One of the author's main criticisms seems to be that BMW et are commercialized (e.g. good looking and cheap) self-driving cars and Google is making ugly expensive ones.
But I'd argue that concern is backwards. First, go for correctness. Perfect the algorithm and sensors, get the car working. Then look at scaling down the technology and making it cheaper. The fact that Google doesn't make cars (a point the author made) is kind of irrelevant, because this is a sensor/control/software problem, not a car problem.
Recognize that BMW/Daimler/et al really don't want true self driving cars. It's not really in their interest, because it would radically reduce the need for car ownership and would open up a new world of on-the-fly car rental. Human drivers required = good business. I'm not saying its a conspiracy, just that they have no passion to disrupt their industry in this way.
Even the cost is somewhat moot if the business model is different. Let's say the Google Car sensor package costs $100,000. That's cost prohibitive for individual ownership, but it would not be a problem for a business model like ZipCar + Uber, where you call a car on your mobile phone to get you, and 'rent it' for a short self-driving or assisted trip. If car use moves from ownership to renting, then many people can spread the cost of the sensors.
Recognize that BMW/Daimler/et al really don't want true self driving cars. It's not really in their interest, because it would radically reduce the need for car ownership and would open up a new world of on-the-fly car rental. Human drivers required = good business. I'm not saying its a conspiracy, just that they have no passion to disrupt their industry in this way.
This is spot on. The car industry has done a quite wonderful job of transforming the 'mechanical horse', a contraption able to take you between locations with minimal effort from the occupants, into an extension of your personality and some form of lifestyle statement. The weak point in their advertising is that it is very often aimed at the driver and the driving experience.
Automated vehicles offer the opportunity for greater efficiencies which will translate into fewer cars as making use of a vehicle becomes much more common than ownership of one. Thus the price of purchasing these vehicles will remain high and many owners will need to ensure their vehicle is bringing in a decent income as some form of taxi in order to cover the cost of ownership (shouldn't be a problem as at the moment, most vehicles probably spend the vast majority of their time parked, waiting for their owner). However, I can see that if the whole system can be made to work as an uber-efficient taxi service most people will have no need to own a vehicle.
"Recognize that BMW/Daimler/et al really don't want true self driving cars. It's not really in their interest, because it would radically reduce the need for car ownership and would open up a new world of on-the-fly car rental."
This is exactly what is happening, without self-driving cars. E.g. Drive Now is a very popular service in several german cities, and one of the reasons why I don't feel the need to own a car while living in Berlin. I can just hop in a car any time I like, drive around, and then park it anywhere in the city.
Recognize that BMW/Daimler/et al really don't want true self driving cars.
They don't have a passion to, but they must. Capitalism forces companies to adapt to competition, even when it isn't in their individual self-interest. BMW has to, because if they don't, Toyota will.
Companies make necessary self-defeating choices all the time. Newspaper companies have websites. Barnes & Noble sells e-books. The Empire made the Death Star.
I think Capitalism is a pretty broken concept, but I think this particular facet of it tends to work.
It should have read "Competition forces companies to adapt to market demand". Fortunately, there's a lot of competition in the automotive industry; less so in the production of LCD panels.
Well, they could start shoveling money over to politicians and lobbyists in order to create regulatory barriers to new entrants. Not exactly 'capitalism' in the truest sense of the definition, but certainly a common practice in our version of it.
Innovation does emerge from the competitive forces in capitalism, but it doesn't have to come from the old companies (and usually doesn't). B&N sells e-books, but it was a new market entrant, Amazon, that brought the innovations in e-books and readers
Recognize that BMW/Daimler/et al really don't want true self driving cars.
I highly doubt that. Self-driving cars are a revolutionary product. The first manufacturers to enter the market will definitely make a lot of money, as well as a technological advance on what is the future of cars.
They might be slow to invest in these technologies, because at this point it's still high risk and traditional car manufacturers are notorious for being very conservative, but there are definitely very high rewards for those who can make it.
