The following is a summary of our recent podcast interview with RethinkX's James Arbib and Tony Seba, which can be accessed on our site here or on iTunes here.
Oil prices will see a steep plunge as autonomous electric vehicles decimate the value chain of entire industries in just a few years.
So write James Arbib and Tony Seba of RethinkX in their latest thought-provoking report, “Rethinking Transportation 2020-2030,” looking at the power of technological disruptions and why this next one will have profound social and economic impacts far beyond what mainstream analysts and policymakers expect.
Specifically, they project a dramatic drop in the cost of transportation coming from, not bullet trains or high-speed rail, but “on-demand autonomous electric vehicles” owned by large fleets and not individuals.
Think they're wrong? There are a few things that might slow this process down, they admit, but, in general, most people simply don't understand "how disruption works," as Arbib says in the following clip:
Three Technologies Converging
There are three areas where technology is combining to force this transformation, Seba said: the advent and implementation of autonomous vehicles, the rise of electric vehicles, and the move toward shared transportation.
“These three technologies are converging, and … are going to enable transport as a service,” he said.
In their report, Seba and Arbib argue that by 2030, 95% of passenger miles traveled in the U.S. will be served by autonomous on-demand vehicles owned by fleets, not individuals.
Their analysis differs because it focuses on ownership-model disruption, they noted, which leads to a different metric for valuing transportation. Car manufacturers and others will be forced to compete on a cost-per-mile basis vs. upfront costs or costs of lease payments.
“The starting point is economics, and that’s really where our analysis begins,” Arbib said. “It’s really driven by the cost. … That’s going to drive very different incentives and very different behaviors.”
Cost Per Mile Becomes King
Because vehicles in this model are driven continuously and are owned by fleets, cost savings will become paramount.
“In the private ownership model, you don’t really care about the lifetime miles of a vehicle,” Arbib said. “You’re not going to own it for its lifetime. … You’re more concerned about residual value, how your lease payment’s calculated.”
As a result, currently, there is no real incentive for car manufacturers to produce cars that last beyond 150,000 to 200,000-miles, he added. But when we move to a transport-as-a-service model, the service life of a vehicle becomes critical.
This is where electric vehicles will begin to take over, Arbib stated, as the EV platform has massive advantages over gasoline vehicles. With greater efficiency and fewer moving parts, EVs will be cheaper to operate, and will have a service life of about 500,000 miles, Arbib added.
Social Disruption
“Whilst we picked 2021 as the most likely date, it is both a technology challenge and a regulatory challenge,” Arbib said. “We would expect … that point in time to come between 2020 and 2025, but 2021 is our best estimate.”
To those who say this transition can’t happen in 10 years, Seba explained how disruptions take place and pointed to Uber as example. In 2008, Uber did not exist. By 2016, less than 10 years, Uber had more bookings than the entire taxi industry in America.
“This is hugely beneficial on a social level,” Arbib said. “You’ve got much lower costs, much more accessible transport with huge gains for most populations. On the other side, there will undoubtedly be some job loses that come along with this. That’s a critical issue. In the current economic environment, it’s something we really need to be thinking about.”
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