ARK Estimates That Autonomous Driving Could Expand The Ride-Hail Market To An $11–12 Trillion Opportunity
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Takeaway:
ARK previously estimated that autonomous ride-hail could expand the ride-hailing market from $150 billion today to $6–7 trillion by 2030. Based on our most recent research on consumers’ perceived value of time, we now estimate the total addressable opportunity to be $11–12 trillion.
Background:
ARK estimates that autonomous driving could reduce the cost of ride-hail significantly, expanding the addressable market. Today, the average price of an Uber is $2 per mile, while Didi is $0.50-$.70 per mile. We estimate that autonomous ride-hail vehicles will have higher utilization rates than human-driven cars, as well as lower labor and insurance costs. At scale, ARK estimates that an autonomous taxi platform could price rides profitably at 25 cents per mile.[1] As shown below, autonomous rides could be cheaper than driving a personal car and cost competitive with public transit
Our Recent Analysis:
We arrived at our 25 cents per mile estimate by examining the cost to operate an autonomous ride-hail platform and assuming the operator keeps a modest profit margin. Recently, we analyzed the market from the perspective of the consumer: what would the average consumer be willing to pay for a ride-hail mile?
We used past studies to estimate how consumers perceive the value of their time. ARK estimates that time spent commuting could be valued on average at roughly $1.10 per mile, while time spent on personal travel could be valued at roughly $0.60 per mile.[2] Note that these estimates only include the perceived value of time, while the full cost of driving would include an additional 56 cents per mile cost to drive a personal car, as shown below.[3]
So What?
Our estimates for the perceived value of time suggest that before autonomous ride-hail is widespread and costs decline to 25 cents per mile, it is likely that there would be substantial demand today for a higher priced service. For example, given consumers’ perception of the value of time, we believe that an average robotaxi price of $0.60 — $1.10 per mile would be sufficient to address the rough 5 trillion urban miles that people in the United States and Western Europe drive annually.[4] In China, however, there is likely more demand for a service priced at $0.50 per mile, given the inexpensive human-driven ride-hail options available today, as shown below.
ARK estimates that at our $0.25 per mile pricing level, there will be an additional 20 trillion miles worth of demand. As ride-hail prices decrease and more customers enter the market, ARK estimates that global traffic miles could triple relative to today’s levels.
With these assumptions, our estimate for the ride-hail addressable market expands to $11–12 trillion, as shown below.
ARK believes the companies best poised to win share in this market will be the companies that own the autonomous technology stack, or the autonomous platform operators. Without a successful autonomous platform, today’s ride-hail players may be forced to partner with outside technology providers and cede a substantial portion of the fees they collect off rides in the process. Autonomous technology companies will both expand the addressable market and snag the lion’s share of the economics.
[1] Note that ARK’s work assumes an autonomous taxi has no driver and occasionally requires the help of a remote operator.
[2] Sources: ARK Investment Management LLC, https://www.transportation.gov/sites/dot.gov/files/docs/2016%20Revised%20Value%20of%20Travel%20Time%20Guidance.pdf, https://nhts.ornl.gov/assets/2017_nhts_summary_travel_trends.pdf, http://s3.amazonaws.com/fieldexperiments-papers2/papers/00720.pdf, https://www.bls.gov/opub/ted/2020/average-hourly-earnings-for-private-payrolls-increased-3-point-1-percent-for-year-ended-january-2020.html, https://ideas.repec.org/p/feb/natura/00720.html
[3] Source: https://www.irs.gov/tax-professionals/standard-mileage-rates . Note: By ARK’s estimates, a new car costs roughly 70 cents per mile to drive.
[4] Note that this is likely conservative, as our $1.10 and $0.60 per mile price points do not account for the price per mile of driving a personal car.
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