The Key to Autonome Success – ‘Money Flow’

By Mr. Paul Godsmark posted 01-13-2013 07:33 PM


In my first blog I raised the subject of the impending autonome (autonomous vehicle) revolution on our roads which included a link to my ‘Autonomes 101’ presentation.  In there I explained some of the big benefits such as reductions in car crashes, business and operational benefits etc.  But this only partially explains explain why I believe autonomes will be in huge demand from the informed public even before the technology is available.

So in this blog I want to tackle the whole ‘cost’ issue – as this technology can only work in capitalistic societies if it shows a net benefit in financial terms.  If we understand the ‘money flow’ then we can predict the impact of this technology.  What I present following is my theory – and it will need modifying as more information becomes available. See if you agree.

Let’s start with some key assumptions:

1.       Autonomes are certified safe for ‘body-out’ use - they can move from one place to another without a licensed driver, or any other person, inside. This would appear to be the ultimate purpose of all autonome development.

2.        The cost of autonomes will not be prohibitive – in 2012 the Velodyne LiDAR sensor cost in the order of $70,000.  I have heard a professor speaking on this subject say that they will cost $2,000 in 2013.  Ibeo said in June 2012 that in 2014 they would supply LiDAR for $250 each.  In April 2012 Anthony Levandowski of Google said that “When they go into mass production, he estimated an ordinary car could be retrofitted for a couple of thousand dollars”.

Business models that will be immediately affected are:

·         Taxis – currently the driver adds anywhere between 14% and 62% of the fare – in Manhattan I understand that it is about 57%.  So remove the driver and costs plummet.

·         Car rentals – many customers will save money by simply hiring an autonome when they need one, rather than leave the rental vehicle parked up and costing money.  So rental companies will modify their business model and supply autonomes for rent for a journey rather than a time period.

·          The rapidly growing carsharing fleet business model (Avis Zipcar, Hertz on Demand, WeCar, U Car Share, Car2Go etc.) will similarly use autonomes as a natural extension of their business model.

·         The peer-to-peer car sharing (P2P or or ride sharing) (RelayRides, Getaround etc.) will also see this as a natural extension of their business model.  Google and GM are investors in RelayRides.  Sebastian Thrun (Google) is an advisor to Getaround (who use technology enabled by GM’s OnStar).

So these businesses will have recognized a threat to their existing ‘money flows’ and will invest in autonomes in order to stay competitive.  Each of them will likely set up autonome fleets and compete with each other.  As businesses they all benefit from economies of scale, but they all have overheads and most will be answerable to shareholders to be profitable.

But the real competition will come from the private vehicle owners.  Entrepreneur types will realize that they can buy/retrofit their own autonome and start hiring it out when not in use (more than 90% of the time) so that they can recover their running costs and maybe make a small profit from owning a car.  They will naturally recognize the benefits of joining together in ad-hoc fleets, probably paying a small percentage of revenues to companies that will provide smartphone apps to coordinate customers, plan efficient journeys and collect payments, as well as to vehicle cleaners and maintainers.

The competition between the autonome fleets of the established businesses and the private vehicle entrepreneurs will likely be brutal – but according to the research paper ‘Transforming Personal Mobility’ by the Earth Institute, Columbia University we can expect autonome fleets to reduce typical daily transportation costs from around $21/day to $8/day using autonomes based on current cars.

However, once the autonome technology has been firmly established to significantly reduce crashes then these vehicles can shed much of the weight and ‘safety baggage’ of current designs, and very likely shift to alternative propulsion systems like electric, and average daily transport costs could fall to as low as $2/day.

The current percentage of income that Americans spend on transportation is typically 9% in location efficient environments, 19% for an average family and 25% in auto dependent exurbs.

Such cost savings in personal transportation costs will be so transformative that an increasing number of people will choose to forego car ownership and use this new Transport/Mobility as a Service (TaaS/MaaS) model.  This trend towards reduced ownership and sharing can already be seen in the success of the P2P sharing businesses and the way that average age for first obtaining a driving license and owning a vehicle is rising (even beyond ‘recession effects’).

Thus many individuals will chose to re-direct how their money currently flows to automakers, oil companies, insurers, depreciation etc. and receive a very similar level of service to car ownership by making autonome fleet rental a normal part of their daily life, but for a fraction of the cost.

A significant proportion of individuals will initially choose to own their own autonome, but this will be at a hefty premium and they will be viewed as inefficient, wasteful and unsustainable by the growing numbers of autonome fleet users.

It will only be a matter of time before the first major city bans human car drivers from their City Centre as they are viewed as dangerous, sub-optimal and wasteful.  I predict that this could be as early as 2027.