Who Loses From Google's Driverless Car?

Margie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Google’s (NASDAQ: GOOG) driverless car technology is poised to save society potentially trillions of dollars. From shepherding the elderly and disabled around, to allowing people to be productive in the back seat with time they’d otherwise spend concentrating on the road in front of them, driverless cars will create tremendous returns for society. Of course, with a massively disruptive technology such as this, there are always companies that stand to lose. Driverless car technology has the potential to be more disruptive than the MP3 was for Tower Records --only for more industries.

Expect to see many of these companies and special interests groups lining up on the other side of the aisle from Google, trying to inhibit mass implementation of the technology.

Presupposition

Google estimates that between 77% and 90% of accidents are caused by human error, and that mass implementation of robotic drivers will eliminate this.

There is good reason to believe this is accurate. Robotic cars have driven almost 500,000 miles now (being legal and tested on the roads of California, Nevada, and Florida) and the only fender-benders the cars have been in took place when humans were at the controls. I'm assuming Google's estimates and track record will bear themselves out in the future.

I’m also assuming that due to the convenience of 24-hour robotic taxi service in major cities, very few people in those areas will purchase cars, if only to save money on ownership costs.

So who’s going to be opposed to this? Who'll lose jobs and profits? Let’s examine.

Taxi Drivers + Valets

The first obvious casualty. Why pay someone to chauffeur you when a robot can drive you around both more safely and cheaply? In addition, it will be easier to share rides to further reduce costs when everyone is plugged in electronically, and few people (if any in major cities) own cars.

If we don’t own the car we go to a club/restaurant in, or if for some reason we do, and if the car can park itself, what need will there be for a valet?

Body Shops + Insurers + Media

With 80%+ fewer accidents, the number of auto body shops will dramatically decrease, and the jobs inside the facilities as well.

All those car insurance commercials you see? Think about how much money insurers like GEICO, wholly owned by Berkshire Hathway (NYSE: BRK-B) (NYSE: BRK-A) spend trying to convince us to do business with them. While they'll likely still advertise for their other insurance services, it's possible that they could reduce their ad buys related to auto insurance. For a media company like CBS or Fox, which pays tremendous amounts to broadcast live sports like the NCAA Tourney or the Superbowl, that could mean less revenue from a major sponsor.

Since cab companies will likely negotiate one insurance rate for their entire automated fleets, the profit margins generated for insurance companies could dwindle from today's rates, even with the decreased costs of processing many claims. 

In addition, Warren Buffett is famous for taking his huge insurance float (partly derived from GEICO) and investing it at higher rates of return. That float could shrink -- a double whammy, albeit small in relation to its size, for Berkshire shareholders.

Steel Companies and Road Builders

According the EPA, steel represents approximately 65% of a car's materials, offering passengers some protection in a collision. With a massive decrease increase in accidents, cars will likely be redesigned out of lighter-weight composites for greater fuel efficiency. This will open up a whole new industry, and the potential for much lower-cost production of more environmentally friendly composites.

As for road builders, less public money will be spent on roads due to driverless cars being able to drive closer to one another (a rare win for taxpayers). Of course, that means less demand for construction crews and the raw materials needed to pave over new roads. Our highways will still need required maintenance and such, but what the road builders lose, society will save, since it costs much more to build new roads than maintain them.

The Fuel Industry

As mentioned above, with cars built from lighter-weight and more fuel-efficient composites, more carpooling, and cars driving in convoys to reduce wind resistance, demand for fuel may not escalate nearly as much as we're now projecting. It might even drop.

Parking Lots

Have shares in a privately owned airport parking lot? Sell them now. This is as obvious a casualty of driverless technology as Tower Records was for the mp3. With a robotic taxi driving you to the airport, and few people owning an individual car, there would be almost no demand to park near a terminal.

Instead this real estate can be turned into parks, office buildings, housing, a more efficient use of land.

Municipalities

Municipalities that generate much of their budgets from traffic and parking tickets would have to look elsewhere for revenue. I don’t think too many of you out there would shed tears over the end of these "revenue enhancers," however. 

Takeaway

I have explored but a small percentage of the ways driverless technology might affect society and who stands to lose or gain from it. Undoubtedly, it will have affects none of us can forsee today, but much like the press spoke so much about the “information superhighway” that was coming in the early 1990’s, driverless cars are well on their way, and much like the internet, will have a massive effect on civilization as we know it.

As an investor, it’s a wonderful exercise to consider how it will affect you and your investments.


Margie Nemcick-Cruz has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway and Google. The Motley Fool owns shares of Berkshire Hathaway and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus