Autonomous Vehicles

Opportunities, Strategies, and Disruptions


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Executive Summary

                                    
Autonomous vehicles will change our fundamental lifestyles, and in doing so create what are perhaps the most significant opportunities of this century. The benefits are unprecedented. The challenges are sizable but not insurmountable. The strategies are exciting. The disruptions will be frightening.

In this book, I explain why I believe these statements are true. I expect that many people will challenge these statements, just as in 1899 when the Literary Digest declared “The horseless carriage…will never come into as common use as the bicycle.”

Transportation is involved in almost everything in our everyday lives, and autonomous vehicles will completely transform transportation. People will commute to work autonomously, using their new-found time for work or leisure. Restaurants and others will provide free car service for their customers. People who currently can't drive will have new mobility. All types of travel will change. Even food will be delivered autonomously. The change in lifestyles creates so much enthusiasm that I made it the first chapter.
Chapter 2 introduces autonomous vehicles. It defines practical categories for autonomous driving, including the definition of an essential new category that is critical to a strategic perspective. While it will take time for autonomous vehicles to master everything, the point that most people miss is that autonomous vehicles only need to be, what I refer to as, [G25] [G26] sufficiently autonomous. Sufficiently autonomous is a category of autonomous driving that means that an autonomous vehicle can take you from one specific point to another – such as from your home to the airport or the office or the restaurant. That will cover more than 90% of the trips needed. This chapter also discusses the SAE levels of autonomous driving and describes the functions of autonomous driving from basic to semi-autonomous to sufficiently autonomous. 

The benefits of autonomous vehicles (AVs) are mind-boggling. They will avoid 90% of the accidents, saving 40,000 lives annually and preventing serious injuries to millions of people in the United States alone. AVs will reduce the costs of transportation by as much as 80% and save families thousands of dollars annually. The average person will be able to do things other than driving, giving him/her nearly 300 hours of "found time" yearly. That equates to more than 250 million hours of new time in the United States alone. AVs will provide mobility to millions of people who cannot drive, improving their lives for the better. As I describe in Chapter 3, the sheer magnitude of these benefits is unprecedented, and it makes the advent of autonomous vehicles inevitable.[

One of the major conclusions in this book is the significance of what I call autonomous ride services (ARS). There are many different terms for this, such as mobility as a service, transportation as a service, robo-taxis, etc., but I prefer to use this term. ARS will be huge! This new industry will achieve $750 billion in revenue, possibly more by 2030. It will also be the first significant use of AVs because they only need to be sufficiently autonomous for ARS. In Chapter 4, I clarify why ARS will be the primary new market for AVs. Then I introduce new economic and business models to illustrate how ARS businesses will work. They will deploy fleets of autonomous vehicles to provide these ride services in each major metropolitan area. The exceptional economics of ARS enable extraordinary profitability at a price of less than $1 per mile. The underlying reasons for this profitability are the elimination of driver costs and a significant increase in vehicle utilization. ARS will be so inexpensive and convenient that many people will abandon individual car ownership.  Most people will be able to summon a car whenever they want, travel in luxury, and the cost will be much less than owning a car. I explain how the autonomous ride service industry will emerge, and the fascinating economic models behind.[

Autonomous vehicles include trucks, delivery vehicles, and buses. However, as I describe in Chapter 5, autonomy will benefit these segments in different ways. Autonomous trucking will initially benefit from enabling the truck driver to let the truck drive by itself while he is resting and taking the required breaks. Long-haul trucking can see up to a 40% improvement in delivery time and truck utilization from this alone. Food delivery will quickly become autonomous because the savings and efficiency improvements are significant. Package delivery, however, won't benefit as soon because, unlike food delivery, there isn't always someone there to take the package from the truck. Autonomous shuttle buses also will see early benefits since they have short predetermined routs, but buses used for general transit may not change, and in fact, may be displaced by ARS.


Autonomous Vehicles (AVs) are enabled by some exciting new technologies that are developing in parallel. Up until now, the necessary technologies have been theoretical or in their infancy. In Chapter 6, I try to provide a layman's view of these technologies. AVs can see what's around them using an array of sensors. While there are different types of sensors, such as cameras and radar, lidar is perhaps the most important new technology. It also is expensive and getting cost reductions are essential. There is also some technical debate about the need for lidar.

Computers provide the brain for AVs. The computers used in AVs are specialized. They are very powerful custom processors with high-speed graphics processing, The Nvidia Pegasus, for example, is designed with four high-speed processors explicitly designed for AVs. It processes a fantastic 320 trillion operations a second. Computer software provides the intelligence for AVs doing sensor fusion, analyzing everything that surrounds the vehicle, planning its path, and instructing its moves. Artificial intelligence is critical to the AV learning process both in the vehicle and in simulations.

The market opportunity for autonomous vehicles is enormous. Some estimates show it exceeding $1 trillion per year. This opportunity is not a single market; autonomous vehicles will create several large markets and multiple market segments. The first significant market to emerge will be autonomous ride services. In Chapter 7, I attempt to define and estimate the size of these new markets and predict the strategies that each major company will pursue.

