In a recent YouTube episode, which we've embedded at the bottom of the page, John, the host of
Dr. Know-it-all Knows it all, talked about the idea of robo-taxi services taking over the bulk of the driving.

The thought is that the robo-taxi services’ very low cost per mile of range will discourage a large number of people from owning vehicles. Personal vehicle ownership will fall off dramatically. Vehicle ownership will go the way of DVD ownership vs online streaming.

This is a subject I’ve been thinking about for a while. I took the opportunity to email John my thoughts about it.


Hi John,

Before I get into this, an interesting thought occurred to me the other day. It occurs to my marketing-centered mind that in the future it may prove difficult for EV power providers to differentiate themselves. Unlike current gasoline providers, they can't claim their electrons are refined better than their competitors. And they can't claim that drivers will get better mpkWh using their electrons. Interesting thought, eh?

I watched your Transportation As A Service (TAAS) video.

It's a bit of a paradox to me. Proponents of TAAS say that electric vehicles (EVs) will become cheap to purchase and operate which will proliferate TAAS and yet we won't want to own one (an EV).

Let's throw a real, true-life example at the question of TAAS.

Five years ago, I purchased my used (10 years old) Dodge Grand Caravan that had 45,000 miles on it for $10,000. I absolutely could own this vehicle for 10 years total, no prob. I average around 8,000 miles per year, so, in 10 years, I'll probably put around 80,000 miles on the vehicle. Let's look at all the costs which I may incur over the ten year period.

My Vehicle

$10,000 purchase price

$6,000 repairs and maintenance (I'm being a little generous)

$4,000 insurance (I have USAA, great rates)

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$20,000 total cost of the vehicle over 10 years, or about $166 a month.

or

$0.25 per mile (over 80,000 miles)

I get around 20 miles to the gallon. So:

$0.125 per mile fuel cost

Grand Total about $0.375 cost per mile. Again over 10 years and 80,000 miles

Let’s compare

EV Robo-Taxi over 10 years and 500,000 miles

$26,000 purchase price (forward-looking to EV cost parity)

$3,000 repairs and maintenance (tires)

$4,000 insurance

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$33,000 total cost of the vehicle over 10 years or about $275 per month

or

$0.066 per mile (over 500,000 miles)

$0.04 "fuel" cost

Grand Total cost of about $0.10 per mile (Keep in mind this is not including the FDS software costs.)

So, yea, a ride-sharing service may be able to charge $0.25 per mile and make money ($75,000 over 10 years). That would, however, have to be split between the fleet owner and the ride-sharing network. In Tesla's case, the two could often be one and the same. But, doing that does represent many billions of capital assets being held on to and deployed.

BUT WAIT!

I want to own an old, used one of these EVs. So, we have to refigure. Again, based on a 10-year-old vehicle.

$10,000 purchase price

$1,000 repairs and maintenance (I may go through just one set of tires)

$4,000 insurance

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$14,000 total cost of the vehicle over 10 years, or about $116 a month.

Or

$0.175 per mile (over 80,000 miles)

$0.04 per mile fuel cost

Grand Total about $0.215 cost per mile. Again over ten years and 80,000 miles

Now, the Robo-Taxi service could possibly charge $0.20 per mile and still make a slim profit. But, the service might have a hard time persuading me that not owning my own vehicle is worth saving $1,200 over a 10-year period.

Of course, some of these figures are just guesses. (There are, though, already used EVs available in the $10,000 price range.) But, regardless, I think the point is illustrated. The idea that people won’t own vehicles ignores the myriad of alternative possibilities that may be out there in the market. It doesn’t consider competition or competing possibilities.

Now, there is the possibility that the secondary market goes away and I can't buy a discounted used EV. I fervently hope that it never comes to that. The feudal system wasn't a very good deal for most people. If only one class of people can own the assets then the wealth disparity gap will widen even more dramatically and in not that many years.

Anyway, that’s my two cents for now.

Geoff

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