Market Update on Shared Autonomous Electric Vehicles

Urban mobility is the source of multiple pain points. We believe that ride-hailing fleets made up of autonomous, electric vehicles are the best solution.

Sure, you love your vintage Mustang or whatever dream car has captured your heart. We focus on the automotive industry, and we certainly understand. But for a lot of people, owning and operating a car, particularly in an urban setting, is a pain. It’s expensive, given upfront costs as well as insurance, repairs, parking fees, tickets for infractions, and so on. And time that could have been spent more productively is lost to traffic jams or searching for parking.

Society at large suffers from the shortcomings of today’s urban mobility offerings, too. In lower-income areas, affordable and dependent access to mobility is lacking, making it difficult or impossible for residents of those areas to commute to many jobs and contributing to economic inequality. In Chicago, for instance, commutes in low-income areas take an hour longer than they do in high-income areas. The proliferation of vehicles on the road contributes to pollution and poor air quality that is detrimental to health: light-duty vehicles emit 6 gigatons of CO2 annually, making up 12% of total global emissions. Health is at risk from traffic accidents as well. More than 1.3 million lives are lost annually because of traffic accidents. Alarmingly, the number has risen during the pandemic, by 17.5% from the summer of 2019 to the summer of 2021—the largest two-year increase since the World War II era.

In fact, urban mobility is the source of multiple pain points—and not just for car owners.

Take ride hailing. Service providers in this business are still struggling to make their economics work. They’re dependent on contracted drivers, which constitute some 70% of their operating costs. Ride-hailing services are not efficient, given today’s relatively low vehicle utilization rates. And the pending reality of mandated vehicle requirements—like the push for electric vehicles—will disrupt the model, at significant cost to providers.

Some solutions to the urban mobility challenges are in play, but they have yet to resolve the pain points. Ride hailing is one of these options, though it doesn’t meet all urban mobility needs (on a cost-per-mile basis, ride-hailing services are still more expensive than personal-car ownership, for instance, and currently they contribute to congestion and pollution). Attempts to push city dwellers to shared or electric options are not well coordinated. Multimodal integration is extremely limited, and, with few exceptions, it generally remains expensive and inconvenient to stitch together trips across modes (such as ride hailing, public transportation, and micromobility options like bicycles and scooters).

We believe the best solution is shared autonomous electric vehicles (SAEVs; also called robotaxis).

This is an ideal moment to take a close look at SAEVs. In June 2022, San Francisco approved the first commercial SAEV fleet in a major US city, a ride-hailing option operated by Cruise (whose majority owner is GM, maker of the Chevy Bolt cars that will populate the fleets). Initially, the passenger service will operate in certain areas of the city, at certain hours, and in certain weather conditions. The plan is to extend usage over time depending on the results of the initial rollout.

The Promise of SAEVs

Done right, SAEVs can address long-standing pain points:

  • They can give consumers an affordable, door-to-door means of reaching nearly any destination in a metropolitan area, thus increasing access to jobs, education, and more. And they can make it possible for many people in urban areas to forgo vehicle ownership affordably. (Of course, these benefits do not apply to people with certain travel characteristics, like needing car seats or commuting with pets—at least, they do not apply yet.)
  • SAEVs can give ride-hailing service providers the means to become profitable (by allowing providers to increase the utilization of their active assets to 70% or more). SAEV fleets can be standardized to improve the customer experience. These vehicles can also be moneymakers beyond the fare that covers the ride: the software and sensors that power the cars in these fleets generate data that can be monetized for advertising and other revenue streams, and advertising can directly target passengers while they are in the vehicle .
  • Society as a whole can benefit from SAEVs, which can reduce vehicle ownership and miles traveled, leading to less congestion and safer, more livable and walkable cities. And because SAEV fleets run on electric power, they would also decrease pollution.

Getting it right, though, depends on effective policies and regulations. Without these, SAEV deployment could actually exacerbate pain points. BCG, in conjunction with the World Economic Forum and the City of Boston, simulated SAEV deployment in the city. We found that unregulated SAEV-based ride-hailing fleets would cannibalize public transit for shorter downtown trips and thus worsen congestion and overall mobility throughput. Policymakers need to create the right incentive structure to increase the average occupancy per vehicle (accomplished through ride pooling) beyond today’s levels and incorporate SAEVs into the public transit network as a complementary offering, not a replacement. That will tip the scales on total vehicle miles traveled, suppressing the potential increase in VMT, congestion, and pollution. (Policymakers must also work to ensure that ride pooling is a safe option; our research showed that some commuters hesitated to pool in an autonomous car because of safety concerns.)

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