Bob Lutz: Kiss the good times goodbye: The auto industry's change curve
autonews.com
autonews.com
My wife and I were discussing American culture today and some of the reasons we'll be hard pressed to do anything to solve our present issues with mass shootings and I look at car culture and see the same kind of value. Americans aren't really good at giving up freedom, for any reason, no matter how many people will die. Cars and driving represent a freedom that I don't think we're going to be giving up any time soon. As you likely assumed from my first line, I'm part of the side that would fight tooth and nail against any attempts to legislate away independently owned and operated automobiles.
I won't waste any time trying to convince people who hate cars that I'm right but I'll tell you that Uber doesn't come near my house and that's a perk. I live 30+ miles outside of the nearest "city" and loooooooove driving/riding (motorcycles) back roads and hills. I'm not trading in my car or truck or jeep or bike or bike for a blob that slips in and out of a pneumatic tube, no matter how much I love Futurama.
ps- Some of my neighbors ride their horses on the same road I drive. We wave.
I think what this article misses is that although non-owned automated vehicles would be great for commuting or leisure activities they wouldn't be great for shopping or road trips. There's going to be a place for the personal car for a long time.
Another way to look at it is a lot of Americans risked their lives for our freedoms, and a large percentage of them died for it. The price of freedom is always blood.
We should be exceedingly careful about giving up freedoms so dearly purchased.
As the shift moves on the insurance pool of manual only drivers is going to get worse and worse and the rates are going to skyrocket.
It's analogous to buying flood insurance. It's super expensive because the only people who buy it are those who live on floodplains.
If the only people who bought car insurance are the riskiest drivers who are clinging to less safe forms of transport, and the rest of the pool that used to contribute premiums are now in safer, cheaper autonomous vehicles and different forms of insurance, then the manual group would need higher premiums.
Unless future drivers become more accident-prone than today's drivers, their premiums will be similar. I don't see much incentive for adverse selection.
The point GP was making is that as autonomous vehicles replace manual, the likelihood of an inter-vehicular accident should also fall for the remaining manual vehicles, lowering their premiums. A nice positive externality - more reason to subsidize autonomous vehicles.
You might or might not but most likely you don't know because you never had an opportunity to try riding horses and therefore you don't do it.
Most people get a driver license not because they like driving (learning process is rather unpleasant) but because it's almost a requirement for living.
When self-driving fleets are widely available, most 16 year olds simply won't bother learning to drive. Driving is an acquired taste, no one is born with innate desire to do it.
After few generations it'll be a specialized skill (maybe police will keep using manually driven cars etc.).
You can see this effect today, with motorcycle insurance. Motorcycle riding is far, far riskier than car driving, and it is a largely voluntary activity. You might expect that motorcycle insurance would be spectacularly expensive relative to car insurance, but the opposite is true: motorcycle insurance is so cheap I don't even think about it, so cheap I pay for a year at a time - under a hundred bucks, I'm not sure how much exactly.
Why is motorcycle insurance so cheap? Because providing motorcycle insurance is cheap. Insurers charge whatever they have to charge in order to make a profit over whatever they have to pay out, and motorcycle insurers don't have to pay out very much or very often.
Step into a hypothetical future, where level-5 auto-driving is everywhere, and collisions overall have dropped by 100x. The cost of providing car insurance will necessarily also have dropped by 100x - perhaps even more, if the types of collisions which remain are less damaging. If most vehicles are driven by cautious, predictable robots, capable of maneuvering intelligently to avoid other vehicles, then even human drivers would get into far fewer crashes than they do today. One can imagine a drunk driver speeding and swerving down a highway but failing to hit anyone, because all the robot cars are casually and gracefully weaving out of its way.
What can we expect, then, for people who still want to drive their own cars? Yes, likely they will pay a higher insurance premium for that privilege: but so what? With collisions overall being so rare, and car insurance overall being so cheap, insurance at a 10x or even a 100x markup compared to robot driving is still likely to cost less in absolute terms than car insurance does today. What's the big deal?
