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What If Self-Driving Cars Actually Increase Car Ownership?

car-sunset

Conventional wisdom is that when self-driving autonomous passenger cars arrive, they’re likely to decrease individual ownership of cars. If there’s a liquid supply of cars that can operate autonomously, one needn’t own a car… you could simply summon one on-demand from a fleet run by [Uber, Google, Apple, Ford, etc] and pay per use or subscription or whatever economic model emerges.  Nobody wants a car, they want “mobility” says this line of thinking.

Let’s envision a future where cars are truly 100% self-driving and can operate autonomously (what’s known as Level 4 in NHTSA’s proposed framework).  Let’s assume that they are propelled by electricity or hydrogen or super-efficient gasoline hybrids or some other modality which eliminates or drastically mitigates the externalities associated with fossil fuel combustion.  Let’s further assume that there are legal and financial frameworks that support this technological reality, e.g. insurance and liability law permits companies to manufacture and sell self-driving cars, Federal and state regulations have caught up with the technology, roadways that physically support the telematics that enable self-driving cars to work, etc.

This future is likely to come to pass, so whether it’s 5 years out or 50 years out it’s more a matter of when than if.  If cars are self-driving and widely available as an on-demand transportation utility, more people might prefer to not have an individually owned dedicated car.  And no matter what, when humans become less involved in the act of driving the way we as consumers think about automobiles will undoubtedly change.

But what if self-driving, autonomous cars actually increase car ownership?  One of the main benefits of self-driving cars will be to reduce the opportunity cost of driving.  If “driving” somewhere goes from being something that requires your complete attention (or ought to at least) to being “transported” at your leisure, you obviously think about your time very differently than you do today.  A long daily commute becomes more acceptable if you can spend the time reading, working, playing with your VR headset, or whatever folks like to do in coming years.  The opportunity cost of driving a few hours on the weekend to visit friends or go hiking or “get away” however you like changes radically.

I was talking with another professional recently who lives and works in the urban Boston/Cambridge area.  He remarked that in a world of self-driving cars he would move to a fairly rural town which is 1+ hour away by car, because he and his family like the spot and feel it would offer them a greater quality of life.  Others might live far from their workplace because of real estate costs,  schooling options for children, to be close to family and friends, or other considerations.  And for those with certain transportation needs (e.g. parents with infant car seats, people who frequently transport stuff as part of their job, etc), individual car ownership will remain as compelling in the future as it is today even if there were an infinite supply of on-demand self-driving cars as a service.

While a car is a significant purchase for anyone (whether leasing, financing, or owning outright), the reality is an automobile is within financial reach for a majority of people in the US.  It’s why there are over 250 million cars and trucks on the road, well more than one per American of driving age.  This will likely remain true even once cars are autonomous and self-driving.

It may run counter to widely held views at present, but I think it’s equally likely that self-driving cars make individual ownership at least as desirable as it is today.

Lee Hower

I’m an investor, entrepreneur, and helper of technology startups. I’m currently a General Partner of NextView Ventures, which focuses on seed stage internet-enabled businesses. I co-founded NextView in 2010 with my partners Rob Go and David Beisel. I started in the VC business as a Principal at Point Judith Capital, an early-stage firm. I joined PJC in 2005 and served as a Principal at the firm through early 2010. During this time I co-led investments in FanIQ, Sittercity, and Multiply and sourced investments in Music Nation and NABsys. Prior to becoming a VC, I was a startup guy myself. I was part of the founding team of LinkedIn, and served as Director of Corporate Development from the company’s inception through our early growth phases. Before that I was an early employee at PayPal, and worked in product management and corporate development roles through the company’s IPO in 2002 and subsequent sale to eBay later that year. I went to college at UPenn and received degrees from both the School of Engineering and Wharton School of Business.