The companies pursuing these new markets see autonomous vehicles as an exciting opportunity, and they are investing a massive amount of money developing them. I estimate that more than $100 billion already has been committed to develop these technologies and bring these vehicles to market, and much more will be invested in deployment as the market is created. These companies are not stupid or naïve – they are among the best-managed companies in the world. They see exciting new business opportunities in AVs.[G87]  The sheer magnitude of these investments makes it inevitable that autonomous vehicles will be brought to market as quickly as possible.

The anticipated strategies of significant companies are fascinating. There is a lot at stake in capturing these fantastic new markets.[G88] [G89]  What strategies will succeed? Which companies will capture these enormous markets? Even though most companies have not declared their specific strategy, I describe the strategy that I anticipate each major company will employ. Many companies will jump into the ARS[G90] [G91] [G92] [G93]  market since it is going be so large and will be the first new market. [

Waymo (Google) is developing autonomous driving technology and will be one of the first to provide ARS, modifying Chrysler Pacifica minivans with Waymo technology as its first-generation ARS autonomous vehicle. Uber's ARS strategy is similar. It will use its own technology deployed on Volvo minivans. Lyft will employ a very different strategy. It is creating an open ARS platform for AV manufactures to use for ARS. Car manufacturers, especially Ford, GM, and Mercedes, will try to enter this market but will have challenges that I describe. Apple is the wildcard in ARS. Although it has kept its intentions to itself, I expect that it will become a significant competitor in ARS.

Individually owned autonomous vehicles will also be an incredible new market, but for reasons that I explain, I expect that it will grow more slowly than autonomous ride services. Tesla has been the pioneer of this market, but some traditional car manufacturers such as Mercedes, BMW, GM, and Ford are close behind. AVs require new technologies, and the companies competing to provide these technologies also have some exciting strategies.

There are some frightening disruptions from the advent of autonomous vehicles, which I describe in Chapter 8. The enormous benefits come at a cost. The emergence of autonomous ride services will decrease personal car ownership. Approximately 17 million new cars are sold annually in the United States with a market of almost $1 trillion.  I forecast a continuous decline in this market, as autonomous ride services cannibalize it. Using a model that predicts the growth of autonomous ride services, each new ARS  vehicle will displace 8-10 new cars sold since individually owned cars are only used approximately 5% of the time, while autonomous ride services vehicles are utilized 50% of the time. The switch to ARS could eventually reduce new car sales to less than 10 million vehicles, most of which will be autonomous.


Many auto-related industries also will be disrupted, including car dealers, gas stations, auto repair shops, car rental companies, non-autonomous ridesharing, taxis, public transportation, insurance companies, and many others. In the broader transportation industry, millions of jobs for truck drivers and delivery drivers will be eliminated. There will also be reductions in the need for emergency medical services and significantly lower revenue to cities and states for traffic violations. Collectively, the advent of autonomous vehicles, particularly ARS, will result in the loss of tens of millions of jobs in the United States alone. I expect that a disruption of this magnitude will cause some to question if autonomous vehicles are a good thing. In the end, though, it's difficult to argue that it's not worth the savings in lives, injuries, time, and economic benefits. I believe that society, at least in developed countries, will need to rethink the nature of work.

Government regulation and support will play an essential role in autonomous vehicles. However, as I discuss in Chapter 9, I don't expect regulation will be much of deterrence because the benefits are so enormous.

Given the immense magnitude of the autonomous vehicle transformation, its projected timing is of great interest. I capture this into five-year stages of adoption in the concluding chapter. We are currently in what I call Stage 0 (2016-2020) Development and Testing. AV development is fully underway with $100 billion invested or committed, and the leading companies are already into testing. By 2019 and 2020, Waymo, Uber, and others will complete testing sufficiently to begin rapidly deploying ARS in Stage 1.

Stage 1 (2021-2025) Launch of ARS will be the most exciting stage for AV adoption. As the stage title implies, the focus will be on ARS. There will be what is essentially a land rush by significant players to deploy ARS fleets to critical metropolitan markets during this stage. I estimate that as much as $200 billion will be invested to establish ARS during this stage. By the end of this stage (2025), almost a million ARS vehicles will be deployed generating revenue of more than $150 billion. During this stage, there also will be significant adoption of autonomous vehicles in the retail market and trucking and delivery. The disruptions previously discussed will start toward the end of this stage. 

Stage 2 (2026-2030) will bring broad acceptance of AVs. ARS will continue to grow with revenue approaching $750 billion, and more than 15% of the miles traveled will be by ARS. The automotive retail market will continue to shrink, and by the end of this stage, potentially 75% of the new vehicles sold will be at least sufficiently autonomous, enabling them to drive on their own most of the time. It is also the stage where the disruptions of AVs will become apparent to everyone. 

Stage 3 (2031-2035) More Advanced AVs and Stage 4 (3036+) AVs Completely Displace Cars will be the next two stages in the adoption of AVs. By then the horseless-carriage, a little more than a century after its introduction, will be gone into history, replaced by the driverless autonomous vehicle.