Good smartphones (with capacitive touch-screens, and webkit-based browsers) are also revolutionary. But there's only two companies making much money out of them, and only one of them has been in the phone industry for long (and even Samsung was never that great at phones).
Cars don't just sell a way to get from point A to point B. They sell an experience. If that experience becomes "put your destination into your GPS, then play Angry Birds for a while", then it will turn the car itself into a commodity.
Right but BMW/Daimler/et al's company models are not based around the kind of massive 'moonshot' R&D that is needed to enter this market with a full self-driving car.
They do a lot of R&D but in a very structured way that produces the consistent results their shareholders ask for. The market might be disrupted but until that happens convincingly they will do everything they can to prevent it while adopting the low hanging fruits of automatic parking etc.
They might consider licensing the technology from Google or buying startups working on the tech but even then they might just bury the startups to delay their main business model being disrupted. I think it's going to take disruption from outside the main car manufacturers - in the same way it took Tesla entering the electric car market to shake it up.
You've misunderstood. Automation allows greater throughput given a set road real-estate, but that does not directly transfer into more total cars owned.
In particular, if totally automatic driving is legalized, then many people will have a strong incentive to use on demand car services as they'll be cheaper and more dependable than existing taxi options. In parts of the world where labor is still extremely cheap this may not be the case, but it is the most likely outcome in the developed world.
And an engineering study published last year concluded that automation could theoretically allow nearly four times as many cars to travel on a given stretch of highway.
I am pretty sure it means what it means: the possibility of selling more cars.
allow nearly four times as many cars to travel on a given stretch of highway
That's throughput not total ownership. A manufacturer doesn't monetize throughput. Moreover a study about allowed throughput is about the civil engineering constraints. It doesn't say anything about purchasing demand. Throughput can increase while total ownership decreases if average car utilization increases. The vast majority of cars spend the bulk of their time parked. Autonomy invalidates the reasons why those cars sit parked. If you work in software it's important for you to understand these distinctions. That or you're just trolling. I can't decide.
My point is that if there are less traffic jam, owning a car becomes interesting. I currently do not own a car because of traffic jams. Remove traffic jams and I'll buy one right away.
If you work in software it's important for you to understand these distinctions. That or you're just trolling. I can't decide.
You never know who is at the other end. In my case, I just felt it was inappropriate. But I could have been an insecure teenager and this comment could have hurt a lot.
You say that now but wouldn't you much rather pay a fraction of the cost of a car to own "part" of a car in a car-sharing program similar to NetJets?
You never know who is at the other end. In my case, I just felt it was inappropriate. But I could have been an insecure teenager and this comment could have hurt a lot.
It might actually be quite appealing to them in the "fewer people own cars" scenario. The remaining people who want to own their own car will probably be willing to pay more, and businesses renting them out will almost certainly be willing to do so (since they'll be making money off them). Their margins would probably go up a lot.
That would be against all economic theories I know. I'd demand is lower, profits use to go down too.
I understand part of your reasoning, buying a car for the joy of driving, and probably some sport cars wouldn't be as affected, but for the automobile industry, it's going to be a hard blow.
It really doesn't go against economic theories. Demand has no direct relationship with profit. Supply and demand affect price, which has an effect on profit. When demand goes down production slows and supply eventually reaches a new equilibrium with demand at a new price. Cars that are already constrained in supply could continue to do well while commodity cars would go unsold. There would be a short term downward pressure on price, but it wouldn't last forever.
I'm not saying it wouldn't be a hard blow for the car industry at all. It would decimate it. But what would be left standing would be the most expensive cars and cars equipped to be rented, and the margins on those are much higher. Companies like BMW are more well equipped to take on that new market reality.
Perhaps the part I was unclear about is that the "them" in my OP was high end car manufacturers like BMW.
Comments
One of the author's main criticisms seems to be that BMW et are commercialized (e.g. good looking and cheap) self-driving cars and Google is making ugly expensive ones.
