Experts Say Tesla’s Driverless Cars Won’t Change Auto Loan Lending
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UPDATED: Oct 11, 2013
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Tesla, the technological innovator behind the newest electric automobiles, has announced that it will be competing with Google by developing and selling driverless cars.
The car company has also announced that it will be offering its driverless vehicles in three years, which is far sooner than many experts predict driverless cars will be on America’s roads.
While technology experts applaud environmentally friendly technology and innovation, they recognize that Tesla and Google will not be alone in the driverless car market.
Karl Brauer, Senior Analyst at Kelley Blue Book, said that the self-driving car is part of a larger trend across all automakers.
“In the next five years, there will be a wide range of self-driving technologies introduced by both high-volume and specialty or niche manufacturers,” he said. “Tesla wants to maintain its reputation as a technology leader, so it has to be part of this movement.”
Brauer believes that Tesla’s three year timetable is just an example of good marketing as it casts the company as being a cutting-edge brand. However, creating a technology and making that technology safe for the public, let alone for regulators, is an entirely different matter.
Barriers to Entry
Mariya Palanjian, the Sales and Marketing Director for Zad Cars, doesn’t see clear skies ahead for the driverless car market, at least not at first. She fears that some states and cities will end up banning self-driving vehicles over irrational fears. However, other states are sure to desire and adapt to new car technology.
Tesla will also have to face another opponent, one it is currently battling.
“I think the dealerships will be against it, especially if they don’t have any self-driving cars of their own to sell,” she said. “They already feel threatened by Tesla, thus any new product they come up with will be a threat to them.”
In the end though, Adam Hartung, Managing Partner at Spark Partners, predicts that the car maker will achieve victory over dealerships.
“That Tesla is smart enough to invest in infrastructure (charging stations) to encourage purchasing their product shows that leadership is far more enlightened than GM, where they just complain about distance limitations,” said Hartung. “These major improvements are setting up Tesla as a game changer, especially if any of their cost predictions prove accurate.”
Steve Garfink, Principal at Seer Communications, agrees that while dealers will continue to oppose most any competitive product coming from Tesla, they do not necessarily oppose driverless cars as an idea.
“They are in the business to sell and service cars,” he says. “A case can be made that a self-driving car will be held to a higher standard of maintenance that could benefit dealers’ service business. Those higher maintenance standards could well emerge as part of the new regulatory regime.”
One group that shouldn’t be feeling threatened are consumers. Driverless cars would allow people to sleep or even work while commuting and being driven by a computer.
“Being able to sleep or work in a car as it drives itself will definitely make us more productive, especially when you are stuck in traffic in LA on the 405 freeway,” said Palanjian.
Consumers hoping to purchase one of these vehicles can rest assured that auto loan borrowing won’t likely change, especially once driverless cars gain widespread acceptance. Banks and dealerships will likely still offer auto loans and leases for these revolutionary vehicles.
Hartung sees clear and logical reasons for why auto loans will not change in the near future once driverless cars arrive.
“Loans are based on the auto’s value, its expected future value and the ability of the borrower to pay,” he said. “A loan is not different on a Cadillac than a Chevy. It doesn’t vary if the auto lacks features, or is loaded. Loan rates and terms will be the same on driverless cars.”
The Laws of the Road
As beneficial as driverless cars are for consumers, inevitably there will be accidents, some possibly fatal.
“The first driverless car accident will definitely create a public backlash,” said Palanjian. “However, by the time driverless cars become widespread, the government will have laws and regulations based on proper research and development.”
Hartung said that self-driving technology really isn’t anything new. In fact, the first successful test project was in 1988. However, it will only become commonplace with government mandated change, such as the transition to HD TV.
In Europe, where existing laws prohibit self-driving technology, driverless cars face an uphill battle. However, in America, which lacks the congested urban roads of Europe’s densely packed population, driverless technology is desperately wanted to deal with the nation’s long highways and lengthy drives.
Garfink said that the federal government is slow to move to adopt driverless cars. He doesn’t believe that the National Highway and Traffic Safety Administration will provide guidelines to cover cars with even limited driverless capabilities.
Surprisingly, however, the notorious California DMV is already starting to look at driverless technology.
Garfink praises California’s Department of Motor Vehicles in beginning to examine what special licensure requirements will be needed for the future. Other states are likely to do the same as the first commercial driverless cars begin being unveiled by manufacturers and as auto lobbyists apply pressure to politicians.
In recent news, a Tesla vehicle was recorded catching on fire and went viral online. While the event temporarily damaged Tesla’s stock price, a PR effort assured the public that no one was injured and that in a comparable fire a conventional vehicle would have exploded. Even though the nature of the accident and any comparison to conventional vehicles is speculative, the fact that Tesla rebounded from the event is a sign of consumer confidence.
“Look at it this way, we currently put up with the carnage of about 30,000 vehicle-related fatalities each year,” said Garfink. “Why? The benefits of vehicle travel far outweigh these risks.”