Is the Entire Car Industry Really Doomed?

Bob Lutz drops a nuclear bomb on everything we know and love. But is he right?

DailyTech.com

Last week, Bob Lutz—former vice chairman and head of product development at GM, veteran of Ford, Chrysler, BMW & Opel, father of the Dodge Viper, and the automotive world’s most honest man—published a flamethrowing op-ed targeted titled “Kiss The Good Times Goodbye.” It echoes all the arguments of the Kool-Aid drinking mobility “experts” and everyone in Silicon Valley betting fortunes on the end of human driving as we know it. And not just human driving. Dealerships. Car magazines. Brands. If you believe Lutz, everything we know, love, or hate is utterly doomed by the arrival of self-driving cars.

Is Lutz right?

I’ve been saying the same thing as Lutz since 2015, with one crucial difference. I think it’s all over in 50-70 years. Lutz? Twenty.

That’s a big difference. If this had come from some idiot on LinkedIn whose bio said “Change Agent” or “Radical Disruptor,” I’d answer with customary wrath. But this is Bob Lutz, who delivers insight even when he misses the target. Also, the Dodge Viper wouldn’t exist without him. He’s a true car guy, and has nothing to gain by repeating the self-driving agenda. His argument deserves real analysis.

Let’s dissect this line-by-line.

KISS THE GOOD TIMES GOODBYE
“Everyone will have 5 years to get their car off the road or sell it for scrap”
By Bob Lutz

It saddens me to say it, but we are approaching the end of the automotive era.

To suggest the “automotive era” is over suggests a binary change, as if everything is going to flip, very, very quickly. Lutz is obviously a fan of Malcolm Gladwell’s The Tipping Point. I’d argue that we’re approaching the end of the beginning, which started with the Darpa Challenge back in 2007, and probably ended this week with Waymo’s announcement that they were removing the human monitors from their test vehicle fleet in Phoenix.

The auto industry is on an accelerating change curve. For hundreds of years, the horse was the prime mover of humans and for the past 120 years it has been the automobile.

Was the horse ever the prime mover of humans? Not for the humans who didn’t have horses. The horse metaphor is very popular, but it’s not really accurate. At peak horse, the majority of humans in the world had never owned, leased, financed or rented a horse, let alone ridden one. In the United States, cradle of car culture, peak horse occurred just over 100 years ago, when there were approximately 20 million horses in a human population of just over 100 million. Today there are approximately 323 million humans in the United States. Human driven cars? About 274 million, with an annual turnover of 17 million. The average vehicle's lifespan is 11.5 years. Even if 100% of cars sold starting tomorrow were capable of Level 4 self-driving, it would take 16 years to get to 100% ubiquity.

Sixteen years from today. And the tech doesn’t work yet except in limited conditions, even now. In fact, it doesn’t even work in limited conditions. Thank you, Navya.

A lot has to happen to meet Lutz’s timeline. A lot that technology can’t solve, which is human nature. Fortunes have been lost betting against it, and culture is as powerful as the tides. Both can shift, but nothing can force them.

Now we are approaching the end of the line for the automobile because travel will be in standardized modules.

Lutz is describing what I call the Autonomotive Singularity, which will manifest the day after the last person with the option of using a steering wheel chooses not to. Hold your horses, because Lutz is skipping over everything in between now and then. You know, the part where people still have choices. People like having agency over outcomes, or at least the sense of it. Human driven car sales are at an all-time high. Cars aren’t merely transportation, but transformation. People don’t just buy cars because they need to get from A to B, and even when they do, they’re willing to pay extra for personalization as an extension of self, which the zero-agency standardized module does little to address. Luxury pods? Sure, but those are statements of wealth. The id requires more. It requires agency and control over machines as a statement of power, and Lutz’s Wall-E scenario will be Kryptonite to anyone who can afford to avoid it. Right now, that’s everybody.

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The end state will be the fully autonomous module with no capability for the driver to exercise command. You will call for it, it will arrive at your location, you'll get in, input your destination and go to the freeway.

This makes for perfect sense, after the multi-decade middle part, where people still have a choice.