But I'd argue that concern is backwards. First, go for correctness. Perfect the algorithm and sensors, get the car working. Then look at scaling down the technology and making it cheaper. The fact that Google doesn't make cars (a point the author made) is kind of irrelevant, because this is a sensor/control/software problem, not a car problem.
Recognize that BMW/Daimler/et al really don't want true self driving cars. It's not really in their interest, because it would radically reduce the need for car ownership and would open up a new world of on-the-fly car rental. Human drivers required = good business. I'm not saying its a conspiracy, just that they have no passion to disrupt their industry in this way.
Even the cost is somewhat moot if the business model is different. Let's say the Google Car sensor package costs $100,000. That's cost prohibitive for individual ownership, but it would not be a problem for a business model like ZipCar + Uber, where you call a car on your mobile phone to get you, and 'rent it' for a short self-driving or assisted trip. If car use moves from ownership to renting, then many people can spread the cost of the sensors.
Recognize that BMW/Daimler/et al really don't want true self driving cars. It's not really in their interest, because it would radically reduce the need for car ownership and would open up a new world of on-the-fly car rental. Human drivers required = good business. I'm not saying its a conspiracy, just that they have no passion to disrupt their industry in this way.
This is spot on. The car industry has done a quite wonderful job of transforming the 'mechanical horse', a contraption able to take you between locations with minimal effort from the occupants, into an extension of your personality and some form of lifestyle statement. The weak point in their advertising is that it is very often aimed at the driver and the driving experience.
Automated vehicles offer the opportunity for greater efficiencies which will translate into fewer cars as making use of a vehicle becomes much more common than ownership of one. Thus the price of purchasing these vehicles will remain high and many owners will need to ensure their vehicle is bringing in a decent income as some form of taxi in order to cover the cost of ownership (shouldn't be a problem as at the moment, most vehicles probably spend the vast majority of their time parked, waiting for their owner). However, I can see that if the whole system can be made to work as an uber-efficient taxi service most people will have no need to own a vehicle.
"Recognize that BMW/Daimler/et al really don't want true self driving cars. It's not really in their interest, because it would radically reduce the need for car ownership and would open up a new world of on-the-fly car rental."
This is exactly what is happening, without self-driving cars. E.g. Drive Now is a very popular service in several german cities, and one of the reasons why I don't feel the need to own a car while living in Berlin. I can just hop in a car any time I like, drive around, and then park it anywhere in the city.
It's like GTA!
They don't have a passion to, but they must. Capitalism forces companies to adapt to competition, even when it isn't in their individual self-interest. BMW has to, because if they don't, Toyota will.
Companies make necessary self-defeating choices all the time. Newspaper companies have websites. Barnes & Noble sells e-books. The Empire made the Death Star.
I think Capitalism is a pretty broken concept, but I think this particular facet of it tends to work.
Only in theory, in practice this sort of thing happens: http://www.fbi.gov/news/stories/2012/november/lcd-price-fixi...
It should have read "Competition forces companies to adapt to market demand". Fortunately, there's a lot of competition in the automotive industry; less so in the production of LCD panels.
Well, they could start shoveling money over to politicians and lobbyists in order to create regulatory barriers to new entrants. Not exactly 'capitalism' in the truest sense of the definition, but certainly a common practice in our version of it.
Innovation does emerge from the competitive forces in capitalism, but it doesn't have to come from the old companies (and usually doesn't). B&N sells e-books, but it was a new market entrant, Amazon, that brought the innovations in e-books and readers
I highly doubt that. Self-driving cars are a revolutionary product. The first manufacturers to enter the market will definitely make a lot of money, as well as a technological advance on what is the future of cars.
They might be slow to invest in these technologies, because at this point it's still high risk and traditional car manufacturers are notorious for being very conservative, but there are definitely very high rewards for those who can make it.
Good smartphones (with capacitive touch-screens, and webkit-based browsers) are also revolutionary. But there's only two companies making much money out of them, and only one of them has been in the phone industry for long (and even Samsung was never that great at phones).
Cars don't just sell a way to get from point A to point B. They sell an experience. If that experience becomes "put your destination into your GPS, then play Angry Birds for a while", then it will turn the car itself into a commodity.
