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Self-Driving Vehicles: Excitement and Apprehension

The concept of self-driving vehicles fascinates me. By combining various technologies, including computers, a global positioning system (GPS), and robotics, scientists and engineers are beginning to accomplish what most people could never have imagined — a car that can drive itself from point A to point B.

Combine that with the emerging Internet of Things (IoT) — where machines can communicate with one another — and blockchain technology — a shared ledger system that can record transactions and track assets across business networks — and you can envision a day when you will be able to order a car online and have it deliver itself to your home, stopping for fuel along the way.

I love the prospect (especially when I am stuck in traffic) of eventually having my own, impersonal chauffeur available 24/7/365 that will never fall asleep at the wheel. However, I also feel some apprehension when I think about crossing a street in front of a half dozen self-driving cars bearing down at me as they near the intersection.

As a result, I wonder just how practical self-driving cars will be in rural areas where residents struggle to get a consistent cell phone signal. I also wonder what will happen in the event of an accident; who will be considered at fault? And, of course, what happens not if but when criminals or terrorists figure out how to hijack these high-tech vehicles? A car thief could steal a car or a truckload of televisions in Denver and drive it to Boston all while reclining at home in a lounge chair.

Pondering the Impact on the Auto Industry

As a deep participant in the auto retail market, I am intrigued to hear and read about the vastly different views of how self-driving vehicles will impact auto dealers and the industry as a whole. Some people take the ostrich approach and hope nothing will happen if everyone simply ignores the issue, or they remain in denial arguing that the technology will not be reliable enough or that such cars are too dangerous to be allowed on the roadways. Others paint a gloom and doom scenario for the current dealer model; after all, if cars can drive themselves, before too long, customers will be able to purchase a vehicle online that can deliver itself to their door, and repairs and maintenance will be done with computerized efficiency.

My view is that it will take many more years before the technology is mature enough to make self-driving cars practical, safe, and pervasive, and it is impossible to know what effect autonomous cars will have on dealerships. People may treat self-driving cars similar to the cars they have now but without the hassle of having to drive oneself, or there may be a shift to a fleet vehicle/car sharing model. The degree of disruption will be greatly influenced by how well the technology works and how far consumers and manufacturers are willing to go with it. We already have cars that can parallel-park themselves and apply the brakes when the vehicle senses the need to do so, but whether totally self-driving cars will ever be available or in demand remains to be seen.

As the technology continues to improve safety and convenience, I expect to see continued and sustained vehicle sales to individuals. Assuming we ever get to fully autonomous vehicles, I think the impact on demand will vary in different markets. While metro areas may race toward the adoption of car sharing and thus an accelerated need for dealerships in those markets to adapt, I expect traditional dealership models in more rural areas to stay the course for a longer period of time.

The Bigger Issue: Mobility

Increased technology alone will not threaten the current dealership model. What will be more disruptive is the cultural shift that we see with ride sharing and commoditization of transportation in response to increasing demands for greater mobility — the ability to move freely, easily, and affordably. The concept of mobility on demand, without the burdens of ownership, will start to affect the dealership model. While nobody can predict the extent of the changes, there will be changes as people begin to focus more on mobility itself and not so much on the mode of mobility. The focus and branding will move from the vehicle to the service being provided, namely, mobility. This could eventually be a paradigmatic shift in transportation habits, but over what time horizon and to what extent are questions yet to be fully understood, much less answered.

Will the inextricable bond between car ownership and person, which is a defining characteristic of the American dream, be broken?

Of course, while technology alone is unlikely to disrupt the current dealership model, it has the potential to significantly accelerate the commoditization of transportation by removing its biggest cost — the driver. Think of it as Uber without the Uber driver (which is exactly what the ride sharing giant is testing in Pennsylvania and elsewhere across North America). It is the intersection of autonomy and mobility that will have the greatest impact on the current dealership model.

Sharing the Ride

It is possible we could see a shift towards more car/ride sharing in metropolitan areas, which would result in significantly fewer vehicles being sold directly to individuals. Or, the auto industry may evolve from auto sales into transportation as a service, in which case the question becomes: Who will provide that service, Uber, Ford Motor Company, or a local dealer? Another key question revolves around the number of vehicles needed to serve a given population, and that is not a simple math problem. Travel demand can be low during a normal week but significantly higher on holidays and weekends. Algorithms and actuarial analysis are likely to be used to make these estimates, but if people cannot reliably get a vehicle when they need it, car sharing is unlikely to gain the full traction certain prognosticators are predicting.

In some metro areas, the dealership model may change from one of selling vehicles to individuals to selling or managing fleets of vehicles. Just as computer software has transitioned to Software as a Service (SaaS) on the cloud — where businesses subscribe to the software, storage, and compute resources they need and pay only for the resources they use — perhaps consumers in a metro area will subscribe to a dealership for access to vehicles in its fleet. The dealership may become a service location and fleet headquarters.

With a change in business model, dealerships will have new challenges. How will they monitor and incentivize customers to drive safely and properly care for the vehicles when in their possession? How will their service departments change? How will they deal with periods of peak demand? Where will drivers be able to return the cars after use? How will dealerships charge and account for fuel costs? What happens when these cars are old and need to be replaced?

Too Early to Tell… or Panic

The takeaway message of this post is that it is still too early to tell how self-driving cars or ride-sharing or a combination of the two will impact the auto industry or dealers specifically and to what degree. What is clear is that dealerships are likely to be impacted most by a combination of factors, such as advances in technology combined with cultural shifts and mobility innovations that influence preferences in modes of travel.

The pace of change is too quick and is accelerating, and there are simply too many factors in motion. It is not merely a matter of self-driving cars that will impact dealerships but also the expedited delivery of goods and services, including groceries and entertainment, that make it less necessary for people to drive; the growing popularity of telecommuting; the cost of fuel; the availability, convenience, and affordability of changing mobility options (ride sharing); environmental concerns and legislation; and so on. We cannot yet foresee the impact on all of us as a broad culture of travelers and commuters and specifically on auto dealers who will eventually need to adapt. The only sure thing is that how the future unfolds will be an interesting journey and story.

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Disclaimer: The information in this blog post is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from Stephen Dietrich, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.
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About The Author: Stephen Dietrich is an attorney and author who has a passionate interest in the human side of business. His distinctive combination of legal and business knowledge, human insight, and dedication to clients makes him uniquely qualified to help corporate leaders and other C-level executives navigate high-value mergers and acquisitions, restructure transactions, and manage day-to-day operations. Through this blog, Stephen shares his extensive experience and unique personal and professional insights in the hope of stirring thought and dialogue that leads to ever deepening insights and understanding. For more information, please visit www.StephenDietrich.com.

 

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