Is the Auto Industry in Danger?

The rise of the autonomous, electric vehicle technology along with the sharing economy started by Uber is going to have a huge transformative change on the auto industry which is one of the biggest industries globally. This trillion plus dollar industry has not changed a lot in the last few decades similar to the power utility industry. However, rapid technological change threatens to upend the traditional companies leading to a paradigm change.

The utility industry is facing massive pressure from the growth of cheap distributed solar energy. With storage becoming cheaper by the day, the utility industry faces a death spiral in most places. Germany has already seen its powerful four utilities going into a tailspin, with power prices crashing due to the enormous growth of cheap wind and solar energy. Similar pressures are being seen in other countries where solar energy has grown rapidly (Australia). It is only a matter of time before massive change and disruption happen across other major countries like China, USA, and India.

The automobile industry may soon see a huge degrowth as per a report issued by ReThinkX. The company says that by 2021, autonomous vehicles will see widespread commercial usage causing an inflection point to happen.  This will provide a huge boost to the shared economy (shared vehicle concept), and “transportation as a service” (TAAS) will become widespread. By 2031, number of cars needed will drop drastically as the asset utilization of cars becomes much higher.

The report says that a whopping 100 million owned vehicles will be abandoned in the U.S. alone as the TAAS will lead to huge savings for U.S. customers.

Also, read As Indian Market Remains Dull, EV Pioneer Mahindra Looks At Large Overseas EV Markets

The traditional supply chain players of the auto industry such as the dealers, insurance companies, carmakers will see their businesses getting wiped out. Only the most nimble players such as Tesla, GM etc. which are making rapid moves to adopt to the changes may survive as customers will no longer buy cars on their own. The service providers will be the main point of contract with customers and the car makers may become commoditized with their brands no longer fetching a premium.