Self-Driving Cars Can’t Claim Victory Yet.
“We estimate mass market (manufacturers) will shrink dramatically”
Nobody doubts that autonomous cars are coming and will change the world, but trying to pin down when this might happen shows the case for computer controlled cars is still a bit ambiguous.
Some say a complacent automotive business is about to take a fatal torpedo, while others are a bit more sanguine, see much wishful thinking and wonder where the beef is.
Those in the first category say the first autonomous cars – vehicles driven solely by computers without any human help – will start to hit our roads by 2020. Sanguinistas say they won’t be ubiquitous until maybe 2035.
Reports from consultants like Juniper Research not only reckon the first autonomous cars will appear by 2021, but say there will be 20 million of them on the road globally by 2025. Hampshire, England-based Juniper Research thinks it can even rate how well possible contenders are doing, and says technology giant Google is in first place, followed by China-owned and Swedish based car maker Volvo, Daimler, which owns German luxury manufacturer Mercedes, then electric car maker Tesla Motors, with Apple in 5th place.
Investment banker Barclays says the advent of autonomous cars will be very disruptive, reckoning that in markets like the U.S., vehicle ownership will decline by 50 per cent and annual sales by 20 per cent.
“Shared vehicles could replace at least nine times the number of “traditional” vehicles. In the post-modern era of full autonomy, we see four types of vehicles emerging – 1) traditional vehicles 2) family autonomous vehicles 3) shared autonomous vehicles and 4) pooled shared autonomous vehicles,” Barclays said in a report.
This spells disaster for the likes of GM, Ford, VW, and Toyota.
“We estimate mass market (manufacturers) will shrink dramatically to survive the threat of families downgrading the number of cars they need and switching (to autonomous),” Barclays said.
And naturally the rich will get richer, with the upmarket manufacturers thriving.
“Premium manufacturers may become (autonomous) share leaders given their upscale image,” Barclays said, estimating that mass market sales in the U.S. might fall 27 per cent, while premium makers’ gain nine per cent.
There are massive hurdles to be jumped over first. It is true that technology has made massive strides and various manufacturers have shown the remarkable ability of their cars to drive safely without human interference most of the time. The key though is “most of the time”. A computerised system that works only “most of the time” undermines the whole project.
Watch out for tumbleweed
Recent reports show that mundane things like tumbleweed drifting across highways fatally confuses auto computers, as do policemen giving hand signals, or birds flying towards cars or across them. Snow spooks them too. The well honed judgement of an experience driver waiting for a space to appear at a busy highway entrance is too much for computers. Computers refuse to allow vehicles, however briefly, to stray illegally over double white (or yellow depending on your country) lines which might allow traffic to pass a cyclist.
It’s not clear whether this reveals the need for a bit of tweaking, or if there is a fundamental problem.
Elmar Degenhart, chairman of German supplier Continental Ag, says some autonomous boosters are getting ahead of themselves.
“In the next 10 or 15 years, we won’t see any robot taxis in New York with no steering wheels or pedals. This is science fiction – its fantasy. The traffic scenarios over there would be much too complex and unpredictable for this,” said Degenhart, in an interview with German news agency DPA last year.
Max Warburton, analyst with Bernstein Research agrees that there too many over excited zealots around.
“(Autonomous vehicle) technology remains at the nascent stage, and we think it is simply too early to claim to be able to foresee what the full consequences will be. Talk of dramatically reduced vehicle fleets, zero-differentiation between brands, and the end of individual vehicle ownership is probably at best premature, at worst just fanciful,” Warburton said in a report entitled “The End Of An Era”, in which he expects the current period of high profits for the global auto industry to run itself out.
Balance sheets will be wrecked
Warburton said he is certain of one thing, the move to autonomous cars will cost manufacturers a lot of money, help safety and wreck some balance sheets.
Warburton said Mercedes, Volvo, VW’s Audi and Nissan have been most vocal about their technology, it’s not clear if any have a clear lead.
“Newcomers such as Google probably don’t plan to become automakers and instead are more likely to license their technology to existing (manufacturers),” Warburton said.
“In the long term, autonomous cars may change the economics and balance of power in the industry. But we believe that in the time frame that most investors in the Autos sector care about – which we presume is less than five years – autonomous vehicle technology will simply be a cost headwind, and a conversation topic rather than a driver of changes in competitive advantage or share prices,” he said.
But Morgan Stanley analyst Adam Jonas sees a real and imminent and accelerating threat to the traditional industry.
In a report headlined “Share+Autonomous=Deflation”, Jonas said new entrants are eager to combined the so-called share economy with autonomous driving to take advantage of the fact most cars are used for only four per cent of their lives.
Jonas says this might carry a big risk to auto stocks in 2016 with some big shocks.
“Despite perhaps a generation or more to complete the potential transformation of autos from privately held, human driven machines to a network of shared autonomous vehicles, the peripheral entrance of very large and extremely well capitalized tech hardware and software firms is focussing investor attention on the size of the addressable market and the scope of industry disruption,” Jonas said.
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