The economics of mobility will change significantly. Currently it costs an average of $1 per mile to operate a personal vehicle in the U.S., Ganguli told his audience. AVs can be driven more often and operate under shared usage, so the cost drops to about 67 cents per mile while freeing up driver time.
With more time for productive and entertainment consumption in an autonomous and connected environment, the cost drops significantly to about 30 cents per mile, he said.
It is this math that is driving much of the investment in the AV industry, he said, noting unprecedented levels of investment and partnerships in technology development.
"What is driving it is there is a very strong economic sense, coupled with regulatory forces, coupled with available technology and the openness of industry players to advance change, and that is what's driving the transportation toward mobility," he said.
"We see urban areas leading adoption,...but the question is when and not if. We are seeing the transformation driven by populated urban areas across the world."
During his address, Smallwood noted that the idea of getting into a driverless vehicle that pulls up to your house to take you somewhere isn't a foreign concept.
He half-jokingly pointed out that even attendees at the honors night willingly did what their mothers told them not to do: They got into a strange car (a taxi or Uber service) with a stranger and, not knowing the driver's qualifications or the condition of the vehicle, paid for the privilege of being transported to their destination.
The day will come soon when that taxi doesn't even have a human driver. Tech company NuTonomy Inc. plans to launch an autonomous taxi service in Singapore in 2018; Lyft Inc. predicts a majority of its taxi service vehicles will be autonomous by 2021, Smallwood said.
Speculation on when AVs will become commonplace changes frequently, Smallwood said. Audi A.G.'s semi-autonomous vehicle was introduced this year; Tesla Inc. expects to offer its AV by 2018; Volkswagen A.G. may have a vehicle on the market by 2019; and others plan to make vehicles available by 2020, according to Smallwood.
But there will be a major difference in the rate of adoption of such vehicles between the consumer market and the commercial market, he said.
"On the consumer side you're going to have slower adaptation," Smallwood noted. "Why? It's the emotion. People are afraid to give up control to a robot. Seventy-eight percent of people surveyed said that they are afraid to ride a fully autonomous car."
But it's a different situation with the commercial market, which is driven by economics.
"Businesses are going to be forced to adapt quickly in order to survive." he said. "When the trucking fleet you compete with starts using autonomous vehicles, what happens to their operating costs? Seventy-five percent of costs for delivering a package on a truck is labor. You just eliminated 75 percent by having a robot doing it.
"Will you have the option of not competing? You can't. You have to compete," he added. "This will be driven by dollars and cents."
Acceptance rates will vary by age groups—older people will be more reluctant to accept AVs than the younger generation, who grew up with online gaming—and by country — a nation such as the U.S. that has a long history with personal vehicles will be more reluctant to give up the car than developing nations, such as India or China.
"It's not going to be something that happens slowly. I think it's going to be as we age out and other nations develop, it happens rapidly," Smallwood said.
"It's human adaptation, not technology, that's going to be the greatest hurdle. Technology will happen. There's dollars at stake, so technology's going to happen. But when the emotion of the human blocks it, it's a different story," he said.
Nearly 1.3 million people worldwide, including 33,000 in the U.S., die each year in vehicular accidents, he said, noting that human error accounts for 90 percent of those wrecks.
"If we can eliminate the human error, we could reduce the accidents, right? That's the whole idea behind the autonomous vehicles. Autonomous vehicles, they don't drink, they don't get sleepy, they don't text,…they don't get distracted."
However, "autonomous vehicles don't need to be perfect. They just need to be better than us," he said. But they will be held to a higher standard than humans, and there will be more scrutiny when an AV crash does happen, he said.
Such a scenario presents a new problem: "Who's responsible when an autonomous vehicle crashes?... Is it the company that designed the software? Is it the vehicle manufacturer? Is it the driver, meaning the passenger—you're not the driver, you're the passenger now. Was it the fault of the car's communications (system),…or do they just go to no-fault insurance?" Mr. Smallwood asked.
AVs will save an estimated $1.3 trillion per year through accident avoidance and fuel savings, Smallwood said.
He also noted the average annual cost to own and operate a traditional vehicle, which usually is parked 95 percent of the time, is about $8,700.
One autonomous vehicle could do the work of two or three household vehicle—the AV takes you to work, the car drives back and picks up your wife, takes her to work, then takes the kids to school or practice or wherever, he said.
AV passengers will be more productive as they can do computer work or read while riding in the AV to their offices.
AVs also will provide mobility to a larger percentage of the population.
"Millions of people who rely on others for transportation will gain greater independence," Smallwood said, including the disabled, the elderly and even children who need rides to extracurricular activities.
On the downside, AVs pose several problems that must be addressed, including cybersecurity, privacy and individual freedom.
"Hacking is, I think, one of the major issues. It's going to be a problem. How do you stop it? It will be an open system because, for autonomous vehicles to work optimally, they have to have an open system so they can communicate with other cars and they can communicate with other stuff on the road," Smallwood said.
The AV's computer system also is gathering 4,000 gigabytes of data every day, such as where you went, how long you were there, if someone was with you and what you were talking about, he said. Such data could be sold to marketers, who will cull more information on your personal habits.
"So is society willing to sacrifice even more privacy for the additional safety? That's a real issue," he said.
