Cheetah, the world’s fastest land animal, can reach the top speed of 64 miles per hour. But Cheetahs spend a large percentage of their day resting or sleeping, sometimes up to 16 or 18 hours over a 24-hour period. Your mighty cars can run much faster but also rest longer, usually 22 to 23 hours a day, right? What a waste!
Sharing is usually a very effective way for utility maximization. We do have several ways to share cars, for example car rental, taxi, Uber, shuttle and bus, carpool, etc. First of all, shuttle and bus service is cheap and is also great to reduce the terrible traffic in big cities. Unfortunately, they are not flexible and you often have to take much longer time to arrive at the destination. For personalized service, one will go with car rental, taxi, or Uber.
It is inexpensive to rent a car for short period in United States. However, the car still rests in most time during the rental. In contrast, taxis are almost always running. But they are really expensive because of the sky high cost of medallion cab license. At the New York City’s 2013 medallion auction, the largest bid for a “mini-fleet” of two medallions exceeded $2.5 million. As Uber has disrupted the monopoly of yellow taxi cabs, the price of a medallion cab license in NYC had a 17% drop to $872,000 in 2014. Still an astonishing number, right?
Uber, in the first impression, seems the right solution. The Uber app allows consumers to submit a trip request, which is routed to crowd-sourced drivers who would like to share their own cars. It sounds like that we are sharing cars in an effective way. With a closer look, however, we will find that Uber is just another kind of taxi service. Thanks to the legislation loopholes, Uber and Uber drivers don’t need to pay the medallion cab license. Depending on the area, Uber service may be cheaper than taxi. But it is still expensive in general. According to Uber, the median wage for an UberX driver working at least 40 hours a week in New York City is $90,766 a year. Given the high human capital cost in United States, it is hard to expect a much lower Uber service price.
We all have experience of carpool with friends or neighbors occasionally. The social networking makes large scale ride share possible. For example, Zimride/Lyft connects inter-city drivers and passengers through social networking. But it is very challenging to provide prompt service for short rides in a city.
So, they all have serious limitations. Fortunately, autonomous cars come to the rescue. Imagine a fleet of hundred thousands of self driving cars under the coordination of a Uber-like system. Whenever you need car service, you just tap your phone and get into a car in a few minutes. Like any time-sharing system, it will be inexpensive. And it will be much cheaper than Uber because there is no driver. If you agree, the system can also let people with similar route to carpool with you, which will push the service fee even lower. And the traffic will get better! Moreover, Walmart and Costco stores don’t need huge parking lots any more. When such a system comes alive, why do I need to buy a car? This will end the car ownership!
Fascinating! Even better, it is not science fiction. Autonomous cars are inevitable and they are approaching us quickly. Google’s self-driving vehicles have logged nearly 700,000 autonomous miles by April 2014. And Google expects a possible release of self-driving car from 2017 to 2020. One may argue that self-driving cars will be expensive. IHS Automotive forecasts that the price for the self-driving technology will add between $7,000 and $10,000 to a car’s sticker price in 2025. Well, it is almost nothing compared to UberX driver’s annual incoming. This system can provide much cheaper service compared to all existing business models and make cities much nicer!
But it is not as simple as Uber + self-driving cars to build a business of sharing autonomous cars. Many challenges have to be solved to eliminate car ownership. For example,
- Legislation. Several states already authorized the use of autonomous cars. Law makers have to work fast to accommodate the disruption of technology advancements.
- Safety. According to the International Organization for Road Accident Prevention, human error accounts for 90% of road accidents. With machine drivers, we expect less such kind errors. But we still should think of the rest 10%.
- Secure access. Only the person who orders the service can access the autonomous car. It is also challenging for the self-driving car to locate the customer in a busy city.
- Refueling. With current battery technology, pure electric cars are not suitable for continuously running all day long. Self-driving cars cannot get gasoline by themselves (yet). The partnership with gasoline stations has to be built.
- Fleet size. To make this business fly and get rid of car ownership, a large fleet of autonomous cars has to be built as quick as possible. The manufacture capability and large capital investment are keys.
- Sclable, higly efficient control system. It tracks, monitors, and coordinates hundred thousands cars to meet the customers’ requests in a timely manner.
The day is coming and whoever solves these problem first will be the winner. Uber has the advantage of their popularity and customer base. Uber recently formed a strategic partnership with CMU to do research and development, primarily in the areas of mapping and vehicle safety and autonomy technology.
Google has a huge head start on the self-driving technology. Although Google makes clear that they are definitely not in the business of making cars, they do show an interest in robo-taxi service.
Don’t forget car makers. They could transform themselves from pure manufacturers to service providers too. With the end of car ownership, why not change the lease department to a car sharing service? Detroit, wake up! European competitors are way ahead of you in this space.