The Next Big Idea II

Back in January, I wrote an article on a new technology that would have an enormous impact on the economy. It was that autonomous vehicles were going to change the automotive industry and disrupt transportation industries. What I failed to realize was that even car ownership in the future would change.

Two major ride sharing services, Uber and Lyft, have emerged as the leaders in a race to offer a new way of transportation. Uber believes that self-driving taxis could change the way millions of people get around. Ride sharing may become so inexpensive that people might not even own a vehicle. Uber has already decimated the taxi industry with a smartphone app and now it has its sights on upending the entire automotive industry. Google’s autonomous-drive company, Waymo, is also close to launching a ridesharing service.  In the state of California, there are 42 firms that have permits to test self-driving cars. The Wall Street Journal reports that Waymo now has the world’s largest fleet of self-driving cars, with over three million miles of testing on public roads so far. Uber has over 200 self-driving cars and has logged over 1 million miles.

Uber and Lyft’s vision is to offer a hailing service where customers can hail a ride on their app and a self-driving vehicle will be in their driveway within minutes. Much like a taxi service, they would receive a fee for providing these rides. Ford, GM, and other large automotive companies realize this competitive threat and have drastically increased their research and development in this area. This trend is speeding up the race for self-driving vehicles, which Is now happening faster than most analysts anticipated.

I believe that the entire transportation industry will be disrupted similar to what Amazon has done to the retail industry. The trucking industry will no doubt have less truck drivers employed over the coming decade. Even the pizza delivery job will not be spared. Last month, Domino’s Pizza Inc. and Ford announced plans to conduct a self-driving vehicle test for pizza delivery in the Ann Arbor market. Domino’s CEO said that he believes transportation is undergoing fundamental, dramatic change.

Investors seem more willing to look past quarterly earning misses and are focusing more on the potential for future market share. We are still in the early stages of developing these self-driving technologies. I believe that there will be many new investment opportunities in this area over the coming years.

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