Driverless cars – A £150bn opportunity?

On the Local Transport Today forum I recently commented on how driverless cars will shake up how we think about transport.  It motivated me to probe a bit deeper into the economics of driverless cars and how we plan for them. No doubt about it, driverless cars will be a technological revolution but questions are endless.  How will they work on the existing network?  Will they take over completely as cars did from horses and carts?  Will we see mini mobile offices? Will every household have one?  Will most operate like taxis?  Will this be the death of public transport?  No one really knows yet, but the possibilities are pretty staggering.  But how much do we have to know to get a rough handle on economic benefits?

Time – a resource eater

The problem with transport is that it eats resources.  Not just fuel and the resources in vehicles and infrastructure, but also a little bit of everything else that gest moved around.  Goods in transit are extra inventory, professional drivers are a massive cost and firms have to hire people whether they are at their desk or driving to a meeting. Some rough maths tells us that the economic benefits are potentially eye-watering.  Our recent work finds that the total value of time spent travelling by road is around £120bn per annum.  And this excludes professional drivers.  Spin off benefits on firm productivity and through wage effects attracting people into the labour market might be at least another 20%, even if how we operate doesn’t change all that much.  So £140 or £150 billion pounds of economic benefit each year might even look like the bottom end of a range.

Paralysis of uncertainty

So how can we plan to realise these gains in the face of so much uncertainty about what the driverless car ‘product’ will actually look like? However things shake out, we will still need roads and there will still be pinch points. The massive public infrastructure challenge remains.  And public transport will still have a competitive advantage in some areas – such as mass transit and over long distances.  In fact, when you think about it, vehicles you don’t own will still probably be called taxis, the bus companies will probably operate high capacity driverless vehicles we call buses and many people will probably have their own – possibly which they use to take them to the station for a long distance trip.

Transport challenges are already here

From here this looks like a revolution, but looking back it will probably look more like look like an evolution.  We have always had to make long term decisions in the light of massive uncertainty – weren’t we all going to have jet packs? Let’s not get distracted but plan and build adequately with suitable risk management. We need to get comfortable with the idea the future will never be exactly what we expect.  If, when we look back in 20 years’ time, we have better transport options than today with an expanded infrastructure to meet demand we will have succeeded.  If ‘driverless cars’ was an excuse for not investing then we will have failed.

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