Driverless vehicles will be the most disruptive technology in all history. There may be more disruptive technologies on the horizon, but it is hard to imagine anything that will add more changes to our daily lives faster than this one.
It will even be more disruptive than past innovations like the wheel, fire, electricity, filtered water, and sanitation systems because it will happen to more people in a shorter period of time.
As I step you through some of the following scenarios, you’ll begin to get a sense as to how massive this disruption will truly be.
If you’re still on the fence about unmanned vehicles, still love your car, and think driverless cars are doomed to failure, please read on.
The economics of driverless cars are so compelling; they create their own force of nature, pushing society for greater adoption every step of the way.
This is particularly true for cities. Most cities are destined to lose over 50% of their current revenue streams.
Over the next 2-3 decades, cities will have to deal with a number of looming crises that are currently not on their radar.
Driverless vehicles will be the catalyst that changes nearly every line item in a city’s budget. This means virtually every revenue stream; expense, long-term obligation, and planning process will be altered in some way.
City employment in most areas will plummet. The way we think about property values, land use, zoning, transportation, taxes, and public safety will begin to morph and shift in ways we never imagined.
With so many moving parts it will be impossible to determine the “new normal” for cities, counties, and states anytime soon.
Watching the Transition Unfold
As driverless technologies progress, there will be less and less need for human oversight. Eventually we will achieve fully autonomous cars where we can summon a car whenever we need it and car ownership becomes a thing of the past.
First generation vehicles will come with a variety of regulator issues and technical problems few can anticipate. But as with all early stage technologies, each of these problems will be dealt with as they arise.
Realistically though, in 2015 there were 257.9 million registered vehicles in the U.S. at an average age of 11.4 years. So how long will it take to replace this many cars and what happens to all the old cars?
In 2015, automakers sold 17.5 million new cars and light trucks. With estimates that one driverless car will likely replace 15-20 traditional cars, then 1 million driverless cars could offset the sale of 17.5 million other vehicles.
Since traditional cars are only used 4% of every day, driverless cars will transition us from a just-in-case mindset where we have a car in our garage just-in-case we need to go somewhere, to a just-in-time mindset where we can summon a vehicle any time we need one.
Every problem creates an opportunity and we will find thousands of new opportunities as we step into this brave new driverless world.
Large Fleet Ownership
The first big change will involve large fleet ownership of driverless vehicles, perhaps as large as 5-10 million vehicles with 20,000 in one city and 50,000 in the next.
Fleets may be owned by large companies like Hertz or Avis, General Motors or Ford, or Uber or Lyft. Along with fleet ownership will come the responsibility of cleaning, upkeep, and repair, but these companies will also wield a huge amount of clout when it comes to car design and efficiency.
The Shift to Electric Vehicles
As battery life improves and recharging stations become more automated and plentiful, the demand for electric vehicles will jump exponentially. However, large fleet owners will only choose electric cars if they are more reliable and cost efficient.
The shift to electric vehicles will dramatically change the sound of a city. This cannot be overstated. Rumbling engines, smelly exhaust clouds, and loud revving noises will all fade into distant memories.
Over time, driverless cars will queue up for people coming and going from a building. Since most trips will involve only one passenger, the majority of driverless cars will be one-passenger vehicles.
These mono-vehicles will come equipped with all the tools necessary to be productive – Wi-Fi, computer table, window-dimmers – as well as features to make it a fun and relaxing space – video games, movies, music, and VR.
Larger vehicles can be summoned for families, couples, and groups. Some will request upscale vehicles to match their need for status and luxury.
This means that rental cars will eventually disappear. So will the taxis, limos, shuttles, valet services, and parking lots.
Eight Examples of Disruption
As we enter the driverless car era, and quickly transition into an autonomous vehicle era, all other forms of transportation will begin to fade into the background.
Consider the following examples developed with my “situational futuring” technique.
1.) Retail Sales Tax Loss
Roughly 40% of State and local sales tax comes from auto sales.
In addition, over 10% of today’s retail businesses are car-related. As ownership goes away, people will be less invested in their car’s maintenance and efficiency. This means a rapid decline in gas stations, car washes, oil change businesses, detail shops, tire shops, brake shops, emissions testing, alignment shops, auto repair, body shops, tow trucks, glass repair, transmission repair, auto part stores, rental car agencies, and auto insurance offices.
Dealerships themselves will also disappear.
The declining sales tax revenues from all these businesses should not be underestimated.
2.) Traffic Courts
A significant number of cities in the U.S. rely heavily on traffic tickets, court fines and fees for balancing the local budget, often accounting for as high as 30% of their total revenue. In many cases, the courts only keep between 5-10% of the fees they collect.
In 2015, New York City collected a record $1.9 billion in fees and fines for motor vehicle violations.
As we make this transition to driverless cars, there will be no more speeding tickets, failure to stop at stoplights, DUIs, and road rage. Courtrooms, judges, lawyers, DAs, driver’s education, sobriety checkpoints, and anger management schools all fade away. This will translate into dwindling revenues and far fewer staff positions in these areas.
In 2013, 41% of airport revenue came from parking and ground transportation, according to Airports Council International-North America (ACI-NA).
It’s amazing how sophisticated airports have become. Since I’m personally in and out of airports several dozen times a year, this is a topic I’ve become very attuned to.
Airports have evolved into a massive intersection of people-in-transition. The number of vehicles being staged at most large airports has grown from hundreds, to thousands, to tens of thousands.
Rental cars, buses, taxis, shuttles, Ubers, limos, vans, trucks, scooters, and trains all play a role in the continuous waves of people going to and from an airport. All that is about to disappear.
In addition to airports, parking lots throughout cities begin to lose revenue and staff. Meter maids, parking meters, parking tickets, valet services, and handicap parking all go away.
