Monday, 24 October 2016

The Impact of Driverless Cars: Blog 2

Paul Sweeney: In the last blog, it was forecast that driverless cars will be in mass production and in use in less than ten years. In this Blog, I will briefly examine the impact of driverless cars on different areas of the economy and society.
a) Impact on Manufacturing 
One estimate is that US households will cut their average number of cars from 2.1 to 1.2 by 2040 (Barclays Bank). But itwas seen in Blog 1 that cars are not used for 96 per cent of the time. So if there are cheap, viable, accessible alternatives to car ownership, there will be a huge shift to these as a service and not as an expensive good to be purchased and left outside the door most of the time.

A Google self driving car.

As driverless cars are used for up to 80 per cent of the time, as estimated by former Google driverless car scientist, Sebastian Thrun,  then the number of cars required will be around 25 to 30 per cent of current production. Others think it will fall to as low as 10 per cent.

Thus the impact on production and distribution and on resource use (metals plastics, rubber, fuel etc.) will be dramatic. Their use will hit many other sectors as demand falls. The automotive industry has been a key driver of innovation with impacts on much of the economy. A sudden drop in demand will have negative multiplier effects. 

A study by an automotive company Alixpartners estimated that a single ride hailing car could displace 32 existing cars in the US. Then there is the employment impact on those who drive cars and vans as the replacements will be without drivers. 

As was seen above, virtually all those in car production and technology expect mass production of driverless cars to become a reality within a decade. 

Then people will abandon car ownership for the ease and cheapness of buying in a service. Cars will be sold to fleet operators and will shift from being the sale of a good to the sale of services. 

b) Impact on employment
So if demand for cars halves, then employment will more than halve in car and commercial vehicle manufacturing, in sales, services, taxi, and other driver services as major economies of scale could be realised. It was seen earlier that over 12 million work in the broad automotive industry in Europe now. 

Employment in manufacturing, in distribution, in driving cars, buses, vans, and taxis, in insurance, in accident care provision, parking and road building will all fall and fall dramatically. Tens of millions of jobs will go. Tech optimists will be very challenged to forecast their replacement with new jobs.

c) Safety will dramatically improve

Road deaths should fall. In 2013, there were a staggering 1,250,000 road deaths worldwide (WHO). Road deaths have been falling in recent years but are still one of the greatest causes of death, being the ninth biggest cause of death in the world (WHO).  Road injuries are both costly and painful. 94 per cent of car accidents are due to human error according to the US Highway Road Safety body. 

Thus the number of road accidents will fall dramatically, improving longevity, well being but hitting jobs in insurance, in hospitals and clinics etc.

New Zealand Transport ministry put the average social cost at an estimated $4,582,600 (€2.9m) per fatal crash, $857,000 per reported serious crash and $90,000 per reported minor crash. 

d) Insurance
A study by BCG and Morgan Stanley forecasts that driverless cars and more car sharing will drive down insurance costs by 80 percent, which will be good for consumers, passengers but not for the industry. Motor insurance is big, being around 42 per cent of all property and injury insurance. 

e) Impact on the urban landscape and street use 
In US cities parking takes up almost one-third of city space. It is less here but it still takes up a lot of space and most of it is on public roads in urban areas. In some cities there are over three parking places per car. With far less cars, public space is freed up for citizens. Paths could be widened and there can be more parks and green areas.

People pay a lot for parking. Indeed a parking space was on sale in London recently for 350,000 stg, and in Manhattan, ten basement spots were sold for $1 million each in 2014. Finding parking spaces reputedly can take up to 25 per cent of all urban driving miles.

In Summit, New Jersey, Uber was hired by the city to drive commuters to and from its train station. This cost is $167,000 a year, according to the city, whereas building a parking garage would have cost more than $15m. Uber is also targeting public transport providers and plans to “partner” with them as an alternative to the private car, according to one of its executives. The subsidies for urban public transport may be an attraction. Either way, disruption is expected.

f) Impact on personal mobility and on social interaction.
Personal mobility for the old, young and disabled will increase dramatically because they will have greater access to cheap and more accessible driverless electric cars.

On the other hand will funding for public transport dry up as more and more shift to the easy and cheap use of hired driverless cars? This potential shift will be a major challenge for public policy.

g) Impact on climate and the environment
A halving of the number of cars in a decade or more would have a massive impact on pollution. Furthermore a large fleet of driverless electric cars will cut pollution and impact positively on a localised, renewable electrical grid system

Emissions from car production in Europe peaked in 2010 and was lower by 25% per car produced in 2015. That is in production of cars, so with far fewer cars, which are driverless and powered by electricity, pollution will almost be wiped out, except for production and road construction.

Yet if there are less cars on the road, congestion will be less and parking will be easier or not needed with driverless cars, so investment in roads will fall too.

h) Impact on the economy overall.
The impact on the economy will be far less employment in auto manufacturing, distribution and sales, servicing, insurance, etc leading to falls in GDP. There will be the need for far less investment in roads because driverless cars will use road space far more efficiently than humans. 

On the positive side, delays will be cut with attendant positive effect on leisure, health and the environment.

Conclusion.
The impact of driverless cars will be revolutionary. It will affect all the areas listed above and more.  The disruption will begin within a decade. The impact on jobs will be negative and it is hard to see where the replacement jobs will be in two decades. This is a major negative impact. 

But there will be many positives – not least less deaths and injuries, lower insurance and more productive and efficient economies, with far better streetscapes and environment.

Paul Sweeney is Chair of TASC Economist Network.

Key Words: Driverless cars, Uber, Google, manufacturing, environment.



3 comments:

AM McGauran said...

hi Paul - a very interesting article, but I don't see the direct connection between the advent of driverless cars and less personal ownership of cars. Why won't people just own a driverless car?

PAUL SWEENEY said...

AM, it will be so much cheaper to call up a driverless car for a trip than to spend a lot of money on buying an expensive one. Why have it outside your door - depreciating away - when most people only use a car on average a fraction of the time? Call it up and drop it in town where another picks it up.

Of course those in remote areas may chose to have one rather than call one out. Then there are those rich men (and latterly women) who have to show off and will have to own a fancy car (or two)!

Those renting the cars will do so cheaply as the cars will have much higher occupancy than say current car rentals and so can do so far cheaper than renting today.

AM McGauran said...

thanks Paul. Yes this may happen, but I wonder is this scenario more likely to take move people from public transport to shared driverless cars, than move them from their own cars to shared driverless cars?
The shared Dublin Bikes scheme is great, but problematic when at rush hour when either the bikes or bike space are gone! The same could be the case with shared cars.
I think that the sharing of driverless cars would be due to internet systems that allow sharing, rather than they fact that they are driverless??