Thoughts on Driverless Cars (part 1 of 6)


I can’t believe it was ~6 months ago, when Elon Musk posted his second master plan for Tesla, but since then I’ve been ruminating about who is going to win in this market. I thought I should share my thoughts.

Before doing so, I think it’s important to state that this vision is based on a lot of assumptions, so its best to see if you agree with these assumptions, before adopting my prescriptions. These assumptions include, but are not limited to:

  • The primary method of driving will be autonomous/driverless
    • A highly disputed assumption
  • Vehicles will be primarily electrically powered

I’m a strong believer in testing your assumptions before building any sort of effort towards a solution so I would suggest everyone to take these thoughts with significant grains of salt, as they have not been tested, and are often disputed.

Given those assumptions, I’ve broken my vision of the future driverless world into a couple of parts:

  • What will the driverless fleet look like and how we will use it?
  • How to manage surges in ridership demand?
  • How does ride-hailing fit into all of this?
  • How will it change urban planning?
  • Who or what will have the biggest impact in this market?
  • How will regulation have to adapt to this?

What will the driverless fleet look like and how we will use it?

45 percent of daily trips are taken for shopping and errands, 27 percent of daily trips are social and recreational, such as visiting a friend, 15 percent of daily trips are taken for commuting. Given that 87% of transit accounts for a functional use of getting from point A to point B, I will operate under the assumption that transit primarily fulfills a utilitarian act – not a recreational/leisure act. I’m certain people will still want to enjoy the pleasures of operating their own vehicle, just as people enjoy riding horses, but the act of transit will be primarily taken over by driverless vehicles.

Shape of the fleet/Fleet business models

Now with a driverless car, we have to consider whether people will own their own cars, participate in the “sharing economy” on a CapEx basis (not own a car, but have personal rides – a traditional uberX model), or participate in the “sharing economy” on an OpEx basis (pooling).

I’ve not qualified mass transit, as I assume that public transit as a whole will also move to a driverless model as well, adopting a larger pooling blocks (and no set routes), to distribute operational costs across all the riders and/or may choose to subsidize the pooling model (see Altamonte Springs, FL).

How will we use these fleets

Because of the inherent costs of operating with each model (owning being the most expensive, and pooling being the least) you will see a socio-economic stratification in the ridership of each of these models – just as today there is a generalized stratification in the make and model of the vehicles we drive. I assume the following breakdown:

  • Mass Pooling – Base/down market riders will typically opt for public transit (longer ride time, lower cost) models.
  • Micro-Pooling – Lower Middle Class and most of the population will participate in the micro-pooling based approach
    • Overall transit costs should come down because OpEx is being shared to make mass pooling in lower demand
  • Shared CapEx (uberX) – Mid-market customer will typically opt for this
  • Owned + Lending – Upper-mid market will opt to own their vehicles and lend them to the fleet
  • Solely Owned – High-end market will tend to own and not lease their vehicles

The class stratification is not exact. People will switch between the model they subscribe to based on the experience they need (some will need to get from point A to point B quickly and switch for that instant from a mass pooling model subscriber to a momentary uberX model). Also, depending on geography and population density the primary demographic of the subscribing base will vary.

Who will own these shared resources:

The base to mid-market customers will never own a vehicle, and a result the next question is who will?

  • Shared OpEx (pooled) vehicles will often be owned by the public sector (see Altamonte Springs, FL), fleet operators (uber, lyft, juno, etc), or automotive OEMs (Tesla, GM, Ford, BMW, etc) themselves
  • Shared CapEx (uberX) vehicles will be owned by individuals, fleet operators, and potentially OEMs
  • Private Vehicles (traditional model) will be owned by the high net worth individuals and private companies

Transit experience is key

Today, we use the same vehicle to fulfill our needs of managing errands, going to recreational activities, as well as commuting (pick up trucks for taking our kids to soccer practice, or minivans to drive 1 person to work). As a result of OpEx and CapEx sharing, the appropriate car they need can be summoned from the fleet (riding in a minivan only when you’re taking the entire family for shopping).

That said, this model poses two compromises:

  • Fleet owners will require an excess capacity of vehicle types all the time
    • Evening and weekends requiring more errand shopping experiences, and working hours requiring more commuter vehicles.
    • Late evening having a tremendous idle time
  • Riders will want to also potentially keep their vehicle between rides at certain times, because they need access to the trailer bed, etc.

Fleet owners and riders can manage both of these issues by making having OEMs build their vehicles to be modular. Vehicles can break up into modules depending on the need (e.g. trailer bed platform attached to 6 person vehicle if required). Riders can choose to own a module entirely (a trunk of a car, handicap access, etc), or rent the module transiting and in between rides.

This obviously is a technological stretch of the imagination, in the meantime, I expect riders and fleet operators to continue to manage this through excess capacity in the system of specific experiential vehicles.

What are your thoughts on how fleets will look like? Leave your thoughts in the comments below.

In the next post, I’ll discuss how fleets should manage surges in rider demand.

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