Andrew Lockley – Exponential Investor (United Kingdom) –
Yesterday, we looked at the winners from the forthcoming transport revolution – the switch to autonomous, electric vehicles. A wide range of sectors stands to benefit – and there are some real surprises.
But it’s not all good news – and a wide range of industries will take an absolute battering. Today, we’re talking about the losers.
This is actually a very mixed story, but we’ll start with the bad. Many small towns have a tiny petrol station, often selling little more than Diet Coke and diesel. These fuel-heavy retailers are going to get wiped out. But overall, petrol stations will be disrupted, not destroyed. This is counter-intuitive – as robots driving electric cars have no need to buy petrol. But those cars will still need charging – be that with electricity, hydrogen or whatever.
If electric cars with lithium-ion batteries become the technology of choice, then longer and more frequent stops will become the norm – and that’s fantastic news for gas-less petrol stations. Furthermore, with motoring that’s cheaper and more accessible, we’ll see more people driving further. On top of this, lots of the reasons why society tries to persuade us all to drive less will fade with electric cars: pollution, safety, and global warming.
These are all strong arguments against expanded road transport, and all are weakened by a transition to autonomous electric cars. Accordingly, we’ll likely see much more road transport, not much less. All these new travellers will still need to buy coffee, sandwiches and use the restroom. As such, petrol stations will look more and more like mini motorway services, and much less like the “two pumps and a cashier” businesses that are doomed to die.
Let’s be honest, electric cars are an absolute catastrophe for the vehicle repair industry. Other than swapping a battery once a decade, they almost never go wrong. All garages will be left to do is changing the odd tyre and wiper blade. Even brakes will hardly need servicing, as electric motors can do most of the stopping. So, if you’ve got shares in Kwik Fit, FastFit Station and the like – then it’s a great time to get out. Very soon it will be obvious that the writing is on the wall for this industry, and there will be no buyers left for your stock.
The road safety industry is vast, and sprawling. It encompasses everything from motorway lighting, to speed cameras and fire engines. Even a substantial fraction of the criminal justice system is tied up with bad driving. Autonomous cars will deal a deadly blow to this sector – as they’ll remove the need for everything from back-street shops, to police stingers and driver re-education courses. That’s because autonomous cars will hardly ever crash: they don’t drive drunk, nod off at the wheel, get distracted by children, or flee from police. Dying in a car crash will soon seem as alien as dying from smallpox.
Despite us seeing a boom in total miles travelled, car manufacturers are going to have a hard time. Firstly, we will we see a move away from private car ownership, towards ultra-high mileage 24hr taxi fleets. As our cars stand idle around 95% of the time, we can expect the new car market to contract by a comparable amount – less adjustments for overlapping times of use, and an increase in overall mileage travelled. Additionally, a near-total absence of accidents will take away a major driver of new vehicle sales. Not only will sales drop, but margins will also be cut.
The business model for the industry is often to cover costs with volume vehicles, and cream off profits with high-end variants. That’s why we see utility brands (like Skoda) in the same groups as premium brands (like Audi); they’re basically the same cars, with different trim. But, when almost all vehicles sold are generic taxis, it’s hard to see how the luxury sector can hold up. The failing high-end sector will take down many manufacturers, and remove much of the profit for those that remain. Of course, some people will still own their own vehicles, for various reasons (such as needing to carry tools) but the majority of us will carry on our daily lives using robot taxis. If you think this is an odd idea, try and remember when you last used your house phone…
As if traditional retailers didn’t have enough to contend with already, the revolutionary impact on haulage and warehouse costs from automation will be the death knell for many of them. When delivery costs are near-zero, there’s really no reason for any to come to your shop – unless it’s fun. Therefore, the future for physical retail is extending the trends we’ve seen to date – and that’s mostly been downwards. Utility retail will increasingly fade away, and experience retail will take up a larger proportion of the remainder of the sector. We’ll see more service-driven shops like Starbucks and Build-A-Bear, and far fewer dull stores, such as Wilko.
Parking garages are going to take as much of a battering as are vehicle repair garages. Without a need to own a car, you’ve no need to park a car. Furthermore, the last place a taxi owner wants their vehicle to be is sat in a parking garage. Surface parking will also be affected, and we’ll see tiny taxi ranks replacing huge car parks. This will unlock a lot of land for redevelopment, as we saw yesterday.
Who do you think will win, from the autonomous, electric vehicle revolution? Please let us know your views – firstname.lastname@example.org.