Self-driving Cars – Wow! But also like dang.

Self-driving cars have the capacity to revolutionize the car industry but also everything related to vehicle transportation. Sure, the current expectations are high – autonomous vehicles are on the peak of the “hype cycle” as the information technology research company Gardner defines it.

Recent technological development has allowed significant advancements in self-driving technologies. Neural networks or computer vision are two technologies mentioned by Dr. Daniel Barreto and by Jeff Welser VP of IBM Research, in their presentations at Stanford University on Friday June 7.  In addition, such technologies has influenced the auto industry to new heights.  

However, experts like Hans-Werner Kaas and Detlev Mohr from McKenzie & Co., or Ferdinand Dudenhoeffer from the University of Duisburg, are convinced that it will take many years if not decades till we all commute in autonomous vehicles. Yet, the question (when?) seems secondary if we look at the potential impact the new technology can have. From an economical perspective the question therefore is; what is going to change? Let us elaborate on a few examples.

Labor Market

Probably the most straightforward impact will be felt by professional drivers. The Bureau of Labour Statistics counts 1.7 million truck drivers and 1.3 million delivery truck drivers in the US. This essentially would mean 3 million jobs that will become potentially obsolete due to autonomous vehicles. This estimation does not account for taxi drivers,  which stresses the dire prediction for those working in these jobs. It is not clear how many employees will be affected, if at all. Eventually the pace at which the technology gets implemented and the industry changes will be a defining factor. The faster the change, the more drastic the effect on the labor market.

Insurance models

Entire business models like the ones from insurance, will have to change. Up until today, a car insurance protects the consumer in case of an accident caused by human error. If the car is taking over the driving part, insurance companies have to adapt their model entirely. It is rather the car producer, maybe the software provider, that will need an insurance. Instead of millions of consumers, only a few companies need coverage. Regarding accidents, predictions expect a drop of 90 percent in the US. The estimates are based on the reports of the National Highway Traffic Safety Administration which show almost all accidents are caused by human error. In comparison, Germany’s predictions go as high as 95 percent.

Real estate

Self-driving cars are not only about driving, they are also about parking. They will take us to work, to the movies or to a date, all the while parking themselves autonomously in a parking spot. Or it will drive around with other passengers if a it’s a shared car. Since we don’t have to park at all or at least not ourselves, means that less parking is needed as McKinsey & Co describes in their study committed with Stanford University. Joel Barbier, director, Cisco Digitization Office attributes up to one-third of real estate in large US cities to parking. He predicts 40 percent of those parking structures could become redundant due to autonomous vehicles. This would have serious impacts on the real estate market. (And yes, also on the city’s budget since revenues from parking and speeding tickets will dissolve.) Barbier sees another factor affecting the real estate sector. As commuting in a self-driving car gets more comfortable, workers will accept longer commutes to work. This in turn rises demand for real estate in suburban areas while demand in city centres will rather drop.

Labor, insurance, and real estate markets are three examples of how the economy will be impacted by autonomous vehicles. More industries will be challenged and so will profit or take harm from the new technology. Whether the overall economical effects will be positive or negative depends on the pace of change and the agility of the sectors affected by it.



M Bertochello and F Wee, McKinsey & Company (June 2015)

Bureau of Labor statistics,

F Dudenhoeffer, BR-Interview (18.10.2016)

N Hyatt, Recode (19.4.2017), “Autonomous Driving is Here and it is Going to Change Everything”,

T Litman, Victoria Transport Policy Institute (27.2.2017) “Autonomous Vehicle Implementation Predictions”

H W Kaas and D Mohr, McKinsey Podcast (August 2016)

National Highway Traffic Safety Administration,

F Shafroth, Govtech (17.1.2017)



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6 comments on “Self-driving Cars – Wow! But also like dang.”

  1. Hi Samuel,

    This is a very informative blog. I totally agree with you. Even though we are now technologically more advanced to bring the autonomous cars into reality, you have given us the insight on some of the barriers to bringing self-drive cars on road. The government has to plan how to overcome the unemployment in the labor market, insurance models you mentioned in this blog. To add to this, In one of the recent case study reported below
    to learn how much it cost to prepare for self-driving cars on north avenue street in city of Atlanta , the case study says : the city estimates it could take 50,000 environmental sensors, 20,000 pedestrian, and mobility sensors, and 10,000 cameras on top of the current 960 street lights and more than 50,000 street lights to upconvert its city grid to so-called “smart street” status . This involves huge cost which government needs to allocate.
    So overall even though we have cutting edge technology, there are social and economic barriers which need to resolve to bring self-drive cars on road.

    1. Hey Ramdev,
      thank you much for your feedback and for the additional information. The point you are making is very interesting. You mention a good example of a city that specifically is counting the costs. Impressive numbers I have to say.
      The infrastructure where those autonomous vehicles drive on is a crucial point for implementing the new technology. The infrastructure is payed by the administration and as such if fact by the taxpayer. For me that raises also the question of who is going to profit from those updated roads and bridges? Is it mainly the (paying) taxpayer or is it the industry that now can commercialise the new product?
      As mentioned in my post, many sectors in the economy will be affected by self-driving cars. But also governments on municipal, state and federal level are challenged by the development, as your example shows.

  2. Interesting angle, Samuel! What you state is absolutely correct. The impact of self driving cars will be beyond the auto industry. Insurance industry in particular will definitely have to rethink how they penalize accidents when they cannot blame it on human error.
    Nevertheless, self driving cars is a perfect example of application of science and technology for real world problems — and potentially reduce human error. We are in a world where it is not hard to imagine machines out performing humans at our own tasks!

  3. Hi Samuel,

    As you mentioned here, self-driving cars will be popularized in the foreseeable future. In addition to labor market, insurance models, and real estate, I think that self-driving cars will also change the definition of a smart city. For example, the self-driving cars can be hybrid cars or even 100% electricity-driven cars. First of all, the self-driving cars can be charged automatically. No gas stations or related labors are needed. Moreover, energy efficiency in a smart city can be calculated precisely to reach the optimal energy use. This will be helpful to combat climate change by reducing carbon footprint.

    Yi-Lin Tsai
    (MS&E-238A student)

  4. Very interesting perspective on autonomous driving! I agree that while the industry seems to be very optimistic about driverless cars, there’s still further development to be done which could take another decade or so. At the moment, autonomous driving features only assist the driver, such as remote parking and adaptive cruise control with steering assist. Just a few days ago on July 11th, Audi announced their new Audi AI system on their new A8 sedan, which is the first production car to reach autonomous drive level 3. This means that the driver can pay no attention to road conditions up to 60km/h. Audi says it will take liability if a crash happens during the AI system is active. This takes the burden away from the insurance companies, and also the responsibility from the drivers.

    Considering the current technological shortcomings towards full driverless cars, I think the labor market will not experience a drastic shift in near future. The mainstream car manufacturers are still focused on assistance systems, so a driver will still be needed in the driver’s seat at all times. As for the impacts on the real estate market, I see it as a largely positive impact since it frees up space especially in the metropolitan areas, which is a more efficient way of managing space. This might be disruptive in the short run, but in the long run we will enjoy a lower living cost.

    Michael Zhang
    MS&E-238A student

  5. self-driving Cars is indeed one of the most popular area that lots of people are excited. In silicon valley, lots of companies set up their own elf-driving Cars research programs. It is amazing and also the trend of the future. However, we can never neglect the fact that there are also lots of problems waiting to be addressed. For example, what if hacker hacked into the car? If self-driving Cars replaces traditional cars, how can people still enjoy the feeling of driving cars?


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