Secondary effects of self-driving cars 1/2

Next: Secondary Effects of Self-Driving Cars part 2

By now its obvious that cars in not so distant future will be self-driving.

Let’s take a look at some secondary effects autonomous cars are likely to make. This is the first part of two part mini-segment looking this. The next one focuses on city structure.

From Personal Ownership to Fleet Ownership

Who will be own cars in future? No doubt individuals continue to own their own due to personal preferences. Sharing will be quite much cheaper so it will increase in popularity.

The new mix to the ownership will be institutional and corporate owners - insurance companies, taxi companies, cooperatives, smart contract-based funds. For traditional car manufacturers offering mobility using exclusively own products is one way to stay relevant in future.

In any case the industry structure will undergo a fundamental change. It will be a business to business domain where industrial buyers and their requirements will dominate features. Return of Investment (ROI) becomes most important and buyers look for additional revenue streams that cars can produce.

Users today have a direct relationship with reseller but likely will in future have a relationship with mobility operator. Not even knowing which company made the vehicle and caring less.

Some fleet operators might have cars exclusively designed for their brand.

Mobility as a Service

Mobility as a service (MaaS) is a result of this trend. Based on need users subscribe to the right package.

Before autonomous cars MaaS packages will be made from a number of current transport modes. This means packages with unlimited public transport (metro, trains, buses, city bikes and electric scooters) with additional weekend car and short taxi rides, some packages with unlimited rentals etc.

Later self-driving cars will be part of the package and replace a sizeable part of public transport options.

MaaS has been for quite some time available in Finland for example by Whim https://whimapp.com/ If Finland laws were recently changed to force transport providers to open their APIs so that this type of services could be made. In Finland public transport operators have been less than happy about increases in their services when third parties do it. Proving once more that public interest and public organisation interest are not the same thing - every hierarchy for themselves.

The best MaaS providers will in future offer regional packages where you can use public transit/autonomous cars say in any EU country for a monthly fee. This would be very convenient during summer holidays or on business trips. Perhaps regulators will force this. This already happened with mobile subscriptions, now everyone has either unlimited access or very sizeable package when visiting another EU country.

Cars Monetising You and Making Money for You

Digital assistants in car entertainment systems allow large Internet companies to monetise every hour of your calendar. A basic scenario is for example: You arrive to a new city on work or holiday and hop onto a car, you ask the digital assistant what would be a good Italian restaurant near the hotel, assistant displays a few alternatives with customer reviews and asks if you’d like to reserve a table. A reservation is made, and your calendar is also updated. Assistant follows clock and in due time reminds you that your table is waiting for you so if you walk there, you’d be just in time. This whole interaction can be monetised by showing first alternative based on who bid most for that position.

Every hour of your day that you are awake becomes a spot to be sold to advertisers.

Of course, the whole interaction can happen in your phone, but experience is better if you can just speak and a big, high-quality screen shows alternatives with videos of chefs preparing food, ready-made dishes and customer reviews etc.

People speculate that working during commute could become common, but studies seem to indicate that what really happens is that these hours will be spent on entertainment. Watching films, listening to music, gaming, browsing Internet content with no intention to work or study.

These are some of the ways the car of the future will monetise you.

On flip side, if you own a car, you can rent it out when not needed.

Moving the City Services to Meet You

Car of future might not be about moving you around, but arounds to meet you.

Why take people to the bar when the car can be the bar and pick you and your friends where you are. The profits from selling beverages then go to the fleet operator. The Car Bar. Start night there, pop in a few local establishments for variety and end the night on the wheels.

Cars can also be fitted to be the office for personal business. It can be a doctor’s office, place to get a massage, vaccinations, manicure, reception for foot nurse, dentists, optician, song teacher, piano instructor, guitar shop, personal lawyer, roaming employment agency etc. Service providers move around the city to meet customers rather than the other way around.

This would mean two things – there is less need for fixed office space and traffic gets distributed evenly around the city and throughout the day.

On a very high-rise city there might be less space to move business to wheels, so city structure also plays a role.

Still about Moving You About?

Car can be a rentable meeting room on wheels: pick participants and drive up to a place with noted scenery or golf course etc. having catering on the vehicle. Why not hotel on wheels. Rather than flying, you could sleep through the night on your journey to holiday destination and be relaxed when the toes hit the sand.

Perhaps I could even stay on the same vehicle (van, minibus etc.) through the whole holiday. This allows packing more personal stuff than what the average airlines allow.

Loans and Insurance

For fleet operators’ self-insurance is the cheaper option. They have the economics of scale to cover for occasional losses that insurance companies cover for individual consumers.

Some manufacturers might go to insurance companies to get their self-driving models insured . This is a good option for new entrants and smaller brands that specialise in niche markets who do not have the needed volume for self-insurance. In this option the insurance industry survives but its structure changes. Instead of millions of individual contracts, there will be a small number of companies negotiating with insurance companies. The manufacturers will in addition have information advantage (they capture the data from sensors in their cars) compared to insurance companies making life trickier for insurers.

Consumers no longer need to take out loans to buy cars.

Nor need to sell used cars. Institutional owners will have permanent deals how to dispose of used ones. Most likely they all go to the same places for materials recycling. Refurnished batteries are re-sold as energy storage for households.

If home as a service (HaaS) becomes popular, people no longer need to buy apartments either. Where will banks dump their money when consumers no longer need it? To institutional investors. This means the banking industry goes through a fundamental shift in industry structure as institutional investors have professional organisations in procurement and can source money globally or issue their own bonds.

(note that there are significant structural risks for now owning your own stuff, someone else always does and there is risk for them becoming malevolent at some point in time. Read history if you do not believe this to be possible or even very likely).

