The World Needs Self-Driving Cars, But Will You Own One?

December 12, 2016


Car & Road Injuries


Daniel Araya


Long before the arrival of self-driving cars, there was of course, the elevator. Elevators transformed how humans physically move through buildings and through cities, eventually eliminating the need for human operators altogether.

There have been similar technological shifts in factories (automation), telecommunication (Internet), and aircraft (autopilot). In this sense, transferring the burden of manual operation to computers is nothing new. But are we ready for the massive disruption of autonomous vehicle technology (AVT)?

Predictions are that there will be as many as 10 million self-driving cars on the road by 2020. With 3.7 billion people living in cities, the expectation is that AVT will provide solutions to overloaded transportation systems.

But even as the capabilities of self-driving cars continue to evolve, it is not a given that consumers will decide to buy one. What is more likely is that the on-demand nature of autonomous vehicles will remake the transportation industry entirely.

The truth is that people are simply driving less, even as more and more people avoid purchasing a car. In fact, fewer people are even interested in getting a driver’s license. According to a new study by the University of Michigan, the percentage of people with a driver’s license has decreased across every age group. This is especially the case with the millennial generation.

The percentage of 16 to 44-year olds obtaining a driver’s license has been steadily declining since 1983. And given the global rise in urban living, we can safely assume that alternatives to traditional car ownership will become the norm.

<blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">Millennials leading switch from individual car ownership to mobility services <a href=""></a> <a href=""></a></p>&mdash; Digital Trends (@DigitalTrends) <a href="">November 17, 2016</a></blockquote>

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Indeed, the promise of autonomous vehicles suggests that some fusion between public transportation and private car use is on the horizon. A recent British study predicts that shared autonomous vehicles will increase available urban space by 15 to 20 percent (largely by eliminating parking spaces). Given this shift, the obvious question is: Will people actually buy self-driving cars?

The assumption is that AVT fleets will make car ownership much less attractive. For this reason, analysts anticipate a future of widespread autonomous ridesharing. The heated competition between service on-demand companies like Uber and Lyft is, in fact, converging with both traditional car companies (GM, BMW, Audi, Mercedes Benz), and technology leaders (Google, Apple, Tesla). Tesla, for example, aims to have its driverless fleet ready by 2018.

More recently, the company made headlines for its software and hardware upgrades enabling its entire fleet to become semi-autonomous. In fact, all new Tesla vehicles now offer the necessary computing hardware for fully autonomous operation.

<blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">&#39;<a href=";ref_src=twsrc%5Etfw">#Tesla</a> Network&#39; and Self-Driving Capability will put an end to car ownership <a href=""></a> <a href=""></a></p>&mdash; Teslaliving (@teslaliving) <a href="">October 22, 2016</a></blockquote>

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To be sure, Lyft’s president and co-founder John Zimmer is banking on the convergence between autonomous vehicles and ride-sharing. Zimmer recently posted a manifesto predicting that the majority of rides within the Lyft network would be autonomous vehicles by as early as 2021. In his estimation, personal car ownership in the United States will be a thing of the past.

<blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">&quot;I believe that in 10 years, car ownership will be irrelevant. You&#39;ll have a mileage plan instead of a minutes plan.&quot; Zimmer/Lyft <a href=";ref_src=twsrc%5Etfw">#WSJDLive</a> <a href=""></a></p>&mdash; Bill Gross (@Bill_Gross) <a href="">October 25, 2016</a></blockquote>

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If we assume that the market for private automobile ownership is headed for disruption then what are the implications for, say, insurance providers? Auto accidents cause more than 1 million deaths globally each year— 90% of them the result of human error. Given this stark reality, it seems most likely that self-driving cars will transform the auto insurance industry entirely. Autonomous vehicles are safe.

That is not in question. Indeed, as Warren Buffet recently commented, “If there are no accidents, there is no need for insurance.” This is the assumption of many automakers as well. Volvo and Mercedes have already indicated they will assume full liability for their autonomous vehicles.

Of course, the issue of liability is a thorny one. But if autonomous vehicles save lives they will also restructure the risks inherent in driving. Self-driving cars may not entirely eliminate personal injury insurance, but they will drastically reduce the number of insurance claims. Of course, this hinges on changes in the law.

To be fair, Google's self-driving cars have been heavily challenged by poor weather conditions and complicated city driving. Nonetheless, legislation supporting driverless cars in the United States has already passed in Nevada, Florida, California, Michigan and Washington, D.C.

Consider that by 2030, the autonomous car industry could be worth $2 trillion. In addition to saving lives, self-driving cars will mean significant cost savings—traffic accidents cause $500 billion worldwide year on year.

Notwithstanding the fact that autonomous vehicles face some major hurdles to widespread use, they are coming. Google alone has tested its’ self-driving across some two million miles with only one major accident. Indeed, if Zimmer is right, autonomous cars-on-demand will eventually be as ubiquitous as Netflix or Spotify.

Daniel Araya

Daniel Araya is a researcher and advisor to government with a special interest in technological innovation, public policy, and education. He is a a Sharing Cities Policy Fellow with Shareable and a regular contributor to various media outlets including Forbes, Futurism and The Brookings Institution.

Daniel Araya is a researcher and advisor to government with a special interest in technological innovation, public policy, and education. He is a a Sharing Cities Policy Fellow with Shareable and a regular contributor to various media outlets including Forbes, Futurism and The Brookings Institution.