Originally published in American City Business Journals
By Daron Gifford
The epochal era of owning and driving an automobile — more than a century old — is about to get smaller and smaller in America’s rearview mirror and, eventually, fade into a new era of mobility.
The reasons are manifold. Buyers today are less likely to go gaga over car styles or engine sizes; ride-sharing is accelerating quickly as an alternative means of transportation; college debt is siphoning off money that millennials ordinarily would be using to pay auto loans.
No less a luminary than auto design genius and former General Motors Vice Chairman Bob Lutz recently opinedthat car manufacturing was on an “accelerating change curve” that will end, perhaps soon, with passengers riding in what he called “autonomous” and “standardized” modules.
Sounds about as alluring as stowing away in a cargo container, doesn’t it?
As much as I believe the automotive landscape and future is changing fast, I also think Lutz is overstating his case a bit, especially with his widely publicized comment that “Everyone will have five years to get his or her car off the road or sell it for scrap.”
So, what is the future more likely to look like, and how might consumers, manufacturers and suppliers, as well as the rest of our world, be affected?
What’s ahead
For some, the traditional, gas-powered car, particularly those priced at the high end, will remain a status symbol or a piece of art, for some time.
Utilitarian electric vehicles and computerized autonomy will slowly overtake emotional attachment to the combustion engines and hands-on-the-wheel experience, most notably, at least in the beginning, in urban environments and with younger people.
Indeed, numerous production launches of self-driving cars are being projected for 2021 to 2025. By 2035, 21 million self-driving cars could be on the road in the United States.
Adoption still will be a struggle, however, because people aren’t going to trust a machine to drive them and their loved ones around. The first step to public adoption will utilize some type of geo-fencing, as autonomous and traditional cars don’t mix well on the road. Cities will partition their traffic grid, so autonomous-only vehicles can use a section.
Next, they’ll aim for the key demographics, which, surprisingly perhaps, are younger and older Americans. After all, kids (16- to 18-year-olds) don’t drive long distances generally. The same is true for those over 70 years old (a fast growing segment), as they become less sure behind the wheel or stop driving.
Incidentally, neither group will have to worry about getting or maintaining a driver’s license anymore because, well, they won’t be driving; the cars’ computers will be steering.
That probability shouldn’t alarm others on the road because the cars will talk to each other. That means no crashes, horn honking, or need for seat belts, air bags, traffic lights, road signs, speeding tickets, car insurance, the Automobile Association of America or the National Highway Traffic Safety Administration.
What else will change?
Say adios to gas stations, too, as they’ll be replaced by facilities where the electrified cars can be charged while the drivers relax for a brief period, or spend the night in a lounge or motel on a longer trip.
As for manufacturers and suppliers, the cost and difficulty of making these self-driving cars could initially rise as much as 20 percent with the addition of complex electronics and components. But the cost is projected to decline quickly with increased volume and scale of production. And the life expectancy of the vehicles could be shorter as they have the potential to be in use — potentially, with multiple passengers — around the clock, driving up the mileage incurred leading to more frequent replacement sales.
Moreover, they might make their autonomous vehicles out of lighter, less-expensive but less-durable materials, perhaps plastic, which will eliminate the need for paint and steel. Glass windows, which are problematic, structurally, could be a thing of the past.
Unfortunately, if you’re making auto glass, body paint or metal stampings, you might be out of a job. The same holds true for many mechanics, unfortunately, because cars in the future will consist, essentially, of a battery on a chassis with some modular add-ons. No need will exist for expensive engine maintenance and transmission repairs.
The interiors of these new modules will be different, as well. They will be designed to be much more of a user-friendly space, like an office, a reception area or a train, with seats that face each other and allowing for private compartments.
Instead of windows — remember, glass may not be needed — you could have video screens with 3-D images caught by cameras outside that will show you the scenery. Or maybe you’ll watch CNN.
Businesses besides the automotive industry will be affected, too.
Think about media. Gone will be all that revenue from road signage advertisers.
Think about real estate. Commercial buildings will no longer need large parking lots for tenants, which should provide more availability of higher value added commercial space. Freeing up the land could help increase the local tax base, too. Residential homes will no longer need driveways or garages, at least not as much, if people use autonomous vehicles on call or ride-sharing.
After all this, who knows what will come next?
Jetsons-like flying cars are already on some drawing boards. Airbus in Europe has already announced plans for a prototype to fly in 2018.
Transportation will be changing dramatically. I don’t know how soon all or any of this will happen, but I am excited about the future and all the challenges that will come.
Daron Gifford leads Plante Moran’s Strategy and Automotive Industry consulting practices. He has more than 40 years of experience in the manufacturing and automotive industries, with nearly 30 years in management consulting. His versatile experience has translated into radical changes in many organizations including new strategies in geographic markets and product technologies, mergers and acquisitions, and manufacturing operations.