Self-Driving Cars: The Winners and The Losers

 

Previously, I wrote about how I Will Never Own a Self-Driving Car (and Neither will You). In that post, I discussed why self-driving cars would not only become a reality, but how the leaders in this industry (folks like Google and Apple) will likely capitalize on this revolution. At the end of that article, I promised to present the Winners and Losers that will result once these vehicles become ubiquitous.

To make good on that promise, here are 6 winners and 6 losers I see as a result of the self-driving car:

The Obvious Losers:

1) Taxi Drivers

What Uber and Lyft are currently doing to the taxi industry, the addition of autonomous vehicles will complete. The best thing about autonomous vehicles is that you don’t need a driver. No driver, no labor costs; and no labor costs means today’s $50 cab ride will likely run you less than $15. (Note: There is no word yet on whether autonomous vehicles will artificially add the scent of beaded seats and body odor. Stay tuned.)

Of course, this means that Uber and Lyft drivers will also be out of a gig starting in about ten years.

Strategy? If I was a taxi driver or an Uber driver under the age of 55, I would spend my free time taking online courses in an effort to build a skillset not dependent on delivering humans from one place to another.

2) New Car Dealers

There is a misconception that today’s franchised new car dealers will eventually start selling the self-driving variety. This will not happen, as the vast majority of self-driving cars will not be sold directly to consumers. When you add autonomous vehicles to a service like Uber you remove the need for 90% or more of the population to ever own a car self driving crasagain. (Note: A possible winner in here will be companies who facilitate the sale of used cars between private parties; since the gearheads will still want to tool around “in control” on the weekends.)

By the way, I am not naïve enough to think that all new car dealers will be immediately wiped off the face of the earth by the autonomous vehicle – though in 1998, Boston Consulting predicted that the internet would cut the dealership ranks by more than half in just a few years. That didn’t happen. (In fact, it took a worldwide recession caused by the mortgage crisis and some necessary industry consolidation to reduce the ranks of new car dealers by only about 25%. All of this happened more than a decade after the predicted demise of the industry.)

The coming steep reduction in vehicle ownership (beginning around 2025) will likely start to fulfill the Boston Consulting prediction (albeit commencing about a quarter century later than projected and taking upwards of ten years for dealer counts to bottom out).

Strategy? There’s no need for dealers to panic, as the noticeable decline likely won’t even begin for 10 years. In fact, if asked, I would entertain a partnership or COO role with a good dealer group even today. Of course, in that role I would begin making sure that my dealership or group was doing everything necessary to stay on top during the next industry downturn (because it could be the last downturn – if you get my drift).

The Not-So-Obvious Losers:

3) Auto Manufacturers

Wait, won’t today’s vehicle manufacturers just start making tomorrow’s self-driving versions? Well, perhaps.

With tech giants Google, Apple, Tesla, Alibaba and Baidu aggressively pursuing the market lead in this space – and given the fact that most of the autonomous vehicles produced will become part of enormous fleets controlled by these same tech giants – there is little market share remaining for the vast majority of brands we see today.

Think about it. When (not if) vehicle ownership plummets, will there still be room for Acura, Alfa Romeo, Aston Martin, Audi, BMW, Bentley, Buick, Cadillac, Chery, Chevrolet, Chrysler, Daewoo, Daihatsu, Dodge, Ferrari, Fiat, Ford, GMC, Honda, Hyundai, Infiniti, Isuzu, Jaguar, Jeep, Kia, Lamborghini, Land Rover, Lexus, Lincoln, Lotus, MINI, Mahindra, Maserati, Maybach, Mazda, Mercedes-Benz, Mitsubishi, Nissan, Peugeot, Porsche, RAM, Rolls-Royce, Saab, Scion, Smart, Sterling, Subaru, Suzuki, Tata, Tesla, Toyota, Volkswagen, Volvo and the others out there today? (Beyond the exotics, I think you can pick your favorite three and assume the rest will eventually start manufacturing something other than automobiles.)



Strategy? If I ran an OEM today I would focus my teams as heavily as possible on developing autonomous vehicles as I aggressively looked for partners and potential acquisitions/mergers. (I would never, as GM recently did, squander $5 billion on share buybacks. That cash would have better served the shareholders being used to position GM as a leader in the coming autonomous vehicle revolution.)

4) Insurance Agents

The most recent recession notwithstanding, insurance agencies have enjoyed relatively steady growth in employment for decades. This could come to an abrupt end sometime in the next ten to fifteen years due to autonomous vehicles.

There are three primary realities of self-driving vehicles that will indeed hurt the auto insurance industry:

  1. Accidents will happen at a rate so minute when compared to human-guided vehicles that insurance rates (and industry revenue) can and will crater.
  2. Once consumers no longer own cars they won’t need car insurance.
  3. The owners of the ginormous autonomous fleets will no doubt self-insure.

Strategy? If I owned an insurance agency today, I would focus heavily on business, health, life and other insurance lines, while also beefing up my team’s ability (and credibility) to manage my customers’ financial assets.

