Aug 18 2017
Autonomous vehicles, or vehicles that can guide themselves without human conduction, are becoming an increasingly realistic technology. Autonomous vehicles use various technical inputs including GPS navigation equipment, advanced processing semiconductors, communication equipment and spatial sensors. These vehicles, though most are still in development, could have profound impacts on our economy and society in the ways we travel, conduct business and even the locations in which we live. Not only will autonomous vehicles change legislation in regard to transportation and safety standards, they have the power to seriously impact some of the most prevalent industries in the US economy today. The following industries are expected to be impacted, for better or worse, as a result of autonomous vehicles hitting the road.
Semiconductors are one of main technical inputs in autonomous and driver-assisted vehicles, and are responsible for acting as the “brain” and making the decisions for the vehicle. For example, advanced driver-assistance systems (ADAS), which monitor and perform driving tasks, require specially manufactured chips to perform their duties. Operators in the Semiconductor and Circuit Manufacturingindustry produce electronic goods including sensors to perceive external data, and processors, which process data needed to make decisions. These high-end electronic products require specialized equipment, highly educated employees and expensive materials to manufacture. Consequently, semiconductor manufacturers that have begun to supply this niche market are able to charge inflated prices for their services. In turn, the industry has much potential to grow its profit margins. For example, Nvidia Corporation, a designer and manufacturer of system-on-a-chip units for applications such as mobile computing and automotive, announced a partnership with Toyota Motor Corporation for its DRIVE PX self-driving vehicle technology. Toyota is one of many self-driving car partnerships that Nvidia has begun to work with in this domain, others including Tesla Inc., Honda Motor Company and BMW.
Nvidia is just one of the many manufacturers within the Semiconductor and Circuit Manufacturing industry. Major competitors include Intel Corporation and Micron Technology Inc., both of which have developed chips for autonomous applications. The industry has high potential in the coming years as demand for autonomous and driver-assisted vehicles grows. Consequently, the burgeoning applications that are developing from future expectations in autonomous vehicles will likely stimulate industry revenue, which is expected to increase at an annualized rate of 0.9% to $51.9 billion over the five years to 2022.
Another technical component that makes autonomous vehicles safer than traditional vehicles is their ability to communicate data instantaneously. For example, the concept of vehicle-to-everything (V2X) describes communication between a vehicle and anything else, including road infrastructure, devices, other vehicles and more. Current applications of V2X include the syncing of smart phones, precollision warnings, satellite radio connection and lane correction assistance. However, there is much room for this technology to grow, such as integrated information and alerts for things such as roadwork, lane closures, congested traffic flow, or even open parking spots. Autonomous vehicles would need to be equipped with technology that can effectively and quickly transmit messages and data wirelessly. This is where the role of communications equipment comes into play.
The Communication Equipment Manufacturing industry primarily manufactures broadcasting and other wireless communications equipment. In this context specifically, wireless communications will play a highly important role, transmitting data from the vehicle and its surroundings to any nearby vehicles. For many V2X systems, direct short-range communications are the go to. These systems, however, will all require equipment to receive such signals. For example, antennas, mobile communications equipment and transmission equipment will all be necessary to send and receive signals and data. Additionally, there may arise a need for a universal communications device which will allow for communications between vehicles regardless of make or model. The industry may have a strong opportunity at hand with the continuing progression of autonomous vehicles. Consequently, the applications offered by autonomous vehicles will likely positively impact the industry, which is expected to rebound and grow at an annualized rate of 1.7% to $27.8 billion over the five years to 2022.
Automobile insurance providers may see a large shift in the products they offer and from which areas they will generate revenue. Going forward, auto insurance providers may rely more heavily on telematics devices, more commonly known as “black boxes” to monitor driver activity. However, this form of insurance may generate pushback from consumers as it involves consistent monitoring of location, driving distance and frequency of driving, which some consider an invasion of privacy.
At the same time, auto insurance providers will likely see fewer, but more expensive accidents because autonomous vehicles are safer but more technologically advanced. The complex parts and technical inputs in the vehicles that prevent accidents at a higher rate will likely be more expensive to replace in the case of an accident. However, as more consumers adopt the autonomous vehicles, accidents caused by human error will be minimized. Additionally, due to the increasing amount of data and verifiable information produced by the automobile itself, costs associated with fraudulent claims will likely plummet. The industry will likely undergo a paradigm shift with the introduction of autonomous vehicles. Once the industry has adjusted to the new insurance environment taking into account autonomous vehicles, it will likely perform well. This adjustment will likely aid the industry in its projected growth at an annualized rate of 2.5% to $3.5 billion over the five years to 2022.
