2016 was quite the year for enormous advancements in the tech industry. Things we once saw only in futuristic Hollywood screenplays have begun to materialize in our present reality. Autonomous (self-driving) vehicles, artificial intelligence, virtual reality, space exploration, and plenty more has us leaving 2016 on our toes as we dive into the next chapter of the 21st century.
After decades of living and working in Silicon Valley, I have some predictions about how certain parts of the industry will close out 2017, which are preceded by some of the highlights of 2016…
1. By the end of 2017 the majority of traditional car makers will start forecasting significantly lower sales due to the adoption of the auto revolution trifecta — electric cars, autonomous cars, and ride sharing.
2016 was the year for autonomous vehicles. Singapore launched the driverless taxi in August, and not long after, Uber launched their first autonomous vehicle program test in Pittsburgh. Users could be picked up by self-driving vehicles within a 12-mile radius of the city with an operator (for the test period) at the wheel to correct any possible mistakes. If all goes well, those operators won’t be needed for long, and that 12-mile radius of Pittsburgh will quickly propagate.
Cities around the world are already prepping and planning their city landscapes for the transition into the mass adoption of autonomous vehicles. In some cases, this includes the removal of plentiful parking garages and other automotive-related real estate space that could be transformed into housing, storefronts, or—even better—green-space! With ride-sharing becoming more and more practical, owning a car will also be less and less relevant for city dwellers.
I recently joined the board of BestMile – a fleet management software company based in Switzerland designed to manage any fleet of autonomous vehicles. The company is at the forefront of the autonomous technology revolution tackling urban mobility in populated areas. While some experts predict that it could be decades until the world has reached a point of mass adoption of this technology, there is no ignoring the momentum behind the wave of change —a wave which will be “ride or die” for traditional car makers.
A few startups, and some car makers including Mercedes Benz, are preparing for a future beyond self-driving: one, about which I’ve written previously, in self-flying vehicles. Right now, the flying drones being developed are forecasted for use in delivery services; this introduces the reality of our transportation grid options becoming multidimensional.
With companies like Tesla innovating the space, traditional car makers already have a challenge ahead. Add to the mix that the three big factors (ride-sharing, autonomous vehicles, and electric vehicles) will minimize the demand for cars. Currently most car owners utilize their vehicles maybe 5% of the time. For the most part, cars are sitting idle at home or in a parking garage while we sleep or work. The innovations that are already in motion take the utilization of each vehicle to a much higher level, maybe 80%. This means fewer and fewer cars will be necessary to produce. And the cars produced will be different from what gives traditional makers their competitive advantage. The tidal wave is already approaching the shore. We will be needing fewer cars. It is merely a question of when.
2. Tesla’s stock price will be valued at over $300 compared to its 2016 closing price of $213.69
Tesla’s 2016 was an action-packed one further demonstrating how CEO, Elon Musk enjoys his trail-blazing position. Tesla announced their production plans for a more affordable $35,000 Model 3 and began taking $1,000 reservations which led to the most successful product announcement in history. Tesla, within a few weeks, received pre-orders with a $1000 deposit for nearly 400,000 vehicles… unheard of success!
The company announced its acquisition of SolarCity, one of the nation’s largest providers of solar electricity (also founded by Elon Musk), as well as launched the new Tesla Energy. Tesla Energy launched the Powerwall home battery intended to store electricity gained from solar panels to use at peak grid times and eventually take homes off the grid lines completely. Tesla has completely disrupted the auto industry and now they’re pushing into the housing industry.
Some have expressed concern for the future of the company for various reasons:
- The new administration may not be as supportive of an environmentally friendly tech company that prides itself in automation in manufacturing,
- Other automakers joining the competitive landscape in electric vehicle innovation,
- And, Musk’s risky business in taking on a multitude of high-cost ventures.
While Tesla may not be the ideal company for the new administration to support, their U.S. based manufacturing certainly is. Unlike other car makers, Tesla is already manufacturing primarily in the U.S. This means they won’t be pushed to give up low cost production and move manufacturing to the U.S. —they are already producing here—however, they will benefit from incentives offered to U.S. based manufacturers….which incentivizes what they are already doing.
Because of the merger with SolarCity, Tesla now employs 30,000 people; over 25,000 of those jobs are in the U.S. The company plans to add over 3,000 manufacturing jobs at its factory in Fremont, California, 1,000 at its solar panel factory in Buffalo, New York, and over 6,500 at the Gigafactory in Nevada.
I think we can expect another record breaking 2017 from Tesla. And that’s just the beginning. Tesla has the ingredients of becoming the most valuable company in the world. Could it be more valuable than Amazon is today in 10 years? If so that would mean a stock price above $2,300.
3. Amazon cloud services will become major players in the autonomous driving space.
Amazon as a company has become one of the most innovative players in the tech space for its ability to continue evolving. The company rarely turns a profit, not because they’re not creating successful products, but because they continually pour over their profits into research and development for the next big thing. Recently, the company decided to create Amazon Go – its own chain of grocery stores with no checkout lines. Customers simply scan their amazon account with their phone to enter and their technology keeps track of everything they walk out with charging them on their phone. They also began their drone delivery service in Europe this past year with abilities to deliver packages up to 5 lbs. And, let’s not forget about Alexa, the AI voice that’s entered into the smart home tech space to help keep users organized and updated.
With all this forward movement, we can’t expect the company to veer away from the autonomous driving space – they’re simply addicted to innovation and good at it. It was back in April when rumors began spreading across tech blogs that Amazon was looking to enter the autonomous vehicle space by using their cloud computing services for mapping functions. And in 2017, I believe that’s exactly where they’ll play a massive part. An investment in HERE 360 —a mapping data technology company —is just the opening act for Amazon’s role in this space.
4. We will end the year with a slightly higher unemployment rate
The technological leaps in artificial intelligence and automation did not lag in 2016, and ever growing companies are learning how they can continue to increase productivity. The push to cut outsourcing and offshore employment will further accelerate move to automation.
In 2017, this trend will continue to disperse leading to a slight rise in the unemployment rate. The new administration’s move to bring jobs back to the U.S. can have negative impact on employment rate here at home. The fact is, companies cannot simply let go of their staff overseas and hire replacements in the U.S. and simply absorb the costs. Cutting staff overseas will cause many companies to experience lower margins. To maintain profits, and in some cases survive, many of them will be forced to also cut staff in the U.S. in order to maintain profitability. Of course, some will argue that incentives offered by the government will cause the playing field to remain efficient and competitive. That will not be the case. The tax cuts and other incentives will not be sufficient to make up for the massive salary gap for an employee in the U.S. vs. India or Vietnam. I believe the above will cause slight increase in unemployment in 2017; however, this pace will grow in 2018 as autonomous driving will add to the problem, displacing millions of workers in the automotive industry, from drivers to garage attendants to car sales people and more.
Let’s also not forget we are already at a low 4.7% unemployment rate.
5. Warriors will win the 2017 NBA Finals!
You heard it here first.