Future of Automobile

Will Google disrupt the automobile industry?

What does Blackberry, DEC, IBM, Kodak, Microsoft, Motorola, Nokia have in common? They were all market leaders that fell prey to disruptive technology. These companies are also examples of companies following ‘sustained innovation’ in which each new model or version upended only small incremental improvements. Albeit profitable, this linear trajectory quickly took a turn for the worse as another player/s completely disrupted the market with their offerings.

Automakers for decades also seemed to bet on non-incremental approaches not panning out, but now are pulling up their socks to hold their ground against non-traditional rivals.

Chunka Mui in his article series for Forbes pointed out that traditional car makers have all the reasons to closely watch the development of Goggle’s driverless car. Anticipating Google to become a dominant supplier and dictating terms to them is the least of their worries. The incumbent carmakers are more wary of Google creating platforms for totally new car manufacturers to leapfrog.

Self-driving cars are believed to eliminate many multicar households, and reduce US auto sales by 40% over the next 25 years forcing GM and Ford to cut their production to half.

Personally owned cars remain unutilised over 95% of the time (on average, in a year). Self-driving cars will provide plenty of room to better utilise them through car sharing or taxi-like car services. Farther down the road, fully driverless vehicles, including ‘robo-taxis’, could prompt a dramatic shift in urban driving, with more car sharing helping to reduce traffic density, pollution and fuel consumption. This could disrupt the business model for car companies who are totally dependent on car sales figure for growth and survival.

The future is also bleak for the traditional taxi business as they are replaced by ride-sharing services such as Uber and Lyft, which will be earlier adopters of self-driving vehicles.

Brian Johnson, an analyst with Barclays wrote , “By removing the driver from the equation (the largest cost in a taxi ride), the average cost per mile to the consumer could be 44 cents for a private ride in a standard sedan and 8 cents for a shared ride in a two-seater” . This is less than half the $1 to $1.50 a mile users pay for an UberPool vehicle.

Our perspective

It’s indeed revolutionary.

At stake are also around 70 million driving jobs worldwide, which will vanish as driverless cars populate the roads. Apart from improved economic costs resulting from saved salaries, lower insurance costs, pilferages and rest time, the roads will be safer with absence of sleepy, intoxicated or careless drivers who claim 40,000 lives every year in the US alone.

The average commute time on road in Delhi is around 47 minutes one way (not including the time needed to find parking). The driverless cars will not only help the driver put to use over 8 hours every week to more useful pursuit, but also obliterate the need to own a car. Car usage will emerge as on-demand service, which will intelligently sense the peak hour demand to automatically push or withdraw cars from the city traffic system.

A parallel already exists in bicycle sharing which began in Europe and a viable format emerged in the mid-2000s thanks to the introduction of information technology. As of June 2014, public bike sharing systems were available in 712 cities in five continents, operating approximately 806,200 bicycles at 37,500 stations.

Gazing through the crystal ball

  1. A major saving of all kinds – time of drive, cost, invested capital and parking space. Many urban residents will chose not to own a personal car. Though, luxury car as a symbol of prestige will remain, however, many could chose to do that by buying one later in life.
  2. Driverless cars are just the beginning – expect a growing impetus for bike riding and public transport in general. The IT corridor in Hyderabad will be the first area in the country where Thursdays will be car-free aiming to keep at least 50,000 cars off the roads in the IT corridor every Thursday.
  3. It would make travel safe for all including women, children, the elderly and open more socio-economic opportunities for all; for instance, just look at what empowering women would do to national development – “India’s GDP can expand by a whopping 27 per cent if the number of female workers increases to the same level as that of men”, International Monetary Fund’s chief Christine Lagarde said at the launch of W20 Conference in Ankara in September 2015.

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