A Threatening Driverless Future to Financial Services Companies

What will happen to the automotive-captive financial services companies when vehicles drive by themselves and owning a vehicle is no longer interesting? 

For many years by now, automobile manufacturers have invested zillions of Dollars developing and operating their own financial services companies in order to make their vehicles affordable for their customers. Leasing and financing conditions have been, very often, more important than the price of the vehicle. The manufacturing company, the dealers, and the financial services company have mastered how to bundle together the price of the vehicle and the interest rate of the financing so that the purchase operation would be more appealing to the customers.  

Thanks to financial services, many customers could have access to own cars, trucks and buses. And access in this case means ownership. Leasing and financing are, in fact, means to facilitate the ownership of a good, in this case, a vehicle. 

Now we are talking about a different future in this market. All manufacturers are developing their systems to get their vehicles fully automated. Vehicles that can go from origin to destination without a human being sitting on the driver seat. This development has already been there for a long time. It started, long ago, with the cruise control. Later the intelligent cruise control has come, allowing cars to reduce speed according to traffic. Automated parking systems are also a component of the development. Cars that can park by themselves are not novelty any more. Neither are the cars that keep more attention to the traffic than their drivers do. Those cars can brake in case of necessity and can keep in the lane even if the driver is not paying attention to the way. Now comes the “eyes off” level of autonomy. That means the driver will not have to pay attention to the road nor the traffic. The vehicle will automatically take care of those “details”. Then comes the “mind off” level of autonomy. It will not be necessary to even think about the journey as it develops. We will simply program the destination, sit down and read a book or play a video game. 

It will not be long until we see on the streets the cars moving without people inside. It is fair to imagine that cars are going to be widely available as a mean of transportation and, basically, a commodity. Nowadays, people have the need to buy a car and, in addition, to the need there is a wish. One wants to buy a certain model because it is appealing, it is fun to drive. Customers fulfill the need to have a car using leasing and financing plans to make their purchase affordable. But, what if people do not have the need to buy a car anymore? Moreover, what if the car is no longer fun to drive because it drives by itself? What will happen to automotive financial services companies when the customers neither have the need to have a car nor want a car that is “fun to drive”. What kind to financial services will be necessary in the future when cars drive by themselves, are widely available as a mean of transportation and people will not need to own them?

Probably the large financial services companies owned by the automobile manufacturers will have to be converted in large rental companies that will own the vehicles, have them available to customers and charge by the use of them. Imagine a future when you signal to a car, just like you signal to a taxi nowadays, specify the desired destination and the car takes you there. At the end of the journey, the car will automatically charge to your credit card the owed amount. Probably the price will be per minute or according to the distance. We can also think of mileage programs to increase loyalty to a certain fleet of driverless cars. Well, someone will have to own those cars, maintain them, optimize their routes to make them immediately available when an ordinary customer needs them. 

Just like a taxi company but without drivers. Well, perhaps Uber can do it better.

Driverless regards, 

Fernando Mascarenhas

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