With autonomous driving technology already in use, experts predict it wonï¿½t be long until autonomous vehicles (AVs) are available to the mainstream, bringing with them significant changes to the auto industry.
How Automakers Will Respond
Although AVs are not available for consumer purchase, automakers should get ready for strategic response in the near future. In fact, according to a June 2015 article from worldwide business management consulting firm McKinsey & Company, AVs are already being used for mining and farming and could soon be seen in construction.
McKinsey interviewed 30 experts worldwide about the implications of Advanced Driver-Assistance Systems (ADAS) and AVs for the auto industry. Using this research, McKinsey established four main responses likely to come from automakers:
1. Gradual incorporation of technology - "Established premium players with extensive customer bases and strong technical and commercial legacies will probably take an incremental approach to AVs."
2. Adoption specific to the needs of the accessible mobility market - ï¿½New industry players developing ï¿½radically newï¿½ vehicle architectures [will tap into the handicapped accessibility market and] capture volumes quickly and sustain ancillary business models.ï¿½
3. Early adoption overall - Automakers with ï¿½significant technical and commercial legacies ï¿½ will most likely invest in AV research and then wait for the vehicle-level costs of the core technologies to drop while penetration in the premium segments grows.ï¿½
4. Opposition to the technology - These will be the automakers that will most likely avoid entering the AV market until the later years of development.
Changing the Market for Automakers and Financing Needs
Regardless of how manufacturers respond, there will be a definite change in the market for automakers.
In its report, McKinsey posits that once the AVs begin to enter the market in the early adoption phase, automakers and manufacturers could take advantage of the need for original service equipment and car parts. Instead of producing new car models, these companies would change their business focus to serving, repairing and maintaining AVs.
ï¿½Our research shows that nearly 60 percent of customers would follow their smart carsï¿½ recommendations for service locations. Beyond the benefits of a bigger after-sales revenue stream, OEMs will have a strong incentive to service these vehicles, since regulators could ultimately force them to take on the greatest portion of the responsibility and risk associated with crashes caused by AV technical failures,ï¿½ reports McKinsey.
This could lead to a change in the supply chain and in manufacturing employment as AVs enter the manufacturing industry, with both positive and negative effects.
ï¿½AVs in combination with smart technologies could reduce labor costs while boosting equipment and facility productivityï¿½ but would decrease employment in this sector as AVs take over jobs once performed by humans, says McKinsey.
It could also change whether consumers will still need financing for vehicle purchases.
In a February 2016 article in Road & Track, automotive industry expert Bob Lutz poses some very tough predictions for the auto industry and the need for vehicle financing.
ï¿½When we really get to the point where we have individually programmable but standardized transportation modules moving on the freeway with a whole snake of vehicles at 150 mph, brands will no longer matter,ï¿½ states Lutz.
Itï¿½s possible that some consumers will still opt to own AVs, which will not kill off the automotive industry altogether, but there are still large implications for ownership decline, automotive sales and financing needs. Lutz predicts this change will occur first in urban areas, where car ownership has been declining and people are already groomed for AV use.
ï¿½We see, basically, this model in the form of Uber. Uber is simply autonomous vehicles with a driver,ï¿½ Lutz says.
Implications for Non-Automated Vehicles
Lutz compares the change over from non-automated vehicles to AVs to an earlier change in transportation history, from horses and carriages to the first car. Lutz poses that regular vehicles will become relics of entertainment and status, kept purely for personal enjoyment.
ï¿½Consider the horse. With the advent of the car, horses were essentially banned from streets,ï¿½ he says. ï¿½But they made a very nice comeback on private property. Dude ranches, farms, riding stables, racing. I think the same thing can and will happen to the automobile.ï¿½
If this is the case, financing for a non-automated vehicle will certainly change and may even become a much more inclusive buying process across the credit score spectrum.
If you have any queries, ask us about financing and weï¿½ll be happy to talk to you about possible changes and what to do today.