Experts: Self-Driving Cars Could Add $1.3 Trillion to U.S. Economy

Driverless Cars Mercedes - H 2013
Courtesy of Mercedes Benz

Driverless Cars Mercedes - H 2013

The cost savings from reduced accidents and productivity gains will transform all aspects of society, said experts at the Los Angeles Auto Show

Self-driving, or autonomous, vehicles are inevitable and will cause significant disruptions  not only to transportation, but to housing, urban planning, finance and even health care, said experts at this week's Connected Car Expo at the 2014 Los Angeles Auto Show.

That autonomous vehicles being on the horizon is now a foregone conclusion — the only questions are timing and the degree of automation. Car manufacturers predict highly autonomous cars will arrive between 2020 and 2030 while Google, which has been testing a fleet of self-driving cars on California highways, suggests they are only three years away.

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"Every government department will be impacted by this technology: heath, education, tax revenues, pension plans," said Paul Godsmark, co-founder of the Canadian Automated Vehicles Centre of Excellence. "It's absolutely transformational, a paradigm shift — the fact that a vehicle can drive itself."

The changes would be both mundane — parking garages would dramatically shrink in size because ceiling heights would no longer have to accommodate drivers--and far-reaching: less stressful driving would encourage longer commutes, contributing to suburban sprawl, Godsmark said.

In a research report, Morgan Stanley predicted that widespread adoption of autonomous vehicles would contribute $1.3 trillion to the U.S. economy through cost savings from reduced fuel consumption and accidents, including $507 billion in productivity gains because people could work while commuting instead of driving. 

Today's self-driving cars rely on cameras and other technology to avoid collisions with vehicles, pedestrians and obstacles and to stay in lanes. They work best in controlled-access environments such as parking garages and freeways but have difficulty parsing city streets, where the movements of cars and pedestrians are less predictable. (The University of Michigan is building a $6.5 million "city" on 30 acres of its Ann Arbor campus to test autonomous cars in a simulated urban environment.)

Still, even with present technology, the performance of self-driving cars can be impressive.

Mark Platshon, managing director of Icebreaker Ventures and a consultant to BMW's iDivision, which manufactures electric and plug-in hybrid cars, has ridden in the Google driverless cars. "They can merge onto rush hour traffic on the 101 and go through a construction site," Platshon told The Hollywood Reporter. "It's very doable."

Autonomous cars will also have a number of nonlinear effects with impacts on categories as diverse as affordable housing and health care, Platshon said. "If we get autonomous cars, we don't have 33,000 fatalities, 2,500,000 ER visits and $18 billion per year in costs. Take that burden off of every hospital and you've fixed the health care problem."

Platshon cited the example of an acquaintance in San Francisco who had decided to not buy a car, use Uber for transportation and convert his garage to a student apartment. There are tens of thousands of garages in the U.S. that could be converted to affordable housing if people relied on car services like Uber or, in the future, autonomous vehicles that could be summoned by smart phone, Platshon said. "American drivers pay $200 billion a year for car insurance. We could give back $1,000 per person as discretionary spending."

Semi-autonomous driving features such as adaptive cruise control, automatic parking and collision avoidance are already incorporated into many new models and are increasingly popular with consumers, according to J.D. Power and Associates. In recent surveys, 24 percent of all respondents said they would be be willing to pay as much as $4,000 more for an autonomous driving mode — increasing to 41 percent for Generation Y respondents, who value driving — and car ownership — far less than their parents and have made plausible Uber, Lyft and other on-demand services.

Americans spend, on average, three hours per workday in a car, according to a 2013 Arbitron study, or "5.5 billion hours lost on roads every year," said Godsmark. Reclaiming those hours — for relaxation or work — will be the ultimate selling point for autonomous vehicles, said Kyle Vogt, founder of Cruise Automation, a San Francisco-based startup that earlier this year launched an autopilot system that can be retrofitted onto existing cars. 

"This kind of technology, that can actually give me that time back, is going to the No. 1 driver of auto sales," Vogt said. Car manufacturers today, he added, don't understand that. Vogt said that during the auto show, the president of a prominent car maker told him, "Our customers are never going to want autonomous cars because they love driving so much." To which Vogt asked rhetorically, "Has he ever driven in L.A. traffic?"