Category Archives: Economics

The Mobility Ecosystem: the changing landscape and the need for fresh, new ideas. (Part 4: Economics of Autonomous Vehicles)

06 Saturday Feb 2021

Posted by in Autonomous Vehicles, Business Transformation, Clean Energy, Collaboration, Connected and Autonomous Vehicles (CAV), Dynamic Transportation Management, Economics, Electric Vehicles, Future, Government & Policy, Internet of Things or IoT, Mobility, Mobility as a Service, Mobility Ecosystem, Relationships, Ride Sharing, Safety, Smart Cities, Society, Strategic Planning, Technology, Transportation

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Motorized vehicles began with the advent of electric vehicles as evidenced by the first recorded powered vehicle fatality in the United States in 1899, from an electric taxi (see Part 2 of this series). Technology advances in the intervening 100 plus years have given rise to fully autonomous vehicles which are on the horizon.

The summary (abstract) provided by Clements and Kockelman (2017) is superb and provided in full.

“Connected and fully automated or autonomous vehicles (CAVs) may soon dominate the automotive industry. Once CAVs are sufficiently reliable and affordable, they will penetrate markets and thereby generate economic ripple effects throughout industries. This paper synthesizes and expands on existing analyses of the economic effects of CAVs in the United States across 13 industries and the overall economy. CAVs will soon be central to the automotive industry, with software composing a greater share of vehicle value than previously. The number of vehicles purchased each year may fall because of vehicle sharing, but rising travel distances may increase vehicle sales. The opportunity for heavy-truck drivers to do other work or rest during long drives may lower freight costs and increase capacity. Personal transport may shift toward shared autonomous vehicle fleet use, reducing that of taxis, buses, and other forms of group travel. Fewer collisions and more law-abiding vehicles will lower demand for auto repair, traffic police, medical, insurance, and legal services. CAVs will also lead to new methods for managing travel demand and the repurposing of curbside and off-street parking and will generate major savings from productivity gains during hands-free travel and reduction of pain and suffering costs from crashes. If CAVs eventually capture a large share of the automotive market, they are estimated to have economic impacts of $1.2 trillion or $3,800 per American per year. This paper presents important considerations for CAVs’ overall effects and quantifies those impacts.”

See Table 1 for a summary of the economic impacts of autonomous vehicles.

TABLE 1. Table 1. Summary of economic effects (industry- and economy-wide) (source: Clements, L. M. and Kockelman, K. M., “Economic effects of automated vehicles”, Transportation Research Record: Journal of the Transportation Research Board Volume 2606, Issue 1, January 2017, pages 106-114)

In the columns headed “Dollar Change in Industry” and “Percent Change in Industry,” signs “+” and “-”, respectively, denote a gain and a loss for the industry, whereas the industry-specific total for the dollar change in industry is the sum of their absolute values. Figures in the “$/Capita” columns and provided as overall total represent the sum of net economic benefits enjoyed by consumers.

According to an estimate by Intel Corporation and Strategy Analytics, announced in June 2017, the economic effects of autonomous vehicles will total $7 trillion in 2050 (Figure 6). The dollar amount represents a newly created value or a new ‘passenger economy’, calculated based on the assumption that fully automated Level 5 vehicles will be on the roads by 2050.

Figure 6. Global service revenue generated by autonomous driving in 2050 (US$ millions) (source: Lanctot, R. Strategy Analytics, Accelerating the Future: The Economic Impact of the Emerging Passenger Economy, June 2017)

They also assumed that consumers and businesses will use Mobility-as-a-Service (MaaS) offerings instead of owning cars, and those who had been commuting to work by car will become passengers and spend the commuting time doing something else. Furthermore, transportation companies suffering from a serious labour shortage – such as long-haul truck operators and home delivery service providers – will introduce autonomous driving services, thereby enabling them to change their business models drastically. As such, the estimate reflects a very broad range of potential effects, which also include a wide variety of new commercial services such as onboard dining and retailing (Tomita, 2017).

