17 Aug Autonomous Cars: The Buggy Whip Moment for the Auto Industry is Here

It may just be as important a development as the first mass production of cars by the Ford Motor Company in the 1920s. That same company, Ford, announced yesterday it will build a fleet of driverless cars for ride sharing or ride-hailing by 2021. That was news enough. They also said the cars will have no steering wheel and no pedals or brakes. They will just go, and in their announcement Ford said the industry should skip the intermediate step of first having driverless cars that someone can also drive.

Is this like that moment of transition to cars? People rode horses and attached them to buggies for thousands of years before the auto was invented. When did that happen? It’s not totally clear but many credit Germany’s Carl Benz who developed a car in 1885. But it was not until Henry Ford figured out how to make a lot of them and make them cheap that everyone started putting the horses out to stud. It is said that New York was facing a serious horse poop problem at the time and fretting about how to address it. Not only how to get rid of it but the disease that was emanating from it. Over 25 million horses were said to be at work in America in 1900.

The advent of cars affected long standing industries, such as the thriving buggy whip industry centered in Manhattan, which disappeared. Horse breeders also were hurt. The guys who made buggies. The price of grain to feed the dwindling horse population plummeted, which some say was a big contributor to the Great Depression. And it cemented our dependence on fossil fuels to make them go, which most agree ended up not such a good thing (though yes now we finally have electric cars). Got it?

Let me say I’m about the most excited person around at the prospect of giving up driving and of autonomous cars transforming our very society and being ultimately good for the economy. Some cities, like Beverly Hills, CA, are already talking about evolving into an autonomous car-only city. And while I’m no auto industry analyst, this stuff just fascinates me.

Some of the manufacturers with driverless cars in the works include Audi, Mercedes, Tesla, Ford (as mentioned), BMW, GM, Honda, etc. Everyone is in it. At least this isn’t like the invention of the rechargeable battery, where the traditional battery industry fought it tooth and nail until they realized they can make money diving in themselves. The auto companies are a go.

But the buggy whip question now is: who gets hurt when the driverless cars take over?

1. Car manufacturers (maybe): Some are predicting car ownership will be replaced by everyone just calling a cheap driverless car when they need it. Others say that will work in cities but maybe not elsewhere. And the status and convenience of car ownership may not go away, therefore many may still want to own a driverless car. But if we’re sharing cars there may well be fewer of them.

2. Public transportation (maybe): If it’s about the same price to commute to work from the suburbs to a city in a driverless car why not go for that convenience if you don’t have to drive and pay to park? But won’t this lead to more traffic if more of us are out there? In discussing this with my 14-year old son, he feels the driverless cars will do a better job of controlling and easing traffic by using GPS systems like Waze to work around traffic. And if I’m going, say, from NYC to Washington DC for business, I might let the car take me door to door in four hours vs. schlepping to the Amtrak station then schlepping some more when I get there, not to mention paying for the train. Though I would miss the fabulous Amtrak hot dogs and horrible wifi.

3. Every kind of professional vehicle driver: Well duh. Yellow taxi guys? Gone. Uber and Lyft drivers? Gone. The entire chauffeur industry? Gone. Truck drivers also are likely going to be replaced by the robot- there is already testing of a “platooning” concept where groups of trucks travel together controlled by a lead truck. The first driverless buses are already being tested (though who will even ride a bus anymore if a car can pick you up?). There’s even talk of autonomous snow plows. The only ones probably still requiring drivers will be the garbage collectors and police and emergency vehicles. What happens when all these folks are unemployed?

4. The oil companies: the move to cars from horses was only accelerated (pun unintended) when a massive flu epidemic killed a lot of horses. Now that new technology is creating new types of cars, it appears they will all be electric powered. This will not be good for Big Oil.

5. The airlines (maybe): If you and your 4 family members want to go to Florida from New York for a week’s vacation, just let the car take you directly with no real need to stop. Leave Friday morning and be there before the sun rises Saturday morning. No falling asleep at the wheel, you can flatten the seats, sleep, read, watch movies. Take the dog with no hassle. You save all the airline costs, and take however much stuff you want, no TSA, etc.

6. The parking industry: Certainly more of an issue for cities, but the only required parking now will be for the driverless cars to “sleep.” Everywhere you go now, the car will just drop you off and leave. The lots where I live in NYC are full of cars used by commuters and folks who live in the city. We wouldn’t need the massive parking structures at stadiums, Costco, you name it. Imagine all that gone?

Can you think of any more? Why does this matter to anyone else? If you’re an investor in stocks of companies that might be affected by this, give some thought to that mix of investments. And think about companies that will benefit, like some of the existing ride-sharing companies, who are already gearing up. Not to mention Silicon Valley, which is a critical part of creating the technology that’s allowing all this in the first place. And the green energy companies who will help create the electric part of these cars or build out the charging stations for the cars. And what about real estate in areas beyond the immediate suburbs of cities? Maybe more people will move further from work for a cheaper home if they can work or sleep comfortably in a longer commute.

As David Letterman used to say, it’s just plain big.