Autonomous vehicles will not be cheaper – A cost-based analysis


Many people wonder how soon autonomous vehicles (AV) will hit the road to solve the current transportation problems. Optimists believe that by 2030, autonomous vehicles will be sufficiently reliable, affordable, and common to displace most human driving, providing huge savings and benefits.

But, there are good reasons to be skeptical. Most optimistic predictions are made by people with financial interests in the industry. They tend to ignore significant obstacles to autonomous vehicle development and exaggerate future benefits.

Although Level 5 autonomous vehicles will operate without a driver and significantly reduce external costs, including parking costs, crash risks, traffic congestion, and pollution emissions, optimistic predictions often overlook the significant cost-related obstacles.

According to critics, this additional cost will pose constraints in sales because many motorists are likely to be reluctant to pay thousands of extra dollars for vehicles that may sometimes be unable to reach a destination due to technical issues, inclement weather, or unmapped roads.

According to critics, autonomous vehicles are likely to be more expensive than human-driven private vehicles and public transit. Many predictions assume that autonomous vehicles will be electric, eliminating the fuel costs, but instead will require costly batteries. A typical vehicle battery should be replaced approximately every 100,000 miles, which currently costs $3,000-15,000 or 3-10₵ per vehicle mile. This may decline with product innovations, but probably not much, since future vehicles will require increasingly sophisticated batteries, to maximize performance. Incorporating higher battery replacement costs and road user fees will increase electric vehicle operating costs similar to fossil fuel vehicles.

Autonomous vehicles require dedicated infrastructure such as lanes, special signs, roadway markings, signals, and transponders to allow platooning. But this public infrastructure will impose external costs and require more public planning and regulation than most other technologies. The policymakers will need to decide whether to build special autonomous vehicle lanes, how to price them, and regulate their operation to maximize total benefits. These public policies will also affect the costs. For instance, governments may impose new road user fees to recover the high roadway costs, which would increase electric vehicle operating costs.

Autonomous vehicles require various equipment and services such as sensors (optical, infrared, radar, laser, etc.), automated controls (steering, braking, signals, etc.), short-range vehicle-to-vehicle communication networks, internet access for maps, software upgrades and road reports, GPS systems for navigation, etc. Any critical component maintenance, repair, testing, or subscriptions will probably cost several thousand dollars annually. The current advanced driver assistance system sensors (cameras, radar, and ultrasound) approximately double minor collision damage costs, typically adding $3,000 to a repair bill, suggesting that autonomous vehicles will increase vehicle repair costs. All complex electronic systems fail due to false sensors, distorted signals, and software errors. Self-driving vehicles will certainly have hardware and software failures that contribute to additional costs.

Advocates argue that these additional costs will be offset by insurance and fuel cost savings, but that seems unlikely. For example, if autonomous driving cuts collision insurance costs in half, the $300-500 annual savings is just 10-20% of estimated additional costs. Fuel cost savings are also likely to be small, and additional equipment and larger vehicles to serve as mobile offices and bedrooms may increase rather than reduce energy consumption.

This indicates that private autonomous vehicle costs will probably average (total annual costs divided by annual mileage) $0.80-$1.20 per vehicle-mile, which may eventually decline to $0.60-$1.00 per mile as the technology becomes available in cheaper models. Shared autonomous vehicles will probably cost 50-70₵ per vehicle-mile, and shared autonomous rides will probably cost $0.20-0.40 per passenger-mile. This is cheaper than human-operated taxis ($2.00-$3.00 per mile) and ride-hailing ($1.50-2.50 per mile), but more expensive than personal vehicle operating costs or public transit fares (20-40¢ per passenger-mile).

Currently, automobile owners typically drive about 10,000 annual miles. People who rely on autonomous taxis and rides are likely to travel less due to higher financing costs and reduced convenience. In contrast, people who own private electric autonomous vehicles are likely to travel more due to lower operating and travel time costs and high convenience.

Of course, these costs and consumer responses are difficult to predict and depend on other factors, including quality of mobility services, land use development conditions, and individual preferences. However, it is safe to predict that people who rely on shared autonomous vehicles will, on average, travel less, and those who own personal electric autonomous vehicles will travel more than they would with conventional, fossil fuel, human-operated vehicles. Public policies can affect the amount of travel generated by these modes by affecting their financial and travel time costs, for example, through fuel and road user fees and roadway management strategies that make shared vehicles more convenient and faster to use.

Some of the cost challenges of autonomous vehicles are as follows:

  • Increased vehicle costs. Requires additional vehicle equipment, services, and fees.
  • Increased infrastructure costs. May require higher roadway design and maintenance standards
  • Increased sprawl-related costs.
  • Costly batteries will increase battery replacement costs
  • Will require expensive equipment, services, and subscriptions
  • Increased residential parking and roadway costs