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  • Driverless Cars Are Here to Stay

    This week, California Governor Jerry Brown signed a bill to enable driverless cars to be operated and tested on the public roads of California. Google’s Sergey Brin expects that people will be able to drive these robot cars in the next few years. A few years ago, people were discounting the possibility of driverless cars and here they are. This innovation is a potential game-changer and is bound to change how several industries operate. 

    Human error is the primary reason for traffic fatalities, so driverless cars are bound to reduce traffic accidents due to human errors.  You can easily expand the concept to driverless buses and trucks. Transportation-as-a-service will become the norm of the day. Traffic jams are likely to be non-existent.  Fuel efficiency is likely to be higher.

    In this era of driverless vehicles, why would individuals buy cars? Owning a car is an expensive proposition but we do so because of the convenience in terms of driving when we want, wherever we want. Driverless cars take that convenience attribute to a whole new level. We can summon a car when we want and off we go. It opens up the garage spaces that we can use more productively. So cars are likely to become B2B products bought by companies for the express purpose of renting out. So auto companies have to change the way they view and reach their customer bases.

    From a design point of view, it is likely that ergonomic design is likely to become extremely important in driverless cars. Comfort of the passengers is likely to take precedence over everything else.  It is likely that the form design (how cars look) will change as well. Right now, car design is optimized mostly for a larger set of passengers, and not designed for a single passenger.  So it is likely we will see driverless single-seater pods.

    What happens to the auto insurance industry that focuses on the heterogeneity of the driver characteristics in setting insurance rates? Where is the driver risk? Would car manufacturers be liable if technology goes wrong? It is likely that car renters would be liable for problems due to improper maintenance.  The larger point is that auto insurance will undergo a sea change as well.

    The possibilities for change are endless.  Please check out Brad Templeton’s blog post on the likely impact on the transportation infrastructure. We’re entering into an era of incredible change and limitless possibilities.


    Raj Echambadi
    Professor of Business Administration and
    James F. Towey Faculty Fellow and
    Executive MBA Academic Director