A Taxi to the Airport for $1.80
Electric driverless taxis can drastically cut the costs of personal transport.
It bemuses me that when flying from Melbourne to Sydney for a meeting the return airfare can be less than the taxi fare to and from the city at each end. The return flight is about 1,600km. Depending on the route, the total taxi distance for all four trips is approximately 70km. All this will change once we have driverless electric cars as a transport service. You will be able to get a shared driverless car from the Melbourne CBD to the airport for $1.80, including GST. Think Uber in an electric car with no driver.
The first big cost saving is eliminating the need for a driver. If a petrol car could drive itself to the airport then the one-way cost would be about $16.84 (23.2km x 66 cents per kilometre . This is based on the total mileage cost for a standard personally owned car. The actual mileage cost of the vehicle for a taxi is less because fixed costs are amortised over far more kilometres. The cheapest taxi fare for the same trip is $41.83, excluding tolls and airport fees. So just removing the driver can save enormous amounts of money. Of course there are other costs in the taxi service because of regulation and a need to make a margin. I will address that later in this post to make it a fair comparison.
The second key cost reduction is increased car utilisation. Most of our cars travel 15,000 km per year. If a driverless car can travel 300 km per day (10 hrs averaging 30 km an hour or an equivalent charge for waiting time) then the fixed costs per km fall significantly. Of course, we already have this model — a taxi. This is where the electric and driverless aspects come in. Electric cars are already showing considerable improvements in reducing car costs.
An example of dramatically reduced maintenance costs is the first Tesla S used by the Tesloop company. This vehicle has now travelled over 480,000 km in its role as a luxury car transfer service. The maintenance costs for that travel have been 1.7 cents per km. That is less than half the cost of my fixed price maintenance contract for my new Toyota Corolla. It is about 25% of the maintenance costs in the RACV/RACQ costings for medium-sized vehicles in Australia.
For fuel differences we can look at The Tesla Model 3 or the Chevy Bolt. These are both standard production electric car models. The Model 3 has a range of 354 km on a 50 kWh battery. The Chevy Bolt has a range of 382km on a 60kWh battery. This results in 6.4–7 km per kWh. My home shoulder/off-peak electricity cost is 12.57 cents per kWh. So, the energy costs for an electric car would be about 1.8–1.96 cents per km. By comparison the very best diesel vehicles in Australia get about 4 litres to 100 km. At current prices, this is 5 cents per km. Electric vehicles energy costs can be over 60% cheaper than even the best diesel vehicles. Most petrol vehicles run in the 7–8 cents per km cost range.
Electric vehicles also last longer than internal combustion engine (ICE) cars. This means we can amortise the fixed costs over many more kilometres. Again, we can look at the Tesla S owned by Tesloop — over 480,000 km and still going strong. Tesloop believes they might get 1.9 million km from this vehicle, although it will need some battery changeovers in that time. One of the reasons that electric cars will last longer is that they have far fewer moving parts. Less movement means less stuff to wear out. ICE vehicles are essentially housing a contained explosion to power themselves. Electric vehicle chemistry is far more benign.
For more details on costs see my post: Electric Cars — Saving Real Money or Arbitrage Opportunity?
Lastly, autonomous vehicles have shown a significantly lower accident rates. Given this, insurance costs can only come down on a per kilometre basis.
These factors result in the following comparison:
1: A-EV is Autonomous Electric Vehicle also travelling 75,000 km per year but for 5 years
2: Extended A-EV is Autonomous Electric Vehicle travelling 109,500 km per year for 5 years
3: Platform cost is for the cost of the autonomy and the software systems to run a fleet
An autonomous petrol vehicle travelling 75,000 km per year for 3 years reduces the costs from 66 cents per km to 39.5 cents per km. An electric vehicle doing the same over five years reduces it to 23.2 cents. The main differences are in fuel (5 cents), repairs (5 cents) and depreciation (6 cents). If an electric vehicle travels 109,500 km per year the cost falls to 17.6 cents per km. This is achieved by algorithms providing the smartest route and passenger systems.
Back to the headline of $1.80 to the airport from the CBD. If four separate paying customers share the extended A-EV vehicle, their individual cost is 4.4 cents per kilometre. That is only $1.02. But there are other costs on top of the 17.6 cents per km for the car. We have to assume that the Federal Government will want to claw back the petrol excise tax they will lose if people use electric cars instead of ICE cars. Federal fuel excise in Australia is currently 40.3 cents per litre (yes my American friends that tax is US$1.20 per gallon and then there is sales tax on top ). At 6.0 litres per 100km, that is 2.42 cents per km.
The company running the service will also want a margin on their business. We have calculated that 5 cents per km produces a 13.8% Internal Rate of Return. Companies will need to charge GST on top. All these extra costs put the cost at 27.52 cents per km. We also need to factor in that the car will wander around the CBD picking up people — let’s imagine that this is an extra 2.3 km of travel. The company would need to raise the price a further 10% to allow for this extra non-earning mileage. This brings us to 30.27 cents per km. Let’s allow the company to charge a bit more for billing multiple passengers, and round it out to 31 cents.
The individual passenger cost (based on our four travellers) is now 7.75 cents per km — $1.80 plus tolls. The cost for an individual is 30.27 cents per km if we allow some downtime for the car as well. That is $7.02 for the trip. Goodbye airport bus service (currently A$17 one way)
Two interesting things come out of this.
The actual cost of travel will get so low that company margins and tax become a huge component. By our calculations taxes plus company margin make up 32.7% of the price. What if the government provided the service instead? It could be so much cheaper.
Secondly, shared travel is not necessarily that attractive when costs get so low. If I offer you a deal promising that your trip is 74% cheaper if you share, that sounds appealing. However, if the cost difference is only $5.22 (as in this case) you may decide that sharing, with the delays involved, is not worth the saving. For longer trips the cost differences rise, so you may decide sharing is worth the saving. Convenience trumps small cost differences, even if they are huge on a percentage basis.
At the other end we can get cost advantages and convenience at the same time by sharing. From Melbourne it is about 380 km to the snow fields at Mt Hotham. If I can get in a shared car (with a roof luggage pod for my skis) that will pick me up and only cost $55 return (current discount bus is $125 with resort access) it is less than my petrol cost of getting there. If the demand is high enough then I do not have to stick to the bus schedule and I do not have to get myself to the bus. Bring it on.
No matter how we look at it, lots of disruption is coming in the transportation sector.
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I am writing a book on autonomous vehicles with Dr Chris Rice . It is called Rise of the Autobots: How Driverless Vehicles will Transform our Economies and our Communities.
