How Autonomous Vehicles Will Impact the Passenger Mobility Industry

Autonomous Vehicles and Their Impact on
Passenger Mobility Industry
B235 Managing the Global Corp, Fall 2016
Abraham Cherian, MIB 2017

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Abraham Cherian | B235 Managing the Global Corp
Index
Introduction 3
1 Autonomous Vehicles, Technology and Policy 3
2 Shared Usage Models 4
3 Effect of Shared Use of AVs 6
4 Potential Limitations of AVs in Ride Sharing 9
5 Building a Coherent AV Ecosystem 10
6 The Passenger Mobility Industry 12
7 Effect of AVs on E-Hailing and Rental Car Models 14
Conclusion 18

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Introduction
Autonomous vehicles (AVs) appear to be an innovation that promises to change the world, but
applications and business models that could emerge from AVs are yet to be applied in areal world
environment. There is uncertainty surrounding the issue, yet AVs could play a role in the
economy, mobility and society as a whole that could be a game changer. The widespread use of
AVs could profoundly affect a variety of industry sectors. AVs most likely will be ideal for a pay-
as-you-go system, especially at the local level. This complements car rental companies’ strengths
of fleet management and customer interface over the long term.1 A number of mobility
innovations, both in terms of services and vehicle technology itself are being developed. Many
of these are in the form of pay-per-use models such as car sharing, carpooling, ‘E-Hailing’ taxi
alternatives, and peer-to-peer car rentals and are attracting investments and seeing impressive
growth rates. The e-hailing model in particular has experienced strong growth given both annual
investment funding and market penetration.2
The automobile industry has the potential to quickly and efficiently deploy new autonomous
vehicles in cities and towns of all sizes, while liability issues are still being discussed. This paper
attempts to examine the effects of AVs on the Passenger Mobility Industry to include E-Hailing,
ride sharing and rental car businesses.
Autonomous Vehicles, Technology and Policy
What is the definition of an autonomous vehicle? A fully autonomous vehicle is capable of
completing journeys safely and efficiently, without a driver, in all normally encountered traffic,
road and weather conditions. There is no driver, and occupants can engage in other tasks
without being responsible for controlling the vehicle for the duration of their journey. There is
no driver’s seat and the vehicle can move without a driver on board. This is a huge shift from the
driver model, as AVs can move while empty. They can therefore offer door-to door journeys to
match individual needs exactly without a need for a driver to park them at either end of that trip.
1
Press Release: How Will Autonomous Vehicles Impact Car Rental? (Accessed November 12, 2016), available from
https://www.enterpriseholdings.com/en/press-archive/2016/04/how-will-autonomous-vehicles-impact-car-rental.html
2
Ten ways autonomous driving could redefine the automotive world, (Accessed November 12, 2016), available from
http://www.mckinsey.com/industries/automotive-and-assembly/our-insights/ten-ways-autonomous-driving-could-redefine-
the-automotive-world

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This is critical to the potential for better place making. NHTSA has created a five-level hierarchy
to help clarify this continuum.3
a) Level 0 (no automation)
b) Level 1 (function-specific automation)
c) Level 2 (combined-function automation)
d) Level 3 (limited self-driving automation)
e) Level 4 (full self-driving automation): The vehicle is designed to perform all safety-critical
driving functions and monitor roadway conditions for an entire trip. Such a design
anticipates that the driver will provide destination or navigation input, but is not expected
to be available for control at any time during the trip. This includes both occupied and
unoccupied vehicles. By design, safe operation rests solely on the automated vehicle
system.
AV Technology. State of the art software and safe hardware (the vehicle itself) are the two
elements essential for building the AV of the future. “Given that the automobile market has high
entry barriers, it’s easier for startups to bring their technology to vehicles that already
exist‟ points out Arvind Satyam, a Smart City expert who works for Cisco Systems. Luca
Rigazio, Director of Engineering at the Panasonic Silicon Valley Laboratory, says that “if you look
at the value pyramid, the value of the software is far higher than that of the automobile itself.
Software has much greater value than hardware‟. Dan Wellers, Global Lead, Digital Futures at
SAP, predicts that “software, which will be running everything from navigation to acceleration,
plus entertainment – doing far more than human drivers do today – will account for up to 40% of
the total value of the vehicle”. Design focus of OEMs will likely shift to passenger experience from
driver comfort and ease of operation of the vehicle. AV equipment and service requirements
would include automatic transmissions, diverse and redundant sensors (optical, infrared, radar,
ultrasonic and laser) capable of operating in diverse conditions (rain, snow, unpaved roads,
tunnels, etc.), wireless networks, short range systems for vehicle-to-vehicle communications, and
long-range systems to access to maps, software upgrades, road condition reports, and
3
National Highway Traffic Safety Administration: Federal Automated Vehicles Policy, (Accessed November 10, 2016), available
from http://www.nhtsa.gov/nhtsa/av/pdf/Federal_Automated_Vehicles_Policy.pdf

