1. May 2015 ©2015 by Aniket Banthia. All rights reserved
Driverless Cars by Aniket Banthia
Our future will include driverless (autonomous) cars. These cars are capable of driving themselves without
human input. Major automakers like Audi, Ford, Nissan, and Tesla have announced plans to begin selling
such cars in next few years. Some jurisdictions have permitted the use of driverless cars on public roads.
For several years traditional automakers have been experimenting with technologies that take up more and
more responsibilities away from the driver. Examples include cruise control, parking assist, and crash
prevention systems. But now companies both inside and outside the auto industry are testing technologies
that will make cars fully autonomous. Driverless cars will not only disrupt the existing automotive landscape
but also change the way we interact with vehicles.
The new technology offers enormous opportunity. Research shows that self-driving vehicles might create
$42 billion market for technology by 2025.1
It improves safety, eases congestion, and lowers environmental
impact. Additionally, it also increases mobility and productivity. Driverless cars extend mobility for those
who are currently unable or unwilling to drive. Commuters will be able to engage in productive activity while
the cars drive themselves. According to a Morgan Stanley report, replacing traditional cars with driverless
cars in the US will contribute $507 billion to the economy as a result of increased worker productivity.2
And
these benefits will increase exponentially as more and more people adopt this technology.
Impact on the automobile and related industries –
 Driverless cars will virtually eliminate the concept of private car ownership. People will commute using
driverless taxis. This would disrupt current automaker business models. It would reduce overall car
sales which will impact automaker revenue and profitability.
 Research indicates that human error accounts for 90% of the road accidents.3
Autonomous cars will
reduce frequency and severity of accidents, so insurance costs should fall. This new technology will
have a dramatic impact on underwriting.
 Driverless cars will be more energy efficient; this will impact the demand of gasoline.
How widespread adoption of driverless cars might occur?
 Selling the Value Proposition: To embrace driverless cars, consumers will need to see the real value of
the technology they are buying. The industry’s ability to deliver an attractive value proposition will
drive consumers to pay.
 Insurance Underwriting: The entire underwriting process will need to be revamped, and the question
of who ‘owns’ the risk, will need to be addressed for this technology to gain mass market adoption.
 Reducing the Costs: According to research conducted by J.D. Power and Associates, 20% of the
consumers surveyed said they would ‘definitely’ or ‘probably’ be willing to pay $3,000 for autonomous
driving technology.4
When the pricing is right, rate of adoption will increase.
Driverless cars are sure to disrupt the automobile and related industries, seriously hurting the bottom line of
those companies who are not quick to adapt. At the same time, the benefits to society and the economy will
be positive and significant.
1
https://www.bcg.com/media/PressReleaseDetails.aspx?id=tcm:12-180096
2
http://www.wisburg.com/wp-content/uploads/2014/09/%EF%BC%88109-pages-2014%EF%BC%89MORGAN-STANLEY-BLUE-PAPER-AUTONOMOUS-
CARS%EF%BC%9A-SELF-DRIVING-THE-NEW-AUTO-INDUSTRY-PARADIGM.pdf
3
http://www.alertdriving.com/home/fleet-alert-magazine/international/human-error-accounts-90-road-accidents
4
http://autos.jdpower.com/content/press-release/gGOwCnW/2012-u-s-automotive-emerging-technologies-study.htm