2/4/2019 The Cost of Self-Driving Cars Will Be the Biggest Barrier to Their Adoption

TECHNOLOGY

The Cost of Self-Driving Cars Will

Be the Biggest Barrier to Their
Adoption
by Ashley Nunes and Kristen Hernandez
JANUARY 31, 2019

ALXPIN/GETTY IMAGES

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

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 2/4/2019 The Cost of Self-Driving Cars Will Be the Biggest Barrier to Their Adoption
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.

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
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 2/4/2019 The Cost of Self-Driving Cars Will Be the Biggest Barrier to Their Adoption
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.

Our results suggest we need to change how we think about the future of mobility. Thus far, public
scrutiny of self-driving technology has centered around answering questions like how safe is “safe
enough?” Can safety provision be left to the private marketplace? And, are existing regulations
effective and worthwhile? Addressing these questions is important given self-driving technology’s
potential to address what the United Nations has labelled a major public health problem. Doing so,
however, demands making the technology cost competitive with existing, older vehicles. Our work
suggests this is unlikely.

In our view, consumer subsidies will be crucial to realizing the life-saving benefits of this
technology. Although politically challenging, public revenues already pay for a portion of road
crash-related expenditures. In the United States alone, this amounts to $18 billion, the equivalent of
over $156 in added taxes for every household. If consumer subsidies can deliver an equivalent or
greater benefit, using the public purse as a lever to incentivize widespread HAV use becomes
politically palatable.

We conclude on a cautionary note. While self-driving technology is maturing quickly, realizing its
benefits – particularly for those who need it most – requires that the technology be affordable. This
prospect is, in our view, far from certain. Leaving this issue unaddressed risks fostering greater
socioeconomic inequality on the nation’s roads.

Acknowledgements: This work was supported by the MIT Energy Initiative’s Mobility of the Future
study.

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Ashley
2/4/2019
Nunes is a Senior ResearchTheAssociate
Cost of Self-Driving Cars Will Be the Biggest Barrier to Their Adoption
at Harvard Law School. He was previously a Research Scientist at the
Massachusetts Institute of Technology.

Kristen Hernandez is a policy analyst at Secure America’s Energy Future. She was previously a Research Assistant
at the Massachusetts Institute of Technology.

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Micah udoh 4 days ago

What exactly is meant by safety oversight and how has that cost been estimated?

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