Advancements continue almost daily. CNN Business (Farland, 2020) reports a self-driving and electric robotaxi from Amazon’s Zoox can travel up to 75 mph and never has to turn around, reversing directions as needed to navigate crowded city streets. In an effort to become a leader in this sector, China is advancing autonomous vehicles quickly, including fully autonomous highways (Metha, 2019; KPMG International, 2019).

There are a myriad of challenges to realize fully automated vehicles and that will require an accumulation of massive quantities of data and learning processes to enable the development of AI capable of coping with navigating the rules, laws, traffic control devices, unique infrastructure, and nuances in each city, county, and state, not to mention internationally. Moreover, developing soft infrastructure, including laws and regulations, and setting rules for liability arising from accidents involving autonomous vehicles will be challenging. Similar to the open ITS architecture established by USDOT, there is a need to establish AV architecture within the U. S., if not internationally.

The advent of fully automated driverless vehicles will have a tremendous impact on our society, bringing fundamental changes to the entire economic and social systems. When fully automated vehicles come into operation, they will become a major means of mobility for the elderly and infirmed in rural areas, in addition to agriculture uses. Urban areas will likely experience the greatest changes, the number of cars owned for personal use will drop, eliminating congestion and the need for parking spaces, and car-sharing services will continue to grow.

Companies are investing enormous money in both electric and autonomous vehicles. For example, Microsoft is investing $2 billion in Cruise, that is majority owned by GM, for a valuation of over $30 billion (Colias, 2021). Apple and Hyundai-Kia are planning to start production of a fully autonomous electric car in 2024 (Lebeau, 2021). It is interesting to note that the smart phone market is about $500 billion annually of which Apple has roughly one-third of that market. By contrast, the mobility market is about $10 trillion annually so Apple would only need two percent of that market to match their iPhone business. It is little wonder the interest in the autonomous and electric vehicle space.

Although some estimates are that it will be at least 2040 before fully autonomous vehicles will be dominant, how should we cope with these forthcoming changes? How should we redesign and change the urban and rural infrastructure and landscapes, land use, and the economic and social systems?

There are test beds spreading around the nation in an effort to bring these and other technologies to market—Contra Costa County California formed a Transportation Authority (CCTA) and developed the leading facility in the nation—GoMentum (https://gomentumstation.net), the University of Michigan established Mcity some years ago (https://mcity.umich.edu), Waymo is planning a test facility in Ohio (Moderation Team, n.d.), and Missouri just formed a Missouri Center for Transportation Innovation (https://mcti.missouri.edu). These test beds, and other efforts, reflect the drive toward an autonomous and safe mobility ecosystem future. What do they have in common? They are built on partnerships and collaboration. Of course, the National Academies Transportation Research Board (https://www.nationalacademies.org/trb/transportation-research-board), U. S. Department of Transportation, state departments of transportation, universities, and the private sector represent the best minds around and continually add to our body of knowledge on all aspects of mobility and transportation.

Autonomous marine, freshwater, river, air, truck, and train vessels

This discussion does not even mention other modes and types of autonomous vehicles such as marine, riverine, freshwater, trucks, trains, planes, drones or unmanned aerial vehicles, aircraft, or space craft. Although they share many of the same challenges as cars and similar vehicles, many of these are likely years away before widespread use. Nonetheless, they are on the horizon. Of course, the elimination/reduction of operators will require careful planning to help people find other jobs in addition to negotiations with unions, changes in business models, and changes in society. The following links provide more information on these topics.

“What Will the Autonomous Ship of the Future Looks Like?” Smithsonian Magazine: https://www.smithsonianmag.com/innovation/what-will-autonomous-ship-future-look-180962236/

“The Marine Corps is eyeing a long-range robot boat that can nail targets with kamikaze drones” Task & Purpose: https://taskandpurpose.com/news/marine-corps-long-range-unmanned-surface-vessel-contract/

“A New Generation of Autonomous Vessels Is Looking to Catch Illegal Fishers” Smithsonian Magazine: https://www.smithsonianmag.com/innovation/new-generation-autonomous-vessels-looking-catch-illegal-fishers-180976336/

