A recent analysis by Goldman Sachs found that private car ownership is likely to continue growing through 2030, even with ride-hailing expanding as it is. The Ubers of tomorrow are likely to turn to today’s veteran car makers to produce and manage vast fleets of self-driving vehicles, and the fleet-management business could be more profitable than car-making is today.
Ford's new CEO, Jim Hackett, seems to be focusing on the future, as he has spent the past year running Ford Smart Mobility, a new venture designed to prepare for a pay-as-you-go robo-car horizon, and as he lays out his case for self driving cars to Wall Street, it looks as though Ford's stock should recover from its recent slide. Shareholders could make 30% in a year, including dividends. Over the next five years, Ford stock may have an excellent chance of outperforming Tesla.
Alphabet’s Waymo division has already logged three million autonomous miles. Eight companies have plans to bring fully self-driving cars to market within the next five years. IHS Markit, a research group, predicts 32% market penetration of highly autonomous cars by 2035. Ride-hailing services are already testing driverless taxis, including Uber and Lyft in the U.S. and GrabTaxi in Singapore.
[caption id="" align="alignleft" width="309"] Ford CEO Jim Hackett[/caption]
That will be even more true of autonomous ride-hailing, because cars are kept busy in between tuneups. After all, today’s cars sit unused 95% of the time. Higher utilization bends the cost curve away from internal-combustion engines to favor electric vehicles, which cost plenty upfront but little to run. And electric, self-driving vehicles will be linked together wirelessly to form an Internet of Cars. That will allow for machine learning—a never-ending driver’s education class for the robots.
The transition is unlikely to be seamless. Self-driving cars will disrupt a $7 trillion market in vehicle sales, supplies, and services, render some professions obsolete, and have knock-on effects for oil, real estate, ethics, and more. There will be accidents, including deadly ones, with no drunk or reckless drivers to blame, just programming bugs, and an already robo-phobic public will recoil from the constant coverage on cable news. But the cold calculus of those deaths is perhaps the main reason that self-driving cars are inevitable.
Everyone thinks he or she is an excellent driver. And everyone is wrong. Humans are reckless in their youth, doddering in their old age, and in between, are prone to fatigue, distraction, and rage. Worldwide, 1.2 million people die each year in car accidents, and many times that number are injured. In the U.S., if 90% of cars were self-driving, road deaths would plunge from 40,000 a year to 11,300, and accidents, from six million to 1.3 million, according to a study by Eno Center for Transportation, a research group. Alphabet’s Waymo has yet to cause an injury.
The potential benefits of self-driving cars extend well beyond saved lives. Fewer accidents mean fewer traffic jams and speedier commutes for all. And unlike humans, robots don’t need things like extra-wide lanes and guard rails, which could one day lower infrastructure costs. If former drivers spend their riding time working, the result would be a surge in productivity. If they spend it watching video or reading, that could mean more revenue for media and internet firms. Without combustion engines, cars will become lighter and require fewer resources to produce. The air will become cleaner. Cramped cities might benefit the most. Nearly a third of their space is now used for parking, and despite this, much of their traffic consists of drivers looking for parking. Congestion adds to emissions and wasted time. In central London, average driving speed fell below eight miles per hour last year. As Bank of America Merrill Lynch pointed out in a recent report, that is 30% slower than a running pig.
There is also money to be made by well-funded companies. Morgan Stanley recently did the math on a theoretical Waymo spinoff, assuming that Alphabet would eventually want to distance itself from crash liability. It assumes that Waymo first becomes profitable in 2022 and by 2030 has a fleet of three million cars controlling 1% of global miles traveled, with average revenue per mile of $1.25. That could give it a value of $70 billion, which, even to a parent worth $680 billion today, seems like more than just a hobby.
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