owner – and people won’t need to stop in at convenience stores for food or coffee.

Truck stop chains may face challenges with the rise of AVs as well; if trucks are automated, there will be no human drivers who need to stop for a shower or a hot meal along the road.

Still, it isn’t a death kneel quite yet. With AVs making travel cheaper, it could encourage more travelers to drive rather than fly, and passengers will still need to stop in for food and bathroom breaks.

Buffett certainly thinks time is not up for gas stations and convenience stores, taking a 38.1 percent stake in Pilot/Flying J (which will turn into a majority stake in five years).

“We don’t buy businesses to change them,” Buffett said.

Hotels and Airlines

As AVs make travel cheaper, easier, and faster in some cases, more travelers will take weekend trips to nearby locales, increasing traffic for hotels and other lodging services like Airbnb. Even restaurants could benefit from the increased traffic.

It’s less great for roadside motels, which were created specifically for weary travelers en route to a destination. Without a driver, passengers may opt to snooze in the vehicle overnight to get to their destination faster over stopping at a motel.

Automakers are likely to include multiple modes into their AVs, depending on the passenger’s needs at the time (e.g. sleep mode, seats facing each other, etc.). Beyond that, it could give rise to “sleeper buses”, much like sleeper cars on a train, and it spells trouble for motels.

AVs could even take business from airlines; a trip from Salt Lake City to L.A. takes ten hours, and in an AV passengers could make the drive overnight. Airlines like Southwest, that only serve the domestic U.S., could be in trouble if they don’t improve service to remain competitive.

Other industries will be affected, of course: parking spaces will be less necessary, leading to new use of real estate; long-haul trucking will be more efficient; passengers will consume more entertainment during trips (e.g. Netflix, Hulu, etc.); both food and package delivery will more efficient, cheaper; and so on.

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