People will continue to drive manually for fun, or because they like old cars, or because they live on a farm, or in the woods, or because they like to go camping out in the woods, or whatever. Manual driving is simply not going to disappear overnight like this article is suggesting. Instead, I think there will be a slow, steady drift toward automation, much like we've seen with the gradual transition from manual to automatic transmissions.
Motorcycle riding won't be automated any time soon, that's for sure. What would be the point? So we'll have humans piloting vehicles on the highways for a long time to come, in some form or another.
I wouldn't be surprised if the Supreme Court ruled such laws unconstitutional. Car culture == freedom of expression or something.
In Manhattan, only 23% of households own cars (https://www.nycedc.com/blog-entry/new-yorkers-and-cars).
In suburbs, it's 100%+.
Are Americans living in suburbs 5x more freedom loving than those living in Manhattan?
Of course not. In suburbs owning a car is a necessity (regardless of price). In Manhattan, you can live without a car and space is in such a premium that owning a car is an expensive hassle. You can see how massive effect of price and convenience can be.
Now imagine that long term per-mile cost of using a car from a fleet is lower than buying your own car? Most people will switch.
How is that possible? Cars are idle, on average, 96% of the time. If a fleet of cars can generate 50% utilization (12 hour out of 24 hour day), there's a lot of room to make a profit while charging lower per-mile price than owning a car.
When self-driving technology works, it'll be a matter of time for majority (easily 50%+) of people to switch to using a car from self-driving fleet vs. owning a car.
If price were a motivating enough factor for people to change, places like SF and Manhattan would be empty.
Don't conflate the two.
A car is an extension of an American's freedom. We won't give it up: it has to be taken.
One path i see it taken is selling public roadways to shore up state (et al) deficits. Big-driverless-company gets control of the roads and can begin to modify and place restrictions.
I, for one, believe my roadways are mine. Won by my father for winning Ww2 as Eisenhower created the interstate system, the "explosion" of freedom where the car is the center.
Just try to restrict my getting in my car and going where i please, when i please. If a driverless car gets in my way, watch out!
So you really are an outlier.
Your problem won't be your freedoms being legislated away, it will be the cost of them increasing when everybody else abandons the platform.
My wife and her friends ride their horses to the neighborhood bar which actually has a tie rail for them out back. They had someone call a local TV station a few years back when she rode a horse into a McD's drive-through.
No point to this post besides that you reminded me of it :-)
The article doesn't discuss how far-ranging these impacts will be. Automakers and dealerships are just the tip of the iceberg. Part suppliers are impacted, as well as auto insurers and gasoline filling stations. Perhaps less obvious are auto repair shops of all stripes, auto repair stores, parking garages...this is a HUGE impact to the U.S. economy. It's amazing how little discussion this is getting beyond unemployed taxicab drivers.
If we had the resources to give 500,000 people a living wage, a home, health care, in exchange for performing a completely meaningless task then that would be a pretty good deal (that many would also be happy to take).
So no, it is not better to give people resources for performing a completely meaningless task. If the task were completely meaningless then we could provide them the same resources without requiring the labor. Neo-Luddites arguing against driverless cars are fighting the wrong thing. Their fight should be distribution of wealth created, not against innovation that increases productivity and makes our lives collectively easier.
https://en.wikipedia.org/wiki/Parable_of_the_broken_window
Basically, it's foolish to have people do unnecessary work because in doing so you have squandered time and resources that could have been spent creating additional value.
Why don't we just give them the money and care instead? Then they can actually do something useful with their time.
Horses are still legally permitted on basically all of the roads they were before automobiles were invented.
Granted, they're generally quite rare, expensive to maintain, and a luxury ... but they're still with us.
Take a drive through Lancaster, PA. First time I saw a horse and buggy on the highway I was kind of freaked out.
It might make sense to do so, but you won't have to.
And, unlike a horse, a car doesn't require much to keep. If you have space to keep it (which, unless you live in a very densely populated urban area, you absolutely do), why wouldn't you? And on that note, if I could keep a pony for free, I would keep one too.
I wouldn't start this sentence with "Unfortunately".
The bit I am seeing is private ownership of cars with a view to the batteries in the car partnering up with their solar panel and cheap overnight electricity. In this mode the car plays a really important role in evening out the peak power demands on the grid by selling electricity back at a higher rate than purchased overnight.
