Ok, by now it is pretty obvious that autonomous cars are no longer just in the testing phase, various corporations (not just automotive manufacturers) are rolling out plans to introduce them to our roads in the next couple of years. Going by recent reports, 2017 will be the year that consumers get a feel of autonomous vehicles for the first time, thanks to Volvo. They plan to lease 100 fully driverless cars to consumers to test them out in a controlled 31-mile stretch of road in Gothenburg, Sweden.
With such developments expected in the next couple of months, the excitement is not only confined to the corporate circles. The U.S government is also interested in a piece of this automotive technology. As a matter of fact, the Obama administration is so eager to get their hands on autonomous cars that they are injecting $4 billion in funding to speed up the research and development process. They are particularly keen on the fact that the vehicles are projected to cut traffic-related deaths by more than 90% by the year 2050. That is almost equivalent to 30,000 lives saved on an annual basis.
Well, of course, that is great news… however, only to a particular group of people. Although we all share a utopian belief that autonomous cars will revolutionize the entire industry for the better, the idea is not entirely working for everybody.
Winners and Losers
At the end of the day, society is predictably going to be the biggest winner. Major corporations on the other hand, including motor vehicle manufacturers, could potentially lose a substantial amount of their earnings.
Currently, American households on average have more vehicles than drivers, yet the average number of people with driving licenses per household stands at 1.8. But with the advent of this new technology, Americans will progressively purchase fewer cars.
Apart from the fact that some people simply buy cars to admire the engineering spectacle, a vast majority of Americans get them to enjoy increased convenience. So, imagine a situation where all your family members simply summon their rides, much like an Uber taxi. That means you could comfortably use it in the morning to go to work, send it back to escort your kids to school, and probably even pick them up in the evening as you go about your business. While this model may take time to get used to, but ultimately, it will see American families purchase fewer cars.
As far as consumers are concerned, that is a significant financial boon for them, especially since vehicles are currently the second largest items in the average American household budget. A budget relief, of course, would be welcome, particularly when it is backed by a study that proved American cars usually sit idle 95% of the time.
Gravity of Losses
So, now that we’ve established that Americans will buy fewer cars, just how much of their regular sales will automotive manufacturers lose?
According to a report by Barclays analyst Brian Johnson, autonomous vehicles will single-handedly plunge overall U.S car sales by 40 percent over the next 25 years. The subsequent ripple effect could see companies like Ford Motor and General Motors cut their combined number of U.S and Canada plants from 30 down to 17- a move that could eventually leave about 25,000 auto workers jobless.
Possible Mitigation Measures
As a response to the predicted drop in sales, automakers are now weighing in their options to mitigate revenue loss by offering transportation as a service. According to the vice president of strategy and global portfolio planning at General Motors, Mike Abelson, they’ve already studied a number of market scenarios on autonomous vehicles and so far, while some project a volume decline, others predict a rise in the number of car purchases. His sentiments, which were also echoed by Google’s executives, suggest that the latter scenario would be possible due to increased purchase of vehicles by people who may not even know how to drive. So, although the sales would go down among drivers, non-drivers would offset the numbers, especially if automakers begin offering transportation as a service.
Unfortunately, these mitigation measures only apply to corporate groups. Individual workers like taxi, delivery trucks and transit bus drivers, who will lose about 2.6 million jobs, are yet to find an alternative solution that could keep them in the industry. According to University of Michigan economist Martin Zimmerman, although that is equivalent to 2% of the nation’s workforce, the economy will possibly adjust well like it has done since 1979 when manufacturing plants began shedding over 11% of the nation’s workforce.