How the era of the driverless car will impact your life

(Editor's note: This is the first of two parts.)

I started writing this column while I was in Manila, Philippines for a talk with UnionBank, one of the most innovative banks I’ve ever come across.

Driving across Manila is often a painful experience, with far too many cars locking up all possible arterials and nowhere near enough money to redesign and build the needed infrastructure. But this is not unique to Manila.

As I’ve traveled around the world, I’ve run into equally bad traffic in Istanbul, Rotterdam, Los Angeles, Seoul, Mexico City, San Francisco, Rome, London, Beijing and Mumbai. In fact, there are literally thousands of cities where bad traffic is a way of life.

Car companies have become very good at selling vehicles but few countries have anticipated them being this good at it.

A recent study by Morgan Stanley showed that the average car is only used 4 percent of the day, making cars an astonishing waste of resources. If all cars were to be on the road simultaneously, we cannot even imagine the chaos that would ensue.

For these reasons, I’ve become enamored with the coming autonomous car era where many of today's problems get solved. However, going through the transition will be anything but smooth.

Making the Transition

There’s a significant difference between a driverless car and a fully autonomous vehicle. We already have a number of vehicles on the road today with driverless features, but that’s only small step towards the no-steering-wheel type of driverless car many are imagining.

As we move further into the fully autonomous car era, we also need to understand the distinction between “user-operated” and “completely driverless” vehicles. Because of regulatory and insurance issues, user-operated fully autonomous cars will come to market within the next five years, while complete autonomous driverless autos will remain further off.

Even though both Google and Tesla have predicted that fully-autonomous cars, the kind that Elon Musk describes as “true autonomous driving where you could literally get in the car, go to sleep, and wake up at your destination,” will be available to the public by 2020, that’s not the full story.

First generation vehicles like these will come with a variety of regulator issues and technical problems few can anticipate. But as with all early stage technologies, each of these problems will be dealt with as they arise.

In addition, being available and being commonplace are also many years apart.

While we are entering a game-changing transition period accompanied with a never-ending stream of industry hype, most of the changes will happen after 2030. Somewhere in the 2030-2035 timeframe, we’ll begin to see highways designated as “driverless only,” only allowing vehicles that can be switched into driverless mode.

Fleet Ownership and On-Demand Transportation

Imagine stepping out of your house 15 years from now and using your smartphone to summon a driverless vehicle. In less than three minutes, a driverless vehicle arrives and whisks you off to work, school, shopping or wherever you want to go.

A form of on-demand transportation is already happening with companies like Uber and Lyft. If we eliminate the driver, costs will plummet.

Once the technology is perfected, on-demand transportation companies will crop up in most metropolitan areas with large fleets of vehicles poised to meet consumer demand.

As car companies come to grips with a future that has fewer cars in it, they will begin changing their business model. Rather than charging for each vehicle sold, they will partner with fleet managers and charge for every mile the car is driven.

In a move to strengthen their financial position, car companies will begin to reduce the number of dealers, middlemen and finance costs. This will put large fleet owners in an unusually influential position regarding car design.

Over time, riders will place far more emphasis on features like ingress and egress, riding comfort and entertainment options, placing far less emphasis on things like car brand, style, color and efficiency ratings.

Since the idea of fleet ownership and on-demand transportation tend to break down in rural communities, early use cases will spring up first in large metro areas.

(Next: 128 things that will disappear in the driverless car era)