Autonomous cars are here to stay – that much is for certain. But, how much will they change the motoring industry? Well, let’s think about that for a moment. Not only will people traveling in autonomous cars need to get used to them, but so will other road users. So, I would say that the introduction of autonomous cars will change the motoring industry quite a lot.
And although change is good, no one is prepared for this – not even the auto manufacturers themselves. Georg Bauer is Former Vice President of Financial Services in Europe and America-Pacific for Tesla, and he says, “We’re due for a makeover of the car buying and ownership process. The auto industry is 125 years old, and the industry has been charging ahead on the technology side. But if you look at the auto business today, the traditional buying process has experienced only marginal changes over the last 20 years. Everybody is still hanging onto a process that 87 percent of Americans dislike.”
Bauer is a firm believer that the auto industry is long overdue a makeover in the way we buy, service and pays for parts for our cars. “We’ve observed some consequences on the customer side, such as the push into leasing in the 1980s and 1990s. A lot has happened, and we’re now starting to realize that the industry is facing a revolution”, says Bauer. He continues, “What we’ve seen over the last 20 to 40 years was driven by technological changes and customer desires for a low monthly payment, or affordability, and things like that. But now it’s a revolution that will come in evolutionary stages.”
Moving forward what we’ll see is the cars and automaker being insured the individual rather, freeing people from having to go through all those time-consuming, pain-staking processes that are traditionally associated with buying a car. Bauer explains, “We have to reimagine the car-buying process and ownership process completely. For example, we could put together into one single monthly payment all the components of maintenance, insurance, parking, registration, fuel, and accessories.”
I think we’ll start to notice these changes within the next three to five years. Bauer maintains, “Paradigm shifts are never easy on those who dominate the markets, and that’s the automakers right now. With fully autonomous vehicles over time, the insurance situation will change completely. We’ll no longer see individuals being insured, but cars and automakers.”
The problem is, with all this autonomy coming about people will begin to question whether they need a car at all, and at that point, the whole auto industry could come crashing down. Jobs will be affected as traditional car dealerships will begin to decline. The local repair shop will also disappear along with the tire dealer, car stereo store, and individual repair businesses. Beyond that, gas stations and oil companies will continue slowing decline as electricity becomes the norm. And no longer will people get tickets for speeding.
One more significant change that’s inevitable for the autonomous car industry is the way insurance works, and that will cost the industry a huge sum of money. “Right now there’s $1.1 trillion in auto finance loans, and another $400 billion in the ecosystem when you add maintenance and extended warranty and insurance”, explains Bauer. With the introduction of autonomous cars and the shift in who has to insure the vehicle, this will hit the insurers hard. How they react and bounce back from it remains to be seen.
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