Tesla announced last week its new self-driving technology, which will be delivered to the market next year, a year ahead of everyone else (that we know about so far). I’m actually at the BMC Engage conference this week and there is also talk about how disruptive this technology will be on the road once it is available for everyone. It means that every car on the road today will likely be banned from most freeways in the U.S. within 10 years. In fact, even buying cars will be obsolete once this technology becomes common and the market shifts to adapt to it.
Let’s talk about that this week.
How Your Car Will Become Obsolete
The model analysts are using to determine what will happen once self-driving cars become common is one that is based on what happened to horses and horse drawn carriages. At the beginning of the last century, the market was awash with horses and by the 1920s they were nearly out of cities and off major roads.
The reason for this then is somewhat similar to the one we have now. Horses and cars didn’t mix well and self-driving cars won’t mix well with manually driven cars - especially on major highways and freeways. Horses could get spooked by car noises and harm both pedestrians and their riders as a result (not to mention the job of cleaning up horse poop wasn’t exactly one that folks were lining up to do).
With self-driving cars, they can operate at full speed with inches between the cars because they are connected and if one car brakes, all of the cars in close line behind that car will brake at the same time effectively stopping all the cars as if they were connected in a train. While a manually driven car could be rigged with a sensor to alert cars behind it is braking or changing lanes - or a self-driving car could give it plenty of room in case it behaved unexpectedly - a trailing manual car simply wouldn’t be able to react fast enough and because the self-driving cars are operating so closely together, the resulting accident could be catastrophic.
The expected evolution would initially put self-driving cars in HOV like lanes and these lanes would slowly expand one lane at a time until manually driven cars were pushed off the freeways and to side roads.
This process is expected to take 5 to 10 years from when the first lanes are given over to self-driving cars and should complete no later than 2025. But, by then, you may no longer be buying a car but subscribing to a car service.
Why Own A Car?
With autonomous self-driving cars, you shouldn’t need to own one, well unless you are very wealthy and want something very unique. This is because the cars can be programmed to pick you up and deliver you to where ever you need to go right from your cellphone, tablet, PC, or wearable device. There’d be no driver to pay and the service could automatically provision car pools if you wanted to save money. You also wouldn’t worry about parking because the car would handle that and the cars would place themselves around the city or town based on usage patterns so, if you hadn’t preordered one, it would still get to you in a reasonable time.
Now, practically speaking, I expect most of us will still own cars well into the next decade and perhaps beyond but likely not as many because you could rely on this service to cover your second or third car needs and the services would provide a different level of cars if you wanted to impress the neighbors. Still, I expect performance cars will be relegated to a small number of hobbyists. I expect to be one of them.
Wrapping Up: Self-Driving Cars Will Be a Game Changer
One of the things BMC pointed out at the event was that the$200B auto insurance business will be a $20B business (dropping 90 percent) once self-driving cars become common and the insurance savings alone could have us flocking to this solution. In fact, while self-driving policy cost is cut by 90 percent, I expect manual car insurance will go up 2x or 3x to cover the increased risk of hitting a train of self-driving cars - providing an extra push to get rid of any car that doesn’t have this feature.
With the launch next year of the Tesla self-driving car, the clock starts ticking on our beloved vehicles and suggests the car you just bought may be the last car you ever buy. Oh, and you may be wondering why BMC brought this up at their event - apparently, they plan to be a major part of the back end for this driving revolution. Go figure?
President and Principal Analyst, Enderle Group
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