While reading Josh Durbin’s great blog post on the lithium boom we are currently experiencing, I began thinking about the on-coming disruption that will come from electric vehicles. There is no doubt that as electric vehicles become as cheap as their petrol-based counterparts, we will see a worldwide trend towards electric vehicles and clean energy in general. Obviously this will cause massive disruption for the oil industry and car-makers who can’t adapt with an electric product, but while doing research on the topic I came across a much bigger disruption coming in the near future; driverless cars.
Electric or not, driverless cars are coming. Nearly every major car-maker has forecast to have a driverless model coming at sometime between 2018 and 2021. Google and Tesla appear to be first off the rank, both aiming to have fully autonomous cars on the road by 2018, with BMW, Ford, Toyota, Audi, Nissan and many others to follow. Uber plans to have a fully autonomous fleet by 2030, and the Institute of Electrical and Electronics Engineers have forecast that 75% of the world’s vehicles will be autonomous by 2040.
Driverless cars will cause obvious disruption for some industries. As driverless cars will spur the growth of the ride-sharing industry (Uber, Lyft, etc.) car manufacturing will slow as the need for people to own their own car reduces. From that, demand for car parts and repair services will fall as driverless cars will be involved in fewer accidents, and integrated software will monitor all parts of the car to ensure major problems are detected before they arrive.I think people have always thought that driverless cars are a possibility, even from the earliest days of computers. However, it seems that the speed of innovation and development will catch many people by surprise and we must start looking now to the future at how driverless cars will affect our world (and the potential opportunities that will arise for businesses and investors).
The taxi and trucking industries is also an obvious candidate for disruption, as the human cost of labour can completely be removed from the equation for these services. Right now, the biggest cost and inefficiency for a taxi operator is the driver. Without a driver, a taxi can operate 24/7 with a fleet management system ensuring communication between driverless taxis creates the optimal pick-ups and drop-offs for travellers.
Long term, there may even be a structural impact for the real estate industry. There will certainly be less of a need for long term parking garages, but driverless cars may also impact the way towns and cities are planned as there will be less of a need for people to live and work in urban centres as travelling between destinations gets easier.However, there are some other industries that may find themselves ripe for disruption that may not automatically come to mind. Consider the impact on airlines and hotels. Given driverless cars won’t have the need for the traditional driver’s seat with steering wheel, there is no reason they can’t be designed as a moving bedroom. Why get up at 4am to get to the airport for a Sydney to Melbourne flight to make a 9am meeting? Set the destination into your driverless car and get a full night’s sleep as you make your way to your morning meeting.
It’s clear to see that some industries will disrupted by driverless cars and some business models will become obsolete. But as investors, we must ask what are the opportunities arising from disruption? Obviously there will be an opportunity for the company who can be first to market with a reliable, safe and cost effective driverless car option. Right now the race appears to be between Google (providing the software) and Tesla, with traditional car-makers playing catch-up.
Beyond that, I also see opportunity for media and content companies. Given that people’s attention will now no longer need to be directed to the road, they will be free to consume additional media and content on their drive to destinations. Media and content providers (along with advertisers) who can adapt will find themselves with tremendous growth opportunities.
Finally, there will be opportunities for companies who can create the software surrounding driverless cars. Fleet management systems will become crucial to co-ordinate ride-sharing between travellers, as well as optimising supply chain management for manufacturers, distributors and retailers. Companies will also have the opportunity to develop software for other areas of the vehicle, such as safety and monitoring on-going performance.
Overall, the biggest disruption that will come from driverless cars will be the ability to mobilise human capital more efficiently. This will provide opportunities for all sorts of businesses big or small to create efficiencies and save costs. Ultimately, as investors we need to be sure that the companies we invest in are not only open to change, but actively seeking innovation and technology as a way to improve their operations.
If we can do that, the driverless car innovation will almost certainly generate value like every other technological revolution before it.