Due to the culture of private ownership I see people getting electric plugs on the lamppost in their street, hooking up to that and buying their electric car on a favourable 5 year lease arrangement. It is very much the family vehicle with child-seats and whatnot permanently installed. These cars will be conventionally driven except on A roads and motorways when the car is allowed to drive. There will still be some expectation of the driver being at the wheel.
There are trucks from all over Europe, until that guy from Turkey also has an electric, self-driving truck then the road is not going to be a fully automated zone, as proposed in the article.
If you don't own an electric car then you won't be able to use it to even out the power demand at home, you would need a Tesla PowerWall or equivalent to store your solar and do that. I am not seeing people buy those things as quickly as they are buying iPhones. Most people don't even have decent insulation.
The ownership of the car jumpstarts this transformation in how we use the electric grid and gets people involved in a way 'Uber' services will not.
I'd like to observe that "a handset provider" is the most valuable public company on earth.
General Motors knows they won't be Tesla and they don't exactly looking forward to fighting over table scraps.
I believe we are in the same time period as AI was during 50s, 60s, 70s when huge promises of great things it would achieve were made but it took many more decades before AI started to really take off (meaning just recently).
I believe Waymo and others are still in very early stage and it will take decades to get reliable enough product which can be rolled out en masse.
The same doesn't really hold true for driverless cars. It appears they will be cheaper, traffic and road safety would improve significantly and we're already now used to calling for a car with the push of a button on our mobile phones. Plus, we've already got billions being put into the development of them, by real public companies with a lot of shareholders and boards to answer to.
We never really had that with flying cars or moon-bases.
> traveling at 120, 150 mph. The speed doesn't matter.
What about pedestrians? Or an animal, such as a moose, that wanders, or bounds, onto the roadway from the nearby forest? Even an autonomous vehicle, even a group of autonomous vehicles traveling as a well coordinated group, need to be able to stop for the person/moose, or they risk killing their occupant or that person. (or the moose.) The top speed will be dependent on how far you can clear around the vehicle. (A quick Google says a speed of 150mph has a stopping distance for a car of a fifth of mile!)
> in 15 to 20 years — at the latest
That is, by 2037, there will be no vehicles that aren't fully autonomous. It won't happen. Even if the technology manages to progress that far, I doubt society is capable of that kind of rapid deprecation, even if we limit it to just the mainland US.
> Everyone will have five years to get their car off the road or sell it for scrap or trade it on a module.
Such legislation is going to be terrible for the individual; how are you going to propose that people make such a selfless trade, because in my experience, they'll never do it. For some people, you're going to legislate away their current means of transport, require them to start paying either for a new vehicle or for the cost of renting one (through a provider, e.g., Uber, counts as renting), and expect them to be fine with it, when for some folks, this might be hugely financially harmful?
> That is the death knell for companies such as BMW, Mercedes-Benz and Audi.
Seems to me like they could easily pivot to making luxury cars (which isn't really a pivot?); want a decent ride? $X. Want nice ride? $Y, where Y > X. There will still be people who want to go from point A to point B, and other people who want to do so in style.
> computer terminals with full connectivity.
No, there will be WiFi. Maybe. And unless we make big improvements to mobile connectivity (which in 20 years, hopefully we will), it must be limited by that.
> This transition will be largely complete in 20 years.
That would be nice, but I just don't see us going from "I can't buy a fully autonomous vehicle" to "manually cars are illegal" in 20 years.
I'm still also curious about a few aspects of (what I know are hypothetical, since nothing is on the market yet) autonomous vehicles:
* Will it bend the law, particular during the transition when there is a mix of human and computer driven vehicles? I, as a human, will regularly bend the absolute letter of the law to keep myself and others on the road safe: e.g., to avoid hazards, to allow a motorcycle to lane-split, because I don't believe the fool next to me will remain in his lane, etc. I.e., I'd rather be alive than right, as the old saying goes.)
