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Disruptive transportation

George Mallay's picture
Wed, 05/31/2017 - 12:10 -- George Mallay

There has been a lot of news coverage over the past year regarding autonomous vehicles. It is an area of interest for the Province with an $80 million Innovation Network announced in the April 2017 Provincial budget. Stratford has been designated as a test bed in Ontario. This builds on its work as an Intelligent Community with fibre penetration, applications development and its long automotive history.

Most automotive manufacturers now have development programs for autonomous cars and technology firms such as Google and QNX Software are very active in the space. Forecasting firms such as IHS Automotive, Moodys and Boston Consulting Group have all made projections that they expect a transition to self-driving cars to take several decades. Boston Consulting Group expects cars with autonomous features to capture 25% of the new car market by 2025.

However, a new study by Rethinkx forecasts a much quicker transformation. The new research report, Rethinking Transportation 2020-2030: The Disruption of Transportation and Collapse of the ICE Vehicle and Oil Industries was released this May. The report’s author, Tony Seba, suggests one of the fastest and deepest transformations in transportation history is underway.  From a creditability perspective, Mr. Seba’s 2009 prediction that unsubsidized solar energy could be as low as coal and nuclear by 2020 recently came through. RethinkX authors suggest most mainstream analysts produce linear and incremental forecasts. They fail to incorporate systems dynamics including, technology convergence, demand-side scale economics, feedback loops, and markets that reflect the reality of fast-paced technology adoption S-curves. They fail to account for impacts of technology convergence and   new business model formation.

RethinkX is projecting that within 10 years of mass regulatory approval the market will move from a model of individual private car ownership to one labelled as transport-as-a-service (TaaS). They see firms such as Uber, Lyft and Didi as being pre-Taas platform providers. Large urban markets will move faster than rural markets.

Some major market projections from the study include:

  • 95% of U.S. passenger miles travelled will be served by on-demand autonomous electric vehicles owned by fleets not individuals in a new TaaS model  
  • The cost of TaaS will be driven down by several factors, including utilization rates 10 times higher, electric vehicle lifetimes exceeding 500,000 miles and far lower maintenance, energy and finance costs
  • Using TaaS will be four to 10 times cheaper per mile than buying a new car, and two to four times cheaper than operating a paid-off vehicle by 2021
  • The Average American household will save $5,600 per year by giving up a gas fueled car and travelling by autonomous electric TaaS vehicles
  • 70% fewer cars and trucks will be manufactured per year resulting in destruction of the car value chain including sales, insurance and maintenance firms
  • Global oil demand will peak at 100 million barrels by 2020 dropping to 70 million by 2030.
  • Savings on transportation costs will boost annual disposable income for U.S. households totaling $1 trillion by 2030. Consumer spending is America’s greatest economic driver

The authors are assuming autonomous vehicles can follow an adoption model and rate similar for, cell phones, Facebook, google maps, personal computers and most recently solar. However, 13 years seems awfully aggressive for cars, a possession that people have generally liked to own and enjoy the independence and convenience of self-travel. It was only a few years ago there was considerable discussion around peak oil. Shell economist King Hubbert initially predicted 1970 as the time the world would run out of economically competitive oil, later shifting his position to 1995.  Recently, other oil industry experts predicted peak oil in 2017 and 2020 but now it looks like we will never run out of oil. In 1995, there were projections of a hydrogen economy with transportation driven growth in fuel cells with mass penetration by 2015.
Changing the future is a combination of technological development, new models for economic and social behavior and political leadership within the context of global markets.  The report is a very good read and provides an interesting context for evaluating future economic and community development.

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