How will ‘robo-taxis’ change the transport industry?

Real-world pilots of these “robo-taxis” are already being conducted to test the use of fully autonomous vehicles for commuting short distances or providing first-and-last-mile connectivity to main public-transportation nodes. Many of these vehicles will likely be owned and operated by mobility providers—taxi service operators, ride-sharing services, new entrants from the technology sector, OEMs—and rented to consumers by the minute or the mile. Robo-taxis would offer commuters door-to-door service, enable them to work or be entertained during the trip, and allow them to share the ride—and cost—with other commuters. The cost of a robo-taxi ride would be lower than that of a conventional cab ride and, depending on the commuter’s annual driving mileage and car occupancy, could be less than owning a vehicle.

In our New York example, the cost of conveying one passenger one mile by robo-taxi would be 35 percent less than doing so by conventional taxi at the average taxi occupancy rate of 1.2 passengers. (See the exhibit below.) From a provider’s perspective—and factoring in the full cost of public transit, including government subsidies—robo-taxis would become competitive with mass transit at an occupancy rate of 2 passengers.

The cost comparison supports the case for replacing conventional taxi fleets with robo-taxis. AVs could also whittle away at subway ridership if passengers who use the subway mainly for short trips opt to pay a slight premium for door-to-door service. The economics of robo-taxis could even persuade some drivers, especially those who don’t rack up a lot of miles per year and who are open to car sharing, to give up their cars altogether.

AVs could spur mass-market adoption of ride sharing, which could ultimately result in a marked reduction in owned vehicles and in the total number of cars on the road, at least within cities. It could also slow the growth in vehicle sales over time, reducing the total number of cars in cities worldwide, easing traffic congestion, and improving urban land use as parking infrastructure is repurposed or replaced. Congestion and greenhouse gas emissions could be diminished as automation technology, including vehicle-to-vehicle communication, optimizes routes and vehicle flow.

The application of AVs to taxi and car-sharing business models will have far-reaching consequences for mobility players. Public transportation companies will need to reconsider their infrastructure investments as shared AVs blur the frontier between public and individual transportation. What will change when public transportation and mass transportation are no longer synonymous?

Taxi companies will need to anticipate and adjust to a new business model in which times and locations of pick-ups would be optimized centrally and in which municipalities might want to play a bigger role. OEMs, for their part, must prepare to cater to a growing business-to-business customer base. And finally, urban vehicle owners will need to select their next vehicle carefully—it might be the last one they will ever buy.

This article is published in collaboration with BCG Perspectives. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Xavier Mosquet, Thomas Dauner, Nikolaus Lang, Michael Rüßmann, Antonella Mei-Pochtler, Rakshita Agrawal, and Florian Schmieg writes ofr BCG Perspectives.

Image: People ride on a driverless electric vehicle at the Nanyang Technological University (NTU) in Singapore. REUTERS/Edgar Su