The most disruptive technological change of the 21st century will be the widespread adoption of self-driving cars. And it’s not a matter of if, it’s when.
Each day brings with it yet another news story, another update in the progress toward fully automated automobiles. The adoption of this technology will carry both benefits and drawbacks, but what are they, really?
In 2015, there were 38,300 motor vehicle-related deaths in the United States and 4.4 million serious injuries. The death total represents an 8% year-over-year increase, the largest percent increase in 50 years, according to the National Safety Council.
Vehicle traffic deaths rank second to poisoning as the leading causes of accidental death in this country, and the adoption of fully automated automobiles offers an attractive promise: Remove flawed human decision-making from driving and allow inter-vehicle communication to make roads safe.
Automation also brings with it the promise of increased speed and convenience. In a fully autonomous world, there’s no need for stoplights or stop signs. Remove erratic human behavior, which rules to regulate the flow of traffic are meant to address, and there’s potential for unfettered travel at higher average speeds.
Finally, transportation costs will dramatically decline. A large percentage of fares for cabs and ridesharing services go to pay the driver. Eliminate this cost and that $20 ride falls by 50% … or more.
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For consumers, the adoption of fully autonomous automobiles undoubtedly creates advantageous market forces: fewer deaths, lower commute times, and reduced transportation costs.
But there will be consequences that are easy to underestimate.
For example, how soon will automated vehicles hit the public road? In Pittsburgh, Uber has already launched a self-driving fleet of vehicles, and Moody’s predicts the commercial release of automated vehicles by 2020. The financial services company further predicts that automation will become a standard option in vehicles by 2030, will be standard in all new cars by 2035, will represent the majority of vehicles on the road by 2045, and will be universal by 2055.
Yes, 2055 is four decades away, but people will have to deal with the implications of automated vehicles within the next decade. Change might occur so rapidly that those who work in related industries won’t have time to adjust careers and enter new fields. Plus, there’s no guarantee other industries will have the room to absorb millions of workers.
In the short term, taxi businesses and ride-sharing services like Uber and Lyft are the most ripe for disruption. But they're not the only ones whose futures are at stake.
Consider the American trucking industry. At face value, it would be safer and cheaper for companies to adopt automated trucks that can drive all night at a quicker pace. If that happened, the 191,000 jobs the American mining industry has lost since late 2014 would represent approximately 5% of the 3.5 million American truck drivers whose jobs would be made obsolete by automation.
And the disruption doesn’t stop there.
Insurance, Home Prices, Credit Unions, And More
In the age of autonomous vehicles, what happens to auto insurance? In June 2015, KPMG published a study that estimated the insurance industry would shrink by as much as 60% within 25 years, a loss of some $75 billion. And local governments, which recover hundreds of millions of dollars in traffic fines and vehicle registration costs, will need new revenue models or taxation venues.
Automated vehicles might even cause home values to drop. One of the largest drivers of home price is location — people pay for convenience. But in a world where an eight-mile ride takes eight minutes, is it any less convenient to live 20 miles away? Of course other factors also drive home value, but today’s borrowers might not be willing to gamble that in 10 years their home price will hold steady or increase.
Credit unions face unprecedented changes, and responses to competitive pressures that might have worked in the past might not lead to success in the future. Contact Callahan & Associates to learn more about team learning experiences developed to help credit unions succeed in a changing world.
Automated cars affect credit unions, too. Maybe not in the short-term, but certainly within the next few decades, the rise of automated vehicles will require credit unions to find a way to replace their auto loans. As of third quarter 2016, they made up more than 34% of the credit union balance sheet, according to data from Callahan & Associates.
Nationally, auto loans make up 34.2% of the credit union loan portfolio, representing $293.2 billion.
The strategic question for credit unions is: If you believe automation is a matter of when and not if, where do you focus your resources?
Student loans? Business loans? Lifestyle financing?
The good news is this change is not a short-term problem. But the bad news is, it is a problem.