Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. He operates the blog MISH'S Global Economic Trend Analysis and believes in the Austrian School of economics.
I have been a leading proponent that self-driving vehicles, especially trucks, will be here sooner than most think. My estimate for long-haul trucks taking over is 2021-2022 or so. Widespread adoption of self-driving cars will be slower.
Many of my readers think that 2021-2022 is impossible. However, some recent studies claim I am far too pessimistic in my assessment.
For example, a California think tank proposes Fuel-powered cars ‘will not be manufactured after 2024’.
Cars powered by fossil fuels will no longer be made after 2024 as self-driving electrical vehicles become vastly cheaper to use, according to a report by a Californian think tank.
The death of the internal combustion engine will be accelerated by a new model of car use in which fleets of self-driving vehicles are available for all to use, making car ownership uneconomic, the study said.
The report by Tony Seba, an economist at Stanford University, finds that forecasts of a slow move from fuel-powered vehicles to electric vehicles envisage drivers continuing to own cars. He argues that the introduction of driverless technology will be driven by companies such as Uber and DiDi, which will invest massively in creating a fleet of vehicles that are so cheap and convenient to use that car ownership will become a thing of the past.
Seba said the world is on the cusp of one of the fastest, deepest, most consequential disruptions of transportation in history. “By 2030, within 10 years of regulatory approval of autonomous vehicles, 95 percent of US passenger miles traveled will be served by on-demand autonomous electric vehicles owned by fleets, not individuals, in a new business model we call ‘transportas-a-service.’”
The report, co-authored by James Arbib, estimates that the costs at the moment of disruption when transport as a service is available will be:
- Driving a paid-off fuel car: 34 cents per mile
- Buying a new fuel car: 65 cents per mile
- Buying a new electric vehicle: 62 cents per mile
- Using transport as a service: 16 cents per mile
Death Spiral for Cars
Renew Economy says Death spiral for cars. By 2030, you probably won’t own one. The source of this article is also Tony Seba.
By 2030, you probably won’t own a car, but you may get a free trip with your morning coffee. Transport-As-A-Service will use only electric vehicles and will upend two trillion-dollar industries. It’s the death spiral for cars.
A major new report predicts that by 2030, the overwhelming majority of consumers will no longer own a car – instead they will use on-demand electric autonomous vehicles.
By 2030, within 10 years of regulatory approval of autonomous electric vehicles (A-EVs), the report says, 95 percent of all US passenger miles traveled will be served by on-demand, autonomous, electric vehicles that will be owned by fleets rather than individuals.
The provision of this service may come virtually free as part of another offering, or a corporate sponsorship. Imagine, for instance, paying a token sum for a ride into town after buying a latte for $4.50. Or getting a free ride because the local government has decided to make transport easier.
The report, by RethinkX, an independent think tank that focuses on technology-driven disruption and its implications across society, says this stunning and radical will be driven entirely by economics and will overcome the current desire for individual car ownership, starting first in the big cities and then spreading to the suburbs and regional areas.
This disruption will have enormous implications across the transportation and oil industries, decimating entire portions of their value chains, causing oil demand and prices to plummet, and destroying trillions of dollars in investor value, not to mention the value of used cars.
At the same time, it will create trillions of dollars in new business opportunities, consumer surplus and GDP growth.
Seba does not say that individual car ownership will completely disappear. By 2030, 40 per cent of cars will still be privately owned, but they will only account for 5 percent of kilometers traveled.
Autonomous cars will be used 10 times more than internal combustion vehicles were, they will last longer – maybe one million miles (1.6 million km) – and the savings will inject an additional $1US trillion into the pockets of Americans by 2030.
Seba admits that his forecasts are hard to digest. But what he sees in the transition to autonomous EVs from privately owned petrol cars is the same he has seen for all other major transitions: what he calls the 10x opportunity cost.
It happened with the printing press, it happened with the first Model T – it cost the same as a carriage and two horses, but offered 10x the horsepower.
“Every time we have had a ten x change in technology, we had a disruption. This is going to be no different.”
Why is this? Because everything will be cheaper.
Like his predictions on the rise of solar, and the sudden decline of fossil fuels, Seba’s calculations are driven by simple economics. Within few years, the upfront costs of AEVs will match those of petrol cars. But the depreciation costs will be minimal, because the cars, owned by fleets, will “last a lifetime”.
Maintenance costs will be significantly lower – thanks to 20 moving parts in the powertrain compared to 2,000 for petrol cars – and the miles traveled significantly higher; they will be doing 1.6 million km by 2030, more than five times more than petrol cars.
Moreover, battery technology will improve, needing to be replaced only once, and old batteries will be able to used elsewhere (in the power grid). The cost of maintenance will be one-fifth the cost of current cars, the cost of finance one tenth, and the cost of insurance also one tenth.
“The survival of car manufacturers will depend on building cars with long lifetimes and low operating costs. This means that they will optimize for minimum waste of resources in building and operating vehicles, including designing vehicle platforms with parts that are interchangeable and recyclable.”
Pie in the Sky Forecast
Much of this is pie in the sky stuff, even to me. Solar, where the hell is it? And where would it be without taxpayer subsidies?
Old car batteries powering the electric grid? In a meaningful way? Please be serious is my reply. Cars powered by fossil fuels will no longer be made after 2024? Really?
That said, one aspect of the report is on the right track. There is a lot of time between 2024 and 2030. By 2030 I do expect car ownership to plunge.
Mike “Mish” Shedlock