Meet Clint, Kevin and Mia: the future (non-)users of self-driving cars
How do consumers really perceive autonomous vehicles? And which of them will use AVs? Arthur Kipferler, partner at Berylls Strategy Advisors, analyzes the results of a revealing new report.
Autonomous vehicles (AVs) are no longer confined to secretive test tracks or even tranquil suburban streets. They are prowling through cities in the U.S., Singapore and Japan, among many others. They are honing their skills among other vehicles; understanding where they are, what is around them and how they can move from A to B, just like humans. It seems that AVs – a topic of speculation, if not science fiction, just a decade ago – are about to go mainstream.
The seeming near-readiness of AV technology raises two critical questions this Berylls report will explore: How do consumers really perceive AVs? And which of them will use AVs?
Stick To Non-AV: Not Everyone Is Convinced Of, Nor Able To Use, AVs
On average, 64 per cent of all vehicle owners have ‘emotional’ or ‘functional’ barriers that prevent adoption or usage of AVs. These disinclinations are most prevalent among older age groups who are more averse to new technologies; and inhabitants of smaller cities, suburban areas, and rural territories, who are more reliant on their vehicles for travel (often due a lack of alternatives).
Emotional barriers override purchase decisions
Most emotional barriers relate to fear and scepticism. Other concerns include not knowing enough about the technology, nor not wanting to be ‘guinea pigs’ in a trial. Some people just like to drive, or enjoy the lifestyle behind it, particularly in places that have ingrained vehicle culture like in the U.S (this motivation is typified in our segment example, ‘Clint’). The existence of such barriers is unsurprising given that only a small minority of consumers have seen, yet alone experienced, an AV in-person.
However, the proportion of consumers reluctant to use AVs due to emotional factors is expected to decrease over time. This change is led by the now-young – who embrace digital concepts and are less inclined to have a driver’s license – and who will become a larger share of the overall population.
Ownership is bound by functional and lifestyle constraints
Not all consumers comfortable with the idea of using an AV will be able to afford their own. The additional costs for autonomous features places an economic hurdle that leaves the shared form as the only realistic means of access.
But, again, shared AVs won’t be a viable option for everyone either, especially for consumers with functional constraints that make owning a car a necessity. The strongest constraints exist for: the disabled and elderly, who require customised vehicle design; and for families, who require a child seat or room for more than a set number of passengers.
Even if these restrictions are non-applicable, some consumers will still be shut out simply because they live in areas that operators deem unprofitable to serve.
Switch To Private AV: Private AV Ownership Will Be Restricted To Affluent and Financially-Savvy Segments
If AVs were available today, they would account for only 0.1 per cent of the total passenger vehicle market. This lack of penetration would be due to today’s prohibitively high price-point: few consumers can afford the additional $69,100 of hardware and software required to make a vehicle autonomous. However, as costs of autonomy fall, so too will financial barriers for consumers. Our analysis shows that by 2030, the additional cost will shrink to $6,400, which will push private AV adoption to 10 per cent of all passenger vehicles sold.
The majority of these adopters will be owners of premium or large vehicle nameplates, who can comfortably afford the additional cost. This cluster also displays characteristics that suggest disinclination towards sharing a vehicle, autonomous or not (this attitude is exemplified in our segment example, ‘Kevin’).
AVs enable greater usage of fewer owned vehicles
Nearly two thirds of U.S. households own more than one vehicle; and, on average, these households use the second vehicle a third less than the first (the average annual mileage of a first vehicle is 11,600 miles, compared to 7,500 miles for a second vehicle). Each additional vehicle is less important, costlier per mile, and more susceptible to AV replacement, than the one before it. Moreover, this effect is particularly applicable to households that have limited or even no overlaps in trips: here, the dynamic is driven by the AVs ‘return-to-home’ feature.
Another segment with a similar inclination is the financially-savvy that justify the price premium with a rational business case: a private AV would enable them to save on insurance and parking, economise on rent by enabling them to live further from expensive city locations, and generate returns by sharing their AV when not in use.