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emergency messages, navigation, including GPS systems and special maps, automated controls
(steering, braking, signals, etc.), servers, software and power supplies with high reliability
standards.4
Policy Issues. Policymakers are currently faced with a large number of issues with allowing AVs
on the roads that are currently being used by human drivers. A large number of questions are yet
unanswered and will emerge as further development in the field occurs. A few of the questions
that need to be answered are given below:
a) How should the safety of AVs be tested, and by whom? To what safety standards should
AVs be held?
b) How might different liability regimes shape the timely and safe adoption of AVs, and what
are the tradeoffs? Under what conditions would limitations on tort liability be
appropriate?
c) What are the implications of a patchwork of state-by-state laws and regulations, and what
are the tradeoffs in harmonizing these policies?
d) To what extent should policymakers encourage the adoption of AVs; e.g., through smart
road infrastructure, dedicated highway lanes, manufacturer or consumer incentives?
Shared Usage Models
The advent of AVs is predicted to bring in automotive product-based ownership model to a use-
based service model. People use transportation based on their private conditions – for eg. a
family with small children will use their AV (car) differently from a young single person using it to
commute to work. Six different models of AV usage that can, and perhaps will, co-exist5 with the
development of AVs is given below:
True Ownership model. This represents the current model, with the difference being that the
vehicle drives itself.
Traditional Lease model. Similar to the status quo business model. A consumer leases the car for
a term of years and is otherwise responsible for all costs of ownership. The limited benefits are
identical to the true ownership model.
4
Autonomous Vehicle Implementation Predictions: Implications for Transport Planning, (Accessed November 10, 2016),
available from http://www.vtpi.org/avip.pdf
5
Autonomous Vehicle Business Models: How Will You ‘Own’ One? (Accessed November 12, 2016), available from
http://informationcounts.com/autonomous-vehicle-business-models-how-will-you-own-one/

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Exclusive License model. This is a first step in transitioning to a different way of consuming
private transportation, where the owner and day to day user may be different. The true owner
decides on the logistics of owning the car: where to store it and how to maintain it. The exclusive
license could be for a combination of use of the car as a service, including when its use is
permitted, where it can be used etc. For example, the user has the services of car for storage of
personal belongings, but does not have to worry about parking in return for a fixed rental.
Non-Exclusive License model This model is similar to the exclusive license, except over the term
the user does not have full control over the vehicle to which they have access. The consumer
could get access to use the vehicle over varying periods of time, for example daily, monthly,
yearly, or some longer term. A known and specified group of multiple users could also contract
to use a vehicle or group of vehicles over a finite period of time. This could be a model relevant
to an extended family. Resource consumption could be enhanced in this non-exclusive approach
since idle time is minimized across different users.
Service-Based Model (fleet-owned) A model similar to a cab or an Uber, the user pays for access
either by-the-ride or over some finite period of time (monthly or yearly). The car is owned, stored
elsewhere, and maintained independent of the user, who consumes transportation as needed.
Storage, maintenance, and lifespan of the service are exclusively the owner’s concern.
Companies in this space, like car rental companies are ideally suited to replace the driver with an
AV.
Service-Based Model (individually-owned) Uber-like providers would still connect riders with
cars, but the cars would be driverless in this model. Service providers could avoid the huge capital
investment since the AVs would be owned by individual car owners. The time that Uber/Lyft
drivers currently spend driving is completely freed up for other purposes, while the vehicle itself
is out ferrying passengers. A driverless car could drive people to a place of employment and,
while the owners are employed otherwise, their car would be out earning money. Once the
driver is removed from the scene, ride sharing pricing would decrease, reducing the owner’s
income.
Effect of Shared Use of AVs
The following effects of shared use of AVs are likely to emerge over time:

