How Driverless Cars Will Re-Shape Our World

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How Driverless Cars Will Re-Shape Our World

In 2018, self-driving automobiles are likely to morph from carefully-monitored prototypes into deliverable products, doing real work.  We showed in the August 2017 issue of Trends, that at least a dozen companies will have Level 4 or 5 autonomous automobiles on the road by 2025. 

The Society of Automotive Engineers (or SAE) defines a Level-5 vehicles as one that can operate without a driver almost anywhere, and in almost all road and weather conditions.  A level 4 vehicle differs from a Level 5 vehicle, in that it can only operate autonomously in certain areas that have been fully mapped and under normal road conditions. 

The key take-away is that that, starting as early as next year, driverless cars will be in commercial service with ridesharing services such as Uber and Lyft.  And, while it will start with this limited application in places like Singapore and San Francisco, it will quickly grow into a global reality by 2025.  

Experts estimate that Level-4 self-driving technology will initially add about $10,000 to the price of a vehicle.  The Trends editors believe that for EU and North American markets, this price is at or near “the price corridor of the mass” made famous in the book, Blue Ocean Strategy.  Better yet, that premium is likely to diminish quickly, under the convergent forces of economies of scale, learning curve effects, Moore’s law, and competitive pressures.  

As a result, the market will readily absorb as many as 10 million self-driving vehicles in the coming decade and by 2037, they will be the norm on highways throughout the OECD.

Given this trend we offer the following forecasts for your consideration.

First, the distinctive characteristics of self-driving automobiles will inevitably favor the “mobility as a service” (or MAAS) business model. 

The popularity of Uber and Lyft demonstrates that consumers like to have affordable transportation on call, without the upfront costs, on-going maintenance, and parking hassles of owning a car.  Arguably, a sizeable fraction of the population will still want to own traditional and self-driving cars for multiple reasons.  However, once the cost of the driver is taken out of the Uber ride-hailing equation, it will be impossible for the life-cycle cost of car ownership to compete with MAAS for most “use cases.”  Under this model, fleets of autonomous cars will roam cities waiting for passenger calls 24/7, selecting passengers based on various optimization algorithms.   The result will be extremely high utilization rates and consequently far fewer total vehicles in service...

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