Switch To Shared AVs: City-life Hassles And Economic Benefits Will Encourage Some To Switch
A distinct set of lifestyle choices, priorities, and values indicate propensity to switch to shared AVs. Consumers most inclined to switch are convenience driven, environmentally aware, cost conscious, and less emotionally attached to their vehicles.
Shared AVs can be cheaper than ownership due to the higher vehicle utilisation made possible by autonomy and sharing. The total cost of ownership (considering depreciation, tax, finance, maintenance, repairs, insurance, cleaning, and parking) for each vehicle segment, spread over annual distance driven, forms a per-mile cost curve that enables direct comparison between private and shared AVs. A vehicle owner that drives 5,000 miles per year, pays $1.01 per mile, and $5,100 in total (this usage pattern is illustrated in our segment example, ‘Mia’). If the vehicle owner switches to shared AVs, he or she would pay $0.67 per mile, $3,300 in total, and save more than $1,800 each year (without the hassles of ownership to boot).
City-vehicle owners that drive less than 7,900 miles a year would incur a lower total cost of ownership with shared AVs. This is enough to convince them to switch; but owners of more expensive vehicles need greater economic gain to do the same. For compact-vehicle owners, 10,200 miles per year breaks even against shared AVs. At 9,000 miles per year, sharing the AV would save them 10 percent of the costs which convinces them to switch. Midsize-vehicle owners require further savings; and large-vehicle owners necessitate even more. Our study suggests that in all, nine per cent of vehicle buyers will substitute their purchase of a private vehicle for a shared AV by 2030.
Add Shared AVs To Public Transport: Vehicle-less Households Of Today Can Be Shared AV Users Of Tomorrow
For the first time in nearly 50 years, the percentage of households without a vehicle is increasing In order to understand why requires splitting this group into two segments – ‘given ups’ that have given up their vehicles, and ‘never boughts’ that have never bought a vehicle – and understanding their motivations separately.
Ownership has never been less attractive
Consumers that give up ownership do so because of deteriorating driving conditions, restricting financial circumstances, or emerging mobility options. Increased congestion in almost every large U.S. city has made driving increasingly burdensome. A lack of meaningful wage growth has led to vehicle ownership becoming more expensive now than in the past (relative to disposable income). And new mobility options in the form of car sharing and ride sharing provide a cheaper and more convenient option than ownership for some.
Generational circumstances drive Millennials to delay or, more severely, never buy their first vehicle. A heavier debt burden and smaller pool of disposable income erodes the purchasing power of Millennials. They also choose to marry and have children later, trends that can slow patterns of migration to the suburbs, where vehicle ownership is more necessary. A 16 percentage-point dip in the proportion of 20-to-25 year-olds without a driving license indicates a deep structural shift in ownership habits.
‘Never boughts’ and ‘given ups’ can be accessed with new business models
These consumers can be accessed with shared AV services. The ‘never boughts’ are a natural target given their inclination towards new technologies and business models; and the ‘given ups’ can be targeted so long as the proposition does not induce hassle and offers a superior alternative to existing options.
Observing the New York City mobility market before and after the entrance of ridesharing players displays this potential. Where traditional yellow and green taxis were ubiquitous, such as in Manhattan, new mobility players mostly cannibalised incumbent market share, meaning demand was already saturated. In contrast, these entrants grew the market in underserved boroughs such as Brooklyn, where over four years it tripled the number of journeys to consumers, which included ‘never boughts’ and ‘given ups’ segments. Our case study suggests these segments have latent demandthat can be unlocked.
Shared AVs Will Reduce New Vehicle Sales – But Not Dramatically So
All things considered, we estimate penetration of private AVs to reach ten per cent and shared AVs to reach three percent of U.S. passenger vehicle sales by 2030. We foresee a drop in sales of 1.9 million units; a decline not as dramatic as often touted. This outlook represents a market worth $13 billion for autonomous technologies (excluding the base price of the cars); an additional $4.8 billion for fleet operators of shared AVs; and perhaps even more for additional services associated with AVs.