A World Of Driverless Cars: What It Will Mean

Business, China, Company Strategy, Economics, Environment, Polyolefins, Sustainability, Technology

By John Richardson

Nissan-Autonomous-1-blog480SURE, whenever a computer-driven, driverless car is involved in an accident there will be lots of doubters who worry that this not a viable breakthrough. We will also see lots of people worried that malignant hackers will take over the wheels of your self-driven car and do something evil (this, of course, also applies to all the software technology that is increasingly being used in human-driven autos).

But I feel that these problems will eventually be overcome. And given the speed with which other new technologies have recently been adopted, we are talking about a much-shorter timeframe than many people think  before we are in a world, at least in developed markets, of roads filled with almost entirely – if not entirely – self-driven cars.

Why will these problems be quickly overcome? Because the environmental, health and cost-saving advantages of switching to a world with driverless cars are immense. Despite the obvious short term disruption to employment, and so to economic growth as this shift takes place, all the other benefits for politicians and corporations are just too big to ignore.

There is another important reason why the switch to driverless cars will gain tremendous momentum. To have one of the most expensive assets that any of us will ever own sitting idle for what The Economist argues is 96% of the time will increasingly make less and less dollars and cents sense to the vast majority of people everywhere.

The reason is that the end of the demographics-driven and China-driven economic Supercycle will exert increasing downward-pressure on middle-income earners. So why buy a driverless carl when there are lots of rental or leasing companies willing to provide you with an almost instant ride every time you need it at a much-lower cost?

There are sure to be both negative and positive implications for the chemicals and polymers industry. Here are just four of the economic effects of driverless cars, followed by my thoughts on what the negative and positive implications for our industry will be for each of these four effects:

  1. Self-driving vehicles could reduce urban vehicle numbers by as much as 90%, according to the same Economist article I have linked to above. That’s a potential 90% fall in demand for all the chemicals and polymers that go into autos. Negatives: Think of polypropylene (PP) demand. A very important driver of PP consumption as a whole is block copolymer grades of PP that go into autos. Take 90% of this demand away and what does the global PP market look like in a decade’s time? The same, to varying other degrees, will apply to all the other products from our industry that go into autos such as nylon engineering resins, polyurethanes, polyvinyl chloride (PVC) and high-density polyethylene. Positives: There is an opportunity for the innovative chemicals companies that start working with auto manufacturers right now. Driverless cars will look very different from today’s auto fleet – for example, seats might face backwards rather than forwards and in terms of comfort might be more like a living-room armchair than a conventional driver’s seat. Auto builders will need new chemicals solutions to make their designs work.
  2. Smaller houses because there is no need for garages anymore, and so people will end up living closer together. The end-result could be a lot taller houses in order to make better use of land. These taller properties might also be more likely to be located in town and city centres because, as The Economist once again pointed out, parking accounts for as much as 24% of the area of American cities, and some urban areas have as many as 3.5 parking spaces per car.  So less space taken up by parked cars means more space for urban living. Negatives: Less demand for water and sanitation pipes and electrical cabling because homes are built closer together. This would affect demand for PVC pipes, and for PVC and low-density PE coatings grades used in electrical cabling. There would also be less demand for all the chemicals and polymers that go into housing. Positives: The value will be working with the housing industry to redesign homes, as with autos. And if urban living becomes far-more dense, sustainability will become an even bigger issue. This is where the chemicals industry can also help.
  3. Accidents kill around 1.2 million people globally every year, which is the equivalent to a 9/11 attack every single day, according to the World Health Organisation. So you can see the health savings for governments as driverless cars cannot drink – and if they are properly programmed and fully protected from hacking, they will never drive like complete idiots. Negatives: Less demand for all the chemicals and polymers used by accident and emergency departments. Positives: If governments are sensible, they won’t sack A&E consultants, doctors and nurses, but will instead redeploy them to work on heart disease, diabetes, Alzheimer’s disease and all the other illnesses that will become more prevalent as populations age. Chemicals companies and pharmaceutical companies that again switch their focus in line with this change in healthcare focus can make tremendous gains.
  4. A big fall in demand for gasoline and diesel, perhaps by as much as 90% – or perhaps even more if most self-driven autos end up being largely electric. Negatives: Refineries will obviously have to shut down, resulting in big implications for those chemicals producers dependent on refinery feedstocks. Positives: This process could take many years, during which time there might be plenty of cheap naphtha and other refinery-sourced feedstocks available for chemicals producers. And/ or as climate change concerns accelerate (another reason to, of course, believe in the growth of driverless cars), chemicals producers can use the imminent closure of refineries to persuade their investors to let them spend more R&D on renewable feedstocks.

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