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The Tesla Network: The Future of Fully Autonomous Ride Sharing

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The autonomous vehicle will revolutionize society in profound ways. Elon Musk is positioning Tesla to lead the way.

The Autonomous Vehicle Revolution is Happening

Make no mistake about it; autonomous vehicles are no longer a hard to conceptualize fantasy. They are in fact a near-term certainty whose wholesale integration into global transportation networks is just years – not decades – away.

Market predictions vary, but most industry experts and automaker executives predict that autonomous vehicles will be mainstays on American highways within the next ten years. Morgan Stanley’s widely followed auto analyst, Adam Jonas, has long pegged the mid-2020s as the time when autonomous vehicles will fully penetrate the market, so long as government regulators don’t stand in the way.

These autonomous vehicle predictions – once thought to be lofty – are actually playing out right before our eyes. Executives from major auto manufacturers have gone on record in recent years to declare that their respective companies will have fully autonomous vehicles on the road in the 2020s, if not sooner.

There are thought to be at least 44 major tech and auto corporations currently working on autonomous vehicle development for personal use.

 

Photo Source: CB Insights

Autonomous Vehicles Lead to More Ride-Sharing

The integration of autonomous vehicles onto our roadways will put wind at the sails of a ride-sharing culture that has swiftly become the norm in many corners of the world.

Since unmanned autonomous vehicles will have minimal idle times and no labor costs, they represent a significant opportunity for existing ride-sharing systems to be optimized.

In an expansive study released earlier this year by Stanford economist and clean energy expert, Tony Seba, and London-based tech investor, James Arbib, the two researchers document the monumental changes in store for the transportation industry as autonomous ride-sharing gradually becomes more ubiquitous. According to the researchers:

“By 2030, within 10 years of regulatory approval of autonomous vehicles (AVs), 95% of U.S. passenger miles traveled will be served by on-demand autonomous electric vehicles owned by fleets, not individuals.”

Their analysis predicts an 80% drop in private car ownership in the U.S. by 2030, and a drastic reduction in the number of passenger vehicles on America’s roadways in the next decade, thanks to the expected widespread adoption of autonomous electric vehicle fleets.

Existing ride-sharing companies like Uber and Lyft have fully embraced autonomous vehicles as the future of their respective businesses.

Uber has invested heavily in autonomous vehicle research in recent years. Their autonomous vehicle research division – the Advanced Technologies Group – now employs several hundred people in multiple offices in North America. Disgraced former CEO, Travis Kalanick, declared back in 2015 that Uber would have a driverless fleet by 2030.

Photo Source: Wired

 

Lyft’s CEO, John Zimmer, projects that a majority of the rides offered on his company’s network will be in autonomous vehicles by 2021, and personal car ownership will go the way of the dinosaur in many U.S. cities shortly thereafter.

Photo Source: Time Magazine

 

Similarly, auto companies also recognize that mass production of ride-sharing capable autonomous vehicles is where the future of their industry is headed.

Ford has already announced their plans to roll out an autonomous vehicle designed for high volume commercial use in a ride-sharing service by 2021. General Motors, the #1 automaker in the U.S., has committed to investing $500 million in Lyft as it pursues the develop of an on-demand network of self-driving cars with the ride-sharing company. Through this partnership, GM is basically acknowledging that the future of the automobile industry does not involve personal ownership of human-driven cars. As their President, Dan Ammann, succinctly put it:

“We see the future of personal mobility as connected, seamless and autonomous.”

And then there’s Tesla.

Photo Source: Tesla

 

There is perhaps no player in the auto manufacturing or ride-sharing sphere who has been able to connect the dots about the future of personal transportation like Tesla.

In “Part Deux” of his Master Plan, released last year, Tesla’s Elon Musk outlined the company’s plans to transform personal transportation by melding autonomy with ride sharing. On the topic of autonomy, Musk’s vision is clear:

“As the technology matures, all Tesla vehicles will have the hardware necessary to be fully self-driving with fail-operational capability, meaning that any given system in the car could break and your car will still drive itself safely.”