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Transforming City Planning. Parking spaces could potentially be reduced and redesigned since
AVs need not be parked in crowded city areas. Increased availability of land for residential and
commercial activities could mean lower real estate costs in densely populated areas. It would
also mean safer local roads, with less traffic on roads.6
Parking Spaces. AVs can drop off passengers and find a parking space, increasing motorist
convenience and reducing total parking costs. This may undermine parking revenues that are an
important and reliable source of funding for many cities. AVs would still need to be parked while
not being used or shared.
Public Transport System. A new level of mobility to some users may mean erosion of usage and
support to public transport systems. Currently, public transport has the distinct advantage that
passengers have the ability to undertake other tasks in transit, an advantage that may get eroded
by autonomous vehicle technology. Public transport systems could take advantage of AVs by
complementary and flexible deployment to enhance last mile connectivity with the main
transport system. Platooning (vehicle groups traveling close together), narrower lanes, and
reduced intersection stops, reducing congestion and roadway costs are some potential
advantages to public transport due to AVs.
Paratransit services are important feeders into the fixed routes that may not serve people where
they live and work. However, they are expensive because they require a trained, salaried, human
driver. Substituting less expensive AVs for paratransit services has the potential to improve social
welfare by reducing these costs.7
Fewer Car Sales. AV sharing programs may decrease the rate of car ownership with its effects
extended beyond taxi services. With a rate that’s cheaper per mile than owning and driving a car,
calling an Uber will be much cheaper than car ownership in the future. Car ownership will possibly
become outdated and extinct. One study by Deutsche Marketing team concludes that with the
present rates, ridesharing is cheaper in some metropolitan areas and will be equal to and even
lower than the cost of ownership when driverless cars are introduced. “Another report by Uber
6
Autonomous Vehicle Technology: A Guide for Policymakers, (Accessed November 12, 2016), available from
http://www.rand.org/content/dam/rand/pubs/research_reports/RR400/RR443-2/RAND_RR443-2.pdf
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Autonomous Vehicle Technology: A Guide for Policymakers

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itself pointed that the annual cost of car ownership is equivalent to 882 UberX rides. That exceeds
more than 2 trips a day- sufficient to cover your office rides and weekend trips”.8
Shared Vehicles vs Personal Vehicles. Shared vehicles have multiple effects on usage that are
difficult to predict. Multiple use within a household could reduce vehicle ownership up to 43%,
but increase travel per vehicle by up to 75%. However, many people own personal vehicles as a
lifestyle choice, (to display their style and success) and for convenience (need for specialized
vehicles, ability to leave equipment in vehicles or carry dirty loads). Shared autonomous vehicle
cost profiles are likely to range between car-sharing ($0.60- $1.00 per vehicle-mile, including
ownership, operation and administrative costs) and human-operated taxis ($2.00-3.00 per
vehicle-mile including ownership, operation, administration and labor costs).9 These cost savings
are not likely to attract people who own vehicles by choice, as they view the benefits of owning
a vehicle worth the price they pay for its ownership.
Energy use and Pollution. AV technology can improve fuel economy by upto 4–10 percent, just
by accelerating and decelerating more smoothly than a human driver. Additional improvements
by reducing distance between vehicles and increasing roadway capacity are also possible. A
platoon of closely spaced AVs that stops or slows down less often resembles a train, enabling
lower peak speeds (improving fuel economy) but higher effective speeds (improving travel time).
As the frequency of crashes goes down, cars and trucks could be made much lighter, increasing
fuel economy even more. Lighter vehicles also positively affect the range of battery operated
vehicles. AVs might also reduce pollution by enabling the use of alternative fuels.
Likely Timeline of Benefits. Some benefits, such as independent mobility for affluent non-drivers,
may begin in the 2020s or 2030s. However, most impact on a large scale, including reduced traffic
and parking congestion (and therefore road and parking facility supply requirements),
independent mobility for low-income people (and therefore reduced need to subsidize transit),
increased safety, energy conservation and pollution reductions, will only be significant when
autonomous vehicles become common and affordable, probably in the 2040s to 2060s.
8
Impact Of Autonomous Vehicles On The Economy, (Accessed November 12, 2016), available from
http://www.useoftechnology.com/autonomous-vehicles-impact-on-economy/
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Autonomous Vehicle Implementation Predictions: Implications for Transport Planning

