Self driving cars are getting big. You can tell it’s coming and a lot of people are very worried. Driving based jobs account for a huge number and what will all those people do once they’re unemployed?
In this piece we look into the future not with a scare mongering eye, but with positivity. Yes self driving cars are coming. Sure, we don’t know if they’ll take 2 years or 10 but it won’t be long. With that shift there will be massive disruption to huge companies and jobs. So how can you profit from this change?
Table of Contents
Transport as a Service (TaaS)
When you pair an all electric car and a self driving car you get something extra special. A car that doesn’t require any paid driver in it eliminates huge cost overheads. Electricity is of course also far cheaper than petrol or diesel too.
Together you get a new form of Transport as a Service (TaaS).
TaaS is a new term to describe companies like Uber or Lyft. Ones where instead of buying the car, you just pay for it like any other service. Amusingly, the “XaaS” style acronym is directly taken from the IT world. There you have Software as a Service (SaaS) and other cloud infrastructure terms. If you needed any more proof about EV’s being viewed as “technology” there you go!
What Will TaaS Look Like?
When most car companies discuss autonomous cars they speak of the various levels of autonomy. Some stay in the lanes, others stop at stop signs. Most are aiming for “full autonomy” or L4/L5 where you basically don’t have to touch the car at all. With L5 it’s expected you can fall asleep and be fine end to end.
Google’s Self Driving Car
The next step after that is when the government allows for the car to drive itself without any passengers. No one at all in the car. Just an empty vehicle whooshing along. This is when true TaaS comes into play and it will happen very soon.
Unlike a lot of other technologies, TaaS has multiple companies throwing billions at it. Uber, Lyft, Ford, Tesla and on and on. They’re all racing to develop it first which means it’s going to come quicker than people think. Estimates vary of course but most agree it’ll be a reality within 5 years, 10 max.
Why Care About Self Driving Cars?
When full TaaS kicks in, the reduced costs will be dramatic. No driver. No petrol costs. Near 100% constant operation of the vehicle. The car won’t be left in a parking lot all day, it will be used 24/7/365.
Due to this far higher utilization factor, the economics of the asset become much better. It sounds complicated but is in fact quite straightforward. If you buy a $10,000 car and use it once a year, you’re paying $10,000 per use. If you use that same car 10,000 times per year (roughly 28 times a day) it now costs you $1 per use.
While we don’t think about our cars this way today, companies like Uber will in the future. With it operating 24/7/365 they can have the car (asset) make more trips, earn more profit and thus get a better return. That in turn means they can offer their services at a cheaper price to you.
TaaS vs Ownership
Below you can see a very quick comparison between the two systems. The current model of car ownership and the future TaaS. In it I have used one of the more efficient and low cost cars the Mazda 2. The bigger the car, the higher the savings go. I’ve assumed around 6L/100km for the Mazda 2 and travel of 15,000 km each year.
Furthermore let’s assume you keep the car for 10 years. This means that a simple yearly “cost” estimate for purchasing the car is $1,700. Also note these are Australian based cost estimates but the calculations would be similar globally.
| Car | Mazda 2 | Tesla Model 3 (TaaS) |
| New Purchase Cost: | $17,000 | $0 |
| Purchase Cost Per Year (10 Year Life): | $1,700 | $0 |
| Range: | 400 km’s | N/A |
| Cost Per Tank: | $39.00 | N/A |
| Cost Per Kilometer: | $0.0975 | $0.2793 |
| Insurance Costs ($850 Excess): | $582 | $0 |
| Fuel Cost Per Year: | $1,463 | $0 |
| Registration Costs Per Year: | $772 | $0 |
| Maintenance Costs Per Year: | $500 | $0 |
| Total Yearly Costs: | $5,016 | $4,190 |
As you can see it ends up cheaper to simply use TaaS than manage your own car. You may be wondering where that $0.2793 cost per kilometer figure came from though. This rate was taken from estimating the per kilometer cost of two separate Uber rides. One was a short trip (~5 km), the other long distance (~20 km). The total cost of both was averaged to find the cost per kilometer. That final figure was then reduced by a factor of 10!
Calculating TaaS Costs
That’s right, that rate is one tenth of what an Australian might pay per kilometer right now. This might seem like a ridiculous notion. However even at this extremely low rate Uber would still make a healthy profit. This is with quite conservative estimates too.
These include a $66,000 purchase cost for the Tesla Model 3 with Fully Self-Driving options. Utilisation of the vehicle is also for only 80% of the day. This allows for roughly 5 hours per day of time for travel between customers and repairs. It also includes a full service and tyre change every 20,000 km’s at a Tesla service centre.
These calculations are so conservative that they even estimate electricity as being $0.317 per kWh. That likely sounds ludicrous to most outside Australia but here electricity is quite expensive. In the end you get the following results for whomever operates the TaaS.
| New Purchase Cost (Model 3 With Autopilot): | $66,000 |
| Battery Size: | 52 kWh |
| Range: | 352 km’s |
| Kilometers Per kWh: | 6.77 km |
| Cost Per Full Charge: | $16.52 |
| Utilisation: | 80% |
| Average Speed During Use: | 50 km/h |
| Estimated Distance Travelled/Day: | 960 km’s |
| Tesla Fleet’s Cut: | 30% |
| Charged Cost To Customer/km: | $0.2793 |
| Energy Cost/km: | $0.0469 |
| Profit/km: | $0.1485 |
| Registration Costs Per Year: | $800 |
| Insurance Costs ($850 Excess): | $1,000 |
| Maintenance Costs Per Year: | $17,520 |
| Revenue/Year: | $52,050 |
| Expenses/Year: | $35,768 |
| Profit/Year: | $16,281 |
How You Can Take Advantage
Rather than let Uber do this, why not become a TaaS operator yourself? As you can see above, using very conservative assumptions the figures look good. The initial purchase cost or “investment” is around $66,000. For that you could get around $16,000 in profit every year. This is a return on investment of around 24% which is exceptionally good.
This is also a business model that would be available to anyone with a Tesla. It would also be a positive force for the environment given EV’s are far cleaner than fossil fuel based cars. Yes, even in Australia where a lot of the electricity is made with coal.
So while a lot of TaaS trips will be done through very large companies like Uber, you can be a part too. Just like you can build an App and sell it on the Google Play Store. One day you should be able to buy a Tesla and make money while you sleep or work.
Tesla CEO Elon Musk has even stated this is part of his “Master Plan Part Duex“:
You will also be able to add your car to the Tesla shared fleet just by tapping a button on the Tesla phone app and have it generate income for you while you’re at work or on vacation, significantly offsetting and at times potentially exceeding the monthly loan or lease cost.
The Future
Just imagine it. Cities full of 100% electric Tesla’s whooshing around making money for their owners. The quality level of cars would go up. Pollution would come down and also don’t forget the other benefits. A car you use as a service never needs a parking space. It never needs maintenance. You can be driven in it totally drunk!
There’s also the added bonus of being able to rent the right car for the job. Need a van? No worries. How about a big 4WD for going camping this weekend? Not a problem. What about a sexy convertible for a romantic getaway? You can have all of these cars with TaaS rather than being stuck with the same one.
All the articles others write worrying about self driving cars don’t seem to mention these positive points. I see an amazing future and I hope you can too now. Now we just need to make it a reality!
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