On the freeway, it will merge seamlessly into a stream of other modules traveling at 120, 150 mph. The speed doesn't matter. You have a blending of rail-type with individual transportation.

This sounds great, but won’t work at those speeds until you have 100% ubiquity, which comes back to the issue of new vehicle turnover and mandating self-driving cars, which is going to be tough slog if safety is the argument, at least in the United States. Does anyone really care about safety? Nope. The USA isn’t one nation, but a collection of mini-nations with vastly different cultures. Check out drivers licensing standards and gun control laws. There’s your map of how easy it’s going to be to take away people’s steering wheels.

In or near major cities, nothing will be faster than driving yourself, or trains, until that 100% penetration occurs. Until then, all traffic will actually slow down, as the speed equilibrium slows to the slowest driver(s), which will be your self-driving cars.

Unless I have work to do, and even then, I’d rather drive myself around self-driving snails than sit in one while watching human drivers speed past.

Then, as you approach your exit, your module will enter deceleration lanes, exit and go to your final destination. You will be billed for the transportation. You will enter your credit card number or your thumbprint or whatever it will be then. The module will take off and go to its collection point, ready for the next person to call.

All true. which means, privacy will die. It's near death now.

Most of these standardized modules will be purchased and owned by the Ubers and Lyfts and God knows what other companies that will enter the transportation business in the future.

True, if Uber and Lyft survive long enough. Getting people into self-driving cars will probably require incentives before mandates. Incentives means dropping prices, unless there are government subsidies. Good luck with that. Cut prices further? How long can that last? There goes the Uber business plan. Remember Kozmo?

A minority of individuals may elect to have personalized modules sitting at home so they can leave their vacation stuff and the kids' soccer gear in them. They'll still want that convenience.

The vehicles, however, will no longer be driven by humans because in 15 to 20 years — at the latest — human-driven vehicles will be legislated off the highways.

So the wealthy will have personalized modules but the rest of us won’t? Methinks someone doesn’t hang out with normal people. Something tells me that Hurricanes Irma and Harvey set back the Lutz timeline another ten years. NO ONE who had to drive out of the flood zone will give up car ownership. No one. Demand? Meet supply.

As for the rich and their better pods, no one enjoys agency—and hoarding it—more than the rich. That’s why people buy extra cars they don’t drive. The first time a network failure or software crash disables Level 5 self-driving cars, Level 4 capable cars with steering wheels will become all the rage.

Steering wheels may be mandated away, but if they ever are, they will be mandated back in.

The tipping point will come when 20 to 30 percent of vehicles are fully autonomous. Countries will look at the accident statistics and figure out that human drivers are causing 99.9 percent of the accidents.

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Tipping point? Puh-leez. Right now humans are causing 100% of car crashes and road fatalities. Guess what? No one cares. If anyone did, US licensing standards would match Germany’s. I repeat: no one cares, unless you lost a loved one in an accident. Sadly, 1.2M deaths a year out of a population of 7.4 billion doesn't move the global needle on mandating self-driving cars. Even the recent spike in US distracted driving deaths has failed to yield any movement on drivers ed, which is the cheapest way to mitigate such tragedies. Why? Because driver's ed isn't profitable.

REPEAT AFTER ME: SAFETY? NO ONE CARES.

Of course, there will be a transition period. Everyone will have five years to get their car off the road or sell it for scrap or trade it on a module.

Not in America. At least not for a long, long time.

What could work? Mandating Level 2/ADAS (Advanced Driver Assistance System) in every car. We’ll get there. And once we have, fatalities will drop, reducing pressure to get to Level 4, further delaying Lutz's timeline.

The Big Fleets

CNBC recently asked me to comment on a study showing that people don't want to buy an autonomous car because they would be scared of it. They don't trust traditional automakers, so the only autonomous car they'd buy would have to come from Apple or Google. Only then would they trust it.

