Carmageddon is Coming
We’re on the cusp of the fastest, deepest, most consequential disruption in transport history
An overlapping confluence of three different technological waves — the smartphone, the electric vehicle and artificial intelligence — have created the conditions for a technological disruption so profound it’s going to change almost everything about the way we move in modern society.
The first of the three waves is something most of us have already experienced: the ability to summon a car and a driver with your phone. Millions of people use ride sharing every day. When the CEO of the world’s biggest ride sharing company behaves like a dick and is forced to quit, it makes headline news around the world. Incidentally, now that Uber doesn’t have a CEO, COO, CTO or CFO we guess this is the closest it’s ever been to a self-driving car company? (nice one, Mariya Yao)
The second technological wave is the arrival of the electric vehicle. Tesla is now the planet’s 4th most valuable automaker and there are already more than 2 million electric vehicles on the world’s roads. While the falling costs of batteries get most of the attention in the media, the truly revolutionary bit in an electric vehicle is actually the drivetrain. That’s because the drivetrain for an internal combustion engine contains about 2,000 parts while an electric one contains about 20. A system with two orders of magnitude fewer parts is way more reliable and saves money by eliminating around half the cost of traditional car maintenance. It gives electric vehicles much longer lifespans. The average combustion vehicle lasts about 250,000 km, while current estimates for the lifespans of today’s electric vehicles are around 800,000 km.
You know how the value of a car drops by a quarter when you drive it out the dealer? Well, not if it’s electric.
The electric drive-train is also more efficient and powerful than the ones in petrol or diesel cars, which lose most of their energy through heat. This allows electric vehicles to achieve the acceleration and performance of a Ferrari, yet cost far less to buy and run. That’s why Daimler-Mercedes, the world’s oldest car company, is planning to spend $15 billion on building ten new models of electric vehicle by 2022. It’s why legendary car designer Henry Fisker just unveiled a new car that has a top speed of 250km/h, a range of 640km and charges from totally flat to full in 36 minutes.
That’s where we are in 2017… within a few years it’s going to be dramatically better.
The third, and most important wave is artificial intelligence, which has paved the way for autonomy. Thanks to the neural network phase shift that happened about five years ago, computer vision is now good enough to distinguish objects on the road and build 3D maps of surrounding areas. It’s not just the algorithms that have improved; the hardware is better too. A few weeks ago Google unveiled its second generation AI chips, which have 180 teraflops of processing power. To put this in context, 15 years ago, you needed giant banks of supercomputers in underground bunkers to achieve the same kind of performance. Meanwhile, LIDAR units, the things that give self driving cars visibility and depth perception, cost ten times less they did four years ago and have shrunk from the size of large paint cans on the roof to cigarette packs that you can put inside fenders or mirrors.
In 2011 nobody was talking about robot cars. Today, every single major car company says they’ll have fully autonomous vehicles (no steering wheel or pedals) on the road before 2021 and a few, like Tesla and General Motors, say they’ll be ready to go in a year. It’s not just the car companies either. Last week, Apple’s CEO said they’re determined to solve autonomy, “the mother of all AI projects.” Baidu, the Chinese tech giant, is planning to release its open source self-driving platform, Apollo, within the next few months. There’s also a wave of smaller startups chasing a slice of the self-driving pie, all attracting record levels of deals and funding.
All these companies see driverless vehicles as their ticket to the really big prize, which is the ride sharing business. If you remove the cost of the human driver from an on demand trip, the cost goes down by about three quarters. Autonomous vehicles are also safer, which means you can remove or reduce the cost of the insurance. This is not theoretical. Basic autonomy features such as forward warning and automatic braking already save lives, resulting in 7% and 15% reductions in crashes, respectively. Once the accident rate falls, insurance rates go down even further. Autonomy, in other words, is rocket-fuel for on-demand. This makes it much easier for people to dispense with a car, or only have one, or leave their car at home and take an on demand ride for any given trip.
Where is this all going?
Within a few years, electric vehicles are going to be cheaper, more durable and more reliable than petrol powered cars, autonomy will be good enough that you don’t need human drivers and everyone will be able to hail a car on their phone (or their voice-activated Alexa spectacles). The cost of taking a car trip will become cheaper than getting a coffee, which means it will be accessible to everyone. Overnight, we’ll see a mass defection to mobility as a service.
