Self-driving cars

Driverless cars are coming. How will they shape the economy of the future?

By Tina Irgang

This week, Ford announced it would mass-produce cars without steering wheels within five years. In addition, Uber said it would launch a fleet of autonomous cars in Pittsburgh as soon as this month. What does the advent of driverless vehicles mean for key sectors of the economy?

First, let’s look at the overall impact of autonomous cars on national spending. According to the National Highway Traffic Safety Administration, 21,022 drivers or passengers lost their lives in car crashes in 2014 alone. As Forbes points out, based on the “official value of a statistical life” used by the Department of Transportation — $9.2 million — driverless cars have a potential yearly benefit that runs into the billions, assuming their safety track record is even slightly better than human drivers. And that’s to be expected, considering more than 90 percent of accidents today are caused by driver errors.

That’s not even considering the healthcare savings resulting from a reduction in crash-related injuries, or the potential for greater productivity if employees are suddenly able to catch up on work during times they would normally spend driving. According to an estimate by McKinsey, autonomous vehicles “could free as much as 50 minutes a day for users” on average — and certainly much more for long-range commuters or those who spend a lot of time traveling between meetings.

How will the driverless car impact specific industries?

  • Agriculture and manufacturing. Even before driverless technology becomes commonplace in passenger cars, it’s likely to catch on as a way to reduce the need for human labor in operating farm and other industrial vehicles, according to Fox Business.
  • Real estate. Driverless cars could facilitate ride sharing (note the Uber announcement), meaning the number of cars on the road is likely to be drastically reduced over time, says Investopedia. This, in turn, would mean that land area currently occupied by large parking lots could be repurposed, potentially depressing real-estate values as supply increases.
  • Car repair and maintenance. Cars that crash less often need fewer repairs. As a result, repair shops “would need to shift their business model to serving the aftermarket needs of existing cars that lack autonomous driving systems,” says Reuters.
  • Driverless cars share many technologies with other consumer applications, including advanced artificial intelligence, according to McKinsey. “These commonalities might push multiple players to invest in both applications, as already shown by the significant investments in robotics made by selected automakers and high-tech players.”
  • Due to the potential for greater efficiency and safety, driverless cars will challenge not only human-driven cabs and shuttles, but also train lines. “A self-driving car offers much of the convenience of rail service with the added convenience that the service is portal-to-portal rather than station-to-station,” notes Investopedia.
  • “With driverless vehicles, auto insurers might shift the core of their business model, focusing mainly on insuring car manufacturers from liabilities from technical failure of their autonomous vehicles, as opposed to protecting private customers from risks associated with human error in accidents,” says McKinsey.

Tina Irgang is the managing editor of SmartCEO magazine and SmartCEO.com. Contact her at tina@smartceo.com.