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Self-driving cars are approaching us quickly. Google, Apple, and traditional automakers are racing to bring self-driving cars to us by 2020. Imagine a large fleet 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. And it will be much cheaper than Uber because of 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. When such a system comes alive, why do I need to own a car? Therefore, some futurists are predicting the end of car ownership.

The average number of vehicles per American household is currently 2.1. According to a study by Michael Sivak and Brandon Schoettle at the University of Michigan Transportation Research Institute (UMTRI), that could dip as low as 1.2, a reduction of 43%, if self-driving cars become a reality and people take advantage of it as expected.  Forbes talks about “The doomsday scenario for automakers is that fully autonomous cars lessens overall car sales or enables a large-scale shift to car sharing rather than private car ownership.”

Will automaker be doomed if the large-scale car sharing become a reality because of self-driving cars? Well, you can safely say “No” based on Betteridge’s law of headlines that states: “Any headline that ends in a question mark can be answered by the word no.” 🙂

Now let’s have a little more serious discussion. While the dynamics of large-scale car sharing business model may be very complicated, we don’t need rocket science to answer this question. Today, most cars are resting in garages or parking lot for most time every day. Many people drive only one or two hours each day. As many vehicles are rarely used (and also thanks to the low registration and insurance fee), the average age of vehicles in the US is pretty long. In 2001, the National Automobile Dealers Association conducted a study that found that of vehicles in operation in the US, 38.3% were older than ten years, 22.3% were between seven and ten years old, 25.8% were between three and six years old and 13.5% were less than two years old. That is, the majority of vehicles, 60.6%, of vehicles were older than seven years in 2001.

With large scale car sharing, the total number of cars in operation will be much lower. However, cars will also retire much sooner because of more utilization. Anyway, the total milage by the population will be steady. Assuming the lifetime milage of cars not changed, automakers still need to produce the same amount of cars to serve all the commuting and traveling in a long time period. In fact, I expect that more self-driving cars will be made because more people will use cars. For example, individuals suffering from disabilities can enjoy self-driving cars with the freedom that was previously unobtainable.

Moreover, I also expect that automakers will enjoy a higher revenue and margin in the future. Since the cost of the car sharing will be much lower than that of owning cars, people may take the advantage of the saved money on luxury cars, which they cannot afford before. Clearly, automakers will enjoy more profits from that. What a win-win situation!