Autonomous Vehicles Industry Dynamics | Key Considerations and Implications for Winners & Losers
Dr. Evangelo Damigos; PhD | Head of Digital Futures Research Desk
- Emerging Technologies
- Electric Vehicles
Publication | Update: Sep 2020
According to Protivity research, widespread use of autonomous vehicles will affect a number of established sectors and industries. Below, we outline key sectors and the changes they are likely to experience.
Automobile Manufacturing & Technology
· Automated vehicles will cause an initial surge in new and used car sales, estimated at $ 600 billion a year globally, but sales could drop significantly once it becomes possible for unmanned cars to be summoned via an app and shared by multiple people. Parallel with this, there will be a market for technology designed to retrofit vehicles with self-driving abilities. A startup company called Otto is developing a self-driving kit for trucks, which sells for ,000.
· Security is always a risk with newly introduced technology. Car manufacturers will need to ensure cybersecurity vulnerabilities in the technology used to build out autonomous vehicles is properly addressed and assessed once adoption becomes widespread. As more and more cars connect to the internet, the attack surface for hackers will increase, providing them with a greater incentive to invest in car-hacking skills and with a greater return on their efforts.
· Currently, automakers are limited in testing their vehicles in real-life conditions, due to a legal proposition which states that a human must be “in control” of a vehicle. U.S. regulators are making some progress toward guidelines for testing self-driving vehicles on roads shared with human drivers, such as allowing automakers to apply for exemptions to the rules in order to advance progress. Google recently received guidance clarifying that its software used to control the self-driving vehicle can be considered a “driver.” However, progress remains slow, partly because states make their own road laws.
· As cars become automated, accidents are expected to decrease, and car owners are expected to incur less insurance costs, leading to less coverage over time. A study by the Eno Centre for Transportation estimates that if 90 per cent of the cars on American roads were autonomous, the number of accidents would fall from 5.5 million a year to 1.3 million, and road deaths from 32,400 to 11,300. Customer premiums could drop as much as 60 per cent in 15 years as adoption increases.
· The auto insurance industry will not disappear altogether, as cars will still face risks such as flooding, damage or theft; however, the underwriting process will change. The traditional underwriting criteria, such as miles one expects to drive, will still apply, but the model, make and style of the car will assume greater importance. In the short term, insurer premiums will remain the same until insurers actually see declines in accident frequency. Over the long run, insurance companies will need to adjust their business strategies to reflect the reality of fewer accidents. Those that can’t will likely exit the market.
· Autonomous vehicles have the potential to cut police forces in half. According to the Bureau of Justice Statistics most recent survey, more than 85 per cent of the 31 million people who were involuntarily stopped by the police in 2011 were stopped for traffic-related reasons. The need for these activities could decrease significantly with the adoption of autonomous vehicles since they will be programmed to obey all traffic rules.
· Reducing the number of officers can have a negative impact on safety and crime, however. About 4 per cent of all drivers stopped for traffic violations each day are also searched by the police, often resulting in the discovery of more serious crimes. This crime-fighting opportunity may be reduced with driverless cars.
· Once self-driving vehicles become available, ordinary cars will gradually be banned, starting with city centres, business parks and campuses. Car-sharing services will increase, causing the number of cars on the road to drop. Initially, government revenues may decrease due to the elimination of licensing fees, taxes and tolls, and a reduction in fines from traffic violations.
· With fewer cars on the road, the existing roadway infrastructure would be used more efficiently and the need for new roadways may decrease. Even though road repair will still be necessary, the federal and state governments may be able to reallocate a good portion of the roughly billion spent annually on new roads and highways.
· For local governments, active police forces comprise 5 per cent of their spending. A reduction in law enforce- ment staff, as explained above, would mean more money in local and state budgets. The potential savings that autonomous vehicles present is the main reason the government has proposed almost billion for automated vehicle research over the next decade, even with the initial decline of revenue.
Winner qualities include having strong AV technology and a clear AV business plan that considers all of the important network and product aspects: servicing, fleet management, cybersecurity etc. For AV Subscriptions, advantages will extend to having a full line of vehicles for swapping, a liquid dealer network, and robust connectivity/security.
For auto suppliers, relating to the AV technology suite itself to the vehicle electrical architecture, cockpit electronics, and other experience-related content (seats, displays).
According to Itay Michaeli, Citi’s Auto and Auto Parts Analyst, the shift in industry dynamics and profit pools is also bound to affect stakeholder industries to automotive:
· How will the traditional rental car industry respond to potential competition from sourcing cars from AV subscribers)?
· How will the auto aftermarket respond if AV Networks attempt to take back aftermarket/maintenance profit pools that today sit outside of their ecosystem?
· If personal AVs can do last-mile delivery to your home, how does that affect freight and retail companies?
· The impact on insurance companies and repair shops if accidents decline?
· Who benefits from unlocking time spent in cars previously dedicated to driving?
· Real estate in cities if to the extent fewer parking spots are eventually needed?
· Real estate in general if living near a city becomes less of an advantage thanks to reduced traffic or AV commuter cars being able to travel faster
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