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Prohibiting human-driven vehicles on certain roadways may be necessary for some benefits to
accrue, which could take longer.10
Potential Limitations of AVs in Ride Sharing11
State transportation departments may need to anticipate the use of vastly different kinds of AVs
operating on roadways. This may pose challenges for the registration and requirements
necessary for the vehicles to operate and for the level of training particular operators must have.
One short term action that might improve safety is requiring stricter conformance to road signage
requirements, particularly those that involve construction or some alteration to the roadway.
Increased Vehicle Miles of Travel. An overlooked downside of AVs is the additional miles of travel
required to reposition vehicles to areas that generate a high number of trips or to drive empty to
the next booking. Increased vehicle miles of travel (VMT) is problematic because traffic
congestion grows exponentially. As roadways become full, the negative impact of each additional
vehicle or mile of travel is much greater than when roadways are mostly empty. However, if all
road travel included ride sharing, VMT increases only by 6%.12
Ride-Sharing vs Ride Hailing. The ability of AVs to help reduce congestion comes down to the
difference between ride-hailing and ride-sharing. Ride-hailing typically involves a single traveler
matching with a nearby vehicle for one pickup and one drop-off. In effect, ride-hailing is a taxi
service with a more sophisticated technology platform for booking and payment. By comparison,
ride-sharing involves bundling multiple occupants into one extended, multistop trip. This requires
a far more complex form of matching. Rather than simply finding a nearby car, a ride-sharing trip
requires multiple travelers to have approximately the same origin and destination pair at the
same time. Regardless of whether the vehicle is driven by a computer or a person, the matching
challenges are formidable—especially as urban density gives way to suburban and exurban land
use patterns.
Capacity. Today, most passenger vehicles sit idle more than 90 percent of the time. Since most
vehicles are used below capacity during peak times, they have little to no ability to serve multiple
10
ibid
11
Understanding the Limitations of Autonomous Vehicles and the Need for Public Transportation (Accessed November 20,
2016), available from https://www.americanprogress.org/issues/economy/news/2016/08/04/142227/understanding-the-
limitations-of-autonomous-vehicles-and-the-need-for-public-transportation/
12
ibid