“Autonomous Shipping: Trends and Innovators in a Growing Industry” Nasdaq Technology: https://www.nasdaq.com/articles/autonomous-shipping%3A-trends-and-innovators-in-a-growing-industry-2020-02-18

“The Future of Autonomous Aircraft” TechXplore: https://techxplore.com/news/2020-12-future-autonomous-aircraft.html

“Xwing Unveils Autonomous Flight System for Regional Planes” VentureBeat: https://venturebeat.com/2020/08/20/xwing-unveils-autonomous-flight-system-for-regional-planes/

“Rail in on the way to autonomous trains” International Railway Journal: https://www.railjournal.com/opinion/rail-autonomous-trains

“Autonomous vessels on inland waterways” De Vlaamse Waterweg: https://ec.europa.eu/transparency/regexpert/index.cfm?do=groupDetail.groupMeetingDoc&docid=38717

“Automated Trucking, A Technical Milestone That Could Disrupt Hundreds of Thousands of Jobs, Hits the Road” CBS News 60 Minutes: https://www.cbsnews.com/news/driverless-trucks-could-disrupt-the-trucking-industry-as-soon-as-2021-60-minutes-2020-08-23/

“Robots exploring on their own and self-piloting spacecraft are a long way off, says NASA computer scientist” Arizona State University News: https://news.asu.edu/20200220-discoveries-autonomous-spacecraft-baby-steps

Citations

Clements, L.M. and K.M. Kockelman. (2017, January 1). Economic effects of automated vehicles. Research Record: Journal of the Transportation Research Board. Retrieved February 6, 2021, from https://journals.sagepub.com/doi/abs/10.3141/2606-14

Colias, M. (2021, January 19). Microsoft bets bigger on driverless-car space with investment in GM’s Cruise. The Wall Street Journal. Retrieved February 6, 2021, from https://www.wsj.com/articles/microsoft-bets-bigger-on-driverless-car-space-with-investment-ingms-cruise-11611064940#

KPMG International. (2019). 2019 autonomous vehicles readiness index: assessing countries’ preparedness for autonomous vehicles. KPMG International. Retrieved February 6, 2021, from https://assets.kpmg/content/dam/kpmg/xx/pdf/2019/02/2019-autonomous-vehicles-readiness-index.pdf

Korosec, K. (2017, June 1). Intel predicts a $7 trillion self-driving future. The Verge. Retrieved February 6, 2021, from https://www.theverge.com/2017/6/1/15725516/intel-7-trillion-dollar-self-driving-autonomous-cars

Lanctot, R. (2017, June). Accelerating the future: the economic impact of the emerging passenger economy. Strategy Analytics. Retrieved February 6, 2021, from https://newsroom.intel.com/newsroom/wp-content/uploads/sites/11/2017/05/passenger-economy.pdf

LeBeau, P. and Reeder, M. (2021, February 3). Apple and Hyundai-Kia pushing toward deal on Apple Car. CNBC. Retrieved February 6, 2021 from https://www.cnbc.com/2021/02/03/apple-and-hyundai-kia-driving-towards-deal-on-apple-car.html

McFarland, M. (2020, December 14). This robotaxi from Amazon’s Zoox has no reverse function. CNN Business. Retrieved February 6, 2021 from https://www.cnn.com/videos/business/2020/12/14/zoox-robotaxi-amazon-orig.cnn-business

Mehta, Ivan. (2019, April 15). How China’s new highway for self-driving cars will boost its AV ambitions. The Next Web. Retrieved February 6, 2021, from https://thenextweb.com/cars/2019/04/15/how-chinas-new-highway-for-self-driving-cars-will-boost-its-av-ambitions/

Moderation Team. (n.d.). Waymo to open new autonomous testing facility in Ohio. Self Driving Cars 360. Retrieved February 6, 2021, from https://www.selfdrivingcars360.com/waymo-to-open-new-autonomous-testing-facility-in-ohio/

Tomita, H. (2017, December 17). Awaiting the realization of fully automated vehicles: potential economic effects and the need for a new economic and social design. VOXEU CEPR. Retrieved February 6, 2021, from https://voxeu.org/article/potential-economic-and-social-effects-driverless-cars

