Autonomous Vehicles Will Change Our World
Just the other day Ford Motor Co. announced they would have self-driving cars available to ride-sharing firms by 2021. A pretty ambitious goal that Zerohedge was quick to put their own spin on. The ink was barely dry on that impressive news release when Uber and Volvo announced they would start rolling out autonomous vehicles in the Pittsburgh area by the end of the month.
The Uber/Volvo fleet will have a driver on board to take control if needed, and this is just a test run for something that is still years from widespread usage, but both of these stories highlight the fact that Jetson-style mobility is much closer than many of us thought. Interestingly, autonomous passenger cars might not even represent the leading edge of this technology. Companies like Daimler are already well on the way to commercializing semi-autonomous tractor-trailer vehicles.
As a car enthusiast I've been thinking about this a lot lately. My first car was a 1973 MGB. Since then I've owned a Miata, a 944 Turbo, a Boxster, a Peugeot 106 S16, and an assortment of Volvo turbos, Mercedes-Benzes and BMWs. When shopping for a car I'm usually looking for two things: 1) driving fun, and 2) value for money (ie:used). But even for a guy like me, I understand Mish Shedlock when he says there is pent-up demand to get rid of cars. Cars can be a pain. They are expensive to buy and run. They can consume hours at a time in maintenance - just giving your car a good cleaning inside and out can take an entire Saturday if you throw in a wax and polish. Yes, certain cars can be fun to drive, but only because someone has to drive. What if you could be driven - more safely, more quickly, and more cheaply? Would you still be shopping for the Ultimate Driving Machine?
Autonomous vehicles are going to change our world. The first beneficiaries (and victims) will likely be those in the long-haul and taxi businesses. Trucking industry executives must be salivating at the prospect of no more drivers, at least on the interstate portion of the haul. Think of the savings in wages and benefits, the ability to run a vehicle 24 hours a day, the increased safety and fuel efficiency. This is a development that will benefit all of us in reduced prices at Wal-Mart and McDonalds. Of course many of the 3.5 million truck drivers currently in the United States alone will need to start thinking about other employment. Likewise for the taxi business. Today Uber has thrown a wrench into the highly-regulated works of the municipal taxi industry. Tomorrow driverless Uber is about to reshape it completely. But driverless Uber will change the way you and I use cars as well. Will you ever have to drive your kids to piano lessons again? Won't it be great when Grandma can get herself to her doctor's appointment, even if she has memory loss and doesn't remember where she's going? Pretty soon most families will realize they don't need those second and third vehicles.
Commuting to work could become a boon to productivity rather than the burden it is now. Millions of people working, reading, learning while their driverless car whisks them to the office - and also picks up and drops off other commuters along the way. From door-to-door, at a cost less than that to operate your own vehicle, if the CEO of Uber is to be believed.
Death of the Dealer
The Zerohedge article cited above talks about the impact on annual car sales if our vehicle capacity utilization rises from the current (dismal) 3% to a mere 6%. What if it rises to a still-low 12%? Surely even this is a conservative estimate. If utilization rises 300%, it is reasonable to assume annual vehicle sales will drop 75%. This will lead to industry consolidation and bankruptcies that make the 2008 financial crisis look like child's play. Which automakers are positioned to survive this apocalyptic scenario? Add in the fact that new players like Google, Apple and Tesla will almost certainly start to take increasing market share and the situation looks dire for slow-moving incumbents. And what will happen to local dealers? Will there be any dealers left when cars are being primarily sold to large-scale purchasers like Uber and Lyft? When vehicles become a near-commodity will there be any need for salesmen to help buyers choose colors and options? Maybe we'll all be buying cars online or at the mall, like Tesla shoppers. If we're buying them at all.
