$75 billion. That’s the amount of money that the global auto industry is investing in developing autonomous vehicles between 2019 and 2023 according to AlixPartners, a strategic planning and consulting firm. What’s more, the firm says that more than 60 companies are investing in a full automotive vehicle (AV) stack, or the system that will allow Level 4/Level 5 (hands-off transport).
Which is to say that there is a lot of money and effort being put into something that the company’s 2019 International Autonomous‑Vehicle Consumer Survey indicates will be rather difficult to recoup.
At least for those companies that are looking at AV technology as being deployed in private vehicles.
Because potential customers just aren’t willing to pay a whole lot for going from Level 2 technologies — things that are increasingly common in new vehicles, such lane-keeping assistance and automatic emergency braking — to Level 4/5.
What’s more, a surprising number of people are willing to consider foregoing car ownership entirely, using robotaxis instead.
That finding must have been music to Dan Ammann’s ears.
Ammann, CEO of Cruise Automation, wrote in a Medium post that the average San Francisco family would save approximately $5,000 by foregoing ownership of their own vehicle and using something like its Origin AV people mover. As Cruise has raised some $7.25-billion for AV development (from GM, SoftBank Venture Fund, Honda, and T. Rowe Price), calculating a customer benefit for the tech is essential.
As Cruise would certainly be among the 60 companies, this from the AlixPartners study must give Ammann and his colleagues some pause: “the eventual AV market is unlikely to have 60 winning solutions given the network and learning effects and the low marginal cost compared to the investment.”
In the U.S. consumers are willing to pay as much as $1,709 for Level 2 capability — and only $1,868 for Level 4 tech. That’s a 9% increase to go from today’s approach to hands-free driving.
In Germany, consumers are willing to pay 24% more to go from Level 2 to Level 4. But they’re willing to pay just $1,488 for the former and $1,844 for the latter.
In China, the consumers are interested in just an 8% increase to go from Level 2 to 4 — but they will pay $2,178 for Level 2 and $2,343 for Level 4.
But let’s get back to Ammann and the $5,000. Cruise (or any other company) is only going to have their vehicles running 24/7 if people are willing to use the robotaxis. And there is a notable number who AlixPartners have found would.
In the U.S. — where 1,594 people 18 and above were surveyed — 44% said they would “consider giving up vehicle ownership.”
In Germany — where 1,015 were surveyed — 52% would be willing to consider giving up vehicle ownership.
And in China — 1,072 surveyed — a full 84% would consider giving up their vehicles.
One of the rationalizations the AlixPartners researchers have for why there is more interest in robotaxi use is based on GDP: where GDP is lower it is generally the case that owning a vehicle is a higher burden on an individual’s income, which goes a long way to explaining the China number.
But given the depth of automobility in Germany and the U.S. (and solid GDPs), their respective 52% and 44% is nothing more than a wake-up call to OEMs.
As AlixPartners puts it: “It’s imperative that industry players — especially automakers — consider the implications of less personal ownership to their business model and to participate smartly in the progression toward autonomous ride-hailing and car-sharing.”
And as for the people in San Francisco: according to the recently released “TomTom Traffic Index,” it is the third most congested city in the U.S., with people spending an extra 36% stuck in traffic during their daily commutes. Perhaps a large percentage of those people would be willing to give up vehicle ownership even—if it didn’t mean $5,000.
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