[vc_row][vc_column][vc_column_text]Hello, my name is Eric Bergerson and I’m an industrial designer with an additional background in physics. I work as a consultant in the autonomous vehicle industry and I’m very interested in what’s going to happen when Uber, Lyft and their competitors in America and abroad start using cost effective autonomous vehicles. For a quick overview of these ideas and how this phenomenon will end up electrifying America’s automobile fleet, see my introductory post.
Today I want to comment on a video I was recently viewing that features Bob Poole, the Searle Freedom Trust Transportation Fellow and Director of Transportation Policy at the Reason Foundation. Mr. Poole is fairly skeptical of the timeframe that’s going to be required to overcome the challenges of navigating an autonomous vehicle on crowded surface streets in a busy urban environment. He rightly points out that operating in that environment is an order of magnitude or two more difficult than navigating an autonomous vehicle on a freeway. Time will tell if his skepticism about the timing is warranted. Here’s the six and a half minute long interview.
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What interested me the most was the section around 3:40 in the video when the interviewer starts asking Mr. Poole about robotaxis replacing private automobile ownership as the dominant consumer paradigm in America. Around 4:20 in the interview Mr. Poole gets more specific and makes the following comments.
“What fraction of people will choose to own an autonomous vehicle versus to use mobility as a service?”
“. . . so, that is a huge unknown. All the honest researchers says this could be 10% owned and 90% shared or 90% owned and 10% shared and we don’t really have a clue as to which way that’s going to go.”
These comments get my attention because while this is a highly speculative subject, I wouldn’t agree that we have “no clue” to what degree consumers will adopt on-demand transportation. I think our present society does have leading indicators that give insight into how this may play out and can even suggest very rough quantification of how many American automobile consumers will insist on owning their cars vs. how many will be comfortable using on-demand robotaxis for all their transportation needs in the future. More importantly, this question is, and should be, of supreme interest to automobile enthusiasts, of which I am one. If you’re reading this blog you probably are as well.
So how could we know how many consumers will choose to give up their privately owned cars and use robotaxis for all their transportation? First of all it should be mentioned that this question is massively influenced by age, geography, socioeconomics and many other factors that will be hard to account for here. Specifically, someone who’s 55 years old and has always owned a car probably won’t be giving theirs up until they’re eventually forced to do so from old age. Conversely, millennials and post-millennials that decided a driver’s license was worth the trouble to get and were only driving for a few years will probably let that license lapse and start using shared transportation fairly readily. The more urbanized one’s home is the more likely that person is to give up their privately owned car. Conversely, for someone that lives in rural Wisconsin (where I once lived) using robotaxis exclusively for transportation likely won’t even be an option. Wealth plays a role as well. All indicators suggest that shared transportation will eventually be more economical than privately owned cars. If people who are living paycheck to paycheck are given an option for more economical transportation, most of them will take that option without a second thought. Conversely, wealthy folks like to have nice things, and they can afford the extra cost and inconvenience of owning a car, so many of them will choose to do so just because they can regardless of how easy and convenient on demand transportation becomes.
Setting all those qualifications aside for a moment, how could we estimate how many people will choose to use shared transportation versus continuing to own their own car? One thing that exists independently of age, geography and socioeconomics, and transcends those boundaries, is automobile enthusiasm. To make the roughest estimate possible, if you want to know how many people care about cars enough to continue to own one rather than use easier and cheaper on-demand transportation, take a look at what’s out there on the road. How many Ferraris, Lamborghinis, Lotuses, Aston Martins, McLarens, etc do you see driving next to you? The answer is not very many, unless you’re in Monaco in May or Monterey in August. Dialing it back a notch, how many BMW M-cars, AMG Mercedes, S and RS Audis, or high powered domestic muscle cars do you see on the road? In The Bay Area where I live, the answer is “a fair amount,” but I still see a lot more Camrys and Accords. That assessment is interesting, but not actually quantified and, given the first category of supercar manufacturers, it’s too distorted by the rarity of upper echelon socioeconomics. So what’s a way to make a more middle ground assessment that primarily examines Middle Class America’s use of the car? Well, let’s start with looking at a middle class vehicle. Take the Ford Focus pictured below.
