Autonomous Vehicles Will Make Life More Affordable

This is what progress looks like.

A lot of the excitement around autonomous vehicles (AVs) has been about how much safer they already are than human drivers. And they are much safer!

Image Credit: Waymo.

But that’s not their only benefit. Autonomous vehicles are going to make life more affordable. Here’s how.

Reducing Transportation Costs Saves Money

The most direct way AVs will lower costs is by slashing what you pay per mile to get around. And this matters because transportation is the second-largest expense for most American households after housing.

Though AVs are more expensive right now (which is typical for a nascent technology) the cost is expected to decline fairly quickly. Per mile costs for robotaxis are expected to drop by 50 percent between now and 2030. By then, at least in some contexts, they are expected to be cost-competitive with privately owned vehicles and significantly cheaper than current ride-hailing options. This greater affordability means that some urban residents who otherwise would have to buy a car may not need to. Between gas, depreciation, insurance, and financing, it costs an average of more than $12,000 a year to own a new car and $6,000-$8,000 yearly to own a used car. You could spend $300 a month on robotaxi trips and still comparatively save a lot of money. Notice too that if you’re taking AVs instead of your own car, you aren’t paying for parking either. There’s another bit of cost savings.

This isn’t going to be a thing only for the San Francisco and a few other cities. All kinds of places can have the benefits of AVs, assuming they don’t counterproductively get in the way. This is why some estimates envision a much larger share of urban vehicles in 2030 (and a majority in 2035) being AVs.

Image Credit: Intellias.

Another important part of this is that the shapes of the autonomous vehicles themselves (what are called the “form factors”) are going to get more diverse and more efficient over time too. Right now, AVsmostly look and feel like a regular car when you get in them, except for, you know, the lack of a driver. They even have a steering wheel. That’s because they are essentially regular cars that have been retrofitted to be AVs. That will not always be the case. There will likely be many two-seater AVs since most trips only involve one or two people now anyway. Those AVs will very likely be even more fuel efficient and even cheaper to build and maintain, which translates into cheaper rides of consumers. You can get a bit of a preview of this by looking at Amazon’s Zoox. In those, the four seats face each other. The future of transportation is cool, futuristic…..and cheap.

Image Credit: Wall Street Journal.

People in the suburbs and even rural areas will benefit too. Many families there have to have two cars and 22% of households have three or more cars, in large part because everyone needs to go places independently and park there. Imagine instead a world where the family’s autonomous vehicle takes the first adult to work, doesn’t stay parked there as a non-AV would, but instead goes back to the house, picks up the second adult and a child and takes them to school and work. Afterward, it could park at home (or elsewhere) until it’s time for afternoon and evening pickups. This would make it a lot easier for that family to have just one car instead of two. That would be a major cost savings for that family. As I mentioned above, owning even a used car costs $6,000-$8,000 per year. A suburban household shouldn’t compare owning one AV versus one non-AV but instead should compare owning one AV versus two or three non-AVs.

Aiding Mobility Saves Money

AVs, by bringing the costs of transportation services down, also open up cost-saving opportunities for people that currently face mobility challenges. For seniors, the ability to summon an AV can mean maintaining independence longer. Right now, when seniors get to the point where they cannot drive safely anymore, there’s that very painful conversation and moment where it’s time to give up the keys. Once that happens, they have to rely on family members (which often isn’t sustainable) or move to an assisted living facility. That last one, on top of coming with a real loss of independence, is extremely expensive. Assisted living facilities cost an average of more than $5,000 a month. Once AVs have made calling a cab far less costly, that could allow seniors to stay in their homes longer, and even an extra year or two of doing that instead of being in an assisted living facility could potentially save $50,000 to $100,000 in avoided costs per person. And that’s not to mention the dignity and quality of life benefits of being able to stay in your own home and in your own community for longer.

Similarly, people with disabilities who cannot drive face significant transportation barriers today. Specialized transportation services are expensive and often require advance scheduling, limiting spontaneity, and constrained independence. AVs could provide on-demand mobility at a fraction of the cost of those transportation services. Enabling people with disabilities to work, shop, and participate in their communities more fully would have enormous economic benefits beyond just the direct transportation savings and on top of the quality of life benefits for those people. This is why, earlier this week, advocates for blind people argued against Boston’s proposal to essentially ban AVs from the city.

Safety Saves Money

Additionally, AVs improved safety performance over human drivers also saves money. The most obvious place you’ll see this is in insurance premiums. Full coverage car insurance costs an average of nearly $2,500 a year. As AVs prove themselves safer than human drivers, insurance costs will drop. Goldman Sachs estimates that insurance costs could decline from about 50 cents per mile today to around 23 cents per mile by 2040, a more than a 50% reduction.

The healthcare savings are equally significant. The U.S. spends roughly $340 billion annually on costs related to traffic accidents. Much of this stems from emergency room visits, surgeries, rehabilitation, long-term care for severe injuries. This also includes lost productivity from people recovering from crash-related injuries. A 90% reduction in crashes means the vast majority of those costs simply don’t happen.

Even if you aren’t involved in a car crash, this still helps you because those enormous aggregate healthcare costs get spread across all of us through higher insurance premiums, higher taxes to fund Medicare and Medicaid, and higher costs for everything else (because businesses factor their healthcare and insurance costs into prices). When AVs dramatically reduce the total amount of money society spends on the consequences of car crashes, everyone benefits through lower premiums and reduced pressure on healthcare spending.

The Faster AVs Roll Out, The Faster We All Save Money

When you add it all up (cheaper transportation, reduced car ownership costs, extended independence for seniors and people with disabilities, lower insurance premiums, and reduced medical expenses), AVs are very likely to bring about a meaningful reduction in household costs across multiple budget categories. This isn’t some distant future fantasy. AVs are already operating commercially in several U.S. cities (which is why Boston’s Luddism about this is so ridiculous and antediluvian). And the technology is advancing rapidly. The question isn’t whether AVs will lower the cost of living (they will), but how quickly we can remove the regulatory barriers that are slowing their deployment. The faster we can get these vehicles on the road at scale, the faster American families can start keeping Way Mo money in their checking accounts- see what I did there ;-)

-GW