Autonomous vehicles and the new ‘Radio Rentals’

You shouldn’t own a car. For all sorts of reasons. It’s a terrible asset that depreciates quickly. It consumes a huge proportion of your income, especially if you buy it on finance as so many people do now. When I was at Autotrader’s offices this week I saw an incredible stat: car buyers spend 68% more on the sticker price of a car when it is bought on finance than when bought outright.

On top of that there is the insurance, tax, maintenance, and the space as well. In a country desperately short of housing we give an incredible amount of land over to storing our vehicles. And they do spend a huge proportion of their time store, rather than in use.

Manufacturing cars to sit on driveways is also terrible for the planet, since a huge proportion of their carbon footprint is in their manufacture, rather than their use.

All-in-all, a future where we order up electric, self-driving cars from a shared fleet, on demand, looks like a pretty good prospect (unless driving is your profession, or you’re Jeremy Clarkson).

Or does it?

Challenging orthodoxy

One friend, Republic of Things’ Andrew Beechener, made me question this whole argument with one simple sentence:

“I don’t know Tom, it just feels like the Radio Rentals model all over again.”

That phrase hasn’t left my mind since he said it a fortnight ago.

If you’re too young to remember Radio Rentals, many of us use to rent our televisions and video recorders. Rather than buy these big assets outright, we used to pay a monthly fee to borrow them. This was before you could pick up a 60in flatscreen for £300 in the supermarket. Cheap electrical goods made the rental model rather untenable.

(People still pay inordinate sums to finance electrical goods of course, from companies like BrightHouse. Buy a 55in Samsung UHD TV from this company on finance and you will pay over £1400, when you could pick it up for £529 at a high street story like Curry’s.)

Andrew suggested the same might happen with cars. Electric vehicles are simpler to build and maintain than petrol vehicles with many fewer moving parts. Because those moving parts are compressed into a slim chassis layer, it’s easier to produce these at higher volume (hence cheaper) and just have different bodies bolted on top. Performance characteristics can be determined by software upgrades rather than extra engine cylinders. The introduction of new materials into the process (cars are increasingly shaped from composites rather than metals) will also potentially make them cheaper over time.

Price comparisons

I struggled a little bit to find good historical television prices to make a comparison, but as far as I can tell, a good quality 22in colour TV in the early 1980s would have set you back around £300. Accounting for inflation, that’s over £1000 in today’s money. Today an equivalent set would cost around £150. That’s nearly a seven-fold fall in price.

This is a hideous methodology, but imagine that all the technology changes above lead to a similar fall in car prices over the next 35 years. That would mean a solid mid-range saloon that might today cost £25,000 would be under £4000.

If you could get a really nice car for £4000 in today’s money, would you still use a fleet service? It’s certainly food for thought.

Reality check

In reality, I think it is unlikely the cost of cars will fall anywhere near this far. Even with new materials, their raw resource requirements remain significant, especially for the power cells. And while renewable electricity generation should provide an unlimited, cheap and clean source of power, I don’t think their running costs will be allowed to fall to their potential lows.

Even with self-driving making road transport more efficient, what we don’t want is even more cars on the road, and taking up space. Legislation will likely be used to incentivise more shared infrastructure as climate change starts to bite more visibly in places like the UK.

As always, there is no one answer to these questions: some people will likely own a car and some people will rely on a fleet service. On balance, I think the latter group will be larger, especially as more and more of us congregate in densely-populated cities where car ownership makes less sense.

I’m glad I was forced to think about it though. Self-driving fleets being the future has become something of an orthodoxy, and those are always worth challenging.

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