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users, assuming those users mostly prefer traveling alone. A single-occupant driver and single-
occupant rider in an AV both add to roadway congestion. The use of AVs as a shared
transportation service could substantially affect capacity and usage.
Additional costs for Shared Vehicles. Vehicle trips for travelling additional miles to trip origins
may not be large in numbers or mileage, but it may add an additional 10-20% travel in less denser
rural and suburban areas, or for specialized vehicles like trucks and vans. Shared vehicles are
essentially taxis and require a higher level of maintenance due to multiple users who may not
care for the interiors as well. Assuming that vehicles make 200 weekly trips, 5-15% of passengers
leave messes with $10-30 average cleanup costs, and 1-4% vandalize vehicles with $50-100
average repair costs, these costs would average between $200 and $1,700 per vehicle-week.13
Drivers also carry out additional tasks like helping passengers and lifting heavy luggage, which
need to be factored into the design of AVs meant for ride sharing. In addition to a lower level of
comfort, passengers will have to accept that their activities may be monitored. Overall, the way
cars and taxis are used will undergo a shift with widespread deployment of AVs.
Building a Coherent AV Ecosystem14
How will the ecosystem be implemented? Before we can think about getting into an autonomous
vehicle for our daily commute, the vehicle ecosystem needs to adjust itself so that a seamless
transition can take place.
Standard and Stable Technology. Driverless cars will require an unprecedented level of software
and embedded systems that are standardized and meet stringent safety parameters. Stringent
reliability and functional safety norms that keep the launch cycle for modern cars between three
to five years are likely to get extended as the software embedded in AVs with 40% or more of the
value in them need to be flawless. Companies manufacturing AVs will not be able to release Beta
versions of their cars that could be modified based on customer feedback.
Driverless Roads and Highways The automotive industry and governments worldwide must
consider a range of economic challenges as well. There are massive infrastructure challenges that
could create expensive barriers. Intelligent traffic lights, smart lanes with sensors and an
13
Autonomous Vehicle Implementation Predictions: Implications for Transport Planning
14
Self-driving cars: the race to find a business model (Accessed November 18, 2016), available from
http://www.atelier.net/en/trends/articles/self-driving-cars-race-find-business-model_442867

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automated parking infrastructure are all required to ensure autonomous vehicles can drive safely
on roads.
Integration with Public Transport. Integration with public transport will be the biggest challenge,
since their budgets and adaptability to new designs and concept are subject to delays and time
lags. Since large scale deployment of AVs is also likely to reduce support and usage of public
transport, integrating with the driverless vehicle environment would achieve complementarities
in the mobility infrastructure. For instance, designing public transport routes around the shared
vehicles ecosystem to fill the gaps would be ideal. Alternatively, public transport itself could
provide autonomous mobility solutions, since they are cheaper to operate.
Regulatory and Legal Framework. Standards and regulatory frameworks are still evolving to
make implementation as smooth as possible, and there is no central governance over driverless
cars. Since there is no standardization of regulations, manufacturers must be ready to program
and tailor their intelligent drive systems for different geographies and cultures. For instance,
California has ruled that driverless cars need to have a steering wheel, so a human driver can take
over at any time. Data security and privacy are issues to consider: autonomous vehicles are built
with advanced monitoring, sensing and tracking capabilities that could be a threat to personal
privacy. Driverless cars will track movements and provide a window into the users’ travel
behavior. These features create new security concerns including risk of commercial misuse, while
improving vehicle performance.
Insuring AVs.15 A shift from the traditional model of consumer coverage for human error towards
focus on insuring car manufacturers and OEMs from liabilities due to technical failure of their AVs
is likely. An increase in manufacturer liability may lead to inefficient delays in adoption of AV
technology, even if adoption of such technology is socially desirable. Offering the use of such
vehicles as a service rather than as a product may help manufacturers reduce these risks
effectively changing their business model. For the insurance companies, it implies that its pool of
customers will shrink from a large base of drivers to a smaller base of OEMs and service providers,
who will pay a premium to cover their risks to the passengers. Lower occurrence of accidents is
predicted with AVs, but the potential payouts will be much higher.
15
Insuring Self-Driving Cars (Accessed November 18, 2016), available from http://m.wardsauto.com/technology/insuring-self-
driving-cars?page=2

