“Mr. Watson — come here — I want to see you,” are believed to be the first words ever spoken on the telephone by Alexander Graham Bell. I am sure neither Mr. Bell nor Mr. Watson fully appreciated all the advancements and the impact telephony would have on society and the world then.
Similarly, the self-driving car is another game changer. Last week, Singapore became the first country to launch a self-driving taxi service. This follows in the wake of Uber’s announcement earlier this month that it would launch its own trial of self-driving vehicles in Pittsburgh by the end of August. Google, Apple and other automobile companies all have their own trials and plans in place and will be making their own announcements over time.
We are at an inflection point in the history of transportation. The usage of automobiles as we know it is going to change. This will have seismic implications to many sectors of our economy and will fundamentally change our way of life.
Here are 4 key ways life will change with self-driving cars:
1. Health and safety: According to the World Health Organization and the Association for Safe International Road Travel, nearly 1.3 million people die in road crashes worldwide (37,000 in the US). An additional 20-to-50 million people are injured or disabled (2.35 million in the US). While we do not have reliable worldwide numbers on economic impact, it is estimated that, in the US, these road crashes cost $230 billion a year. Autonomous cars will substantially reduce the number of deaths and injuries due to road crashes. In spite of the press you might have read of Tesla’s Autopilot, the reality is that self-driving cars are substantially safer than human drivers and my estimate is that self-driving cars could reduce human fatalities by over 50 percent over time. That would be over 650,000 lives saved every year.
2. Auto industry: It is estimated that 75 million cars will be sold globally in 2016 resulting in approximate revenues of $9 trillion. For most people, after their homes, their car is their biggest asset. However, the average car is used only 5 percent of the time (95 percent of the time it is parked). Self-driving cars will change how people think of this asset. In a world where self-driving cars are ubiquitous and always available, will people need their second vehicle? Or will they need a vehicle at all? People have traditionally bought cars due to the lack of reliable and efficient public transportation. A fleet of self-driving cars, owned by, say, Uber, would be extremely reliable and efficient for point to point travel and even cheaper than current ride-sharing services that depend on drivers. It is reasonable to expect a 20-percent shift in auto buying habits due to these factors, which will be a $1.8 trillion impact to the world economy.
3. Real estate: As mentioned before, since cars are parked 95 percent of the time, we spend a substantial amount of our real estate acreage on parking. Whether its garages at homes — estimated to be 15 percent of your total square footage — or parking lots at offices and cities, there is significant economics tied to the notion that you need space for parking. In a world of self-driving cars, office parks need not set aside a meaningful portion of their real estate for parking. City zoning laws will be changed to not require parking slots and houses can reclaim their garage space and reuse it for living space.
4. Financial services: According to Experian, the size of the auto loan market is over $850 billion in the US alone. Self-driving cars are going to fundamentally change how cars are bought and financed. We are going to see different business models focused more on utilization and annual recurring revenue and away from a capital-expenditures model — auto companies, instead of leasing or selling you a car, might sell you a Netflix like all-you-can-eat subscription model where you can use their fleet of self-driving cars for $200 per month. While car-sharing companies like Zipcar offer such services today, you still have to drive and park them, and you need to have a location near you. With a fleet of driverless cars there is no parking and you do not have to worry about location, since the cars come to you.
Roy Amara famously quipped, “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” Self-driving cars are as much of a paradigm shift as the invention of the telephone and we all need to get prepared for the ride of our lives. By 2021, I expect more than 5 percent of the cars in major US cities to be self-driving.
Image credit: CC by smoothgroover22