On-demand mobility and the 99%

The big question on a lot of people’s minds right now is whether autonomous vehicles (AVs) will be owned or whether they will predominantly be used through an on-demand platform. A lot hinges on this. From congestion to cycling to mobility options for low-income households, the on-demand future looks a lot brighter than the ownership one.

For households in the 99%, the decision to own or subscribe will come down to this: how much convenience will I get, for the money I spend?

It’s difficult to know the exact cost and convenience of future on-demand AV use because there are a lot of variables in the equation. The best we can do is to look at the cost and convenience of services that share some similarities with on-demand AV mobility, and consider how they may evolve.

From a cost perspective, one-way car-share services like Car2Go are a good place to start. Similar to AV mobility, there is no labour cost associated with a driver in this model — you’re just paying for access to the vehicle. The current fee structure for Car2Go in Toronto is:

  • base fare per trip: $1 CAD
  • cost per minute: $0.41 CAD
  • hourly maximum: $10 CAD

To put this in perspective, if you had a 1 hour commute (each way) your annual commuting cost with Car2Go would come to approximately $5,750 including all taxes and fees. Given that the Canadian Automobile Association puts the annual cost of owning and operating a sub-compact car at around $8,500, that leaves a lot of room to pay for non-commuting trips and still come out ahead with Car2Go. And if your commute is less than 25 min each way, the Car2Go costs would drop proportionately, whereas ownership costs would only diminish slightly with declining usage.

One-way car-share services like Car2Go let users pick up and drop off a car at different locations, anywhere within the service area. Photo Credit: City of Toronto

How might these costs shift in an AV context? Here are a few things to consider:

1. Occupancy: this is by far the biggest factor that will push costs down. Services such as UberPool already show that there is a market for multi-occupant trips in high density areas. Add into the mix purpose built multi-occupant vehicles with separate compartments for each passenger, and, save for the affordable price, most people will hardly realize they’re sharing their ride.

2. Economies of Scale: car-share services struggle in suburban markets because it’s hard to get a vehicle within easy walking distance of everyone’s homes. Excluding anyone who lives in or needs to travel to the suburbs obviously precludes a lot of potential users. AVs solve this problem because a car parked several blocks away can be dispatched to arrive at your doorstep within a couple minutes. As a result, service providers could tap into much larger markets and increase the number of trips taken with each vehicle, all of which would significantly lower the cost of using the service.

3. Travel Time: if on-demand mobility prevails, there is good reason to believe that congestion will decrease, which means lower travel times. Given the direct relationship between travel time and cost for both car-share and ride-share services, a reduction in travel times means your ride just got cheaper.

Other costs will also be reduced like insurance (as collisions will become less frequent) and fuel (as AVs will be predominantly electrically powered). But these savings don’t favour an on-demand platform over ownership and therefore won’t sway people in either direction. On the flip side, some costs such as vehicle purchase price could increase, because of the amount of electronics and R&D that go into an AV. An increase in vehicle cost would affect owners much more than on-demand subscribers however, because the cost of ownership is shared among many users in an on-demand system.

At the end of the day, it’s not all about cost — it’s about the amount of convenience you get for that cost. This is why transit has struggled so much to attract ridership in North America: it’s much cheaper than owning a car, but for most people, it’s a lot less convenient. AVs are unquestionably a game changer in this regard. You’ll get door-to-door service. You’ll be able to get a lot more privacy and comfort, if you’re willing to pay for it. And you won’t be restricted by schedules or service areas. In short, AVs will provide you with the convenience of your own car without making you actually own it.

It’s this cost-convenience ratio that will sway most people when they decide whether to own or subscribe. Yes, the ownership concept is deeply entrenched in our culture. But think about this: we’ve never had anything that could really compete with the convenience of ownership, especially in the suburbs.

A car-share service could already save you 30% on your commute relative to ownership — if you’re fortunate enough to live and work within the service area. AVs could drive those savings into the 50%-80% range, and provide a level of convenience that matches that of ownership. Once people start comparing their mobility costs at water coolers, dinner partys, and Wal-Mart checkout lines, owners are going to start wondering what they’re actually getting for their money.

We’re already starting to see ownership’s stranglehold on the market slip as car-share, bike-share and ride-share options proliferate. With the introduction of AVs this trend is going to accelerate. And for anyone interested in an efficient, equitable and sustainable transportation system, the end of widespread car ownership is good news.

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