After the tech and IT revolution of the last 30 years, transportation, especially cars, will be the next big thing that will change the most. Predicting anything in car industry is walking on thin ice – we were supposed to drive hydrogen-fuelled cars since like 2010 and now it appears to be a dead end (Elon Musk thinks they are “silly”). Anyway, current development shows that autonomous cars will help drop the total number of cars significantly. And there are dark sides of this as well.

Why do you own a car?

I own my car mostly for one single reason – it is cheaper and more convenient compared to alternatives (taxis Uber, rental cars, public transit). But what if wasn’t? I believe that autonomous cars will change this equation and Uber knows it well:

“The reason Uber could be expensive is because you’re not just paying for the car — you’re paying for the other dude in the car. When there’s no other dude in the car, the cost of taking an Uber anywhere becomes cheaper than owning a vehicle. So the magic there is, you basically bring the cost below the cost of ownership for everybody, and then car ownership goes away.”
Travis Kalanick, CEO of UBER

These are strong words – as cars are also owned as status symbol and a hobby by many people – they won’t replace their Ferraris by Uber.

It does not have to be just autonomous taxis that will be cheaper than owning the car, if carsharing grows big enought, that can be strong alternative, especially for medium- and long-haul rides.

90% of time your car is a piece of junk occupying a parking spot

There is more than the other dude in the car. I come from Lean management background – I help my clients focus on activities, processes than add value to their customer and eliminate the rest.
My car adds me value when I am using it to get to somewhere. As I use extensive Prague public transit to go to work, I only drive around 6 hours a week. That means that my car adds value only 4% of its lifetime, the other 96% just standing somewhere, prone to decay, damage or theft. People usually drive more, especially in the US, but I don’t expect the average car utilization to be more than 10%.
As there are strong demand peaks for transport (high on commute times or weekend nights for bar-goers, low on late nights, weekend daytimes), 90%+ long term average utilization of cars is probably not achievable. If we start massively sharing cars, can the average go to 30%?  I think that is perfectly possible.

It sounds like heaven!

If the average utilization is 30% instead of 10% and the total mileage stays the same, we will need three times less cars to satisfy the demand. If carpooling rises as well, the total number of cars can down even much further Imagine how much less parking space will be needed. Counting with other massive benefits of autonomous cars => less power consumption, less congestions, les accidens, smoother traffic flow…the world in 2045 sounds like car heaven! But is there anything that can go wrong?

The dark sides of the “Uber revolution””

 

The dark side of uber revolution
The dark side of Uber revolution

Car manufacturing industry challenged – one would think that if there’s three times less cars, the car manufacturing industry will just suffer like hell. It might not be the case, if they can adapt. In order to maintain 30% utilization of cars, they will either need to be replaced much more frequently or needs to be built to last much more. So as the mileage stays the same (assumption) or go up, the car manufacturing industry will be fine on average. Maybe some makes will adapt better, some will clear the place for new players.

Drivers’ jobs and connected jobs loss lostthere are millions of jobs of drivers and connected industry (places where driver eat, sleep etc.) that will be lost and this will be really hard for the society to adapt. People did adapt with this during industrial revolution once, but it seems harder with the tech revolution. Will this car revolution be finally a strong enough case for guaranteed minimum income advocated by economist Milton Friedman and others?

Centralization of power – this is something that might be the biggest change with unpredictable long term outcome. Currently we have hundreds of thousands local companies serving the transport industry – local taxi companies, car dealerships, garages, carwashes, parking lots. If there will be let’s say 4 global car transport players (Google, Uber, Apple and Volkswagen), they will integrate all the services, control them from one place and collect margins there. This will lead to super-centralized economy which may not be the best thing for all stakeholders

After years, it seems to be clear now where the car industry is going. First we thought that change from fossil fuel to alternative power source will change the game. Now we believe it will be autonomous cars that will revolutionize transport. And not just transport. This will change will be even bigger than with rise of internet. Let’s see if it is a good one.

 

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