Almost anything that moves can become an autonomous vehicle. Tiny autonomous shopping carts are on one end of the spectrum and gigantic autonomous long-haul trucks can be considered the other extreme, if we were to think of only vehicles on road. The testing of self-driving cars by Google (now Waymo) began way back in 2009 on city roads. This was indicative of the technology first hitting the consumer/passenger space. This thought, however, met some policy resistance and consumer reluctance, lately.
The question that we are faced with now is which industry autonomous car technology is going to hit first. Keeping the need in mind, factors such as rising labour cost and unavailability of drivers for trucking industry allude that there is a potential opportunity in this space for autonomous vehicle technology. Data validating the increasing labour costs comes from, for instance, China, where the cost is likely to double from 2013 to 20191. Also, since autonomous trucks will imply more of highway driving, the driving environment is favourable. It is less controlled than in mining and agriculture but much more controlled & predictable as compared to in-city autonomous driving. As per the American Trucking Association the trucking industry today employees close to 3.5 million truck drivers2. The cost savings in trucking industry with the advent of autonomous trucks is attributed to elimination of wages (approximately 40% of the operating costs) and the rest to factors like reduction in insurance sums.
The Logistics and Delivery space seems to be the one seeing major upheaval. Waymo is going to have its trucks deliver freight for Google data centres in Atlanta. This is apparently their pilot program to evaluate the effectiveness of integrating Waymo technology with logistics. Amazon’s latest patent of a ground-based autonomous delivery vehicle further reinforces the reports by analysts mentioning that the last mile delivery space will be worth 80 billion USD by 2025. Autonomous Robotic vehicle start-ups like Nuro are entering the last mile delivery space through partnerships with retail giants like Kroger. Thought leaders from the likes of FedEx, UPS, DHL are already talking about the technology. Delivery and logistics space thus seems to be the one seeing hints of the technology at the first and the last nodes, and in the next decade one can expect end-to-end autonomous delivery.
Factors driving market adoption
Accuracy, cost and social acceptance of the autonomous vehicle technology are three important decisive factors. The percolation of autonomous technology into the trucking and logistics space will help it scale up owing to cost reductions. Cost and hence price, is the first barrier for adoption of autonomous technology in consumer space. When the price is low enough for a citizen to be able to afford it, say, on a Lyft trip, the technology will penetrate into the car sharing space. As per reports, in Los Angeles $1.55 is the cost per mile of an Uber while the cost of ownership of cars comes to about 54 cents a mile. As per some predictions, autonomous taxi costs will decrease from around 85¢ per mile in 2018 to about 35¢ per mile by 2035. This will be lower than the cost of ownership of cars today, justifying the economics of owing an autonomous car. A self-driving car needs to be able to beat those numbers.
The second barrier, is the social aspect, how comfortable people are with using autonomous cars. The recent incident in Arizona resulting into the death of a 49-year-old woman has, however, been a derailer for autonomous technology. Where 67% of Americans felt less safe with autonomous technology until a year back, now the number has risen to 73%3. Displaying the efficacy of this technology in trucking space with social experiments by Waymo in different cities, like Phoenix, will help reduce the psychological and social barrier eventually. As adoption increases the cost will reduce further which will in turn drive more adoption, and this will go on. Also, as the usage of autonomous vehicles increases, since it’s a learning system, the technology will become more accurate. Increasing accuracy will lead to faster reduction in social barrier.
Passenger mobility space, alignment of the Automotive players
In the year, 2025 close to 40,000 miles in US will be autonomous shared driving covered. In 2030 people can be expected to “own” self-driving cars. The automotive companies have started positioning themselves in the car sharing space to ride this wave from the very beginning. Automotive giant Daimler AG has car2go, BMW has DriveNow, AUDI has AUDI on demand, GM has Maven indicating that shared mobility along with multi modal transport is the way to go. In the multi-modal space, Daimler AG with its Moovel app has introduced some direction on what is the need of our times in terms of transportation. The industry is polarizing towards technology start-ups and disruptors. GM acquired Cruise Automation, which is amongst the spear heading companies in the space. Fiat Chrysler, Lexus, Jaguar Land Rover are working with Waymo. Other leading automotive companies like Tesla are in news for building their own Autonomous vehicle solutions.
Going forward, with autonomous vehicle technology, the boundaries between different areas of application of vehicles may dissolve. An autonomous taxi, not driving at some time, will end up completing a food delivery and then pick another passenger and drop him somewhere. Autonomous technology will probably enter all nodes of the end-to-end transportation system, autonomous shuttles, trams, trains, bikes, taxis etc. all embedded in a single platform in the next decade or so. Accuracy will drive adoption and more adoption will keep improving the accuracy. The cost of ownership of autonomous cars will decrease as the technology scales up. The whole point then really is which industries are going to be the earliest adopters & when will we see this technology creating a positive impact in the public safety space.
The author would like to acknowledge Partha Mukherjee and Neil Gomes
“The views expressed in this article are mine and my employer does not subscribe to the substance or veracity of my views.”
1 McKinsey & Co.: Gearing up for growth, Future perspectives on the global truck market
2 American Trucking Associations: Reports, Trends, and Statistics
3 Valuations Sizzle, Canada Fizzles and Autonomous Vehicles get Rolling Again