How the coming boom in self-driving cars will affect every business

Autonomous cars’ impact on business and society may be as big as Ford’s model T

Volvo driverless car

A test fleet of self-driving Volvos roams the roads of Sweden. (Volvo)

In Google’s videos of its driverless cars, people buckle themselves into toy-like vehicles and ride around, holding hands and enjoying the scenery, as if ensconced in the world’s most delightful taxi. There’s a hint of cinematic fiction to the scenes or, at best, of a stunt that’ll never work in the real world.

The foreseeable future will be nothing of the sort—but that doesn’t mean there isn’t potential for autonomous vehicles (AVs). Quite the opposite: The business of making cars drive themselves will be worth US$87 billion by 2030, according to Boston-based technology consultancy Lux Research. The opportunities for software developers alone will total US$25 billion a year.

Just get it out of your head that cars will drive themselves all the time on all roads and in all weather conditions. Not just technological challenges but also legal, social and insurance-related obstacles stand in the way. Most AVs will instead boast capabilities such as lane-departure warnings and collision-avoidance braking. More sophisticated systems in luxury models will enable the car to make its own decisions three-quarters of the time.

The technology will cost you: from $1,000 to $5,000 for the high-end features, Lux predicts. But car buyers are accustomed to adding options, and automation could boost value by increasing safety and potentially lowering insurance premiums. Indeed, since human error is responsible for 90% of fatal crashes, AVs present a huge opportunity to reduce the perils of personal transportation. Plus, there is convenience. Imagine driving your car right to the door of your destination, then leaving it to find its own parking space. Add in productivity gains and fuel savings from more efficient travel, and a switch to fully automated car fleets could save the U.S. economy a staggering US$1.3 trillion a year, Morgan Stanley estimates.

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“I’m not exaggerating when I say AVs will have as big an impact on our cities and society as the arrival of the first cars over 100 years ago,” says Barrie Kirk, head of the Canadian Automated Vehicles Centre of Excellence (CAVCOE), which is striving to build an ecosystem of organizations to supply the market’s needs.

Most automakers have R&D projects devoted to autonomous capabilities, with Mercedes-Benz, Nissan and Ford leading the way, says Cosmin Laslau, lead author of the Lux report. Volvo is currently deploying a test fleet of 100 largely autonomous cars among ordinary drivers in Sweden, though the AVs will be restricted to certain roads and speeds.

Systems suppliers such as Continental and Valeo are forming partnerships with the likes of IBM, Cisco and Nokia. California’s Velodyne Lidar is developing new radar aimed at AVs using lasers. And, of course, Google has its research program.

“I think [AVs] are a really interesting opportunity for new business models,” says Laslau. For example, he envisions third-party financiers stepping in to help consumers pay for autonomous add-ons on a per-kilometre basis instead of up front. Self-driving cars could also make car-sharing networks more appealing. Instead of having to return the car to where you got it, as Zipcar members do now, the vehicle would drive itself “home” or to the next person who ordered it.

There are additional business opportunities beyond the car itself. “Autonomous cars are going to need extremely high-resolution maps, far beyond what we have today,” Laslau says. Hamilton-based GeoDigital International, whose main business is developing 3-D maps power utilities use to inspect transmission lines, recently landed a multi-year contract with an unnamed carmaker to map America’s roadways using the same technology. BlackBerry subsidiary QNX Software Systems, meanwhile, is supplying the operating system for an experimental vehicle being developed at Italy’s University of Parma.

These firms are exceptions, however. “Technology companies in Canada are not yet sufficiently aware of the opportunities in this market, or they think they’re too far in the future,” CAVCOE’s Kirk says. “AVs are here now only in one form,” he adds, referring to the automated trucks deployed in the oilsands—importantly, on private property.

California has introduced regulations to allow AVs on public roads, and Ontario may follow suit. But it will take time and feature improvements for the public to embrace them. Describing the units atop Google’s cars as “bulky,” the Lux report concludes that “no automaker would ever go to market with [such technology] in a mass-produced product.”

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