From the Harvard Business Review, January 31, 2019:
Road crashes claim nearly 40,000 lives annually in the United States. The result is considerable financial and emotional suffering to society. Highly automated vehicles (HAVs) — vehicles that drive themselves some or all of the time – should help. By shifting responsibility for driving from humans to machines, this technology minimizes opportunities for behavioral errors blamed in most road crashes.
However, the systems underlying HAVs, namely sensors, radar, and communication devices, are costly compared to older (less safe) vehicles. This raises questions about the affordability of life-saving technology for those who need it most. While all segments of society are affected by road crashes, the risks are greatest for the poor. These individuals are more likely to die on the road partly because they own older vehicles that lack advanced safety features and have lower crash-test ratings.
Some people have suggested that the inability to purchase HAVs outright may be circumvented by offering these vehicles for-hire. This setup, analogous to modern day taxis, distributes operating costs over a large number of consumers making mobility services more affordable. Self-driving technology advocates suggest that so-called robotaxis, operated by for-profit businesses, could produce considerable savings for consumers.This was posted the morning after Tesla's last quarterly report.
In our research, we wanted to determine if this was right. Is it realistic to expect robotaxis to become cost-competitive with owning older vehicles any time soon? The answer, according to our analysis, is no.
We focused on the city of San Francisco. First, we calculated the cost of owning an older vehicle in the Bay area. Second, we used public financial data associated with the local taxi industry to estimate likely robotaxi operating expenses – things like vehicle cost, licensing, insurance, maintenance, cleaning, fuel, and safety oversight. Third, we adjusted these expenses to include envisioned profit margins expected by investors in the technology. Finally, we applied econometric testing to identify if and under what conditions robotaxi fares could be lowered. Our figures are an estimate, but they reflect the best knowledge we currently have about robotaxis.
Assuming current market conditions hold, we estimate that using a robotaxi will cost consumers nearly three times more – on a per mile basis – than owning an older vehicle. The primary driver of this result isn’t the capital cost of the robotaxi, which we assumed to be a mere $15,000, well below the average cost of buying a new vehicle. Nor is it because of high insurance, gas, or maintenance costs. All of these could be reduced to zero and hailing a robotaxi would still be more expensive than owning an older car. Instead, high robotaxi fares are driven largely by the vehicle’s utilization rate – how much of these vehicles’ time is spent shuttling passengers around. (Current taxi utilization rates hover around 50%). More worryingly, even if robotaxis had an unrealistically high utilization rate and even if their investors lowered their profit expectations, the cost of providing safety oversight would need to be substantially reduced (to below existing minimum-wage levels) in order for robotaxi fares to be cost competitive with owning an older vehicle....MORE
Also published that morning, and addressing a related issue, electric vehicles, Alphaville's "Stuff Elon Says", posted while the HBR writers were snug in their beds dreaming of robotaxis:
"Stuff Elon says" (TSLA)
In early pre-market trade the stock is down $10.61 (-3.44%) at $298.16, not quite as bad as yesterday's final after-hours print of $294.
The market's initial reaction to the earnings release was muted, off a few bucks, but then Elon started talking.
From FT Alphaville:
Elon Musk is often dubbed a genius.
And yet... if the following statement Musk made during the Tesla Q4 earnings call is anything to go by, he has a habit of stating the obvious and thinking it sounds deeply profound and insightful:
The demand for - the demand for Model 3 is insanely high. The inhibitor is affordability. It's just like people literally don't have the money to buy the car. It's got nothing to do with desire. They just don't have enough money in their bank account. If the car can be made more affordable, the demand is extraordinary.So, to help introduce Elon to the concept of how demand and supply interacts with price we thought we'd take the above quote and adapt it according to various economic scenarios in classic econ text book style.
Scenario one: Private jets
Johnny is a labourer on minimum wage. Johnny idolises the pop star lifestyle....MORE. so much more...
