Self-driven disruption

By Arunabh Satpathy

Everybody is talking about autonomous cars these days, but no one knows the exact contours of its effects. To answer that question, the FiRe 2016 conference brought together host Robert Anderson, Chairman and CEO, Hybrid Electric Vehicle Technologies and HEVT LLC and Craig Giffi, Vice Chairman, US Automotive Leader, and Deloitte LLP to discuss this world changing technology.

Right off the bat, Giffi identified five “areas” that would be critical to the success of the autonomous vehicle. These five areas were entertainingly titled “my mother the car,” “what only goes up,” “Bill Clinton 1992,” “A Game of Thrones,” and “consumers are fickle.

Anderson started by asking Giffi what he thought the biggest problems would be that were solved by autonomous vehicles. Giffi responded that safety would be the biggest part. He mentioned that over 35,000 annual highway fatalities exist, with over 94 percent attributable to human error.

“The vision is these things never crash,” he said. “For society, the most obvious benefit is reducing the risk of a traffic fatality.”

The session then returned to the five major areas to figure out. “My mother the car” refers to vehicle control and ownership, which ridesharing models and autonomous vehicles are increasingly challenging.

Giffi was especially vehement in mentioning the second area, “what only goes up” i.e. regulation. He pointed to existing areas where Uber and Lyft cannot go, and predicted that certain factors inevitably cause uneven implementation.

The third area, Bill Clinton 1992 played on the phrase “it’s the economy, stupid” by emphasizing “it’s the economics, stupid.” He said that in companies (especially entrenched companies) investing in autonomous vehicles, return on investment isn’t considered enough. He cited $8 — $12 billion invested in powertrains running on electricity, gas, diesel, and hybrids and new materials for fuel efficiency like graphene.

He also said that the auto industry has led the way in diminishing returns. A 1x return is considered big in the auto industry, while Ford and GM getting 0.3x.

“With all of the investment that is being put into new technologies, how in fact do the automakers or the industry get any ROI?”

He put the smart money on disruptors and outsiders. He was also wary of the disruptive capabilities of the fourth area, titled “A Game of Thrones.” Continuing on the ROI point, he said insurance premiums will go down because of safer cars, and dealers will likely go out of business if the automakers or ridesharing companies control the business. He also mentioned massive worker disruption.

“If this happens rapidly, it will be fairly catastrophic,” he said. “The disruption will be significant.”

His final area was titled “consumers are fickle.” In this area, Giffi mentioned skepticism among American consumers in adoption of autonomous vehicles following the safety argument, while acknowledging that later generations like millennials and post-millennials would be far more receptive.

“Consumers are slowly warming up to the notion of safety tech,” he said. He further elaborated that on average, the American consumer is willing to save less than $1000 on safety tech, whereas the investment is much higher, causing a major disjunct between investment and ROI.

He ended the panel by saying that entrenched automakers would have to do the hard job of disrupting themselves, while newcomers would have to look at novel business models to monetize data from the experience.

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