Within 13 years self-driving cars will dominate the roads, representing some 95% of all car miles driven, according to a new study released this week. And while 40% of the cars in 2030 will still be of the old, internal combustion variety, they’ll represent just 5% of the consumer miles driven.
The report “Rethinking Transportation 2020-2030: The Disruption of Transportation and the Collapse of the Internal-Combustion Vehicle and Oil Industries,” released today by San Francisco think tank RethinkX departs from a number of forecasts in the past few years, including Moody’s and IHS Automotive, which expect the transition to self-driving cars instead to occupy multiple decades.
The rapid, Facebook-like or smartphone-like adoption curve, the report says, will be driven largely by market forces. Self-driving electric car share plans, in which consumers “subscribe” to a self-driving service much like they subscribe to a cellphone plan today, will be cheaper and more convenient for many people than owning a vehicle. And as a result, the authors say, incumbent industries like oil, cars, insurance, and transportation will face a consumer mass migration away from their old-model products and services if they don’t start preparing for the disruption now.
Contrast these words of warning to Moody’s, for instance, whose March 2016 self-driving car study for the insurance industry assured its readers, “While self-driving cars will likely force auto insurers to rethink their business models, widespread adoption of this technology is decades away, allowing insurers plenty of time to adapt.”
James Arbib, who authored the RethinkX report with Tony Seba, says they reached their findings after “talking to a ton of people down the supply chain in all kinds of different businesses, in high-utilization EV businesses, bus companies, truck companies, car companies.” He adds, “We think when you change a business model from private ownership (of cars) to transport-as-a-service, you change a lot of other things as well.”
Arbib says the report’s dramatic conclusions hinge on a singular assumption: Fully autonomous (also called Level 5 or “wheel optional”) driving, of the kind Elon Musk famously claims will soon be available in Tesla cars, will be coming online in the early 2020s.
“This scenario in the report is based on full autonomy,” says Arbib. “Without full autonomy, the bet’s off. If it is 2030, and we certainly don’t believe that, this scenario is delayed.”
The authors’ forecast of full autonomy within years and not decades is based in part on the rapid growth of data from partially self-driving cars rolling out today. The deep learning AI systems in Waymo’s, Baidu’s, NuTonomy’s, Tesla’s, GM’s and others’ fleets get better as more data becomes available. Seba and Arbib think these cars’ self-driving capabilities will be getting markedly better as the exponentially-growing sensor, mapping and driving data comes in.
“These companies are investing billions of dollars in making this happen,” Seba says. “All you need is one operating system to work, and then you have Level 5 autonomy. And the U.S.-centered view — if it doesn’t happen here, it doesn’t happen anywhere — is a little misguided. A lot of these technologies are global. The Chinese are working on self-driving, and Europe is working on self-driving. And the first one to get it is going to be the Android or iOS of Level 5 autonomy.”
Seba adds that whenever the threshold of Level 5 autonomy is crossed, market forces they outline in the report will take over and start disrupting various sectors of the economy within a decade. On the upside, they forecast the so-called “transportation as a service” (TaaS) industry of self-driving car subscription plan providers will entail broad consumer savings compared to car ownership. The savings represent some $5600 per consumer per year or $1 trillion in additional disposable income in the U.S. alone by 2030. And productivity gains in recouping that time otherwise occupied today in driving represents another $1 trillion per year, Seba and Arbib say.
On the downside, auto dealers, car repair shops, taxicabs, buses, car insurance, filling stations, not to mention oil companies and car makers, will all be hit by a shockwave as the rapid adoption of self-driving electric vehicles drains these present-day industries of income. Which, Seba and Arbib say, could mean widespread job loss — if companies and governments today do not anticipate the deluge and begin retraining their workers for jobs of the 2020s and ‘30s.
The report’s dramatic conclusions further depend on other intermediate figures, like their assertion that compared to the internal-combustion standard, self-driving EVs will represent, “a 90% decrease in finance costs, an 80% decrease in maintenance costs, a 90% decrease in insurance costs and a 70% decrease in fuel costs.”
Those cost savings, Arbib says, come from the interviews they conducted with industry leaders and technical reports they consulted. The financing price drop, for instance, comes from taking car ownership out of the mix. Car subscription services will increase utilization of a vehicle from 16,000-32,000 kilometers per year to 160,000 kilometers or more. And that reduces the number of years the car is in service (and thus interest paid on any financing plan) as well as increases the amount of use wrung out of it per year.
Seba says internal combustion cars have some 2000 moving parts, whereas EVs have something closer to 20. So the wear and tear and depreciation of an EV is similarly lower. And there of course won’t be fully autonomous vehicles broadly adopted till their safety record at least matches that of human drivers. But Seba and Arbib say they think autonomous safety will be significantly better than the 38,000 road deaths per year (U.S.) presently. Which would mean great news for the epidemic of car accidents today, although perhaps less-than-rosy news for the car insurance business model.
The full force of the changes self-driving, electric cars will bring, Seba and Arbib say, is only being dimly appreciated today. Their prognostications carry an echo of recent Cassandras like Alibaba’s Jack Ma and Kai-Fu Lee of Sinovation Ventures in China, who warn of AI and automation inciting “social conflicts over the next 30 years [that] will hugely impact every industry,” in Ma’s words.
But it doesn’t have to be this way, Seba and Arbib say. “We see it in parts of the world right now — there is real resistance to this process,” Arbib says. “People want to reach back to some kind of past security, and stop the process. But that’s economically illiterate. What we need to do is retrain and mitigate and provide the social support networks, and we need to at least have a conversation about how we deal with this. And we don’t feel that’s being done on the basis meaningful data that can really show across the economy how this might do.”