Car Maker General Motors Expects Dramatic Changes In The Next 5 Years: Why It Matters to ComfortDelgro Corporation Ltd

Major US-based car manufacturer General Motors is expecting big changes to the automobile industry over the next five years. In an interview published on Sunday, General Motors’ chief executive Mary Barra went on record saying this:

“I think it’s pretty big. I’m on the record as saying we are in the midst of seeing more change in the next five years than we’ve seen in the last 50 years.”

So, General Motors foresees dramatic changes to its industry happening. But, how exactly will the car industry change over the next five years? Barra believes that the changes will revolve around three broad themes. She said:

“When we step back and look at this broadly, we see it all fits together: electric, autonomous, and sharing. People still need to get from point A to point B, and we believe autonomous will be a big part of it.”

Investors in Singapore’s transport companies might want to take note. These changes may already be taking root in Singapore’s shores.

Automatic for the people

In early August this year, the Land Transport Authority (LTA) signed deals with UK-based Delphi Automotive Systems and local start-up nuTonomy to allow self-driving vehicle services to be tested in Singapore. nuTonomy has also partnered local ride-hailing app Grab for this service.

Full-fledged self-driving car services could arrive in Singapore as early as 2018 according to media reports on LTA’s deals.

Meanwhile, General Motors is also getting into the act by investing US$500 million into the ride-hailing service Lyft. The goal is to pair General Motors’ own electric vehicle, Bolt, with self-driving technology that can be utilised on Lyft’s network.

In short, General Motors may no longer be a car maker alone in the future.

As we enter a world of driverless cars and shared services, it would appear that the lines between a car manufacturer, service provider, and driverless vehicle technologies provider are being blurred. This might complicate matters for local taxi service providers such as ComfortDelGro Corporation Ltd (SGX: C52).

An uncomfortable paradigm shift 

In ComfortDelGro’s 2014 annual report, its chairman Lim Jit Poh discussed self-driving cars in his annual statement:

“While we continue to work at improving our productivity levels, there is currently still a natural limit to how much we can automate since driverless vehicles are still not a reality. Indeed, there is a limit to human productivity as the bulk of our staff is confined to driving vehicles.”

As Lim notes, the majority of ComfortDelGro’s manpower is dedicated towards vehicle driving. On one hand, a future with driverless cars could reduce ComfortDelGro’s dependence on the manpower needed for say, taxis.

On the other hand, with the lines being blurred, present car makers (such as General Motors) could become competitors in the future. Furthermore, other players such as nuTonomy and Grab are also looking to grab (pun intended) a piece of the transportation pie.

Taxis provided around 32% of ComfortDelGro’s revenue in 2015. So, major changes in the car industry could leave a mark on the company’s revenue and/or profit – for better or for worse.

As the picture in the land transport business environment evolves, it is unclear how business models will look like in the future. But if we take the word of General Motors’ chief executive, it could be an interesting five years ahead for commuters and companies such as ComfortDelGro.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn't own shares in any company mentioned.