Smallwood also questioned whether people will fork over decision-making to the computerized car and just be along for the ride.
Other potential questions include:
- Will you have the choice of driving yourself, or is the car always going to drive? (Some cities will demand only AVs operate in certain urban areas.)
- Will you choose the speed, or will the car choose it?
- Will you get to choose the route, or will the car always choose based on efficiency?
"When it comes to vehicle ownership, the most likely scenario is that private vehicle ownership will drop significantly as AVs increase their presence in the market. It is predicted that new car sales could drop by as much as 40 percent. That is substantial," Smallwood said.
Even today, 10 percent of city dwellers say they don't need to own a car, and some city planners already are creating areas where only AVs are allowed on the roads, he noted.
"Vehicle manufacturers are rapidly changing their business models. They're moving to be mobility providers, not just vehicle manufacturers. They have already started that pivot in a different direction," he said.
There also will be the entry of new competitors in the automotive industry and most likely collaboration between technology companies and vehicle manufacturers, he predicted.
As happens with every technological change, there will be disruption and redeployment of the workforce, he predicted.
"If new car sales drop by 40 percent, what happens to the 925,000 (workers) involved in vehicle and parts manufacturing, 1.2 million involved in new car sales, 2 million in parts retail trade, 450,000 automotive repairers, 450,000 in auto body?" he asked.
"What about the 4 million professionals drivers? We're starting to talk about very real numbers here who will be displaced with this change in technology."
However, the tire industry likely will weather the storm.
"The good news, honestly, is AVs will still need tires. But the current manufacturing/distribution model will change significantly," Smallwood predicted.
Tire consumption will be about the same, while total miles traveled actually will climb due to increased use of the AV. Tire tread life and the interval between tire replacement will be extended due to the AV's constant monitoring of its maintenance and repair needs.
"Tires will become more monetized because if you lose passion for the vehicle and you lose passion for driving it, then it's nothing more than transportation. Then the tire becomes round and black and holds air," he said.
Tire dealers will be dealing more with fleets than individual vehicle owners, he predicted, if consumers adopt vehicle-sharing models or use fleet-owned taxis.
"There will be a shift from consumer purchasers to fleet purchasers, because if it goes to a shared model where people no longer own the car...those are fleet items, those aren't consumers," Smallwood said.
"So the buy/sell process changes dramatically. That will force consolidation of distribution and manufacturing. So it has the possibility of impacting the entire chain."
Ganguli noted that AVs could drive 70,000-75,000 miles a year under a shared program, a level of usage the will impact the types of parts, replacement cycles and models for repair and maintenance services.
"There are going to be needs that do not exist today," he said "So the point here is with the vehicle content and the infrastructure around it changing, there's going to be opportunities for this industry to capture."
Some content and parts in vehicles are going to be at risk of commoditization or even elimination, while other parts will be driven by technology.
Ganguli said volume growth is an uncertainty and so is the impact of disruption.
"We see volume increasing in the future. We do see high disruption from vehicle content driven by new entrants, driven by industry peers like yourselves who are not sitting still and who are making moves to get into these technologies," he told the AAPEX audience.
He said the various automotive aftermarket players will have to figure out ways to reposition their product portfolios to reduce risk and to innovate new services and business models to replace revenue and profit for some of the at-risk segments.
Ganguli predicted growth opportunities in three areas: vehicle content and vehicle production; AV, electric and connected content and software; and aftermarket services, "which we see as the biggest driver for growth in this industry going forward."
As autonomous vehicles take on a more utilitarian function, people will become emotionally removed from the driving experience, and they are likely to lose their passion for the vehicle, Mr. Smallwood predicted.
"So brand differentiation on vehicles becomes pretty different. If you look at it, why have the ultimate driving machine if you aren't driving it? Are you going to buy a Porsche or BMW if you're just going to sit in there and let it do whatever it's going to do?
"If the driving experience is controlled by the car and its obedience to the law—which it will be—what functional difference is there between a Ford Focus and a Porsche 911?" he asked.
"The driver will eventually lose their emotional connection to the vehicle and the driving experience. The car becomes nothing more than transportation."
Smallwood predicted several scenarios for the adoption of AVs in the near future:
- Level 5 fully autonomous vehicles will be used for taxis, buses, heavy equipment and long-haul trucking. However, trade unions will be the stumbling block to adoption, he said;
- There will be more rapid adaptation of level 5 AVs in large urban areas, where a majority of the population resides, due to the convenience, cost-savings and even mandates by city planners; and
- There will be gravitation to level 3 or level 4 semi-autonomous vehicles in more rural areas to provide a balance between safety, convenience and pleasure.
Ganguli predicted several trends for the aftermarket:
- Transformation of in-vehicle content and service infrastructure as the industry evolves toward electric, connected and autonomous drive;
- Higher vehicle utilization in shared mobility will drive more frequent parts maintenance and replacement and vehicle service needs;
- Emergence of new B2B and B2C channels to accommodate new customer groups, accompanied by convergence across channels;
- Increased access to end-consumer triggered partnerships across value chains and OEM direct-to-consumer path; and
- Creation of new business models and revenue streams related to in-vehicle consumption (i.e. media and diagnostics) as well as infrastructure enabling.