The Mobility Ecosystem: the changing landscape and the need for fresh, new ideas (Part 3: Economics of Electric Vehicles and the Decline of Oil)

31 Sunday Jan 2021

Posted by in Batteries, Climate, Economics, Electric Vehicles, Future, Gas-Fueled Vehicles, Mobility, Mobility Ecosystem, Oil, Transportation

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As with other subjects, the literature and development of electric vehicles (EVs) and oil is vast and evolving. What can be gleaned, generalized, and estimated is this (Reichert, 2017; Idaho National Laboratory, n.d.; Skeptics, n.d.; Evannex, 2018; Schmidt, 2017):

  • there are growing advantages to electric vehicles
  • a battery charge can go 400-600 miles
  • there are approximately 20 moving parts in a EV versus 2,000 moving parts in internal combustion vehicles
  • there is zero maintenance except for tires
  • EVs are 90 percent cheaper to operate
  • The estimated life of an EV may be 500,000-1,000,000 miles

Globally, peak car ownership is projected to occur by 2035. Cars are used only 4% of the time, and by 2023 it is estimated that EVs will reach parity with the cost of gas-fueled vehicles (Ingham, 2019; Weiland, et al, 2017; Gearino, 2020). As younger generations consider the cost of car ownership, a review of vehicle registration records in more than 200 metro areas revealed that per-capita car purchases increased 0.7 percent on average in the years after Uber, Lyft and other e-taxi giants deployed their fleets, compared to projected registration rates prior to the entry of the companies. These were very slow years for car dealerships, partly due to the pandemic in 2020 (Naughton and Welch, 2019; Wilson, 2021).

The first nine months of 2020 saw car sales crater (Figure 2). Every major automaker was impacted with the exception of Tesla. The electric automaker sold more cars than ever before. Even as the rest of the economy froze, Tesla posted its longest stretch of profitable quarters, increased stock value over 750 percent, is now the largest U. S. vehicle manufacturer, became the 6th largest U. S. company, and ended the year with inclusion in the S&P 500 stock index. A closer look reveals AVs in general managed to thrive even as sales of traditional cars declined. Both Volkswagen and Daimler saw record-setting losses in total sales while sales of their EVs doubled.

This image has an empty alt attribute; its file name is electric-vehicles-defy-slump.png
FIGURE 2. Electric vehicles defy the COVID slump. EV sales grew in 2020, while the rest of the industry crumbled. Sales volumes compare the first three quarters of 2020 with the same period in 2019. R-N-M refers to the Renault-Nissan-Mitsubishi Motors alliance. (Randall and Warren, 2020)

While the sale of electric vehicles has been increasing for some years, there is also a need for the infrastructure and charging stations to support it (Figure 3).

FIGURE 3. Electric cars and the needed infrastructure are still rare in the U. S., but are becoming more common each year (Source: U. S. DOE; Transportation Research Center at Argonne National Laboratory in Welch, 2021).

The Biden Administration wants to increase charging stations by half a million as part of their effort to cut carbon emissions to zero by 2050. As such, new gas-powered cars and trucks would have to be phased out rapidly, probably by 2035 or sooner. That means aggressive action would have to continue. (Welch, 2021).

The energy sector is undergoing a major transformation and it will intensify as more and more consumers, especially in the transportation industry, change their purchase decisions to cleaner and less expensive options in the marketplace (i.e. EVs over internal combustion vehicles) (Figure 4).

FIGURE 4. Clean energy market caps have surpassed those of oil companies. NextEra Resources is the world’s largest producer of wind and solar energy. Enel is an international manufacture and distributor of electricity and gas. Iberdola is the world’s largest producer of wind energy. Orsted is a Danish renewable energy company. Exxon is one of the world’s largest petroleum companies. Eni is a multinational fossil fuel company. Repsol is a multinational fossil fuel company. BP is a nultinational fossil fuel company. (Source Eckhouse, et al, 2020)

Batteries are a technology, not a fuel, which means the more that are produced, the cheaper they are to make. However, up until now, EVs have been more expensive to build than gasoline cars. That’s changing (Figure 5).

