How Can Robotaxis Deliver on Their Promise?Posted to Guidehouse
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- Sep 22, 2020 2:45 pm GMTSep 22, 2020 3:05 pm GMT
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Heralded as the next stage in the evolution of ride-hailing, robotaxis are set to provide on-demand urban transportation with automated vehicle fleets. Robotaxi service providers have an opportunity to build upon the smooth user experience and efficient dispatching of ride-hailing with high utilization and minimal downtime to bring low cost urban mobility to the masses.
By removing the driver from the equation, robotaxis have the promise to substantially reduce operating costs by up to 80% and to finally make ride-hailing profitable for transportation network companies (TNCs). Consumers would benefit from low cost, safe transportation with high availability.
Three Key Enablers for Robotaxi Success
Guidehouse Insights has identified three key areas that need to be addressed for robotaxis to deliver on their promises.
Level 4 Automated Driving Technology
Developing the driving technology to enable Level 4 automation is a challenge. Despite the early hype, automakers have started to backtrack from earlier claims, realizing the technology is not mature enough and that business models and consumer acceptance are still evolving. There have been multiple delays, including the following:
- Cruise delayed its still-awaited launch, which was originally expected in 2019
- Ford postponed its robotaxi launch to 2022 while it analyzes the COVID-19-related impacts on consumer preferences
- Daimler admitted it finds the challenge of automated driving on urban roads much harder than expected
Meanwhile, Elon Musk continues to boldly claim that Tesla robotaxis will be available in 2020 and that Level 5 automation is imminent. However, there is little evidence of the necessary progress for Tesla to achieve this and any robotaxi features are likely to be limited. These challenges will only be compounded by the lack of clarity on the regulation of automated vehicles.
A key requirement for ride-hailing customers is high service availability. To be tempted away from their cars, people need a reliable, on-demand service with minimal wait times. Robotaxis could potentially provide this by initially starting to replace and add to human-driven ride-hailing fleets with the ability to operate over much longer working hours with minimal downtime.
The cost of travel is another major factor for consumers. Even if robotaxis could provide operators with significant operational cost savings, it is unlikely that consumers would see much of this benefit, at least in the early years of deployment. TNCs need to claw back their high investments in developing and marketing ride-hailing services. Furthermore, while robotaxi services may become more affordable, it is doubtful that they will become competitive in emerging markets with low labor costs.
In many respects, the vehicles for shared mobility are of lower importance to the consumer compared to personal vehicles, but robotaxis can benefit from vehicles that are purpose-designed for ride-hailing, maximizing passenger space, luggage space, durability, and hygiene. However, the lack of a driver would be a disadvantage for those riders that value the human element. This may include assistance for the disabled, help with luggage, and (in some cases) conversation.
It is doubtful that robotaxis will provide 80% operating cost savings over human-driven vehicles. Though drivers would be eliminated, it should be remembered that in the current ride-hailing model, drivers bear the cost of vehicles (which would be significantly more expensive for robotaxis) and the responsibility of fleet management. This burden would have to be taken up by either the TNC or by third-party fleet owners that deploy robotaxis on a TNC platform. And while drivers will no longer be necessary in robotaxis, humans will need to be employed to monitor passenger safety and intervene in emergencies.
Vehicle utilization is the other major challenge for profitability. The problem is that urban travel demand sharply peaks during rush hours and can be low at other times. Without a shift in travel and working patterns that could be stimulated by corporate and government policies, it will be challenging to achieve the high vehicle utilization from ride-hailing that is required to achieve profitability.
Dual-purposing vehicles for passenger transport and goods deliveries may help address this challenge. Robotaxis that could switch function to goods delivery during spells of low demand would help to ensure the vehicles are used for longer periods. Amazon’s recent $1.2 billion acquisition of Zoox suggests that this could be a realistic opportunity, as further evidenced by robotaxi operators (including Cruise, Hyundai-Aptiv, and Pony.ai) deploying their fleets for the delivery of food and groceries during the coronavirus outbreak.
Rebounding from COVID-19
The pandemic interrupted most robotaxi services and on-road development. The industry also faces the potential diversion of investment in development as companies conserve capital to help survive the wider economic impact. However, robotaxi companies are learning from the situation in terms of dual-purposing their fleet and in understanding the need to develop more hygienic shared mobility and the potential impact on demand and requirements for ridesharing.
China was first to resume robotaxi pilot operations after lockdown, supported by its government’s aim to commercialize robotaxis by 2025. Since lockdown, there have been several new robotaxi pilot launches including AutoX and DiDi in Shanghai, Baidu in Changsha, WeRide in Guangzhou. Others are expected soon. The key Chinese players are in a bullish mood, with Daimler-backed AI startup Momenta boldly claiming that it will have a completely driverless fleet by 2024 and with DiDi planning to deploy 1 million robotaxis by 2030. Outside of China, Mobileye has promised robotaxis by 2022 and announced a partnership with WILLER for robotaxi services in Japan. Yandex recently unveiled its latest generation of automated vehicle (based on the Hyundai Sonata), which is to be deployed later this year in Israel, Russia, and South Korea.
Confidence in the robotaxi market has generally remained strong. In addition to Amazon’s recent purchase of Zoox, DiDi’s automated driving subsidiary raised $500 million in May (led by SoftBank), Toyota invested $400 million in Pony.ai in February, and Waymo raised its first external funding round of $3 billion in March.
Robotaxi Market Outlook
Despite the industry’s bravado, robotaxis face numerous challenges and are still a long way from becoming mainstream. Guidehouse Insights anticipates that the global robotaxi market will grow at a compound annual growth rate of 215%, to an estimated value of $915 billion by 2030. However, robotaxis are not expected to become a perceptible feature of urban transportation until 2028-2029, when they are anticipated to account for around 4% of ride-hailing rides.
Although consumers may not find robotaxis significantly cheaper than conventional ride-hailing services or other modes of transportation, robotaxis may provide a valuable addition to first and last mile transportation and serve transit deserts. In any case, it is undesirable to take people off mass transit into smaller vehicles, especially in the densest urban cores. However, restricting the use of personal vehicles in city centers and eliminating the hassle of congestion and parking makes robotaxis appealing.
While Level 4 automated driving technologies may be late and still several years away from becoming mainstream, they could be established in time to support the emergence of robotaxis in the late 2020s. In addition to automated driving technology costs, vehicle utilization is the other main drag on profitability. Robotaxi operators need to innovate on and take advantage of the demand for delivery services. If robotaxis can address the three challenges discussed previously, they can succeed in delivering their promises of adoption and profitability—while quite possibly delivering your Amazon parcels.