While the future of autonomous vehicles differs for each automaker, many companies are expected to focus on ride-share services as opposed to individual vehicle sales. For example, automakers such as General Motors and the Ford Motor Company have partnerships with ride-sharing companies and are expected to release fleets of driverless vehicles to conduct those services in the next five years. Consequently, as autonomous vehicles become more common and widely accepted, consumers may choose to abandon used vehicle purchases and opt for driverless ride-hailing services or newer vehicles that include advanced technologies. Additionally, according to a report published by RethinkX, ride-sharing is less expensive than owning a vehicle and is anticipated to save consumers more than $5,000.00 a year. As a result of these trends, demand for older, preowned vehicles is expected to slow. However, demand for used vehicles will not completely disappear, as many consumers who do not live in cities or urban areas still rely on private travel to get around. Moreover, new car sales are expected to decline at an annualized rate of 0.6% in the next five years due to rising interest rates, making it more expensive to finance a new vehicle. Therefore, financially cautious consumers may opt for a less-costly used vehicle as opposed to an expensive, technologically advanced new vehicle. Nevertheless, as automakers introduce more automation and ride-share services become more commonplace, the Used Car Dealers industry is expected to contract. In the five years to 2022, industry revenue is forecast to rise at an annualized rate of 1.0% to $130.5 billion.
The increasing prevalence of technology in vehicles is expected to hamper demand for the parts sold in Auto Parts Stores industry establishments. As a greater share of vehicles become more automated and technologically advanced, it will become harder for consumers to fix and maintain vehicles on their own. Instead, vehicle owners will opt for professional repair services, which are increasingly being offered through dealerships. Therefore, consumers will purchase fewer auto parts on their own at the retail level, negatively impacting the industry.
Additionally, while auto mechanics and repair shops are a major market for the industry, many repair shops and vehicle dealerships are increasingly sourcing their auto parts straight from manufacturers due to their rising complexity, weakening demand for auto parts stores. Furthermore, autonomous vehicles are expected to cause fewer accidents due to smart driving software, such as brake assist and lane-keeping assist. Fewer accidents means fewer trips to the mechanic and, in turn, leads to decreasing demand for auto parts. Moreover, as vehicles become more electronic and technologically advanced, traditional auto mechanics will be unable to perform common repairs and services. Instead, tech companies that have partnerships with automakers are expected to become more involved in repair and maintenance, causing traditional repair shops to account for a smaller share of the market. Additionally, industry employment is forecast to grow at a slower annualized rate of 1.3% over the next five years as lower industry demand will require fewer workers. Over the next five years, industry revenue is expected to rise at an annualized rate of 1.6% to $63.0 billion.
In the five years to 2022, revenue for the Taxi and Limousine Services industry is expected to grow at an annualized rate of 1.2% to $20.3 billion. However, the industry will face growing competition from ride-sharing companies. These competitors have partnered with automakers and tech companies in an attempt to capitalize on the transportation sector. For example, General Motors is expected to release thousands of driverless electric vehicles through its ride-share affiliate, Lyft, in the next five years. Similarly, Ford has invested in Argo AI, an artificial intelligence company founded by former Google and Uber leaders, with the goal of equipping all Ford vehicles with self-driving technology. In August 2016, Uber unveiled its first fleet of Ford driverless vehicles, which appeared in Pittsburgh. The company continued to expand and started using driverless Ubers in San Francisco in December 2016 and Tempe, AZ in February 2017. Additionally, as consumers continue to rely on apps and their mobile devices to do everyday tasks, the overall structure and convenience of ride-share services becomes more appealing, which takes away from the traditional taxi industry. According to Forbes, travelers now prefer sharing rides over taxi services due to their affordable price and accessibility. While these driverless ride shares still require safety drivers, Ford’s goal is to have fully autonomous vehicles for ride sharing by 2021. Consequently, ride-share services are expected to continue competing with taxi and limousine services, especially in cities and metropolitan areas. As a result of lower demand, employment growth in the industry in the next five years is expected to slow, growing at an annualized rate of 3.0% in the five years to 2022, as opposed to the 8.9% annualized growth in the five years to 2017.