Autonomous Vehicles (AV) have taken over the imaginations of the world’s largest innovators.
With Google’s 2009 announcement to start their research into self-driving, the concept became wildly popular amongst start-ups and legacy auto-manufacturers alike.
Tesla most notably started to commercialise their autopilot feature in 2015, but other companies like Ford and Mercedes have dived into the mix and are racing to dominate AVs. The possibilities of AVs are endless, especially in regards to mobility and cost-effectiveness.
ARK Invest has stated in their 2021 Big Ideas report that they believe autonomous ride hailing will reduce the cost of mobility to one-tenth the average cost of a taxi – making it cheaper, and possibly even safer.
Investment Thesis: Why invest in Autonomous Vehicles?
- While there was an estimated total of around 31.4 million autonomous cars (with at least Level 1 autonomy) globally in 2019, this number is expected to increase to 54.2 million in 2024.
- In a base case scenario developed by Statista, around 10% of all vehicles sold in China in 2035 should be at Level 4 or Level autonomy. In a disruptive scenario, the share of autonomous vehicle sales should amount to 66%.
- In 2021 the market is forecasted to recover from the drop due to the pandemic and start growing, reaching a size of 37 billion U.S. dollars in 2023.
- ARK Invest, in the Big Ideas 2021 report, believe autonomous ride-hailing will undercut the cost of human-driven ride-hailing by roughly 90% in the US and 50% in China.
- The same report indicates that autonomous ride-hailing could generate 50% margins, but its lower cost should expand the total market from $150 billion in revenues to $6-7 trillion by 2030.
- Auto manufacturers with electric vehicle platforms, partnered with autonomous technology providers, could generate roughly $250 billion in earnings annually by 2030.
- Fleet owners that own, house, and maintain autonomous ride-hailing vehicles could generate roughly $70 billion in earnings annually by 2030.
Points of concern: What might make investing risky?
- AV manufacturers are liable for liability risk in the form of damage to people or property – especially while the technology is still being developed.
- A fully autonomous car needs to be able to collect data on objects, distance and speed in all environments and conditions. Anything from bad weather and heavy traffic to road signs being partially covered by graffiti or nature can impact these accuracies. This has been shown in Uber’s accident where an Arizona pedestrian was killed during an AV test, and in Tesla’s numerous incidents and crashes with their Level 2 autopilot.
- Autonomous driving will require machine learning and artificial intelligence in order to fully operate. Currently, there is no widely accepted basis for ensuring these algorithms are safe.
- Current regulations assume that a human driver is present to take over in case of an emergency – there is a lack of regulation regarding Level 5 autonomy.
- Cybersecurity will become an even bigger problem. The risk of hacking will influence the safety of the cars.