Right but BMW/Daimler/et al's company models are not based around the kind of massive 'moonshot' R&D that is needed to enter this market with a full self-driving car.
They do a lot of R&D but in a very structured way that produces the consistent results their shareholders ask for. The market might be disrupted but until that happens convincingly they will do everything they can to prevent it while adopting the low hanging fruits of automatic parking etc.
They might consider licensing the technology from Google or buying startups working on the tech but even then they might just bury the startups to delay their main business model being disrupted. I think it's going to take disruption from outside the main car manufacturers - in the same way it took Tesla entering the electric car market to shake it up.
You're partially right; except that in this race they would prefer to be the first as late as possible.
For that you would optimize being the most ready to run, but trying to get the group not to run for as long as possible.
Recognize that BMW/Daimler/et al really don't want true self driving cars.
You might have missed the part where it says that automated cars would allow much more cars to drive on the roads with less traffic congestion...
So in the end automated cars would more likely mean that owning is more convenient than it currently is.
You've misunderstood. Automation allows greater throughput given a set road real-estate, but that does not directly transfer into more total cars owned.
In particular, if totally automatic driving is legalized, then many people will have a strong incentive to use on demand car services as they'll be cheaper and more dependable than existing taxi options. In parts of the world where labor is still extremely cheap this may not be the case, but it is the most likely outcome in the developed world.
And an engineering study published last year concluded that automation could theoretically allow nearly four times as many cars to travel on a given stretch of highway.
I am pretty sure it means what it means: the possibility of selling more cars.
That's throughput not total ownership. A manufacturer doesn't monetize throughput. Moreover a study about allowed throughput is about the civil engineering constraints. It doesn't say anything about purchasing demand. Throughput can increase while total ownership decreases if average car utilization increases. The vast majority of cars spend the bulk of their time parked. Autonomy invalidates the reasons why those cars sit parked. If you work in software it's important for you to understand these distinctions. That or you're just trolling. I can't decide.
My point is that if there are less traffic jam, owning a car becomes interesting. I currently do not own a car because of traffic jams. Remove traffic jams and I'll buy one right away.
If you work in software it's important for you to understand these distinctions. That or you're just trolling. I can't decide.
You never know who is at the other end. In my case, I just felt it was inappropriate. But I could have been an insecure teenager and this comment could have hurt a lot.
You say that now but wouldn't you much rather pay a fraction of the cost of a car to own "part" of a car in a car-sharing program similar to NetJets?
What is inappropriate about Jason's comment?
It might actually be quite appealing to them in the "fewer people own cars" scenario. The remaining people who want to own their own car will probably be willing to pay more, and businesses renting them out will almost certainly be willing to do so (since they'll be making money off them). Their margins would probably go up a lot.
That would be against all economic theories I know. I'd demand is lower, profits use to go down too. I understand part of your reasoning, buying a car for the joy of driving, and probably some sport cars wouldn't be as affected, but for the automobile industry, it's going to be a hard blow.
It really doesn't go against economic theories. Demand has no direct relationship with profit. Supply and demand affect price, which has an effect on profit. When demand goes down production slows and supply eventually reaches a new equilibrium with demand at a new price. Cars that are already constrained in supply could continue to do well while commodity cars would go unsold. There would be a short term downward pressure on price, but it wouldn't last forever.
I'm not saying it wouldn't be a hard blow for the car industry at all. It would decimate it. But what would be left standing would be the most expensive cars and cars equipped to be rented, and the margins on those are much higher. Companies like BMW are more well equipped to take on that new market reality.
Perhaps the part I was unclear about is that the "them" in my OP was high end car manufacturers like BMW.
This is false.
Profit = Revenue - Costs Revenue = Demand * Price Costs = Demand * Variable Costs + Fixed Costs
Thus,
Profit = Demand * Price - Demand * Variable Costs - Fixed Costs
As long as variable costs < price then profit goes down when demand goes down.
I don't disagree with this post, except on semantics.