When you use X and then a substitute Y arrives that is 10x cheaper and more convenient, you'll switch to it.
Using robotaxi network will be much cheaper than total cost of owning a car, mostly because cars are dramatically underutilized.
On average a car is used 1-2 hrs a day out of 12-16 hrs it could be used as a robotaxi. To start off we have 5-7x price difference.
Then most use is not shared. Assuming robotaxis will be used by 2 people on average, it's another 2x cost difference, 10-14x combined.
The cars will be much cheaper. Think $25k Toyota corolla, not $45k SUV or pick up truck. Fleet operators will ask for cars that are cheap and reliable, not for luxurious interior.
Not to mention that GM spends 3 billion dollars on advertising each year, which goes to increase the cost of your car.
It'll be a no-brainer to pay $200-$300 per month for (effectively) unlimited robotaxi service than $400 per month for a lease + $100 month for insurance + fuel + cost and inconvenience of refueling.
Furthermore, you won't be able to buy those cars.
Consider the following scenario to its logical conclusion:
Tesla (or whoever) introduces a robotaxi service.
A car that costs $30k to make can be sold for $40 k to you or put to use as a robotaxi and make $100k - $300k over its lifetime (big spread because it's hard to predict how the pricing will pan out).
Why would Tesla sell a car to you for $10k profit if they can make $70k profit?
For the first 10 years they'll be busy making cars exclusively for robotaxis and they'll prioritize grabbing market share. There will be no $40k self-driving Teslas to buy.
But won't GM or Ford or Toyota sell me that car?
In 2008 car companies went bankrupt because of 20% drop in car sales.
If robotaxis take off, they'll shrink car market by way more than 20%, permanently.
I can't see how this won't end up in bankrupting pretty much every car maker as we know them.
Those that will have self-driving technology will also switch to making robotaxis exclusively.
Those that don't will either become OEMs to the kinds of Waymo (and eventually be bought by them when they vertically integrate) or go bankrupt.
Privately owned cars might become like yachts: sold in very low numbers to multi-millioners.
”On average a car is used 1-2 hrs a day out of 12-16 hrs it could be used as a robotaxi.”
…assuming demand for cars is flat 12-16 hours per day, and that you could somehow, make all their operating hours useful operating hours. For example, society would have to change for commuter cars to end up in places where they immediately can be used productively.
”Why would Tesla sell a car to you for $10k profit if they can make $70k profit?”
Because, if they don’t, somebody else (e.g, a Chinese car manufacturer) will sell me a car for that $10k profit, and Tesla will make zilch.
If cars become that much cheaper, and wouldn’t need a driver’s license to use them, I don’t see why, by necessity, fewer people would own cars.
Your scenario assumes some manufacturer will gain a near-perfect monopoly. That might happen, but it’s not a given.
Also, I don’t think it is a given that the government wouldn’t break up such a monopoly.
> Why would Tesla sell a car to you for $10k profit if they can make $70k profit?
Because there is a niche that is profitable and if Tesla doesn't fill it, someone else will? After all, Tesla has had no motivational difficulties trying to fill that niche right now, so someone will be willing.
I also question the 70K profit part. Assuming robotaxis actually become a thing, why do you think the cars will make much profit at all? There will be a race to the bottom. I know a lot of Model 3 owners trying to justify their FSD purchase by suggesting they will eventually make back all of that money and more, but I can't figure out why they think this time they will be immune to market dynamics.
> It'll be a no-brainer to pay $200-$300 per month for (effectively) unlimited robotaxi service than $400 per month for a lease + $100 month for insurance + fuel + cost and inconvenience of refueling.
It's already possible: a monthly transit pass is often in the $100-150 range. The fact that people have been choosing to forego viable transit options in favor of a much more expensive personal vehicle option for a long time is strongly suggestive of the fact that people really don't want to give up their cars.
That sounds like someone who has never even attempted to make that work.
Transit is least effective in suburbs, where you have to try very hard and basically live in exactly the right location to make a transit-only experience work. But in both large urban conglomerations and even in many small rural cities, it is actually quite effective to do all of your transportation needs using local transit.
First of all, thank you for an interesting article! Looking at it quickly though, if I make some rough extrapolations from their data, it seems like most Teslas will have lost about 40% of their battery life by 500,000 miles. So I really think it's disingenuous to say that a Tesla can drive that long, when its range starts to make it significantly less useful, when replacing the batteries would cost more than buying a cheap car. Basically I think you are just exaggerating the benefit of longevity for electric cars.
That said though, the Tesla batteries are holding up better than I thought and I agree with you electric cars are better for higher mileage applications!
Why wouldn’t there be different classes of cars? If I’m going to work every day in an autonomous car and the price is not that expensive, there’s a chance I’ll decide to pay 25% or 40% more of what you say will be a dirt cheap price, to be in a nicer car with better seating and amenities. Especially if it becomes standard to pop open an iPad or laptop during your commute.
Others have already covered how any potentially profitable niche will be covered.
> It'll be a no-brainer to pay $200-$300 per month for (effectively) unlimited robotaxi service than $400 per month for a lease + $100 month for insurance + fuel + cost and inconvenience of refueling.
My car costs 1.800 € ( I'm not the first owner of that Mercedes), I barely use it as I live in a big city.
I bought my car at 2000miles for $8000. It now has 100000 miles after 5 years, presumably it will turn into dust in another 10 years which kills the underutilization argument. I see no reason why it would be cheaper to use a self driving taxi.
Using robotaxi network will be much cheaper than total cost of owning a car, mostly because cars are dramatically underutilized.
On average a car is used 1-2 hrs a day out of 12-16 hrs it could be used as a robotaxi. To start off we have 5-7x price difference.
Then most use is not shared. Assuming robotaxis will be used by 2 people on average, it's another 2x cost difference, 10-14x combined.
The cars will be much cheaper. Think $25k Toyota corolla, not $45k SUV or pick up truck. Fleet operators will ask for cars that are cheap and reliable, not for luxurious interior.
The cars will last much longer. 500k miles vs. 100k miles of a typical car for personal use. 500k is already a reality with Teslas (https://qz.com/1737145/the-economics-of-driving-seven-teslas...) and Tesla is working to make 1 million miles cars.
Not to mention that GM spends 3 billion dollars on advertising each year, which goes to increase the cost of your car.
It'll be a no-brainer to pay $200-$300 per month for (effectively) unlimited robotaxi service than $400 per month for a lease + $100 month for insurance + fuel + cost and inconvenience of refueling.
Furthermore, you won't be able to buy those cars.
Consider the following scenario to its logical conclusion:
Tesla (or whoever) introduces a robotaxi service.
A car that costs $30k to make can be sold for $40 k to you or put to use as a robotaxi and make $100k - $300k over its lifetime (big spread because it's hard to predict how the pricing will pan out).
Why would Tesla sell a car to you for $10k profit if they can make $70k profit?
For the first 10 years they'll be busy making cars exclusively for robotaxis and they'll prioritize grabbing market share. There will be no $40k self-driving Teslas to buy.
But won't GM or Ford or Toyota sell me that car?
In 2008 car companies went bankrupt because of 20% drop in car sales.
If robotaxis take off, they'll shrink car market by way more than 20%, permanently.
I can't see how this won't end up in bankrupting pretty much every car maker as we know them.
Those that will have self-driving technology will also switch to making robotaxis exclusively.
Those that don't will either become OEMs to the kinds of Waymo (and eventually be bought by them when they vertically integrate) or go bankrupt.
Privately owned cars might become like yachts: sold in very low numbers to multi-millioners.