Making an Economic Case for Robo-Taxis

Autonomous vehicles and new mobility services threaten to disrupt traditional transportation in a number of ways. They promise to improve safety and convenience, while reducing congestion and pollution—and affecting everything from the design, production and sales of vehicles to competition, infrastructure, public access and car ownership itself.

But a lot of questions and concerns remain—including consumer demand for such vehicles and whether they make sense from a financial standpoint.

A recent study found that it is already less expensive to use a ride-hailing service than to own a car in four of the five largest U.S. cities. It’s cheaper to hail an UberX or UberPool ride than to use a personal car in Chicago, Los Angeles, New York City and Washington, D.C., according to Kleiner Perkins Caufield Byers’ (KPCB) annual Internet Trends Report authored by Mary Meeker.

Uber’s biggest advantage is in New York, where consumers can save $76 per week ($142 to hail a ride vs. $218 for ownership) by using the service, according to the report. The analysis takes into account purchase price, maintenance, fuel, insurance and parking expenses. Savings were less in Chicago, Los Angeles and D.C., where Uber was $27-$39 cheaper per week.  But in Dallas, Uber cost $116 more per week than it did to own a car.  

The 294-page KPCB report evaluated dozens of other issues associated with digital technologies, e-commerce and related services. This includes “on-demand” jobs (such as Uber drivers), which are forecasted to soar 25% this year in the U.S. to total 6.8 million workers. Such jobs can provide supplemental income and flexibility to workers who have underutilized skills, Meeker notes.

The KPCB study supports the findings of a report conducted last year by researchers at the University of Texas. They concluded that it would be more economical for as many as one-fourth of American motorists to forego vehicle ownership in favor of emerging shared services.

In addition to the purchase price and various out-of-pocket operating and maintenance expenses, the analysis factored in a driver’s time. The average American spends 335 hours behind the wheel driving about 13,000 miles per year, plus additional time for cleaning and maintain their vehicles, according to the report.

The financial equation is primarily tied to the purchase price of a vehicle, usage rate and how much a person values his or her time, the authors note. The average new vehicle costs $35,000 but is only used 4% of the day. People who drive less than 10,000 miles per year, spend a lot of time in traffic and place a high value on their time stand to benefit the most from mobility services, the report asserts. But those who pay less than $25,000 for a vehicle and drive it more than 15,000 miles per year should stick to traditional ownership.

Future autonomous taxis also could provide a substantial economic benefit to society as a whole. A report released earlier this month by Securing America's Future Energy, an advocacy group that aims to reduce America's dependence on oil, claims the economic payback from automated vehicles will exceed $800 billion per year by 2050. Most of the savings is attributed to forecasted reductions in accidents and congestion, which would reduce pollution and allow people to use their time more productively.

The report argues that the cost savings—and improved quality of life—far outweigh potential job losses caused by autonomous vehicles. The authors expect the number of jobs lost to driverless vehicles would be limited to 0.06% of the workforce over the next 15 years and rise to twice that level by mid-century.  

The report, entitled "America's Workforce and the Self-Driving Future," urges government agencies to work with industry to accelerate the deployment of automated vehicles. At the same time, the report says provisions need to be made to retrain displaced workers for new jobs, including those related to new mobility services.

The viability of so-called robo-taxis and other emerging mobility services depend on a number of factors, including technology, reliability, safety, liability and consumer demand. The future is far from certain. But at this point, there appears to be a growing business case to support and explore such a transition.