Maybe, but people are irrational. They buy Maseratis, despite 40 years of Maserati, and everything Google can tell you about Maserati. They drive SUVs but won’t go to a Skip Barber driving class. They line up to buy iPhone Xs, whose UI is inferior to the 8. So safety ≠ trust ≠ want. I trust Hondas, but I don’t want one, at any price, nor does anyone I know who drives one. People just can’t get enough of crossovers with the same room as the better handling cars they’re derived from. Handling = safety, in the rational mind, but sitting higher up? Must be safer, right? Physics is a harsh mistress no driver wants to listen to, even after getting slapped.

Is trust in the theoretical safety of something more important than the id?

Obviously not.

My reply was that we don't need public acceptance of autonomous vehicles at first. All we need is acceptance by the big fleets: Uber, Lyft, FedEx, UPS, the U.S. Postal Service, utility companies, delivery services. Amazon will probably buy a slew of them. These fleet owners will account for several million vehicles a year. Every few months they will order 100,000 low-end modules, 100,000 medium and 100,000 high-end. The low-cost provider that delivers the specification will get the business.

This seems to make sense, except for all the other cars on the road.

These modules won't be branded Chevrolet, Ford or Toyota. They'll be branded Uber or Lyft or who-ever else is competing in the market.

Hmmm. Not sure about this. Who is buying these vehicles? Uber? Lyft? In what universe do they want to own these vehicles? What about third party fleets who make themselves available to Uber and Lyft on demand via fleet and traffic markets?

The manufacturers of the modules will be much like Nokia — basically building handsets. But that's not where the value is going to be in the future. The value is going to be captured by the companies with the fully autonomous fleets.

But someone has to buy those handsets, or people won’t have handsets.

What does “companies with the fully autonomous fleets mean”? Is it the transportation network companies (TNC’s) like Uber and Lyft? According to Reilly Brennan — editor of The Future of Transportation (one of the few relevant newsletters worth reading) and founder of Trucks.vc — whomever owns the customer’s payment information is in the power position. They don’t need to own the cars if Brennan is right, and they certainly don’t want to own the cars, so who does Lutz think will be in the power position?

The End Of Performance

These transportation companies will be able to order modules of various sizes — short ones, medium ones, long ones, even pickup modules. But the performance will be the same for all because nobody will be passing anybody else on the highway. That is the death knell for companies such as BMW, Mercedes-Benz and Audi. That kind of performance is not going to count anymore.

Absolutely true if/when human driving is outlawed. Good luck with that in Texas. Which automotive brands will survive? Read “The Autonomous Winter Is Coming.” I wrote it two years ago, and it’s even more true today. Lutz clearly isn’t familiar with Augmented Driving, or parallel autonomy, which is being developed by Toyota Research Institute (TRI). Inspired by aviation automation such as Airbus’ flight envelope protections, parallel systems like TRI’s Guardian resolve the conflict between Level 3/4 and the human need for agency by making human controlled vehicles uncrashable.

Make cool/fun cars uncrashable, and enthusiast brands will flourish rather than die. Anyone who's played Forza or Gran Turismo can see exactly who this would work in the real world. I love Lutz, but I bet he hasn't.

Strangely, it’s unclear whether BMW, Mercedes-Benz & Audi understand the distinction between parallel and series autonomy, which is where they all seem to be going, except Porsche. Series autonomy is a dead end no matter how well implemented, because it can never improve as fast human skill declines. Witness Tesla's Autopilot accidents, and theirs is the best such system on the road today. At least it was at the peak of it first generation.

Why is Toyota the only company to put a stake in the ground of the superior semi-autonomous path? There’s no reason Toyota should be first to announce a parallel solution other than due to foresight. That’s a lot of damn foresight. (Thank you, Gil Pratt.)

Porsche should own parallel autonomy. Come on, guys.

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In each size vehicle, you will be able to order different equipment levels. There will be basic modules, and there will be luxury modules that will have a refrigerator, a TV and computer terminals with full connectivity. There will be no limit to what you can cram into these things because drinking while driving or texting while driving will no longer be an issue.

Because everyone loves small RV’s, right? Wrong. How many hi-end RV’s have you seen with a chauffeur? Nowhere outside of Business Insider videos. Does removing the chauffeur suddenly make RVs cool?

Not so much.

