Report Says Driverless Cars Will Reshape Tennessee Economy, Everyday Life

Friday, January 24, 2020

Big changes are in store for Tennesseans over the next decade, according to a new report. It finds that the rise of driverless cars and transition to electric vehicles will not only open new opportunities in the state but also transform jobs, companies, and potentially industries—completely reshaping Tennessee’s economy, tax revenue, and everyday life in the process.

The report, written by Bill Fox, director of the Boyd Center for Business and Economic Research in the Haslam College of Business at the University of Tennessee, Knoxville, outlines the changes expected in the coming years. Boyd Center research associates Alex Norwood and Vickie Cunningham are co-authors on the paper.

The researchers conclude that Tennessee must change how students and adults are trained and educated, the way transportation infrastructure is built, and the regulations in place for vehicles in order to prepare the state for the inevitable shifts to the industry.

“These changes are very good for a lot of Tennesseans,” Mr. Fox said. “AVs will save them money, allow them to use their time better, and will make travel much safer. But the state also needs to begin preparing now for the changes ahead.”

Nearly one in six jobs in Tennessee is tied closely to the vehicle sector in three categories: manufacturing, support, and use of vehicles.

In 2017, 72,507 vehicle manufacturing jobs existed in Tennessee, including jobs in the motor vehicle assembly and automotive parts industries. Because electric cars have fewer components, many of these jobs could transition to making very different car parts or be eliminated altogether. Current vehicles are estimated to derive their value from 90 percent hardware and 10 percent software, but autonomous vehicles, or AVs, could be 60 percent software and 40 percent hardware. For example, an electric motor has only 17 parts, compared to the 1,200 parts in an eight-cylinder engine.

Almost 119,000 Tennesseans work in vehicle support jobs at automobile dealerships, gas stations, auto repair shops, and maintenance or tire stores. The study finds that nearly all employment in existing vehicle support industries and occupations will change drastically because fleet ownership of autonomous cars is more likely than individual ownership.

“You would request a car, much like you do with a taxi or Uber now,” Mr. Fox said. “That means you’re not taking a car to the repair shop, you’re not filling it up with gas, and you’re not budgeting for new tires. This shared mobility benefits Tennessean households, potentially saving them up to $5,000 per year.”

Taxi drivers, truck drivers, and other vehicle drivers may see quick job losses as AVs replace 100 percent of the tasks performed by these workers. Other workers who use vehicles intensively in their jobs, such as ambulance drivers, firefighters, and plumbers, will see their jobs transformed. In 2017, 291,000 Tennesseans were employed in these areas.

“It is important to remember that new vehicle-related jobs will be created, as will other jobs in the economy,” Mr. Fox said. “Tennessee must transform aggressively if it is to be an economic leader as these many changes occur, and a big challenge is helping existing workers transition to the new opportunities.”

The study finds that Tennessee could benefit in several ways by developing policies now to get ahead of the curve. First, it would give the state a chance to be a leader in the AV industry and increase Tennessee’s chance to be a place where related industries want to locate and grow.

Second, in fiscal year 2017–18 Tennessee netted $2.3 billion in revenue from taxes on gasoline, tires, and vehicle sales, as well as motor vehicle registration, rental surcharges, and more—roughly 16 percent of the state’s total tax revenue—and much of that would be at risk with AVs. Changing the tax structure now will keep revenue consistent so roads, bridges, and other infrastructure can be maintained.

Third, rural Tennessee will be unevenly affected if new policies are not adopted soon, because urban residents and businesses may feel the benefits of AVs first and could pay less in taxes, at least initially.

“Current policy that taxes fossil fuel likely leaves many rural residents and businesses paying an uneven share of the burden because they will change to AVs more slowly,” Fox said. “Urban dwellers are already used to ride sharing, so those areas will shift more rapidly to the use of AV fleets that will be taxed much less with the existing structure.”

Finally, the study finds that policy changes will become more difficult as entrenched interests and political views grow. If the state can update these policies sooner, it will also help industry develop more efficiently if business and consumers know the tax and regulatory structures they will confront.

Overall, the study finds AVs have a number of benefits for Tennessee: they are less damaging to the environment, time spent in the vehicles is more productive, a reduced number of traffic accidents will save lives, traffic congestion will decrease, and parking spaces can be freed up for more productive purposes.

“China, Japan, Germany, and the EU more broadly are going to do this. They already have too many cars on the road, and AVs will help alleviate that,” Mr. Fox said. “Does Tennessee want to be a leader or a follower in this emerging industry?”


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