Andrew Lockley – Exponential Investor (United Kingdom) –
Exponential Investor has discussed the forthcoming revolution in transport on many occasions. However, most of this analysis has been focused on the industry itself, and not on the knock-on effects on the wider economy.
Today and tomorrow, we’re going to look at some of the industries which will be affected most strongly by pending changes to transportation. Once you start analysing the full impact of this disruption, you’ll see there are some real surprises.
Firstly, we’ll will look at the winners…
Agricultural and extractive industries are going to experience a boom from autonomous vehicles. Much of the work done in mining, farming and forestry is highly automatable. This is going to be reflected in the prices that these industries pay for their inputs. If you don’t have so many people driving trucks, or cutting down trees, then you can sell your outputs much more cheaply. For secondary industries keen to make use of such products, the resulting price drops can make a world of difference to their economics. As such, a revolution in automation may lead to a significant expansion of customer industries (ie, manufacturing). With input costs falling and demand rising (due to reduced prices), mining and logging operators will see a boom. That’s great news for the industry – but not such good news for sustainability. Expect increased pressure on forests, and an acceleration of profligate use of non-renewable minerals. Meanwhile, land prices in these sectors will likely rise.
One of the most unusual things about autonomous and electric vehicles is that consumers will be relatively unlikely to own them. The idea that we all need a car parked outside our houses is going to seem as alien as having a horse tied up there does. As cars become autonomous, the price of taxi rides falls below private motoring – because capital is more efficiently used by occasional rental, than by full-time ownership. Accordingly, it’s going to be boom time for taxi and minicab firms – although that’s currently an industry concentrating in the hands of major players, such as Uber.
Just like mining and farming, the whole logistics supply chain is going to become enormously cheaper. If you don’t have to pay people to drive lorries, you can drive stuff further, and still keep your economics the same. Even with today’s technology, we already see bizarre logistics operations – like sending British sprouts to Poland for trimming, before they’re sold in UK supermarkets. This modern world of snaking supply chains is only going to get snakier. What’s more, this revolution in logistics is not going to be limited to roads. In the same way as you can automate a tractor, you can also automate much of the internal transport, within warehouses. Industry leaders, like Amazon, are already handing over much of their internal operations to robots – and this trend won’t peter out anytime soon. The economics of logistics are about to be completely shaken up. We’ll all have to get used to a world where there will be many more lorries, and more (or bigger) warehouses.
E-commerce is so inextricably linked to logistics that the two sectors almost act as one. The economics of selling online will be revolutionised by autonomous vehicles – as distribution and delivery operations will get enormously cheaper. These new efficiencies will put ongoing pressure on bricks-and-mortar retailers, as the e-commerce sector expands. This disruption won’t all be about conventional transport, however. There will be a lightweight revolution – because you don’t need a human in a three-tonne van to deliver a burger. Accordingly, we’ve also got to consider both flying and pavements drones as big winners from the on-demand economy.
The construction industry is going to receive a huge boost from the knock-on effects of automation and electric transport. While internal costs will change on a permanent basis, we’ll see a huge temporary building boom, as the country is reconfigured around autonomous electric transport. We’ve built our urban environment around private car ownership for half a century. That’s going to get ripped up in coming decades – and an awful lot of construction is going to be needed.
There will be new patterns of development: in cities, we’ll build over almost all the parking spaces; while new suburbs and towns will spring up, well beyond the conventional commuter belt. No more manual driving means people will be happy to commute further, and will be far less fussy about living far from amenities. While town centres will become even more compact, and even more accessible, peripheral suburbs and unfashionable towns will see a resurgence. People will be happy to browse their phones, sleep or eat on long commutes – travelling many miles to reach inexpensive, pleasant houses. These changes will mean a large increase in demand for both road space and for new suburban and commuter-belt homes. Also, as we’ve seen above, there will be a lot more logistics capacity required – so it’ll be a busy time for people building warehouses, and the roads to reach them.
Let’s face it, the drink-driving laws haven’t exactly been kind to pubs. I’m lucky enough to be able to pop out for a pint without my car – but many people live inconveniently far from their local boozer. Accordingly, many of us are now drinking at home. In future, living in the suburbs will no longer mean you’re cut off from the fun – and ultra-cheap autonomous taxis mean you will be able to enjoy drinking and driving once more.
Property by main roads
If you’d prefer to keep tight control of your investment cash, then buying property near a main road will be a good long-term bet. You’ll have to put up with a decade or two of noise, grime, danger and pollution. But once it’s all over, your house will see a nice pop in value. You’ll be able to enjoy a quieter, safer, cleaner house – and know that you’ve been paid handsomely to do so.
Who do you think will win, from the autonomous, electric vehicle revolution? Please let us know – email@example.com.