4.) Queuing Stations and the Great Retail Store Rework
The success of virtually all retail businesses has long centered around three words – location, location, location – and that location was often defined by the relationship between parking and store access. As our need for parking declines, a new usability metric to watch will stem from the design and construction of queuing stations in front of stores, offices, and businesses.
Planning entrances where driverless cars can quickly pull up, allow passengers to exit, and move on, will soon go through far deeper scrutiny over less understood features like the “arrival experience” and the “frictionless entry.”
Queuing stations will be complex additions to most buildings. Over time the notion of a simple drive through lane for people to enter and exit vehicles will be replaced with multiple lanes, including handicap lanes, and specialty lanes for various classes of vehicles.
Just as wealthy people today enjoy the status of driving a more expensive car, not all driverless vehicles will serve the same utilitarian function. Richer people will pay to “arrive in style,” and will expect to have premier access to buildings. In much the same way hotels often greet their elite guests with teams of people waiting on their arrival, retail stores will find unusual ways to greet their most prominent customers and make them feel welcome.
Having enclosed porticos around entrances for climate-controlled ingress and egress is only part of the equation. Since driverless cars won’t allow you to store a trunk full of shopping from one store to the next, having storage lockers near every entrance will be common.
Because group shopping is never equally rewarding for all members, having waiting areas that serve coffee, tea, and other refreshments near the entrance will also be part and parcel to the arrival-departure experience.
The National Safety Council estimates 38,300 people were killed and 4.4 million injured on U.S. roads in 2015, which saw the largest one-year percentage increase in half a century.
Driverless cars have the potential to drive those numbers to zero.
If we multiply the average cost of repairing a person after a traffic injury, say $10,000, times the number of injuries, 4.4 million, we end up with a potential drop of $440 billion in payments to hospitals and the healthcare industry.
For 2015, the CDC estimates that 38,300 people killed resulted in $62 billion in medical and work loss costs in addition to the immeasurable burden on the victims’ families and friends.
That’s over half a trillion dollars in cost to society, in the U.S. alone, that simply goes away.
6.) Gas Taxes, Car Licensing, and Registration
In researching this topic, I wasn’t able to find the amount of money car owners pay today for gas taxes, car licensing and registration, but rest assured, it amounts to hundreds of billions of dollars every year.
States may still require that all driverless vehicles be registered, but for large fleet owners, car licensing and registration will be handled in a much more automated fashion requiring far fewer employees.
With alternative forms of power generation, and the wholesale shift towards electric vehicles, and large-scale mass energy storage networks that will likely involve these vehicles, our overall dependence upon petroleum products will plummet.
7.) The Coming Municipal Bond Crisis
Most municipal bonds are issued with a long-term repayment plan, often extended over a 30-year period, issued with the assumption that the flow of money will stay relatively consistent during that period of time.
As an example, cities that issue bonds to add toll lanes for high occupancy vehicles and those willing to pay the toll, will soon discover that driverless cars can travel just as fast without using the toll lanes, and anticipated revenues will plummet.
For another example, a city that builds a large parking structure with bonds that are to be repaid with parking fees will soon be left with an empty parking structure and no revenue. Most of these giant parking structures will eventually be torn down, but the debt will still remain.
When it comes to building power plants, which often come with a $4-$8 billion price tag, many are structuring their repayment plans around the additional revenue collected from peak demand pricing. However, once most homeowners have battery packs installed in their basements, the demand for “peak power” will crater, undermining the whole repayment plan.
With declining revenues, virtually every debt taken on by cities, counties, and states will receive extensive scrutiny to make sure there is a viable plan for repayment.
8.) City Pension Crisis
Numerous cities have made overly generous long-term commitments to fund staff pensions, a commitment that will be especially hard to manage when revenues begin to drop. With increased longevity, most pension funds were never adequately funded in the first place.
This is particularly true for the California Public Employees Retirement System, CalPERS, which presently only has 65 cents for every dollar that it needs to provide pension benefits for its two million members.
Many in California are just now coming to grips with the insane amounts of money needed to fund these pensions in the future. Los Angeles already spends 20% of its general fund on retirement costs.
CalPERS pension debt is now roughly $164 billion, a debt that will continue to grow over the coming years. In a radical move to help correct the situation, CalPERS has announced they are cutting pension benefits across the board, by as much as 60% for many recipients.
With driverless technologies zapping many of our city’s existing revenue streams, the challenges we’re facing today will transition into a full-blown, rioting-in-the-streets pension crisis in the future. There will be no easy solutions for bailing out these super expensive pension plans.
Even though I’m sure there are thousands of details that I’ve over looked, and few things ever turn out 100% the way we predict, the level of disruption coming with driverless technologies is staggering.
They will not only change the way we get from point A to point B, but also how we think about shopping, entertainment, dining out, as well as the design of our buildings, houses, hospitals, churches, and shopping centers.
Virtually every aspect of society, in every country around the world, will be touched by driverless technologies, and the vast majority of it is destined to improve our global standard of living.
Job losses will be offset by job creation. Businesses that disappear will be replaced by innovative new businesses, and the overall size of government will begin to shrink.
As transportation becomes faster, cheaper, and easier, we will simply do more of it. We will become a very fluid society, and all this movement will seem natural and effortless.
At the same time, the path to progress is strewn with countless road mines and pitfalls. Many things will go wrong and the journey is never smooth.
As you read through this, I encourage you to mention the thoughts going through your head. What have I missed, overlooked, or simply gotten wrong?
Many of my friends already know that for me, my dream car is no car at all. Personally I can’t wait until I can, once again, look forward to my daily commute. It simply doesn’t need to be this painful.