In Europe there are about 30 000 deaths yearly in traffic accidents. For every lethal injury, there are 4 major injuries having profound effect on victims and 50 smaller ones. Over a million people die globally in traffic yearly. When family and friends are counted in, traffic accidents have enormous impact on global scale. Most accidents are due to human error.

Self-driving cars will eliminate much of this cost and suffering. Same improvement happens when air quality improves with electric drive. Air pollution is one of the major causes of lung cancer in cities. Much of the small particles in city air comes from combustion engines.

If individuals still own cars, why would anyone get a car insurance if accidents do not happen? Would insurances be against bugs in the software of the cars? If there is a systemic error in a model, a large set of cars could be affected meaning that an insurance companies cannot cover the full costs and will default? So, what kind of protection you would really get with this type of insurance payments?

Or will car companies just self-insure their cars

Maybe the winner, dominant design will be car companies doing self-insureance. When car companies provide insurance, new ways to optimise costs emerge. Spare part business is a major income for car companies today with pricing on the rise constantly. Changing lights may require removal of other parts to gain access, bumpers are made from plastic to reduce weight and cost, but this has made them weak. Coughing loudly near a bumper initiates the self-destruct mechanism leading to expensive repairs. This maximises income for car companies and creates a big repair industry at the expense of insurance companies and ultimately the consumers.

When product manufacturer sells also insurance, it makes sense to start designing so that it products easy to repair with cheap to produce and reliable parts.

Shifts in Workforce

It’s quite obvious that a large amount of professions no longer is needed with self-driving cars. No need for service stations as cars will plug in and recharge their batteries automatically – no places there to have a co-located café, restaurant and shop. Similarly, no taxis or bus drivers or truckers. Neither there is need for traffic police as drinking and driving is difficult in cars with no steering wheels.

Less or no car insurances or car loans needed. No need to sell used cars.

Food and Other Products

Products change also when delivered automatically. Customer no longer wanders among the shelves making impulse buys. Large and colourful, eye catching packages and strategic positioning at the end of shelves at the eye level lose their meaning. The industry enriching our lives with enchanting muzak and scent designers for retail need to pivot. Perhaps catchy elevator swing with mood matching scents is coming to a car near you soon.

There are two ingredients that food industries are not shy using in product design - air and water. Take for example water that is thickened, coloured, flavoured and sweetened with chemicals and whip it full of air – that’s how you get everyone’s favourite canteen dessert: the beloved mousse.

When customer no longer touches the product physically in shop but just tells the digital assistant that toilet paper is out and I want ham and sandwiches, the efficiency how products are delivered to customer becomes a key competitive ingredient. Extra space and extra weight are liabilities. First cereal boxes lose all empty space. Next it is discussed whether the cardboard box around it is needed, or could it just be just delivered inside a light pouch. Similarly, products that contain a lot of water like juices are delivered as concentrates and the water is added at last minute at customers’ home.

Still some products that are sold by weight will continue to contain water. This means that also in future we can still savour Christmas hams with 15-25% added salt water.

Products might be manufactured with 3D printing on the way to you and medicine mixed and pressed into solid pills during delivery. Exact dosage in medicine pills can be personalised.

At home the company whose digital assistant you have will be in command position to decide which producer grows all the veggies and who makes all the bread and butter you buy in future. You just order milk and they decide who is the producer. Prices for products are driven to the bottom. This is of course a lethal threat to current producers.

As countermove they may start to offer “full fridge” as a service where they guarantee that your fridge is always full of fresh produce. Different lifestyle “fridges” - veggie, body builder’s etc. The ownership of produce may also change. Goods in your fridge belong to the producer/shop until you eat it. If you drink less milk this week, the producers analytics detects this and moves a few cartons from your fridge to neighbour. This type of model is fairly common in industry where consumables in warehouse belong to producer until used in the factory.

Another option is for producers to combine forces with kitchen equipment makers (hot-pot, fondue etc.) and deliver a few times a month ready-made produce package for a nice evening with friends.

More space at home

Kitchen Begone

With cheap and automated logistics, part of the population may start ordering their meals and breakfasts as a service. Define what style of food you like, and some machine learning model decides what you get today, robots prepare it and self-driving vehicle delivers it to you when you wake up, taking note on your sleep patterns and calendar in the morning. In evening food will be delivered based on location tracking and predictions when family members return to home.

This means that kitchen is no longer needed to prepare food on daily basis and increasingly people may opt out of having one and use the saved space for other activities. This especially in large city centres where space carries premium price.

You might rent a pop-up kitchen for your home for that one weekend in a year when you prepare food.

Seasonal Products

Seasonal things like clothes and recreational goods – skis, ski boots, bikes etc. take up space at your home. Rather than store these at homes or at bike cellar, they can be packed up and overhauled somewhere for longer term storage to release space. This storage can be robotically packed very tight. More space at home.

Buildings

The garages in building become redundant. They can become logistics endpoints, where products are delivered to wait for customers to come home. These logistics end points need to be open so that any vendor and delivery company can drop their packages there.

They could also become small automated shops/vending machines. Logistics are cheaper when consumables are delivered in bigger batches. So, in future you may take the elevator downstairs and go to a former garage – now a self-service mini-market – to buy soaps, shampoos and conditioners, toothpastes, lemonades etc. Who controls the garage mini-market also decides who gets their wares in as space is limited. Another key decision for house associations or other building owners.

Another option for unused parking spaces is to turn them to vertical farming facilities and grow vegetables under LED lightning or meat and other produce in bioreactors.

If buildings have large parking areas outdoors, building owners could get additional construction rights and hoist a new building there bringing in current owners a nice extra profit.

What types of changes happen to city structure is the topic of the second part.