With all the talk about next-generation vehicles (EVs, hybrids, hydrogen fuel cells), and startups enjoying an outpouring of investment capital, you’d think the automobile industry is set for a new era expansion. But what happens if the size of the automobile industry is set to drastically shrink, not expand? According to visionary entrepreneur and author, Jeff Booth, this is exactly the risk that most financial pundits are ignoring. While most forecasts are based on the assumption that all the aggregates of our economy go up forever, this is an outdated construct. The truth is, the speed of technological change is creating efficiencies that are deflationary, that negate the need for expansion in sectors like the automobile industry. Disruptive innovation – like autonomous driving technology – is on the verge of contracting new automobile demand – to an extent that is largely underestimated.
Jeff Booth – a Canadian-based entrepreneur who has built numerous companies, including BuildDirect, which he helped grow to $220 million in annual revenue. Jeff is also the author of “The Price of Tomorrow”, a book in which he discusses the state of the global financial system, inflation and deflation, and the exponential growth curve of disruptive technologies. (audio clip compliments of the Tropical MBA podcast)
Self-Driving Technology Will Destroy Demand for New Cars
If you see the self-driving capability and how fast its advancing, its incredible. Elon Musk recently came out and said that by next year at this time, there will be level 5 self-driving. You can question whether it will be next year, or the year after that, but its coming.
Now if you looked at all of the analysts’ research reports on car production, it looks like demand is growing – everyone needs more cars. But what happens when you have self-driving cars is, it changes the economic paradigm completely. Because the car can drive to you.
Now think about how this will change the demand outlook for the automobile industry.
- Currently the average household has 2 or 3 cars.
- The average car has a 7% utilization rate (meaning most of the time, they sit idle).
- Plus, there is ample parking space (at home and at business) to accommodate for the proportionate number of automobiles.
What happens when a company – like Tesla – says, “hey, you can buy a car and lease it back to the fleet, so it can go off and transport other people while you’re not using it, or you can just buy it for your own use. What do you want to do?” A lot of people are probably going to say, “wait a minute, I can buy a car and it can make money for me? Hell yeah.”
So now, all of those car companies, with all of that production, just goes away. Because if we only use a car 7% of the time, then nobody needs all those other cars. If we have access to automobiles on-demand, anytime we want, a lot of us won’t even buy a car. We’ll start using an on-demand service, just like we use servers from Amazon today for our businesses instead of buying our own servers.
Investing For A Smaller Auto Industry Due To Autonomous Driving Technology
If Jeff Booth’s forecast is correct, and there is a significant decline in demand for new automobiles, which companies will suffer and which will profit? Below we’ve listed our picks for the companies due to decline versus those that will grow from the change in driving behavior.
Big Auto Manufacturers (Declining Demand)
* even though most of these companies are developing self-driving vehicles, this technology has the potential to severely reduce future demand of the very products they manufacture.
Leaders In Autonomous Driving Technology