PARADISE ISLAND, Bahamas—Today people are carrying away their home-delivered pizzas without tipping the driver. The reason: the pie is being delivered by a driverless car–and credit unions should be paying attention for reasons that go far beyond ordering a pizza.
In two cities Dominos is partnering with Ford to test autonomous pizza delivery vehicles that have touchscreen on the widow.
“You walk to the curb, tap on the touchscreen, the window lowers and you take your pizza,” said Tony Boutelle, president and CEO of CU Direct.
In remarks to WOCCU’s World Credit Union Conference, Boutelle used that example to make one of many points about how the automobile industry is changing. He addressed the rise of autonomous vehicles, faster growth of electric cars, car sharing services, car subscription services and more.
“It’s not an if but a when disruption will really occur within the automotive industry, and it will be very interesting to see how all this happens,” said Boutelle.
Boutelle said that predictions of autonomous cars hitting the road in large numbers as consumers dump their cars–and the loans that financed them–may not happen as quickly as some people are predicting. He compared how the U.S. might transition from traditional auto sales/auto ownership to real adoption and acceptance of driverless cars to how the airline industry finally took hold, over a period of 30 years.
‘This Change is Coming’
“Make no mistake, this change is coming,” said Boutelle, pointing out that in 2015 autonomous vehicle investments were $6 billion, a figure jumped to $60 billion last year.
Boutelle described the progression of autonomous vehicles from “level two” cars that are on the road today that have limited self-driving capabilities to “level 5,” where the car has no steering wheel and no brakes for a safety driver to operate.
“That is where everyone is trying to get to. The next big step that will move autonomous vehicles forward is legislation that will allow for greater testing,” he said.
An Electric Future
Boutelle also addressed the growing marketshare of electric cars due to prices coming down as the cost for electric car batteries falls dramatically and more charging stations (61,000 in the U.S.) are in place. Boutelle’s observations on electric vehicles were echoed by a keynote speaker at the World CU Conference, as CUToday.info reports elsewhere.
“Electric car sales in the U.S. are now growing at about 30% a year,” he said, noting that China leads the way in EV sales with a goal of 20% of total cars sales being electric by 2025.
“China estimates 70% of its cars will be electric by 2040,” he said. “The U.S. is behind China, but we will catch up soon. And this will have a big impact on car dealerships, as 40% of their income comes from service, and electric cars are more reliable because they have a lot fewer parts.”
Boutelle addressed the growth of car subscription services and even car sharing—where consumers share their own vehicles with others and make money.
Rent Thy Neighbor’s (Car)
“Rent your neighbor’s car,” said Boutelle. “The Turo app that provides this service has more than a million users now among tens of thousands of cars, according to the company.”
The challenge to credit unions is to find ways to be part of this change, he said.
“From a lending perspective, I try not to be concerned too much,” said Boutelle. “The change will happen over the next 10 to 15 years. I would say for now to focus on traditional auto financing. There are 276 million cars on road now and about 33% of credit unions’ loan portfolios is auto lending, and we depend on that today, and we can continue down this path.”
Begin Now
But it’s important now to begin building relationships with new players, insisted Boutelle.
“Look at electric carmakers, try to get more of those loans,” he said. “And look at other types of transportation that uses electric, like scooters and bikes. Consider relationships with autonomous vehicle fleet companies, creating business lending opportunities here. Be aware, too, of multi-owner contracts, where four to five people will own one car. That is not big today, but we think it could be some day.”