Death of the Collector Market
Collector car prices are closely tied to generational purchasing-power abilities. As a generation cohort moves into its 40s and starts to acquire the means to buy luxury items, cars that were desirable when that generation were teenagers start to climb in price. A good present-day example of this is the 1985-1992 BMW M3. Ten years ago you could buy average examples for well under $10,000. Today you'll be lucky to find one under $30k and good condition cars are headed towards fifty-thousand dollars. Mercedes 190E-16V, Porsche 928, Lancia Delta Integrales, Ferrari 308 (Magnum P.I. anyone?), Lamborghini Countach and other 1980s and early 1990s gems are all reaching skyward. Testarossas have moved from $50,000 to $150,000. Meanwhile, older cars like 1950s Detroit iron are starting to decline in price as the oldest baby-boomers move out of the collecting phase of their lives and into the divesting stage as they retire, downsize and simplify. What's going to happen in the future when a car is not a personally-owned necessity sold to us on the basis of style, speed and desire but a commodity borrowed on a super-short term contract? Why would there be a self-driving Porsche 911? Why would Ferrari make a V12 you can't drive? Without these high-performance objects of lust postering the walls of teenagers across the globe where will the next generation of car collectors come from? No one is going to visit a RM Sotheby's auction to buy a 2030 Ultimate Riding Machine to park beside their CSL, Z8 or M3. Self-driving cars will likely be super-functional appliances. Certainly some will be more desirable than others, but that desire will be based on practicality, reliability and quality. Not beauty, the sensations you get behind the wheel, or racing pedigree - the elements that make up the collector market today.
Death of Motorsports
Would you go to a NASCAR, F1, or WRC event if the cars were all pre-1980 models? Certainly there is a healthy market for classic racing, but it isn't where the big money is. Motorsport is at the leading edge of automotive technology. What happens when the leading edge of technology is a car driven by an algorithm? Will people buy tickets to watch robots race? With no chance of accidents, incidents or drama of any kind wouldn't it just be cheaper to run the whole race through a simulator and have the computer tell us who would have won anyway? People don't want to see cars race. They want to see people race cars. They want to cheer for a driver (and a brand), and they want to dream about being that driver. Twitch is people watching people play on the computer. It isn't people watching computers play.
House prices up or down? And where?
If you could work during your commute, and if a 3 hour commute became a 1.5 hour commute would you move further away from work so you could be closer to nature? Or maybe go where the housing is cheaper? Or if traffic density dropped significantly and you didn't need to find a parking place would you move closer to downtown, where house prices are higher but amenities are all around? It might be hard to predict how the autonomous vehicle will impact residential real estate, but it is pretty certain that it will affect residential real estate. Maybe country-lovers will move out of the city and action-seekers will move in, keeping prices stagnant. But for some people, autonomous moving of people means people moving in, and out, of urban areas.
Impact on Government
Autonomous vehicles will save governments billions in infrastructure spending on new highways, street repair, and mass transit. Hopefully that comes back to us in lower taxes. Probably it will mean governments expanding their reach into other areas of our lives. Computer drivers also means fewer accidents, less (or no) traffic jams, and the ability to centrally control and route vehicles. That should mean much higher speed limits. With every vehicle going the same speed and nobody weaving in and out of traffic, with computers automatically matching speed to the engineering of the roadway and adjusting for corners and conditions in milliseconds, there is no reason governments can't set limits much, much higher. Unless of course there are still human drivers on the road. So politicians are likely to outlaw the manually-driven car in the name of safety.
The End of the Road
Autonomous cars are the way of the future. The benefits are undeniable. They are a near inevitability that will make almost everyone's life more convenient, safer and less expensive. Just as the horse and buggy gave way to mechanically powered car and became something you see only at a historic tourist attraction or certain parts of Pennsylvania, the conventional automobile is soon to be a relic of the 20th century on display in technological museums or driven by a niche group of increasingly aged luddites on closed courses.
As a car enthusiast I'm a little sad about the rise of autonomous vehicles. Scanning the classifieds, turning a wrench, putting the top down and going for a run on a warm fall day have all been a large part of my life, and the lives of countless millions. In the Western world we are at the tail-end of a 100-year love affair with the car. It has been a wild, dangerous and expensive ride, but it is surely and quickly coming to an end.