Lutz is partially right, as the latest New York Times self-driving issue points out in some hilarious short pieces about how autonomy is going to change transportation. It will, but it won’t change human nature.

You won’t be able to drive drunk. But you will be able to drive once Toyota gets Guardian on the road. Once they do, any car maker that wants their brand to survive will have to follow.

The importance of styling will be minimized because the modules in the high-speed trains will have to be blunt at both ends. There will be minimum separation in the train. Air resistance will be minimal because the modules will just be inserted into the train and spat out when you get close to your exit.

In no universe will this be true in this country, except in and near major downtown areas where all human driven vehicles are banned. That will likely require trillions in investment in infrastructure. Good luck with that, too. Assuming it happens, something else is coming: want to enter downtown Manhattan in 2050 in your Porsche 911? Your car won’t let you drive, but it will drive you there amongst all the other self-driving cars, until you choose to leave, at which point you can take over if you choose.

Sounds good to me. NYC traffic sucks. I'd love a car that drove me to where I could take over.

The Future of Dealers?

Unfortunately, I think this is the demise of automotive retailing as we know it.

Totally true, but only partially because of autonomy, and certainly before even partial penetration of self-driving cars. Subscription models like Cadillac Book will move the point of payment away from dealers and onto platforms owned by auto makers and new players, which dealers are not in any way ready for.

AutoNation is the first big exception; their alignment with Waymo suggests real foresight on both sides. Even if Lutz is right, AutoNation is now poised to pivot to a service model for all those self-driving cars. If he's half right, AutoNation gets paid from both sides.

Smaller players, or anyone late to the strategic partnership game? Dead.

Think about it: A horse dealer had a stable of horses of all ages, and you would come in and get the horse that suited you. You'd trade in your old horse and take your new horse home.

Traditional leasing, financing and rental models haven’t come close to this, and Ford’s experiment with shared leasing went nowhere. Again, human nature. People like owning things. They like sharing, but not necessarily at the expense of ownership.

Car dealers will continue to exist as a fringe business for people who want personalized modules or who buy reproduction vintage Ferraris or reproduction Formula 3 cars. Automotive sport — using the cars for fun — will survive, just not on public highways. It will survive in country clubs such as Monticello in New York and Autobahn in Joliet, Ill. It will be the well-to-do, to the amazement of all their friends, who still know how to drive and who will teach their kids how to drive. It is going to be an elitist thing, though there might be public tracks, like public golf courses, where you sign up for a certain car and you go over and have fun for a few hours.

And like racehorse breeders, there will be manufacturers of race cars and sports cars and off-road vehicles. But it will be a cottage industry.

I totally buy this, but not until after a long, multi-decade transition. Lutz basically describes the scenario from Rush’s Red Barchetta, itself based on a 1973 short story, which described a “Motor Law” banning cars as we know them. That sci-fi law was projected to go into effect about now. Or maybe it was last year. The best sci-fi is often conceptually right, but their timelines are off by 100%.

Yes, there will be dealers for this, but they will be few and far between. People will be unable to drive the car to the dealership, so dealers will probably all be on these motorsports and off-road dude ranches. It is there where people will be able to buy the car, drive it, get it serviced and get it repainted. In the early days, those tracks may be relatively numerous, but they will decline over time.

Lutz is totally right about this, except for the decline part. The more human driving is banned, the more racetracks will thrive as mechanical Disneylands.

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So auto retailing will be OK for the next 10, maybe 15 years as the auto companies make autonomous vehicles that still carry the manufacturer's brand and are still on the highway.

Totally agree, but replace 10-15 with 30-50.

But dealerships are ultimately doomed.

YES, as we know them.

And I think Automotive News is doomed. Car and Driver is done; Road & Track is done. They are all facing a finite future. They'll be replaced by a magazine called Battery and Module read by the big fleets.

