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.
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.
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.
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) http://www.mckinsey.com/industries/automotive-and-assembly/our-insights/ten-ways-autonomous-driving-could-redefine-the-automotive-world
Bureau of Labor statistics, https://www.bls.gov/oes/current/oes533032.htm
F Dudenhoeffer, BR-Interview (18.10.2016) http://www.br.de/mediathek/video/sendungen/nachrichten/interview-dudenhoeffer-autonomesfahren-100.html#&time=
N Hyatt, Recode (19.4.2017), “Autonomous Driving is Here and it is Going to Change Everything”, https://www.recode.net/2017/4/19/15364608/autonomous-self-driving-cars-impact-disruption-society-mobility
T Litman, Victoria Transport Policy Institute (27.2.2017) “Autonomous Vehicle Implementation Predictions”
H W Kaas and D Mohr, McKinsey Podcast (August 2016) http://www.mckinsey.com/industries/automotive-and-assembly/our-insights/self-driving-cars-and-the-future-of-the-auto-sector
National Highway Traffic Safety Administration, https://crashstats.nhtsa.dot.gov/Api/Public/ViewPublication/812013
F Shafroth, Govtech (17.1.2017)http://www.govtech.com/fs/perspectives/Breaking-Down-the-Financial-Impact-of-Self-Driving-Cars.html
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