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Frost and Sullivan16
Overall Impact on the Mobility Ecosystem. How will transition and connecting with existing
system work? Once the majority of vehicles have the ability to operate in driverless mode, we
have the opportunity to move to a pay-as-you-go system for road transport. There are also socio-
cultural and commercial challenges to consider. How will cars with human drivers and AVs coexist
during the transition? Consumers must be ready to buy into the concept of a driverless car
ecosystem. This could prove to one of the most significant hurdles and is likely to affect consumer
demand.
The Passenger Mobility Industry
The global automotive industry is attempting to understand the evolution of transportation and
mobility. Research and development is driven by the convergence of information technology,
analytics and Vehicle-to-Vehicle (V2V) and Vehicle-to-Infrastructure (V2I) communication.17 In
the near, future vehicles are expected to gain precise awareness about their surroundings and
then charter out necessary steps, whether it is rerouting or taking pre-emptive collision
avoidance actions. The current trend among consumers is of moving away from vehicle
16
Impact of fully autonomous driving on new business models, (Accessed December 12, 2016), available from
http://www.automotiveworld.com/analysis/impact-fully-autonomous-driving-new-business-models/
17
ibid

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ownership to a service based mobility model that is pay per use. Commuter focus is shifting from
value for money to a value for time approach, where meaningful use of time is considered
important, even while travelling. An established ecosystem is on the verge of a transformational
change that will most certainly result in a new ecosystem of mobility revolving around shared
mobility and last-mile connectivity.
The future mobility solution offers a new perspective on personal commutes from point A to
point B, which features on-demand, fully autonomous vehicles, and affects the way consumers
commute. Some of the business models possible for point to point mobility are:
Vehicle on Demand. Vehicles will be available on demand, depending on commute length and
number of commuters, similar to existing taxi services. Payment methods may be via monthly
billing cycle in view of the large scale usage by commuters, as a result of lower costs. Ride hailing
business models are ideally suited to adapt to this model of service.
First and Last Mile Commuting. Shared AVs can arrive at the start point of a journey, or drop the
user at the destination and drive themselves to a designated parking bay.
Mobility as a Utility. Cities integrate mobility solutions into seamless networks that include last
mile mobility through a public – private cooperative. Vehicle ownership would be primarily B2B
or B2G.
Peer to Peer sharing. Personally owned vehicles are shared within a network, increasing the net
utilization of the vehicle over its lifespan,
Major changes are envisaged by the change in the mobility ecosystem. Managing spatial
distribution of vehicles in the ecosystem during demand fluctuation will be a challenge. The
aggregator who keeps the supply and demand of vehicles in optimal balance across the
ecosystem is likely to become the most profitable player. Fall in fares is likely to bring in cutthroat
competition. The automated taxi segment is likely to dominate the shared mobility space due to
a drop in taxi fares, decline in vehicle ownership, and increasing mobility demand. Huge revenue
potential and low entry barriers in the taxi segment are expected to bring in new market entrants,
thereby oversaturating the already saturated taxi segment. Proprietary solutions are unlikely to
be successful in an ecosystem where consumers can demand seamless integration and a
preference for a specific set of hardware and software. OEMs and aggregators will have to cater
for consumer requirements and AV based businesses may function like any other service

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provider. Consumers in the future may be subject to surge and negative pricing in order to move
vehicles between areas of varying demand.
Future mobility systems will have to be redesigned in order to keep pace with changing times.
Firms will have to develop and manage vehicle operations and traffic network in order to control
traffic movement of autonomous vehicles and shared fleets. Technology companies will face
challenges from new entrants with new business models competing to capture metadata from
passengers with an aim to improve the commuter experience in newer ways.
In context of re-alliance of business models, strong alliance with participants from parallel
industries is a likely key trend; the GM-Lyft collaboration is such an example. Both companies are
faced with issues that can be addressed through collaboration: GM can improve vehicle sales
through shared solutions that need a large fleet of vehicles that are tailor made. , and Lyft gains
by getting access to technical knowhow of creating driverless cars, eliminating the driver, who is
the highest cost factor in the current business model.
The current gap at the last mile of connectivity will be addressed within this mobility ecosystem,
through convergence of business models being influenced by autonomous driving. Google or
Apple, which currently possesses the technical capabilities to develop autonomous mobility
solutions has already aligned businesses that can integrate this solution with the transport needs
of the commuter. Such companies would be best positioned to address all of the needs of
tomorrow’s autonomous mobility market.
Effect of AVs on E-Hailing and Rental Car Models
The future of car ownership is likely to follow a downward trend with diffusion of passenger
friendly AVs.18 Eliminating the driver reduces the cost of using an E-Hailing service, leading to an
increase in people who are likely to use services to travel, rather than own the means of transport
itself. Network effects will play an important role in the spread of point to point travel. What
would it mean for rental and e-hailing companies if car ownership decreases due to AVs?
18
Autonomous Cars Will End the $75 Billion Rental Car Industry as We Know It (Accessed November 24, 2016), available from
http://www.inc.com/alex-moazed/autonomous-cars-will-end-the-75-billion-rental-car-industry-as-we-know-it.html