This is the real kicker: we don’t have to wait for people to get rid of their old cars; they simply walk out their front door one morning and decide they would prefer to hail an autonomous, electric vehicle. Given a choice, people will select the cheaper option. And that option will not include ownership. The combustion vehicle won’t disappear gradually, over a few decades — it’ll happen in the space of a few years. We are talking about the kind of disruption in urban mobility that we haven’t seen in a century happening in a timescale that can be measured in months.
Recent studies from Bloomberg, the London School of Economics and Stanford University have all pegged the date of the confluence of these three technological waves at around 2020 or 2021.
According to Professor Tony Seba (the lead author of the Stanford report), within a year of the tipping point, the demand for global fossil fuels will peak, driven by the drop in demand for petrol and diesel, which account for around half of the world’s oil production. Global oil production will drop by more than 25%, causing upheaval in nations and regions that depend on revenue from oil sales. Excellent news for polar bears and coral reefs. Not such great news for well-fed sheikhs or shareholders of the big oil companies. If you lose a quarter of your market in a few years, you’re in trouble. If you’re $30 billion in debt, like Exxon is right now, you’re screwed. Some of the more forward thinking oil companies are starting to acknowledge this. Shell for example, says oil could peak by 2027, while Total thinks a surge in battery powered vehicles will cause demand for oil to peak in the early 2030s.
Their estimates are too conservative.
Seba’s team suggests that two to three years after the tipping point, car prices will crash as people give up their vehicles. New car sales for individuals will drop to nearly zero, creating carnage for car dealerships, auto insurers and repair shops. The cost per mile for electric vehicles will be 6.8 cents, rendering petrol cars obsolete. Insurance costs will fall by 90 per cent. Within seven years, only hobbyists and motor enthusiasts will be using petrol and diesel cars, and total crude oil use will have dropped by 30% compared to today. The majority of people’s travel will be electric, autonomous and shared.
This is perhaps the most important thing to realise about the pace and change of this disruption: because each shared, autonomous, electric vehicle operates 24 hours a day, and is far more durable and reliable, it’ll be able to ferry around ten times more people. You need far fewer cars to do the same work. Sure, by 2030 most of the world’s stock of 1.1 billion vehicles will still be petrol powered, but they’ll just sit in the driveway gathering dirt, perhaps taken out for a pleasure spin on the weekends, or used for specialised tasks like hauling logs or moving furniture. Most travel will be done via autonomous vehicles, as people realise it’s cheaper and more convenient to get a little work done on the way to the office.
Just take a minute to think what this all means. A major reduction in the deaths of the 1.2 million people killed by cars worldwide. Goodbye to a sizeable chunk of the 14% of global carbon emissions that come from the transport sector. More capacity for our roads, more parking spaces in our cities, fewer traffic jams, less pollution. On the downside, plenty of angry taxpayers in cities around the world who just watched their hard earned money wasted by short sighted politicians on new roads that nobody ended up needing. And bad news for doctors and nurses, who are going to need to find new work when car accidents, responsible for more than half of the admissions to emergency rooms in most OECD countries, disappear. Car accidents also supply the majority of organ donations in these countries, so the biotech companies will need to get cracking on 3D printing.
On the upside, think about the incredible impact on our ageing society, who will no longer have to depend on the leniency of licensing bureaus or family members to continue to travel locally. Or even better, the millions of less abled people for whom mobility as a service has never been possible. And of course, hello to a whole new kind of city. If parking goes away, road capacity increases by several times and an on-demand ride is the cost of a coffee, then we need to start thinking much more generally, not just about cars, trucks and roads but cities, land use and real-estate. As Benedict Evans points out:
Cars have remade cities over the past century, and if cars are now going to change entirely, cities will change too.
So what does all of this mean for you? Consider where you stand. You may be thinking about buying a new car, and wondering whether to go electric. Or perhaps you’re wondering whether you need a new car at all. Car sharing schemes are pretty good these days, and you won’t be left with something you can’t sell. Maybe your retirement funds are linked to the fate of some of the oil companies. Might be a good time to have another look at that too. Carmageddon is coming. You probably want to be on the right side of history.
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