7 Takeaways On Self-Driving Cars For Innovation Investors

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by: ARK Investment Management

Summary

Global auto sales volumes should be lower than anticipated.

Autonomous taxis should boost U.S. GDP.

Mobility-as-a-service could exceed $10 trillion by the early 2030s.

In a recent research report, we illustrate that before 2020, fully autonomous vehicles could become commercially available, enabling the rise and rapid growth of autonomous taxi networks. These networks should decrease the cost and inconvenience of point-to-point mobility dramatically, spurring a transformative boost in economic productivity. As a result, the traditional automotive industry may be subsumed by mobility-as-a-service (MaaS) platforms that could become one of the most valuable investment opportunities in public equity markets. Here are seven takeaways for investors interested in the rise of self-driving cars:

1. Autonomous Taxis Should Reduce the Cost of Door-to-Door Mobility Radically

We estimate that autonomous taxis will cost consumers $0.35 cents per mile, or roughly half of the all-in cost car owners pay to drive today, thanks to much higher utilization rates. These compelling economics will drive widespread adoption of autonomous taxi networks.

2. Global Vehicle Miles Traveled Should Increase

Traffic could increase to almost three times today's levels by 2030. Autonomous taxi platforms will allow the non-driving population, which includes the blind, elderly, and young teens, affordable and convenient transportation options. While traffic will likely increase, autonomous cars should operate more efficiently, and give passengers a more pleasant experience than just sitting behind the wheel.

3. Global Auto Sales Volumes Should Be Lower Than Anticipated

Autonomous cars will likely cause a shift away from personally-owned vehicles, which will depress global auto sales volumes in the coming decades. ARK's research shows that auto sales will fall by nearly half in developed markets while, in the developing world, long-term auto volumes will still increase, but at a rate much slower than expected today.

4. Autonomous Taxis Should Boost U.S. GDP

While a loss in future auto sales may seem like bad news for the economy, self-driving cars should bring economic benefits worth roughly $120,000 in net present value over 15 years for every U.S. consumer that forgoes buying a personal car. Among these economic benefits, we see additional service revenue, more discretionary time for passengers relieved of driving responsibilities, and higher capital returns from repurposing land used for parking lots. Indeed by 2035, autonomous taxis may add more than $2 trillion to U.S. GDP, as shown below.

5. Auto Accident Rates Should Decline By Over 80%

Self-driving cars likely will have a dramatic impact on global health impacts. Auto accident rates could decline by over 80% as robots take the wheel from drunk and distracted drivers, as shown below. Globally, ARK expects 5.5 million deadly accidents will be avoided by 2035. In the U.S. alone, autonomous vehicles potentially will have saved roughly a total of 140,000 lives by 2035, most of them in their 20s.

6. The Autonomous Mobility-As-A-Service Market Could Exceed $10 Trillion By The Early 2030s

Our research shows that the global autonomous MaaS market will exceed $10 trillion in gross revenue by the early 2030s.1 Roughly, a third of those sales will happen in China.2 In the United States, ARK expects the MaaS market to reach over $700 billion in sales by 2030, or roughly 30 times the size of the taxi industry today. The market for autonomous services should be roughly ten times the size of the market for autonomous vehicle hardware by 2030, as shown below.

7. ARK thinks the Impact of Mobility-As-A-Service Is Underappreciated Today

Investors may be undervaluing mobility-as-a-service today severely, and that in 5 years, autonomous taxi networks could have a market cap of roughly $4 trillion. In comparison, the global automotive manufacturing industry probably will be roughly one third of that size. We expect autonomous mobility services alone will expand the total value of the $70 trillion equity market by 10%. The autonomous taxi market presents a massive growth opportunity for technology players or automakers that are able to piece together a successful autonomous strategy.

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