Wheels Chief Operating Officer, Ahsan Rahim, shares the fleet management company’s outlook on autonomous vehicles availability and adoption options for corporate fleets.
There is a lot of buzz around how autonomous vehicles will transform society in the future. But in order to develop a strategic plan for this future, we need to project the timeline for availability and adoption of autonomous vehicles, and assess its implications for the evolution of mobility options for corporate fleets.
The clearest part of this picture is obviously initial availability. Multiple players are experimenting with autonomous vehicles today, and we already have autonomous vehicles in certain applications (e.g.
fixed-route shuttles) operating on public roads in 2019. But we should not expect the technology to be transformative in terms of application or economics immediately. Autonomous vehicles will initially be applied to the autonomous shuttle and ride-hailing space – in small numbers and in select geographies with favorable traffic and weather dynamics. And while ride-hailing services have a strong economic incentive
to go autonomous (with over 50% of the cost of ride-hailing being accounted for by the driver), the early-stage economics are likely to be roughly comparable to existing ride-hailing services, partly based on the initially high cost of autonomous systems, and partly based on the fact that many of these vehicles are likely to include a safety driver. This means that at least initially, roughly between 2019 and 2022, autonomous ride- hailing will essentially be a proving ground for technology maturity and public acceptance, with limited impact on most corporate fleets.
The second stage of adoption will depend on the increasing maturity of autonomous technology and its resulting applicability to more diverse road conditions, as well as the safety track record of these vehicles. The adoption dynamics will vary around the world, with some countries taking a more aggressive stance while others take a more conservative position in allowing and encouraging broad adoption of autonomous vehicles. That said, we expect autonomous vehicles to become available in consumer applications, initially at Level 4 Autonomy in higher-end vehicles, and for additional commercial applications roughly between 2022 and 2027, with intriguing strategic implications for corporate fleets.
Autonomous vehicles are likely to spawn entirely new categories of mobile businesses, such as mobile vending machines and mobile advertising, while enhancing other businesses such as package delivery. In the shared mobility and ride-hailing space, we expect the economics of autonomous technology to significantly improve over time, approaching the cost of consumer mobility particularly in urban geographies. This is due to a decrease in technology costs and elimination of the need for a safety driver. Economic improvement will spark a gradual shift in the consumer market over the next two to three decades from ownership towards shared mobility. We should not expect a seismic shift, but instead, we’ll see younger people putting off owning a vehicle longer – a trend we’re already starting to see – and households going down from two vehicles down to one, with only the densest urban areas approaching zero ownership.
As we look at corporate fleets, both application and economics take on different dimensions, as fleets have varying levels of specialized application, and they have access to economics that are significantly more favorable than the consumer market. Taking a heavily upfitted service fleet as an example – say an oil and gas fleet – it’s not practical to accommodate the required upfitting on a shared-mobility vehicle. This application and many others are not optimally supported by shared mobility, so we should expect many upfitted service fleets to continue in their current form for the foreseeable future. However, these fleets may well tap into shared mobility networks for edge scenarios such as getting an employee to a fleet vehicle at a different branch location.
If we look at a sales fleet scenario, the options become even more intriguing. From an application perspective, shared mobility options partially check the box as they can transport a salesperson to their next sales meeting. However, they don’t provide storage flexibility to the salesperson, and they impose convenience tradeoffs in terms of wait time. When we look at the economics, the sales fleets of today offer a far superior Total Cost of Ownership (TCO), typically $0.32 to $0.37 per kilometre, than shared mobility. While we expect the cost of shared mobility to decline over time, it’s important to understand the economics in the context of the TCO available to a given organization. Based on our analysis, we believe that sales fleets will have the option to step up to dedicated autonomous vehicles at a lower price point than autonomous- enabled shared mobility options. And for many sales fleets, it will make economic sense to pay the premium for dedicated autonomous vehicles based on the ROI of the salesperson’s time this frees up. Sales fleets will still utilize shared mobility options in certain situations (e.g. dense urban areas, travel etc.), but this will likely be a supplement to a dedicated autonomous fleet, designed to maximize the productivity of the sales force.
Autonomous technology will impact mobility options in multiple ways, both for dedicated vehicles and for shared mobility. And fleet managers – in partnership with their fleet management companies – will need to assess both application and economics to evaluate the strategic opportunities that are unlocked
for their organizations.