FIGURE 5. In 2020, some batteries were built for $100 per kWh, paving the way for EVs to become the cheapest option compared to oil. (Source Randall & Warren, 2020)

This past year saw the first companies producing batteries at a cost of $100 per kilowatt-hour. That’s the point that analysts believe will bring the cost of building electric cars in parity with similar gasoline vehicles. After that, EVs should only get less expensive.

Volkswagen, the biggest automaker by cars sold, confirmed that its batteries had reached the $100 threshold for its 2020 ID.3 sedan and upcoming ID.4 compact SUV (Matousek, 2019). China’s CATL, the world’s biggest battery supplier, also claimed $100 battery nirvana as it struck deals across the auto industry (Schmidt, 2020). In addition, Tesla plans to manufacture battery cells, a first for any automaker, and to reduce battery costs 56% by 2023 (Spector, 2020).

Most recently, President Biden has announced his intent to convert the federal vehicle fleet of 645,000 vehicles to electric (Dow, 2021). Still, we need to remain aware of the basic infrastructure required for migration to electric vehicles, charging stations scattered across the Nation, and power generation and network to provide adequate electricity.

General Motors has announced it intends to stop making gas- and diesel-powered vehicles and go all electric by 2035 and be carbon neutral by 2040 (Colias, 2021).

Amazon is also in the process of having 10,000 electric delivery vans on the road by 2022, and 100,000 by 2030 (Hawkins, 2020).

In spite of the Pandemic, 2020 experienced a 30 percent increase in electric vehicle sales and that is expected to increase to 72% in 2021, charging stations infrastructure has lagged (BlastPoint, 2021).

We are near a “tipping point”.

Another aspect to consider, the cost and weight of a power train goes up for large EV vehicles (trains, heavy trucks, and buses), essentially losing any EV advantage. That is a reason Cummins Diesel is looking to use hydrogen fuel cells for these types of large vehicles (Nagel, 2020; Ohnsman, 2020).

A dirty secret of EV— the extraction of minerals such as cobalt used to make batteries is frequently done by child labor (Broom, 2019).

Literature Cited

BlastPoint (2021). 2021 EV Outlook. BlastPoint. Retrieved January 31, 2021, from https://blastpoint.co/wp-content/uploads/2020/02/BlastPoint-2021-EV-Outlook_Report.pdf

Broom, D. (2019, March 27). The dirty secret of electric vehicles. World Economic Forum. Retrieved January 31, 2021, from https://www.weforum.org/agenda/2019/03/the-dirty-secret-of-electric-vehicles/

Colias, M. (2021, January 28). GM to phase out gas- and diesel-powered vehicles by 2035. The Wall Street Journal. Retrieved January 31, 2021, from https://www.wsj.com/articles/gm-sets-2035-target-to-phase-out-gas-and-diesel-powered-vehicles-globally-11611850343

Dow, J. (2021, January 25). President Biden will make entire 645k federal vehicle fleet electric. electrek. Retrieved January 31, 2021, from https://electrek.co/2021/01/25/president-biden-will-make-entire-645k-vehicle-federal-fleet-electric/

Eckhouse, B., R. Morison, W. Mathis, W. Wade, and H. Warren (2020, November 29). The new energy giants are renewable companies. Bloomberg Green. Retrieved January 30, 2021 from https://www.bloomberg.com/graphics/2020-renewable-energy-supermajors/

Evannex. (2018, September 22). Here’s seven reasons why electric vehicles will kill the gas car. InsideEVs. Retrieved January 31, 2021, from https://insideevs.com/news/340502/heres-seven-reasons-why-electric-vehicles-will-kill-the-gas-car/

Gearino, D. (2020, July 31). Electric cars will cost same as gas models as soon as 2023, researchers say. KQED. Retrieved January 30, 2021 from https://www.kqed.org/science/1967914/electric-cars-will-cost-same-as-gas-models-as-soon-as-2023-researchers-say

