Google's Trillion-Dollar Driverless Car -- Part 2: The Ripple Effect

Part Two of a Six-Part Series

While Part 1 of this series laid out the significant benefits in safety and savings that could come from a driverless car, there is an old saying: One man’s savings are another man’s lost revenue.

The fact is that a driverless car would slash hundreds of billions of dollars of annual revenue, or even trillions, from all sorts of entities: car makers, parts suppliers, car dealers, auto insurers, auto financiers, body shops, emergency rooms, health insurers, medical practices, personal-injury lawyers, government taxing authorities, road-construction companies, parking-lot operators, oil companies, owners of urban real estate, and on and on and on.

At the same time, the driverless car will create enormously lucrative business opportunities to serve new customer needs.

I’ll turn first to the revenue that is in peril and then examine the opportunities. I invite you to offer your own ideas on potential business threats and opportunities. Please share them in the comments section below.

While car sales might initially boom, as the fleet shifted to driverless cars, sales would then fall off a cliff—and new and used car sales add up to a $600 billion-a-year business in the US. Any drop in sales would also affect auto finance companies, which write loans for almost 70% of new car purchases and half of used car purchases. Many parts would disappear from cars: Who needs airbags if you aren’t going to crash, or backup assistance when the car parks itself? The amount of steel used in cars would drop, because cars wouldn’t need to be as massive and sturdy. Body shops would mostly disappear for lack of business.

Auto insurers, which collect more than $200 billion in personal auto premiums each year in the US, would initially see profits rise as accidents declined and payments to customers dropped. They would, however, eventually see something like 90% of premiums disappear. In fact, the US model of mandatory personal auto insurance might become archaic.

Picture of the artwork Emergency Room by Frenc...

Emergency Room by French-Danish artist Thierry Geoffroy (Photo credit: Wikipedia)

Emergency rooms would lose millions of patients a year, and hospitals would have hundreds of thousands fewer people who needed to stay overnight. Health insurers would have to give up revenue as car-related injuries plummeted.

Personal-injury lawyers would see car-related cases all but disappear. In fact, the trend is already moving in that direction because the spread of cameras and sensors in cars makes it much easier to document who is to blame in an accident and removes the gray areas where lawyers may get involved.

If cars are in nearly constant use and can come when called, the need for parking almost vanishes. One MIT study claims that, in some U.S. cities, parking lots cover more than a third of the land area. Other estimates are that there are as many as 2 billion parking spaces in the U.S., about the size of Connecticut and Vermont combined. Much of this valuable real estate could be reclaimed for more beneficial social and economic purposes. At the same time, property values, especially in cities, would decline as additional supply becomes available.

source:forbes.com