Half true. Automotive News will become Battery & Module. Car and Driver will survive because there will always be an enthusiast market — albeit smaller — and they’ve made some decent attempts to address autonomous tech in recent issues. Road & Track? Motor Trend? Dead. Upstart brands like Petrolicious will survive because they’re already focused on the best of the past, and need only expand their definition of classics year by year. Petrolicious may have to split into pre and post 2000 classics, but I think most of the cars sold between 2000 and Lutz’s tipping point will be unserviceable — the dark ages of electronics and all — but that’s another story.

The era of the human-driven automobile, its repair facilities, its dealerships, the media surrounding it — all will be gone in 20 years.

Fifty. And we’ll still need repair facilities. But they’ll be for modular replacements, and will most likely come from new companies whose infrastructure is radically different from current dealer models, who have no path to survival short of investing in automation and cheaper real estate in the next five years. As I said, Auto Nation will survive. (FYI, I have no stake in AutoNation.)

Today's automakers?
The companies that can move downstream and get into value creation will do OK. But unless they develop superior technical capability, the manufacturers of the modules, the handset providers, if you will, will have their specifications set by the big transportation companies.

Mostly yes.

The fleets will say, "We want a module of a certain length, a certain weight and a certain range."

Uh huh.

They will prescribe the mileage and the acceleration and take bids.

Transportation markets will be huge. So will traffic markets.

Automakers, if they are smart, may be able to adapt. General Motors sees the handwriting on the wall. It has created Maven and has bought into Cruise Automation and Lyft.

We’ll see. #SelfDrivingTheater is the new security theater. There’s no real evidence GM is any smarter than Daimler, Ford or Toyota, all big players who’ve also invested fortunes as a hedge against Lutz’s argument. Still, all of them blew it relative to Waymo, who just removed the safety engineers from the driver’s seats in their Phoenix deployment.

[GM] doesn't want to be the handset provider. It wants to be the company that creates the value and captures the value, and it is making the right moves to be around when the transition occurs. I think probably everybody sees it coming, but no one wants to talk about it. They know they will be OK for a few years if they keep providing superior technology, superior design and have good software for autonomous driving.

Everyone wants to be that company, and no one sees a clear path forward. At this point it’s unclear whether Uber or even Lyft will survive as independent companies. If and when one or both are acquired, a buyer that can combine manufacturing with a TNC platform is guaranteed to become dominant under their legacy brand, which upends Lutz’s argument.

So for a while, the autonomous thing will be captured by the automobile companies. But then it's going to flip, and the value will be captured by the big fleets.

Again, unless the fleet companies are acquired by manufacturers.

This transition will be largely complete in 20 years.

Not without mandates. This might work in fairly homogenous, socialist states where local culture aligns with broader goals, say, Norway or Sweden. American red states? Guns are the only thing people take more seriously. In this country, the suggestion that people won’t fight to retain control — and by that I mean ownership — is absurd. Lutz’s prediction requires a tough political slog. Anyone pushing to mandate self-driving cars will see the left and right subdivide, coalesce and unite around the concept of ownership of motion, which conflicts with utopian visions of “mobility”, which is no better than code for turning transportation into health insurance.

In America, that's not a good thing.

I won't be around to say, "I told you so," though if I do make it to 105, I could no longer drive anyway because driving will be banned. So my timing once again is impeccable.

Actually, Lutz will be around to see some of this happen. Just not here in the United States.

In the meantime, I can’t wait for a future aftermarket shop to do a restomod of a Gen 1 Dodge Viper, but add the awesome parallel/augmented driving tech I predict will set back Lutz’s timeline by decades, and make driving great again. Those Vipers were awesome, clunky and dangerous. God bless them all, and Lutz, and whomever can build an uncrashable Viper before he dies.

“On a long enough timeline,” according to Fight Club, “the survival rate of everyone drops to zero.”

Now change “everyone” to “everything”.

By that standard, Lutz is right and wrong, by half. As in half a century.

Alex Roy is Editor-at-Large for The Drive, Host of The Autonocast, co-host of /DRIVE on NBC Sports, author of The Driver and Founder of Noho Sound, has set numerous endurance driving records in Europe & the USA in the internal combustion, EV, 3-wheeler & Semi-Autonomous Classes, including the infamous Cannonball Run record. You can follow him on Facebook, Twitter and Instagram.