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Mercedes-Benz F015 - Luxury in Motion
James Bryant

How Will Driverless Cars Affect Vehicle Sales?

by James Bryant | Dun & Bradstreet Editor

May 21, 2015 | 1 Comment »

Mercedes-Benz F015 - Luxury in MotionThe prevailing view about driverless cars is that they are all but inevitable. Google’s autonomous vehicle research has been widely publicized, and traditional car companies including Audi and Mercedes have entered the fray with vehicles offering variable degrees of autonomous function. An upcoming software update to the Tesla Model S will enable it to essentially steer itself while on the highway.

At the moment, only four states allow driverless-car research on public roads (California, Florida, Michigan, and Nevada), but industry watchers believe driverless cars could be used in controlled settings, such as highways, by as soon as 2020. As with electric cars, the key to the success of driverless cars hinges more on consumer acceptance than with the technology. There are also legal, infrastructure, and regulatory issues to work out.

However, assuming that autonomous cars are a foregone conclusion — that they’re just a matter of time — what do they mean for car companies’ bottom lines? Recent analysis by Barclays PLC suggests the implications for mass-market carmakers like GM and Ford could be significant. Over the next 25 years, driverless cars could reduce US new-car sales by 40 percent to about 9.5 million per year. Such a drop in unit sales could mean GM would have to decrease production by nearly 70%; Ford would have to slash production by nearly 60%.

Barclays’ analysis envisions a future with four types of passenger vehicles: traditional cars and trucks used mostly for work in rural areas, autonomous vehicles used by families, shared autonomous taxis that are booked via mobile device, and autonomous buses and vans that accommodate multiple riders.

Consumer attitudes about mobility are changing, and traditional car ownership is being challenged as populations increasingly concentrate in large urban centers. Global carmakers are adapting to these shifts by making investments in various mobility strategies including car-sharing, trip-planning apps, car rental, and taxi services. Autonomous cars are being viewed by many as a logical addition to the landscape of future mobility. Self-driving cars that communicate with each other and infrastructure could help make transportation of people and goods safer, more efficient, and less expensive.

The market for autonomous driving technology is forecast to reach $42 billion by 2025, and by 2035 self-driving cars could make up 25% of global car sales, according to Boston Consulting Group. The firm also predicts partially autonomous vehicles will be coming to market “in large numbers” within the next two years. Its gradual nature makes such a market disruption more manageable, but a 40 percent drop in US car sales over 25 years is still a sobering forecast. The Barclays reports suggests the Detroit Three will still find buyers for their highly profitable trucks, but will be challenged by a move away from mass-market offerings and toward autonomous family cars and shared vehicles. Their recent experiments with mobility-related concepts suggest mass-market carmakers are starting to sense the disruption of their traditional business model and are attempting to evolve. But in a world that moves faster than ever, and in new ways, will they be able to evolve in time?

James Bryant is a writer and editor for the First Research team at Hoover’s.

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Image courtesy of Mercedes-Benz.

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I can think of one consumer segment that can’t wait for driverless cars: the elderly. Many have vision and other problems that lead to their licenses being revoked. Driverless cars would extend their independence and keep the rest of us safer.

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