15
Frost and Sullivan19
E-Hailing Companies. Uber is at the forefront of self-driving cars, and has launched an
autonomous vehicle experiment in partnership with Volvo.20 However, Uber is a technology
company, not a car-fleet management company. Although Uber is likely to design and build a
core fleet of AVs to further the While Uber will likely build and own a core fleet of autonomous
vehicles to further their acceptance both by the general public and regulators, it’s not likely to
gain by owning a large fleet of vehicles, whether AVs or human driven. Uber will benefit from
network effects and benefits from a platform business model. E hailing services are based on a
low margin-cost business model and will lose scale advantage by buying their own fleet of cars.
This includes the huge capital investment required to buy and maintain a large fleet of
depreciating assets.
Companies like Uber would benefit from retaining their current business model: with individual
drivers (or businesses) owning and maintaining their own cars. The relative cost of owning a car
should decrease drastically with AVs, since vehicle owners will be able to let their cars pick up
passengers on Uber while they're not using the car, when they're at work or otherwise engaged.
The driver of success for E-Hailing companies would be in letting the car owners invest capital in
the cars themselves, while the company continues to provide the service. Currently, Uber drivers
take home almost 75% of the fare, a factor that limits the revenues for the company itself. If
drivers are taken out of the equation, the share of revenue from rides would increase for Uber.
19
Impact of fully autonomous driving on new business models
20
Volvo Cars and Uber join forces to develop autonomous driving cars (Accessed December 12, 2016, available from
https://www.media.volvocars.com/global/en-gb/media/pressreleases/194795/volvo-cars-and-uber-join-forces-to-develop-
autonomous-driving-cars

16
Uber is ready to make it big in this transition and has announced that consumers can expect a
self-driving Uber fleet by 2030.21
According to a study conducted by Columbia University, with a fleet of 9,000 AVs, Uber can
replace the 13,000 cabs in the New York City.22 These self-driving “on- demand mobility services”
would have a wait time of 36 seconds and fares of about 50 cents a mile. As the currently highest
valued startup, replacing every cab in the United States is well within the realm of possibilities of
Uber. With such low-cost and convenient rides that take away the hassle of parking and speed
tickets, E-Hailing would become the dominant form of public transport on the roads.
Rental Car Companies. Rental car companies have traditionally managed and maintained large
fleets of cars spread out across a variety of geographies. They have a model for buying cars in
bulk, monetizing them, and then exiting them from their fleets. Unlike E-Hailing companies, they
also have the ability to service and maintain their fleets, which includes a network of retail stores
and repair locations.
However, rental car companies are disadvantaged since they don't have the technical capability
necessary to compete. Their business model also depends on the convenience of renting a car –
once rented, it is available to the user 24 hours, and it can also be used for storing personal items
temporarily. Perhaps the most important factor supporting rental car companies is that this
service can be used by the customer to commute from a geographic area with good networked
mobility (where a rental car is really not needed) to an area with poor mobility options. In the
long run, if car ownership levels drop drastically, it may choke the supply of vehicles (privately
owned) required to run the E-Hailing business model itself! Therefore, a large company like Hertz
integrating with Uber as an AV partner could lead to optimization. GM has already made a $500
million investment in Lyft as a hedge against the future of autonomous vehicles and the changing
nature of car ownership. But GM, too, is unequipped to manage and maintain a large fleet of
vehicles – a situation that is suited to rental car companies.
21
Impact Of Autonomous Vehicles On The Economy
22
A Study Reveals the Potential for Self-Driving Cars (Accessed December 10, 2016), available from
http://www.slate.com/blogs/business_insider/2014/06/03/columbia_university_s_earth_institute_study_on_self_driving_cars
_proposes.html

