“It still takes three hours or more to get all the paperwork in place when you buy a car, with all the insurance and DMV work,” Bauer tells Digital Trends. “It’s highly preventive and non-customer-centric. This customer-unfriendly process is going to change fundamentally.”
The key question, though, is what’s the new system going to be like?
“We have to completely reimagine the car-buying and ownership process,” Bauer insists. “For example, we could put together in one single monthly payment all the components of maintenance, insurance, parking, registration, fuel, and accessories. Today you have to schedule everything yourself, you have to pay separate bills and providers. It’s a completely antiquated process.”
But who’s going to change things? Not the people who make money off the current system, he notes.
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“There’s a lot of thinking going on, and it’s hard to predict who’s going to be able to capture the new ownership experience. The OEMs and the dealers have to start to rethink this completely, but at the same time, I’m concerned whether they have the speed and agility to really move this forward. It’s possible that external players will step in to make it a less cumbersome process.”
Enter the autonomous car
The inflection point that catalyzes fundamental change is likely to be the advent of the truly autonomous car in the next three to five years. Taken together with changes already happening in ride-sharing and mobility, autonomous cars are likely to accelerate changes in the traditional automotive economy.
“Paradigm shifts are never easy on those who dominate the markets, and that’s the automakers right now,” Bauer maintains. “With fully autonomous vehicles, over time the insurance situation will change completely. We’ll no longer see individuals being insured, but cars and automakers.”
Autonomous vehicles are also likely to spur the creation of new ownership models, with wide-ranging consequences.
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“There will be more traditional people who want to keep owning the car as they used to, and others who will be addressing new concepts like mobility-as-a-service,” Bauer says. “Mobility-as-a-service could mean a monthly payment or individual ride-sharing. I think we’ll see subscription-based models of ownership where you change and get out of one car and get into a new one at certain times, providing flexibility.”
Potential for disaster
As electric vehicles come to us in concert with autonomous technology, the paradigm shift becomes massive. The biggest disruptions happen when large numbers of people seriously question the need to own a car at all. At that point, we could see a collapse of the entire automotive economy, which is currently structured around designing and building a car, selling it to you, insuring you, charging you for parking and maintenance, producing fuel and selling it to you, and providing you customized accessories.
In terms of jobs, the impact will be staggering. Automakers will still produce cars, but the traditional car dealership will fail. The local car repair shop will go away too, not to mention the car stereo place, the tire dealer, and the independent collision repair business. Look further ahead, and the corner gas station and the oil company behind it go away, as gasoline trends out of use in favor of electricity. With an autonomous car, the insurance industry doesn’t get to clip you for several hundred dollars a month, and even the local cop won’t be handing out tickets for speeding any more.
Even with all that economic disruption, this scenario could be optimistic. That’s because any artificial intelligence that is smart enough to drive a car may also be smart enough to take over your job, or mine.
The end of traditional auto finance
There’s one more implication of autonomous cars and new mobility. The traditional auto finance portfolio is going to go away — and that’s a huge amount 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,” Bauer says. “It’s a huge pie. The banks and the captive auto finance companies are going to have to get their act together or see this huge pie eaten by creative players.”
Captive auto finance companies are those like GMAC and Ford Credit, which are owned by the automakers, and exist to loan you the money to buy a GM or Ford vehicle. Honda, Toyota, Nissan, and all the other automakers have captive finance organizations, too.