Musk’s Master Plan also made it clear that the mass production of fully-autonomous vehicles and ride-sharing go hand-in-hand:

“When true self-driving is approved by regulators, it will mean that you will be able to summon your Tesla from pretty much anywhere. You will also be able to add your car to the Tesla shared fleet just by tapping a button on the Tesla phone app and have it generate income for you while you’re at work or on vacation, significantly offsetting and at times potentially exceeding the monthly loan or lease cost. This dramatically lowers the true cost of ownership to the point where almost anyone could own a Tesla. Since most cars are only in use by their owner for 5% to 10% of the day, the fundamental economic utility of a true self-driving car is likely to be several times that of a car which is not”

The introduction of the much-anticipated Tesla Model 3 – the first mass-market car with full autonomy capabilities – to the market in July, and the aggressive production plans outlined by Musk, show that Tesla continues to make measurable progress towards realizing Musk’s vision for full shared autonomy.

All Tesla vehicles now being produced have the hardware necessary for full autonomy, and the Tesla 3 is well on its way to being the first mass-market fully autonomous vehicle.

Photo Source: Business Insider

The Future of Shared Autonomous Vehicles is Electric

The transportation industry is in the midst of an era of transformational change, as ride-sharing, autonomous vehicle production, and electric vehicle usage converge.

Recent analyses of the automotive industry conducted by Morgan Stanley and Bloomberg project that global electric vehicle sales will surpass gas-powered vehicle sales by roughly the year 2040. According to the Bloomberg report:

“EVs are on track to accelerate to 54% of new car sales by 2040. Tumbling battery prices mean that EVs will have lower lifetime costs, and will be cheaper to buy, than internal combustion engine (ICE) cars in most countries by 2025-29.”

Other industry experts, like Mr. Electric Vehicle himself, Elon Musk, claim that these projections are far too conservative.

At a July appearance before the summer meeting of the National Governors Association, Musk made his thoughts clear about the future of electric vehicles. On the topic of U.S. electric vehicle sales, Musk declared:

“My guess is probably in 10 years more than half of new vehicle production is electric in the United States.”

Musk’s full remarks at the NGA meeting can be viewed below:

While reasonable people can disagree over exactly when the electric vehicle will overtake its gas-powered counterpart, there can be virtually no disagreement that such an occurrence is inevitable. The cost of batteries continues to plunge and investments in electric vehicles by automakers continue to accelerate.

Photo Source: Bloomberg New Energy Finance

Even before all-electric power-trains reach cost parity with internal combustion engines, lower maintenance and fuel costs will drive consumers and businesses to electric vehicles. As Tony Seba points out, the typical gas-powered vehicle has 2,000+ different moving parts, while the all-electric Tesla S has less than 20.

Further, shared autonomy amplifies the benefits of lower maintenance costs. While human-driven cars sit idle some 90 percent of their lives, shared autonomous vehicles will spend the vast majority of their life in transit.

Tesla’s Competitive Edge

In a crowded space of automakers and ride-sharing service providers, Tesla is in an enviable position to corner the market on shared autonomy.

The competitive advantages of Tesla at this point, relative to its competitors, are widely apparent.

  • Vertical integration: Tesla’s ability to both produce autonomous electric vehicles and develop the shared network and associated software which the vehicles operate on is their chief differentiator in a crowded field of competitors. Traditional OEMs may have the ability to produce electric vehicles capable of autonomy, but they can’t match Tesla’s ability to integrate ride-sharing software on said vehicles. On the other hand, ride-sharing service companies have the software, but don’t have the vehicle production capabilities.
  • Strong brand identity: Musk is a household name and thought of as a transformational innovator and thinker. Tesla is viewed as a socially-conscience company that is committed to tackling big challenges (ie, climate change, inter-planetary travel). Tesla’s unique ability to brand itself as a Silicon Valley-birthed software company that happens to use a car as its hardware system has fundamentally transformed the auto industry.
  • Large existing vehicle fleet: No auto company has more existing vehicles on the road that are equipped with autonomous driving capabilities than Tesla. Tesla’s introduction of the Model 3 into the market and the software updates that continuously modernize their fleet have only put more distance between them and their competitors.
  • Machine learning capabilities: Unlike other auto companies, the whole Tesla fleet is interconnected. When one semi-autonomous Tesla learns something while operating on the road, the whole fleet learns it. The ability of Tesla’s existing fleet of semi-autonomous vehicles to learn as they accumulate miles will – over the long-term – be a coup for Tesla. While other auto companies are working to develop an autonomous vehicle in one fell swoop, Tesla already has an existing fleet of vehicles on the road capable of transitioning from semi-autonomy to full autonomy.

At the end of the day, companies seeking to compete in the shared autonomy arena need to be able to do two things well; 1) manufacture electric autonomous vehicles, and 2) develop software allowing them to connect and communicate.

Right now, Tesla is the only company with that ability, and they are poised to lead the way as we enter a new era for private transportation.

 

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