The promise of autonomous cars is not that it can handle your highway commute but complete the full journey from point A to B.  When that day comes, it will not only dramatically change road safety, but also open up new business models beyond the current vehicle ownership model to mobility on demand service model.

Elon Musk recently reduced his timetable for full autonomy from 3 years down to 2 years.

“We’re going to end up with complete autonomy, and I think we will have complete autonomy in approximately two years.”

The Model 3 is expected to be the first Tesla vehicle to be equipped with the automaker’s self-driving system.

Two recent studies look into the costs, potential profit and market share of using fully autonomous cars to start a mobility on demand service in Austin, TX. One of the scenarios tested a Long Range Shared Autonomous Electric Vehicle & Fast Charging (LR SAEV Fast Charge) is modeled partly on the upcoming Tesla Model 3 using Level III charging infrastructure (DC fast-charging like a Tesla Supercharger).

The first study by T. Donna Chen of the University of Virginia, Kara Kockelman and Josiah P. Hanna of the University of Texas at Austin looks at the costs and charging infrastructure choices. The authors simulate 10% of trip demanded on a 100 mile by 100 mile grid over a simulated Austin, TX. A fleet of 31,859 Tesla Model 3s and 1,517 Level III charging stations would be required.Untitled5

Assuming costs of $50,000 per Model 3, $10,000 for full autonomy and $45,000 per Level III charger – which could be considered a safe to high estimation of the costs considering Musk estimates the average sale price of the Model 3 will be $42,000 – it comes to $0.479 per mile plus an additional $0.184 per mile for general admin for a total costs of $0.663 per mile.


The researchers elaborated on the results:

These costs are on the low end of current manually-driven free-float carsharing services such as Car2Go, which charges roughly $0.70 to $1.23 per mile in Austin, Texas (assuming trips are between 2 to 10 miles and travel speeds are between 15 to 35 mph). Under this pricing assumption, SAEV [Shared Autonomous Electric Vehicle] users would pay roughly 21 to 49% of what is currently charged by transportation network companies like Uber and Lyft (whose equivalent per-mile pricing is $1.50 to $3.18 in Austin). In fact, these costs are competitive with AAA (2014) estimates of average costs of private vehicle ownership, which ranges from $0.40 to $0.95 cents per mile depending on annual mileage and vehicle type, suggesting that availability of a SAEV fleet can have significant impacts on private vehicle use (and ownership), particularly for low-mileage households.

The second study follows up the first study looking at the potential demand for this service compared to privately owned manually driven vehicles and transit service. Assuming the retail price of the service was at $1.00 per mile demand would be approx 14% of trips in the 100 mile by 100 mile grid over a simulated Austin, TX.  At a price of $0.75 per mile the demand would increase to 39% of trips, according to the study.Untitled2

At 39% of trips this would require 137,323 cars serving 4.26 million trips a day with average wait time of 2.6 minutes with revenue per day of $16.2 million and 1.85 revenue to cost ratio. This would be $5.9 billion in revenue per year. In comparison, Tesla generated $5.3 billion of revenue in 2015.Untitled

The researchers elaborated on the results of the second study:

These results suggest that once EV and AV technologies gain market maturity and become less costly, low- VOTT [Value of Travel Time] trip makers will start to choose SAEVs over transit, particularly in areas with poor transit service (as reflected by longer transit-access and wait times). Model results also suggest that SAEVs will attract longer trips away from private vehicles, particularly among high-VOTT travelers who find SAEV travel much less burdensome than driving.

We know Tesla is possibly considering a mobility on demand service based on the answer Elon Musk gave in an earning call last year. Some Wall Street analysts are even accounting for the possible new business in their valuation models.

So when does Tesla Mobility get announced? Is that part 2 of the Model 3 unveiling?

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