By 2030, around a quarter of all miles driven in the U.S. could be in shared autonomous electric vehicles, which will offer consumers in large cities the lowest-cost, most convenient form of transportation, according to new research by The Boston Consulting Group (BCG).
BCG’s key insight is that the convergence of three trends – ridesharing (services such as Uber and Lyft), autonomous driving and vehicle electrification – create a far more compelling economic case than any of these forces alone. Due to their ability to cut travel costs by 60 percent, shared autonomous electric vehicles (SAEVs) could shift about 25 percent of miles traveled from private automobiles, creating enormous benefits for consumers as well as causing major disruption to the automotive industry. While total vehicle demand will only be affected slightly, by 2030 more than 5 million conventional cars per year could be replaced by a combination of fully autonomous electric vehicles for urban fleets and partially autonomous cars for personal use. Cities will benefit from less congestion and cleaner air, but could be disadvantaged by falling ridership on public transit, fear of which could result in some cities proactively trying to regulate the number of SAEVs on the road.
“Such an evolution in mobility is no longer a fantasy. The technology exists and our research shows that many consumers will embrace it,” said Brian Collie, a Chicago-based partner who leads BCG’s automotive practice in North America. “Yet few players are taking the bold steps needed to position themselves to thrive in this not-too-distant future. The time to act is now.”
SAEV is an apt acronym for these vehicles, as fleets would save time, money and lives, according to the study. By using SAEVs, a typical Chicagoan who owns a car and drives 10,000 miles a year could cut the cost of travel from around $1.20 per mile to around 50 cents per mile. Over the course of a year, that could put more than $7,000 in that driver’s pocket – effectively doubling consumer discretionary income.
Unlike most industry studies, which look at trends such as autonomous driving and powertrain electrification in isolation, BCG’s research aims to provide an integrated view of the future of mobility in the U.S. The consultants combine insights from a variety of sources – including a proprietary survey of more than 6,000 U.S. consumers; detailed modeling and analysis of traffic patterns and population density in more than 100 cities of varying sizes; economic forecasting; past BCG studies; and interviews with a wide range of industry experts. The results focus on implications for automobile and parts manufacturers, car dealers, service providers and city governments, as well as other key stakeholders, such as energy and insurance companies.
Radical Shift Will Be Concentrated in Large Cities
BCG’s conservative estimate is that 23 to 26 percent of miles driven in the United States, or about 800 billion to 925 billion miles, could be traveled in SAEVs by 2030. The shift to SAEVs, which would be gradual and would begin by the early 2020s, would likely occur in cities with more than 1 million people, where there is sufficient demand to keep fleet utilization high and there are significant pain points associated with private vehicle ownership (expensive insurance, difficulty finding parking, and congestion).
Adoption could be even faster and more widespread if innovations in technology and pricing models reduce costs further for consumers. Innovations could include radically different vehicle designs (such as driverless pods), new tailored services (such as pooled ridesharing) and new revenue streams (such as in-vehicle advertising). At a lower price point, SAEV service might be attractive in more mid-size cities (with populations of 500,000 to 1 million).
Nonetheless, significant hurdles remain. Major technical and infrastructure challenges must be solved. For example, BCG concludes that SAEVs are unlikely to be economically viable in small cities and rural areas. And even in larger cities, the survey findings suggest that many consumers remain skeptical of the technology or are unwilling to give up the many conveniences and benefits of private vehicle ownership.
Shift Will Have Massive Impact
Moving up to a quarter of all miles driven would have massive impact, not only on household economics and lifestyles, but also on society as a whole, urban planning, the automotive industry and key supporting industries such as energy, finance and insurance, says BCG. Some of the impacts outlined in the study include:
- Automakers and parts suppliers would face the most profound challenge to their business models in a century. While total vehicle demand isn’t likely to change materially, the types of cars required will be vastly different. BCG estimates that in 2030, a total of 4.7 million autonomous electric vehicles will replace 5.1 million conventional autos sold in the U.S. This shift undermines the current industry business model, with its focus on engine technology and its long product cycles, and opens the market to a range of new competitors. Hundreds of billions of dollars worth of industry assets could turn into liabilities, according to the study, and dealers will be less relevant as fleets make up a much bigger portion of sales. Current aftermarket businesses will take a hit because SAEVs will require less maintenance and have fewer accidents. But at the same time, whole new businesses will develop to manage large urban fleets and service them daily.
- The new model also would have important implications for cities. In addition to benefits such as less congestion, fewer traffic deaths, cleaner air and reduced need for parking space, cities also may face financial hardship because of the impact on public transit. The economics of shared autonomous electric vehicles makes them competitive with public transportation for short trips and more convenient (no schedules, door-to-door service). According to BCG analysis of traffic patterns and “pain points” of mass transit riders in Chicago, as many as 20 percent of public transit miles could shift to the new transportation mode. This could leave cities in the position of maintaining aging transit infrastructure with reduced ridership and fare income. However, cities can plan for the loss of transit income by finding other sources of tax revenue, such as fees on SAEV fleets and trips. They could even consider investing in publicly owned fleets.
- Additional effects would include a sharp drop in fuel demand, an impact looked at in depth in an upcoming comprehensive powertrain study by BCG. The sharp reduction of traffic accidents and related injuries from autonomous and semi-autonomous vehicles also could reshape the auto insurance business. Tech companies, data providers and electric utilities would benefit.
The Next Car You Own May Be Your Last
“The age of shared autonomous electric vehicles is upon us and now is the time for automakers, suppliers and cities to begin taking the bold steps necessary to thrive in this rapidly changing world,” said Justin Rose, a Chicago-based partner who leads BCG’s digital efforts for industrial goods companies. “Companies need to deconstruct and rebuild business models, develop new capabilities, create new sources of sustainable advantage and shift assets and talent to new purposes – or risk becoming irrelevant. As with any great disruption, this transition will be risky and extremely challenging, particularly in the face of near-term investor expectations of customer demands.”
To help navigate this turbulent period of transition and uncertainty, the authors have developed a roadmap to guide automakers, cities and regulators in preparing for this profound change, with a set of recommended actions for each.
“The automotive industry is on the brink of a major transformation, and it’ll be here faster than people realize,” said Rose. “For millions of Americans living in large cities, the next vehicle they purchase may be the last car they ever own.”
A formal report with further details on the study – the first in a multi-part series on the reinvention of the automotive industry – will be published in the coming weeks on bcg.com.