Hawkins, A.J. (2020, October 8). Amazon unveils its new electric delivery vans built by Rivian. The Verge. Retrieved January 31, 2021 from https://www.theverge.com/2020/10/8/21507495/amazon-electric-delivery-van-rivian-date-specs

Idaho National Laboratory. (n.d.). How do gasoline & electric vehicles compare? INL. Retrieved January 31, 2021, from https://avt.inl.gov/sites/default/files/pdf/fsev/compare.pdf

Ingham, L. (2019, January 4). Peak car approaches: car ownership will decline after 2034. Verdict. Retrieved January 30, 2021, from https://www.verdict.co.uk/peak-car-ownership-decline-2034/

Matousek, M. (2019, September 10). Volkswagen has reportedly reached a big milestone in battery costs that would heat up its competition with Tesla. Business Insider. Retrieved January 31, 2021, from https://www.businessinsider.com/vw-electric-cars-battery-costs-versus-tesla-2019-9#

Nagel, M. (2020, September 22). From advanced diesel to hydrogen: Four ways Cummins is committed to meeting energy demands. Cummins Newsroom. Retrieved January 31, 2021, from https://www.cummins.com/news/2020/09/22/advanced-diesel-hydrogen-four-ways-cummins-committed-meeting-energy-demands

Naughton, K. and D. Welch. (2019, February 28). This is what peak car looks like: For many people, new forms of mobility are making privately owned vehicles obsolete. Bloomberg Businessweek. Retrieved January 30, 2021, from https://www.bloomberg.com/news/features/2019-02-28/this-is-what-peak-car-looks-like

Ohnsman, A. (2020, November 16). Diesel engine giant Cummins plans hydrogen future — with trains coming before trucks. Forbes. Retrieved January 31, 2021, from https://www.forbes.com/sites/alanohnsman/2020/11/16/diesel-engine-giant-cummins-plans-hydrogen-futurewith-trains-coming-before-trucks/?sh=3bb5e8266ad2

Randall, T. and H. Warren (2020, December 1). Peak oil is suddenly upon US. Bloomberg Green. Retrieved January 30, 2021, from https://www.bloomberg.com/graphics/2020-peak-oil-era-is-suddenly-upon-us/

Reichert, E. (2017, May 11). Electric car components: gas vs. electric. NAPA. Retrieved January 31, 2021 from https://knowhow.napaonline.com/electric-car-components-gas-vs-electric/

Schmidt, B. (2020, May 22). CATL boss opens up about Tesla electric car battery deal. The Driven. Retrieved January 31, 2021, from https://thedriven.io/2020/05/22/catl-boss-opens-up-about-tesla-electric-car-battery-deal/

Schmidt, E. (2017, September 6). Top 12 reasons why electric cars are better than gas cars. Fleetcarma. Retrieved January 31, 2021, from https://www.fleetcarma.com/why-electric-cars-are-better-than-gas-top/

Skeptics. (n.d.). Do electric cars inherently consist of fewer parts than combustion engine cars? Stack Exchange. Retrieved January 31, 2021, from https://skeptics.stackexchange.com/questions/40383/do-electric-cars-inherently-consist-of-fewer-parts-than-combustion-engine-cars

Spector, J. (2020, September 22). Tesla battery day: expect battery cost to drop by half within 3 years. gtm. Retrieved January 31, 2021, from https://www.greentechmedia.com/articles/read/tesla-battery-day-cost-reduction-three-years

Weiland, J. and J. Walker (2017, December 6). Why peak car ownership in 2020 Isn’t So Farfetched. HuffPost. Retrieved January 30, 2021, from https://www.huffpost.com/entry/why-peak-car-ownership-in_b_12200628

Welch, C. (2021, January 22). Has the electric car’s moment arrived at last? National Geographic. Retrieved January 30, 2021, from https://www.nationalgeographic.com/environment/2021/01/has-electric-car-moment-arrived-at-last/

Wilson, K. (2021, January 8). Study: e-taxis increase private car ownership in many cities. StreetsBlog USA. Retrieved January 30, 2021, from https://usa.streetsblog.org/2021/01/08/study-e-taxis-increase-private-car-ownership-in-many-cities/