* Navigation of a car is sometimes a hideously complex thing. E.g., I need to stop on a long road trip. I might not know where, yet, but we need to take the next exit. Today's mapping apps have always, in my experience as a user, failed terribly here: searching for something always shows results in a X mile radius around you; this includes useless results that are behind me, or completely irrelevant due to being hard to get to.
Google maps does have a nice search feature for on the way while you are navigating. https://www.greenbot.com/article/2995423/google-apps/google-...
(Mobile Safari.)
I hope is vision is just as good here.
Lutz arrived at GM just as the Aztek/Rendezvous were being released, way, way after anything could be done about it; in fact, in one of his recent books he talks in detail about the process failures at GM that resulted in those cars as well as others being sent to market when even many people inside the company were acknowledging that they were nowhere near what they needed to be to be competitive.
I liek my car. I like owning my car. I like keeping my random stuff in my car. I like being able to jump in my car and go on a trip if I want. I like having my dog in my car.
How is "oh well you just call for a car" better?
With that ideology, you are already ready to give up control of the vehicle. It's not much of a jump from there to give up ownership, especially if that means only paying for what you use and not having to constantly maintain it.
If there was a reasonable alternative to that $10,000 a year luxury that is car ownership, many people would take that alternative. They might take it gladly or take it reluctantly, but they would still take it.
This fundamentally isn't true. I've had a used Camry for almost a decade and the annual cost of ownership including purchase price, maintenance, registration and insurance is around 2,500 dollars. It has given me a place to store my things when I have limited housing, it is always ready with all my effects when I want to leave, and I am very much in tune with how the car should feel when it is on the road which gives me considerable comfort. Politically, expect any sort of legislation trying to force "legacy" cars off the road as being anti-poor, because it is. Cars don't have to be expensive.
As of 2103 the average yearly cost of ownership was $9000. I doubt it's gone done since.
If you own the car outright and aren’t planning on selling it, this is effectively zero.
There are different amounts of depreciation between a 2-year-lease of a new vehicle, a purchase of a 50k mile vehicle sold at 150k, and the purchase of a 200k mile vehicle that's sold to the scrapyard to be melted down for steel...but it's all depreciation.
To a business, depreciation is a real thing that affects their tax return. The Canada Revenue Agency has a lot of rules around how to depreciate assets and how they affect income. I'm sure the IRS has similar rules.
To a person, this is not the case. If I have a $10,000 car loan on a $20,000 car, the only things that matter are the down payment of $10,000 and the regular loan payments. If I pay the loan off over five years but the car has a 10 year useful life, those last five years are effectively free.
Yes, from a pure accounting perspective I would debit the asset account for my car, credit cash for the down payment, and credit a liability account for the car loan. But in reality, that doesn't actually matter. There is no impact on my taxes by amortizing my car over 10 years vs 5 years. The only impacts are how the down payment affected my savings and how the loan payments affect my cash flow.
Whether you can then sell that car for $8,000 (and thus finance your next vehicle down payment with it) or have to scrap it for $500 has a huge impact on your total cost of owning a vehicle. The loan payments are factored into our sum of car payments, registration, insurance, gas, and maintenance already, yes, but some of your down payment should be factored into the annual cost. Not all of it, because then you'd be ignoring the value of the car when you sell it. The resulting factor in the sum is equal to the depreciation of the vehicle.
But I think we need to draw a distinction between legislation legislation intended to effect a result against the poor, or motivated by that ideology, and ordinary cause-and-effect which has consequences that disproportionately harm the poor.
If a safer, cheaper alternative to cars becomes available, legacy cars will eventually be forced off the road. It's easy to envision gas stations becoming few and far between, parts becoming less available, auto mechanic shops becoming less profitable. Owning a legacy car will become as difficult as owning a horse is today.
Your ability to drive is predicated on an enormous, organically and accidentally developed economic system comprising an automobile industry and culture that, for example, required someone else to buy that Camry and pay for its development and engineering and quality construction at a high list price, then sell it to you as a used vehicle after steep depreciation.
That accident of history that lets you own a car for $2500 a year will not stay the same forever, the industry will continue to change as technology and culture move on. And no amount of politics will protect it when economics are slanted hard against it.
Personally, I'm driving an old vehicle and the total annual cost has been about half that, but on the average people are spending that much.