There’s a lot of talk about young adults having far less desire to drive. Car purchasing has declined by 30% with 18-34 year olds in the past 10 years. While the number of teens with a drivers licence is nearly in free fall. The number of 16 year olds with a drivers license is down 47 percent in past 20 years, while 19 year olds with a drivers license declined by 21 percent in the same period. Today it’s just over half of them who can get in a car and literally drive themselves around.
And that’s the point, unless you’re really into cars, the driving part is not the core benefit the vehicle provides, it’s the connection to people. When I was growing up, we’d use our cars as a tool to hang out, meet each other, go the beach, the mall, the main street and to parties. It was our only way to connect with each other en masse. It’s clear that we can now do that with our smart phones. If we look deep into the emotional benefit the car provided, then it is fair to say that the smart phone is quite a good substitute for it. It can take us anywhere – live video feeds, chatting in groups, it creates a quasi virtual-physical existence for its users at a fraction of the price of a car. I’m also starting to wonder if many kids prefer public transport these days just so they can stay connected on the phone for the entire journey.
While it’s clear being ‘connected‘ to friends via the phone could be a virtual substitute for the car, what about when they want to get real, be physically and in the same space? Well, the smart phone does that too. If they need to get somewhere off the transportation grid they can summon private transport to wherever they happen to be, they don’t even need to be at a physical address. A smart phone does many of the things a car can do, many more, and it comes at a fraction of the cost at around $50 a month. It turns out that the smart phone is one of the disruptive forces for the automobile. While cars will still be needed into the foreseeable future, this does present a financial problem for auto the manufacturers. Let’s take the following thought experiment.
If we all start ‘sharing cars’ instead of buying them, the volume of cars needed will be far fewer. In Australia 75% of the fleet are private, non commercial vehicles. It turns out that these cars are idle 90% of their available life. Which means that the fleet of cars needed could shrink significantly where car sharing is the norm. Sure, we’ll need more than 10% of the cars we have today; Yes, they are only being driven 10% of the time, but there is a large overlap of the time of day in which we need our cars. But even considering this, the number of cars required will be significantly less. Now let’s add to this the potential convergence of private and public transport. Cars as mini-auto buses with unspecified routes, picking up a number of independent passengers on route. Algorithmic car pooling for profit. The number of cars needed will fall. Maybe we’ll only need half as many cars as we have now.
This is where the financial complexity lies. The economies of scale afforded by 24/7 production of automobiles will be under pressure. Prices of cars will potentially rise for the first time since world war two. The net result: lower volume manufacturers develop a competitive advantage because they are small and have an infrastructure more suited to an economy driven by software. Companies like Tesla or those with an outsourced manufacturing model like Apple and Google enter the fore. They could very well become the dominant auto players in the tech era. It feels like industry consolidation is inevitable and some auto players may even go bankrupt. We will see new players emerge, with new business models as usage patterns change and we move to the era of the self drive car, or should we say the rolling computer.
Self driving technology is evolving at a such rapid pace because the Law of Accelerating Returns applies given that they depend more on software and electric power trains than industrial era technology. But, the shift to self drive is not without it’s challenges, or even potential alternatives. Seeds of disruption are constantly being sewn, even the disrupters are being disrupted, and sometimes this happens before a new technology achieves mass adoption. I constantly try to remind myself than our brains work in a linear fashion. That exponential change isn’t something we’ve evolved to comprehend. Let’s take this example of exponential growth:
- 30 linear steps would take me around 30 meters. But 30 steps doubling the distance each step will, wait for it, take me around the world 26 times.
The technology behind the entire transport industry is evolving exponentially. It’s with this that strange unexpected things can happen. While we all expect car sharing, and autonomous vehicles to disrupt the transportation field, maybe we’ll curve jump that altogether and finally get flying cars instead. You read that right – I’m talking about drones. The cost/performance ratio of drone technology has improved by 142 times within the past 6 years. If this trajectory continues then Self Flying Drones – and yes, they already exist, could usurp the self drive car altogether. The literal fork in the road could be the sky.
The technology itself isn’t the only thing we need to consider when it comes to disruption.
We need to take into account the cost of switching, ethics, infrastructure and legal framework. In this sense self drive cars have social and legislative complexity. Cars currently have a 7 year replacement cycle and during the period of transition to self drive cars, drones exponential improvement will continue unabated. If we do get safe human transport drones, and I believe we will, then we don’t need to build anything – the sky becomes the road. We could have ‘layered traffic’ above existing roads, stacked 5 drones high and then code will equal road. In this case we won’t need to build new physical road infrastructure to cope with autonomous cars. Instead we can just set up new laws for Autonomous Flying Vehicles. If this happens maybe cars will become something our children laugh at.