The technology required to enable fully autonomous cars is not here yet. You’ll get no argument from us on that point. 

Despite the loftiest of wishes from companies like Uber and Tesla, for now autonomous cars can’t seem to stop running red lights…which is a slight issue.  And that says nothing about the societal transformation required to fully adopt such technology which will likely span a generation.  Let’s face it, just like grandma refused to adopt the e-commerce revolution, there are certain people who will simply never trust a computer to drive them around.

All that said, it is inevitable that, at some point in the future, autonomous vehicles will be the norm.  And, when that day comes, it will undoubtedly wreak further havoc on a U.S. job market where 95 million people have already decided they would rather sit at home than look for a job…at least according to a new study from the U.S. Commerce Department. 

According to the study released last week, nearly 4 million jobs in the U.S. could be completely eliminated by autonomous vehicle technology while closer 16 million will be radically transformed.

The expected introduction of autonomous, or “self-driving,” vehicles (AVs) promises to have a potentially profound impact on labor demand. This paper explores this potential effect by identifying the occupations most likely to be directly affected by the business adoption of autonomous vehicles.

 

In 2015, 15.5 million U.S. workers were employed in occupations that could be affected (to varying degrees) by the introduction of automated vehicles. This represents about one in nine workers.

 

We divide these occupations into “motor vehicle operators” and “other on-the-job drivers.” Motor vehicle operators are occupations for which driving vehicles to transport persons and goods is a primary activity, are more likely to be displaced by AVs than other driving-related occupations. In 2015, there were 3.8 million workers in these occupations. These workers were predominately male, older, less educated, and compensated less than the typical worker. Motor vehicle operator jobs are most concentrated in the transportation and warehousing sector.

 

Other on-the-job drivers use roadway motor vehicles to deliver services or to travel to work sites, such as first responders, construction trades, repair and installation, and personal home care aides. In 2015, there were 11.7 million workers in these occupations and they are mostly concentrated in construction, administrative and waste management, health care, and government. Other-on-the-job drivers may be more likely to benefit from greater productivity and better working conditions offered by AVs than motor vehicle operator occupations.

So which professions will be hit the hardest?  Well, the Commerce Department says that 65% of the most obvious job losses will likely come from the long and short-haul commercial delivery businesses.

Of course, the direct driving job losses say nothing about the 2nd-derivative losses that will also inevitably come.  For instance, consider our post from almost exactly one year ago in which we argued that autonomous cars could double the capacity utilization of passenger vehicles thus cutting a ‘normalized’ auto SAAR in half (see: Ford Announces Plans To Self-Destruct Starting In 2021).

So what do we mean when we say an autonomous car pretty much ensures Ford’s demise?  To be clear, we’re not specifically targeting Ford…the whole auto industry is in serious trouble when truly autonomous driving arrives.  Below is a little math to help illustrate the point.

 

Right now there are roughly 250mm light-duty passenger cars on the road in the U.S. (that’s about 1 car per driving age person, btw, which is fairly astounding by itself).  American’s travel roughly 3 trillion miles per year in aggregate which which means that each car travels an average of 12k miles per year.  Now if you assume the average rate of travel is 45 miles per hour then you’ll find that each car is implied to be on the road for an average of about 45 minutes per day.  That’s a capacity utilization of about 3% (see table below for quick math).

 

 

A 3% capacity utilization ratio is, needless to say, fairly terrible.  We don’t imagine too many CFOs would model capital allocation decisions based on a 3% capacity utilization for fixed assets.  That said, individuals are forced to underwrite car purchases to a 3% capacity utilization because they have no choice.  People have to get to work and 100% reliance on public transit options as just not feasible for most people in this country.

 

That is, until the arrival of completely autonomous vehicles.  The problem with mass transit is that people still need a car to get back and forth to the train station or bus stop.  The problem with Ubers/Taxis is that they’re expensive for daily use due primarily to the labor overhead that’s built into your per mile rate.  But fully autonomous vehicles solve both those problems.  Now, people will have the option of a vehicle at their beck and call without having to fund the upfront capital cost of a purchase and/or the per unit human capital costs inherent in taking an Uber.  In other words, the per mile rental rate of a fully autonomous car should be competed down to a level that provides an adequate return solely on the cost of the vehicle…no wages, no benefits, none of the typical hassles associated with employing people.  Or, said another way, taking an Uber is going to get really freaking cheap.

 

But the best part is that capacity utilization with fully autonomous cars can skyrocket driving per unit costs even lower for passengers.  For example, when you drive to work right now your car sits there all day until you drive home.  In the autonomous car world, that car will drive you to work then go pick up multiple other people to do the same thing.  Now, if capacity utilization doubles from just 3% to 6% all of sudden half the number of cars are required in the US which means annual SAAR goes from ~17mm to ~8.5mm…which means Ford and GM likely find themselves in another bailout situation.

 

And, if you’re making half the cars, guess how many people you need to make them?

Oh well, at least there’s always that McDonalds job to fall back on…oh wait…

The full Commerce Department study can be viewed here: