United States / Spotlight Reports
Autonomous Externalities: Indirect Effects of Autonomous Vehicles
by Robert Miles, Senior Strategic Market Research Analyst
Mar 14 2019

Disaggregating the widespread externalities likely to occur in a self-driving future requires first understanding the current state of the complex network of industries involved. To do so, it helps to simplify the framework into generalized parts. There are original producers, transportation industries and secondary demand and supply industries. For example, the Car and Automobile Manufacturing (IBISWorld report 33611a), Automobile Electronics Manufacturing (33632) and Software Publishing (51121) industries all exist in the original production stage. These industries have their own internal and connected dynamics that flow into the transportation part. This part includes industries such as Long-Distance Freight Trucking (48412), Automobile Towing (48841) and Scheduled and Charter Bus Services (48522). Similarly, these industries are exposed to their individual and connected industry dynamics, which can be further connected to the secondary demand and supply stage of this autonomous framework. This secondary portion encapsulates those industries that support and purchase from the transportation segment, including Gas Stations (44719), Property, Casualty and Direct Insurance (52412), Retail Trade (44-45) and Hotels and Motels (72111) industries. The multilayered and, in many cases, latent connections between industries generates the potential for significant disruption in an autonomous future.

Where we are now

The current industry landscape affords itself to relatively clear-cut examples of linked industry performance. The Car and Automobile Manufacturing (33611a), SUV and Light Truck Manufacturing (33611b) and Truck and Bus Manufacturing (33612) industries all exist on the same level of production and source parts from a similar set of broad parts manufacturing industries. It is in this subset of the economy where the evolution of vehicles will occur. The Car and Automobile Manufacturing industry is a mature industry with well-established brands and operating conditions. However, this does not mean severe disruption cannot occur. Foreign-owned automakers with significant domestic footprints exemplify this trend. Now ubiquitous, Honda Motor Company Ltd. introduced its first car to the United States in 1970 and Toyota Motor Corporation is the third-most prevalent brand in the United States today. For a more recent case, Tesla Inc. (Tesla) is a prime example. Despite fluctuations, Tesla market capitalization is on par with leading automakers. This example is both emblematic of the potential for change and one of the first steps in the current push for automation. As many technological advances are, the technology is grounded in Department of Defense spending projects that opened the doors for small start-ups, Google LLC, Tesla and, eventually, large automakers and other key technology players.

In many ways, autonomous driving already exists, at least in part. This automation fits into tiered levels of autonomous driving, from parking and break assist to highway autopilot to a vehicle with no human control at all. The early tiers of autonomy are already here and, in many cases, have only expanded the core industries involved with the automotive subsect and bring in ancillary industries into its sphere of influence. Features have flowed from luxury badges to standard brands, and the sensors and electronics that help with parking assist and lane departure warnings add to the selling prices of vehicles and support ancillary parts producers. In this current state of affairs, car makers can sell more expensive units, parts producers make higher value-added products, truck drivers benefit from more assistance, cars and trucks still need to fuel up, people still need to stay at hotels and motels along their trip and insurers can charge higher premiums on more expensive cars. However, the logical endpoint of autonomous vehicles will generate a vastly different scenario.

An autonomous future

Imagining the advent of fully autonomous cars can be best done by using current models as examples. The evolution of the warehouse and distribution systems employed today can be considered a microcosm of the broader systems necessary for autonomous vehicles. Operators in the Automated Guided Vehicle Manufacturing industry (OD4419) companies produce the machines that facilitate the movement of products within modern warehouses. These robots track through warehouse based on inputs and interact with human employees. This system mirrors the original producers, the makers of the vehicles; the transportation sections, the process of moving goods throughout the warehouse; and the secondary industries, the insurance for workplace accidents, fueling forklifts and local restaurants for employees. Understanding the dynamics of the modern warehouse facility can lend valuable insights into the potential autonomous future.

Within car and automobile manufacturing, there will be winners and losers, but it will at the company level. For parts manufacturing, there can be a more direct distinction of winners and losers at the industry level. This can be reduced down to the need for different parts in different types of vehicles. Electric vehicles crowd out Automobile Engine and Parts Manufacturing industry operators (33631). New steering methods directly compete with companies in the Automobile Steering and Suspension Manufacturing (33633). On the opposite end of the spectrum within the same industry, more automated movement may require more complex suspension systems. There would likely be an increased demand for Automobile Electronics Manufacturing (33632). Along similar lines, Communication Equipment Manufacturing (33422) could experience bolstered demand vehicle systems that communicate with various information systems. The vehicle-to-vehicle (V2V) and vehicle-to-everything (V2X) systems that would facilitate autonomous movement would require significant infrastructure building. This trend would also have to move alongside software publishing (51121).

The second layer of effects is evident in the transportation segment. Trucking-related industries are exposed to an interesting array of effects. The Local Specialized Freight Trucking (48422), Local Freight Trucking (48411) and Long-Distance Freight Trucking (48412) industries, there are more than 1.9 million workers employed. In each of these industries, wages account for between 20.0% and 30.0% of revenue. Therefore, a drastic reduction in labor costs would generate major savings. Nonetheless, these changes are complicated by the realities of increasingly more expensive autonomous fleets and possible changes in how autonomous vehicles are sold. These complexities flow into a range of secondary industries. For example, operators in the New Car Dealers industry (44111) are likely to experience a new normal in terms of car ownership. From the perspective of consumer-facing industries, the cost reduction of delivery methods could act as benefit for the Retail Trade sector (44-45). However, for industries that supply transportation rather than purchase from, they are likely to experience the negative effects of automation. Gas stations (44719) would likely experience shrinking consumer pools and hotels away from destinations would likely miss out on patrons. Operators in the Auto Mechanics (81111), Oil Change Services (81119b) and Auto Parts Stores (44131) industries will have to adjust to the new normal. These companies must consider how autonomous cars will be serviced, how parts will get sourced and where  vehicle data will be stored. One of the core industry areas where questions remain about an autonomous future is about insurance. The Property, Casualty and Direct Insurance industry (52412) is exposed to the risks from every potentiality of cars becoming fully autonomous and fully adopted. With software driving the vehicles, it must be determined which entity requires insurance. With a severely reduced accident likelihood, the pricing structure of insurance will change. The potential for a fully autonomous future raises questions on how the specifics will play out. However, without fully understanding the connections between industries and potential reverberations of a disruptions, important questions could go unexamined.

Edited by Victoria Wolak