The “Oh-I-Never-Thought-Of-Them” Losers:

5) Parking Meters

Pity the poor parking meter with its empty space in front of it. Without vehicle ownership, there is no need to park a personal car.

Strategy? Who cares, right? Actually, no need to worry about the cities that stand to lose revenue from their meters; they will likely regulate the autonomous vehicle business heavily enough to make up for that loss (and then some).

6) Quick Lube Joints

Whether consumers or giant fleet companies own the self-driving cars, it’s important to note that these vehicles won’t need oil changes. They will be electric; and electric cars don’t need oil changes… ever.

Strategy? Short of recommending weekly wiper blade changes (which seems close to the norm at some of these places), there is little that the owners of small service facilities will be able to offer in the coming decades. That said, we are a long way off from eliminating gas-powered vehicles from our roads; so unless you plan to be in this business for more than the next 15 years, you’re probably okay. (If you were planning to remain gainfully employed by a quick lube joint beyond 2030, I suggest you follow the strategy offered for taxi drivers above.)

Wait a minute! I thought truck drivers were going to be the first losers with the introduction of autonomous vehicles; what gives?

Actually, autonomous drive vehicles are going to be a bit of a win for truckers – at least initially. You see, it will take more than a few years with zero accidents before even a few jurisdictions will allow over-the-road trucks to pass on their highways without a licensed driver sitting in the front seat. Truckers will win because they will continue to be gainfully employed, though they will spend all of their windshield time reading, painting, sculpting or some other pastime they enjoy but cannot do because they have to keep their hands on the wheel.

The Obvious Winners:

1) Autonomous Vehicle Producers

Duh, right? Well, the title of this section does read “The Obvious Winners” doesn’t it? No winner is more obvious than those who produce these vehicles. Of course, mass producing the autonomous vehicle is one thing; profiting from these for the long term is quite another.

The real winners here will be the manufacturers who find a way to be involved with these vehicles from cradle to grave. More specifically, the ones who create fleet companies as subsidiaries and then manage all aspects of this new form of transportation on an ongoing basis, including maintenance.

2) Ride Hailing Services

Think Uber without the drivers. (By the way, Uber is not a “ride sharing” service. To classify this as a ride share means that the Uber driver was already going my way. He was not. Uber is actually nothing more than the world’s largest and most efficient Gypsy cab company.)

Of course, the smart autonomous vehicle manufacturers will just do this for themselves, given that this is where the long-term money will be made. This could leave companies like Uber and Lyft – two “sharing economy” pioneers that expected to benefit the most from self-driving vehicles – without a chair when the music stops.

The Not-So-Obvious Winners:

3) Solar Companies

Something has to generate the power needed to charge all of these electric vehicles; and there is little chance that fossil fuel providers will win that honor. In fact, in cities like Los Angeles and New York, you can expect that some sort of major investment in solar power infrastructure will be required for any company hoping to win the right to provide self-driving vehicle services to that city’s citizenry.

However, before you decide to invest heavily in the solar power companies out there today, realize that many manufacturers of self-driving cars will be creating their own solar offerings (as Tesla has done). The winners will be those who can generate the most power from the least square footage and those who create the most efficient battery storage solutions.

4) Centralized Parking Structures

All of those autonomous cars are going to need somewhere to park and recharge their batteries throughout the day and especially overnight. If it’s a parking garage at an airport or downtown NYC, it’s probably going to do well (provided the garage owners and/or municipality are willing to support – and not fight – the autonomous vehicle industry). The others …?

In small towns like mine and most of suburbia, I suspect most of the autonomous vehicles will be parked at residences overnight. Either these will be docked at the homes of regular riders or folks who have solar panels, extra electricity and just want to earn a few bucks by using part of their garage or driveway as a staging and charging area.

The “Oh-I-Never-Thought-Of-Them” Winners:

5) Motorcycle Dealers

Simply put: I no longer have the expense of a personal vehicle and I have this empty space in my garage… hmm, sounds like the perfect place for a $12,000 to $30,000 cycle, doesn’t it?

Ultimately, individual consumers are going to save thousands every year when they outsource their basic transportation. They are going to spend this savings somewhere, and the leisure vehicles market (a.k.a. motorcycles, Powersports and RVs) seems as likely a place as any to be the beneficiary.

6) Bars

Here’s a not-so-famous quote that sums up this winner:

“What the crackdown on drunk driving hath taken away, the advent of driverless cars will giveth back.”

  • Steve Stauning, 2015

Of course, while this is meant to be a little tongue-in-cheek, the reality is that establishments that serve alcohol would most likely see an uptick in business if (A) the possibility of a DUI was removed; (B) the availability of a ride home was a certainty; and (C) the cost of that ride was reduced by 70% or more. Self-driving vehicles, for the most part, will deliver A, B and C.

Certainly there will be other winners and losers; though the biggest losers will most likely be those who dismiss the autonomous vehicle as a fantasy that “could never happen.” From Google to Tesla, driverless technology is already a reality; and the bulk of the remaining hurdles are legislative and not necessarily dependent on technology. So… the question really is when (not if) we fully adopt this technology will you be among the winners or the losers?