The Business Implications of a Driverless Future
Over the last decade, a slew of technology and automotive companies have been not-so-secretly developing the vehicles of the future: driverless cars that could render both your driver’s license and designated driver obsolete. These companies include Google, its Chinese counterpart Baidu, BMW, Mercedes Benz, GM, and Tesla, and more. Some are even projecting to have cars on the road within the decade.
The implications of a shift from manned vehicles to autonomous ones are manifold. From a safety perspective, it’s estimated that removing human error from the road could prevent a million deaths a year worldwide. Of course, that’s assuming we reach a point at which all cars are truly driverless. Driverless cars could allow the intoxicated, disabled, elderly, and young to travel to and fro without endangering themselves or others.
From a financial perspective, things are a bit dicier. Fewer accidents would save money in both medical and repair costs; when it comes to fuel, driverless cars would save by increasing energy efficiency. On the other hand, industries that rely on the probability of car accidents will suffer, at least at first.
Insurance is one industry preparing for a negative disruption. Driverless cars would decrease consumer demand for insurance products, and completely alter the way in which policies are priced based on new risk evaluation. This goes for both health and auto insurance, though the latter would likely be upended to a greater degree.
Auto repair is another industry that a driverless future may not be kind to. The fewer accidents occur, the fewer new parts are required, meaning less revenue for the businesses that provide repair services. Other analysts are investigating the potential effects driverless cars would have on police forces, which could be cut in half over plummeting traffic infractions at potential detriment to government revenue. And that’s not to mention the probable elimination of taxi and truck drivers.
Even so, public costs would almost certainly be lowered by driverless cars, and other technologies that would make driving safer, less congested, and more fuel efficient may be “leapfrogged” to numerous benefits. From an entrepreneurial perspective, the opportunities for new business models that support this shift in transportation will become apparent with time. Startups like Uber and Lyft are already anticipating how their services will fit in, and peripheral businesses will no doubt crop up to further modernize the transportation experience. For example, travelers will have more leisure or work time while in transit, which new companies could capitalize on by providing services and products optimized for in-car use.
Evidence has it that on a macro level, driverless cars would indeed be overwhelmingly beneficial, possibly to the tune of billions of dollars. But on a micro level, drastically transforming the DNA of automotive transportation will fundamentally reshape the individual businesses surrounding it, for better or for worse. In the meantime, several hurdles — like harsh weather, privacy, and regulations — remain between driverless cars and those getting ready to let go of the wheel.
Brian Ferdinand is a New York-based financial consultant and entrepreneur, currently working as COO for Vacation Rentals, LLC. He has over 15 years of experience in advanced trading methodologies and technologies, and brings a breadth of technology and complex operating expertise to the short-term vacation rental market as COO.