It sells very well domestically and abroad, it’s available as a sedan or hatchback, and, more importantly for this thought exercise, it’s available in three levels of performance. Above the 160 hp base Focus, of which 202,478 were sold in America in 2015, is the 252 hp Focus ST, of which 8455 were sold in 2015. In 2016 Ford started selling the fire breathing 350 hp AWD Focus RS, pictured below.
Ford sold roughly Focus 4700 RS’s in 2016. That number was suppressed by the fact that it was only a partial sales year but simultaneously, it was magnified by the fact that American car enthusiasts had been waiting eighteen years to buy the Focus RS halo product, which previously had only been available in Europe and other foreign markets. Also take into account the the fact that during the Focus’s 19 year production run (’98-’17), RS versions were only available for eight of those nineteen years (’02-’03, ’09-’12, ’16-’17). In short, during the years an RS version is available, sales are pushed up by pent up demand created in the years it is not available for purchase. This is all a long way of saying that RS sales numbers are always inflated relative to what they would be if they were available in all years. Taking into account the enormous built up demand in America after eighteen years of waiting, plus the fact that the Focus RS is only available for less than half of the years the base Focus has been for sale, I’d say a more reasonable annualized number for RS sales might be more like 2000 sales/year.
OK, so let’s do the math on that. Of all the Focuses (Foci?) sold in 2015, about 4% were Focus STs. Selling 2000 RS models per year works out to about 1% of production. So, adding these together, only about 5% of all Focus purchases are for an enthusiast-friendly, higher performance Focus model. Does that sound depressing? Maybe, but that reflects one part of the current state of auto enthusiasm which is enough to support a $7.4 billion aftermarket industry,1 an enormous magazine and electronic periodical industry devoted to every segment of auto enthusiasm imaginable and a simply huge number of fart can mufflers. Sadly, Pep Boys does not yet sell an aftermarket 140 kWh Telsa battery, but fear not, 5% enthusiasts has given us all the exciting things in automobiledom we have thus far. The trick is hanging on to that 5%.
Now what does that mean for the coming world of on-demand transportation? Well, I interpret that to mean that, outside of special circumstances, eventually 95% of consumers are going to be perfectly happy just giving up the car they own and using on-demand transportation. They really don’t have any emotional attachment to their vehicles. The car is just an appliance to them. Now keep in mind when I say, “outside of special circumstances,” I’m referring to what I mentioned earlier in the post that people who have been in the habit of owning their own vehicle for decades likely will not jump on this new ship so readily. When I say 95% I’m talking about generations of future drivers that aren’t coming off decades of personal car ownership. I’m also not talking about people that live in rural Kansas where there isn’t sufficient population density to economically warrant on-demand transportation. But with mature technology, I think on-demand transportation is viable in suburban and even small town America in the future when enough millennials and post-millennials have tipped the market in favor of on-demand transportation though The Mobility Cloud.
Now, what does the 4% of Focus buyers that purchased the 252 hp ST and 1% that purchased an RS mean in this extrapolation? Hard to say, but let me throw a few ideas out. Perhaps that 4% will have the willingness and funds to rent a fun vehicle which arrives autonomously and then the consumer is able to drive it themselves wherever they want for a weekend getaway or other meaningful drive, but they’ll rely on on-demand transportation during the week to get to work and back and handle the rest of their dull grind driving. What about the lunatics that purchased a 350 hp, AWD ~$36K hatchback? These are the people that love cars enough such that they’ll probably keep driving them as long as they can and they’ll choose to drive themselves rather than be chauffeured in a robotaxi in every scenario outside of an airport run. God bless ’em. Some of us are these people.
This is not meant to be a scientific or statistically rigorous exercise. It’s a thought exercise and electronic musing about what the future might hold.
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