17
While hardware manufacturers are in danger of becoming commoditized as software companies
like Uber, Apple and Google move into the industry, fleet management will likely be a core skill
over the next few decades as nature of car ownership changes and AVs start to hit the road.
Hertz has already struck a small-scale deal with Uber and Lyft to rent traditional vehicles to ride-
share drivers.23 This would enable people who do not own cars to use rental services and earn
through an E-Hailing business model.
Potential Business Models. The success of ride-sharing companies such as Uber, Lyft and
Blablacar reflects this change in our conception of the automobile and how we use it. Argues
Arvind Satyam, a Smart City expert who works for Cisco Systems: “Consumers don’t necessarily
want to own a car, they want to benefit from a service which gets them around.‟24 Thus many
people find it more convenient to use a mobile app to order a car to go to a given destination
than to pay all the costs associated with owning a private car, which will then most probably
spend most of its time in the garage.25 The thinking that the most important thing is not to own
an asset but to be able to use the services it provides has resulted in a surge in the subscription
economy and the on-demand economy. The question is whether taxi services (E-Hailing and ride
sharing) as well as rental car businesses will be able to sustain themselves in all kinds of
environments – dense traffic and rural areas with much less demands for mobility services. It
would appear that car rentals would continue to be viable businesses for customers who want a
higher level of convenience and flexibility possible with a vehicle that can be used over a longer
period of time. Therefore a business model built around AVs that can be rented and work like a
chauffeur service, perhaps with premium benefits and higher level of comfort within the vehicle
itself could evolve. This model would be feasible in geographic locations that do not have a dense
network of e-hailing or ride sharing services. In terms of the business proposition, this would
mean a shift of emphasis away from building and selling cars towards taking customers where
they want to go. Here are some possible responses, as driverless vehicles allow for the re-
conceptualization of cars and car-related business models:26
23
Hertz Signs Deals With Uber, Lyft to Supply Cars to Drivers (Accessed December 10, 2016), available from
https://www.bloomberg.com/news/articles/2016-06-30/hertz-signs-deals-with-uber-lyft-to-supply-cars-to-drivers
24
Self-driving cars: The Race to Find a Business Model
25
ibid
26
Autonomous Vehicles: The Automotive Ecosystem (Accessed December 10, 2016), available from
https://frankdiana.net/2014/03/03/autonomous-vehicles-the-automotive-ecosystem/

18
a) Automakers as fleet operators and transportation service providers.
b) New business models emerge providing cars for free in return for a multi-year contract in
other areas – similar to what mobile phone operators do when they subsidize the
purchase of phones.
c) Automakers bundle Insurance via their warranty operations.
d) Automakers move downstream to engage more directly with consumers through E-
Hailing or ridesharing services.
e) Automakers become brokers that help car owners rent their unused cars (GM-RelayRides
partnership).
f) Automakers deliver a concierge service: Car maintenance, providing remote changes to
engine settings, collect and interpret performance information, other car-related
activities.
Conclusion
The concept of ownership of cars, and business models that have evolved around it are
undergoing slow but certain changes. As finite resources and minerals become scarce and
expensive, sharing of services will allow more people to enjoy the smaller pie more efficiently.
Business models that address this reality will succeed, and this holds good for the passenger
mobility industry as well. It is difficult to sell a car to someone who just wants to reach the
destination in some comfort and does not care about ownership of the means of transport.
Similarly, it will not matter who (or what) drives the vehicle, as long as the passenger reaches the
destination safely. How the ecosystem and business environment adjusts to this new reality will
determine how long and smooth this transition will be. There is no doubt that the Autonomous
Vehicle is going to disrupt personal mobility as we know it today.

How Autonomous Vehicles Will Impact the Passenger Mobility Industry

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