What Can We Learn From Autonomous Vehicles’ First Driving Test?
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Although commercial trials have been successful, robotaxis have significant hurdles to clear before they move into the fast lane.
Volume XXV, Issue 62 |

Over the past two years, AVs (autonomous vehicles) have started to reach a limited number of consumers via ‘robotaxi’ trials taking place in cities around the world. These trials are an important milestone but have also highlighted the remaining hurdles to widespread AV adoption. However, many experts expect that these hurdles will eventually be overcome, so we can start to consider how fleets of robotaxis may enter the market in the future, and what their effect may be on the ownership of private vehicles. 

Trials suggest a potential wider rollout of robotaxi fleets 

There has been much debate as to how AVs will become available to consumers. The launch of several commercial robotaxi trials over the past two years suggests that consumers may first access AVs via ride-hailing apps in urban areas. In the short to medium term, this AV fleet scenario could offer consumers affordable access to AVs, which are likely to remain prohibitively expensive for the vast majority to privately own. In this scenario, the utilisation of robotaxis would be expected to be higher than that of a privately owned vehicle, which would typically only be driven for a few hours each day. This could benefit AV manufacturers by allowing them to quickly collect masses of data to inform development of further technology.  

Robotaxi fleets will likely have to initially compete with traditional taxi and ride-hailing firms. One key area of competition will be price. AV fleet operators will aim to leverage their position of not having to pay drivers to offset the higher cost of developing or leasing AV technology. In order to do this, they will have to efficiently manage their fleets’ capacity to cope with daily fluctuations in demand. Ride hailers currently do this through a combination of surge pricing and ‘gig economy’ drivers to meet high demand without having to maintain a full fleet. 

Maintaining a high utilisation rate for AV assets could be one of the key challenges for robotaxi firms as they begin to scale up AV trials. Figure 1 below plots hourly Uber and Lyft trips in San Francisco and illustrates the significant daily peaks and troughs in demand. Ride hailers are able to use surge pricing to regulate demand peaks and increase supply during these periods. Robotaxi firms will have to adopt a similar mechanism to match supply and demand and avoid having a large surplus of unused vehicles on the road for several hours each day. This presents an opportunity for ride hailers, which could position themselves as valuable partners to robotaxi firms by sharing their extensive data to help overcome this challenge. 

Initial impact in densely populated urban areas, but not on car ownership 

As robotaxi firms aim to efficiently utilise their assets, we can expect them to first roll out in densely populated urban areas by expanding their existing city trials. In the US in 2017, urban areas accounted for about 55% of all private car journeys, with nearly 80% of these trips being under 10 miles. Therefore, the most densely populated urban areas should offer robotaxi firms the best chance for higher vehicle utilisation. This pattern would match what we experienced with ride-hailing companies in the 2010s, when they were initially most active in densely populated city centres before eventually expanding to less-populated city outskirts and suburban areas. 

This steady expansion of robotaxi fleets is expected to affect the ownership of private vehicles. If we reach the stage where consumers are able to access affordable robotaxis in minutes, then it poses the question of whether we will still need to own as many private vehicles. Households which currently own two or more vehicles may decide that a convenient robotaxi service could replace one or more of their vehicles. It may offer a compelling alternative to replacing an existing car once the costs associated with fuel, insurance, maintenance, taxes and parking are considered. For this to occur, it will require robotaxis to be cheaper than today’s ride hailers, along with a considerable behavioural shift from consumers.  

The effect on car ownership won’t be immediate 

Demography will also be an important factor affecting car ownership in the long term. If robotaxis are initially most active in densely populated inner cities, then we will likely not see a notable short-term change in private car ownership, as car ownership in these areas is often relatively low today. London is an example of a city where the centre is the most populated area and population density gradually decreases as the distance from the centre increases (see Figure 2).

When we look at current levels of car ownership in the same areas, we can see that they are lowest in the more densely populated central areas and start to increase as we extend outwards (see Figure 3). Therefore, even if robotaxis capture a large share of private car journeys in densely populated city centres, the knock-on effect on car ownership will not be as pronounced outside those centres as there are relatively few privately owned vehicles in these areas. However, if robotaxi fleets eventually expand to city outskirts and suburbs, then we could see an accelerated decline in privately owned vehicles as these areas are still relatively well populated and tend to feature at least one vehicle per household. 

The timings of these stages depend on multiple factors 

These factors include: 

  • Affordability of AV technology — AVs will need to be produced at such a scale that robotaxi journeys become sufficiently affordable to consumers. The benchmark may initially be becoming cheaper than traditional taxi or ride-hailing services and eventually evolve to becoming more affordable than purchasing and maintaining a private vehicle. Robotaxi firms will have to ensure that they are achieving high utilisation rates for their assets by efficiently matching supply to daily demand fluctuations. 

  • Behavioural changes — Households deciding to forgo private vehicle ownership in exchange for using robotaxis will require a substantial behavioural shift. This is likely to be a gradual change, as consumers become accustomed to sharing the road with AVs and gain confidence in their safety. 

  • Regulation — Governments around the world are starting to approve limited AV trials in major cities; however, more-advanced regulations are required before fleets of AVs are permitted on public roads.

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