Reinventing the wheel

The arrival of electric and autonomous cars will change far more than the auto industry.

EV charger sign photo

The switch from horse-drawn to motorised road vehicles a century ago transformed the world’s cities in ways and to an extent few could have predicted.

The car was not merely a ”faster horse” and a boon for a new industry of automakers: it also spurred the invention of the shopping mall, retail park and the drive-through fast food restaurant, while reshaping cities around new distances and giving rise to urban sprawl.

Its adoption transformed and gave rise to other industries, too. Mass car ownership drove heavy use of non-renewable fuels, a gift to the oil industry, while dramatically increasing the rate of accidental deaths, and drove a rise in obesity and cardiovascular diseases that introduced new demands on healthcare.

The imperative to own a car inspired innovations in credit and new financial markets. Mobility is changing again in the early 21st century, to an extent not seen since Ford’s Model T.

And as before, changing road vehicles will cause surprising and significant consequences reaching well beyond the car industry.

Charging ahead

The two most important shifts for road vehicles will be from fossil fuels to electrical batteries and from human operation to autonomy.

Electrification is well under way, helped by falling costs in battery technology, government incentives and healthy competition and innovation from carmakers. The number of battery-powered (fully electric and plug-in hybrid) cars is expected to top 12 million by the end of 2025, according to estimates from IHS Markit, a group that tracks the electric car market.

That amounts to less than 3 per cent of the world’s fleet, but the figure is growing at pace, and in some regions is much higher. In Norway, the share is 29 per cent. Countries in the Electric Vehicles Initiative, including the EU, US and China, have pledged that 30 per cent of their road vehicles will be electric by 2030.

The shift away from gasoline to reliance on the grid could affect the energy industry as much as the advent of the first passenger cars did. Certainly, electric vehicles will improve urban air quality and should cut carbon emissions, as long as the electricity they use does not come from fossil fuels.

But national electricity infrastructure will need to be prepared. Although future ownership is hard to project, estimates suggest that a fully electric fleet would result in a 10-20 per cent rise in electricity demand.

EV cost

Often recharged at home, vehicles can draw 7 kW or more from the mains, compared with an average of 1-1.5 kW for typical household devices.

Phil Taylor, Siemens professor of energy systems at Newcastle University, reckons that capacity problems will arise at the point that 60 per cent of households in urban areas have electric vehicles (or 20 per cent in rural areas due to weaker local power networks).

Innovation in “smart charging”, whereby users pay variable amounts depending on demand at that time, will help. Users could be paid to allow their plugged-in electric vehicles to store and export power to the grid, balancing demand and helping to use clean but intermittent electricity producers such as wind turbines.

“Having a fleet of millions of electric vehicles in the future, all able to either charge or discharge into the grid in a coordinated way, could be incredibly valuable in keeping the lights on and keeping the grid stable, while going to very high levels of renewable energy,” Taylor says.

Electrification will have other impacts, too. It will probably result in far fewer refuelling stations, as car-owners recharge at home, which will have a sizeable impact on roadside retailing. Governments who levy substantial taxes on gasoline prices will have to raise them elsewhere.

Electric vehicles are likely to reduce the work required of the world’s service technicians and mechanics—an army of 1.53 million in the EU alone—as an electric powertrain has far fewer moving and wearing parts.

The advance of autonomous vehicles is less certain, and the technology is at an earlier stage of development.

But their adoption, whether to a limited extent of autonomy or a comprehensive one, is likely to cause more profound changes.

The greatest benefit would be fewer deaths and injuries from accidents, with nearly 1.3 million people dying on the world’s roads every year, according to the Association for Safe International Road Travel.

This would be a boon to healthcare systems and emergency services. Fewer accidents will also have knock-on effects for law, insurance and other sectors involved in the aftermath of incidents.

Driverless vehicles are by definition set to reduce the number of professional drivers, with 4.4 million employed to do so in the EU alone.

But such vehicles’ ability to deliver themselves to users when required also looks likely to make renting vehicles much cheaper, with far fewer people wanting to own cars as a result. Many companies are betting on a shift from ownership to usage, with vehicle manufacturers creating alliances with app-based taxi providers.

Didi Chuxing, a Chinese ride-sharing platform and the world’s most valuable start-up, recently said it would work with 31 companies to launch its own car models.

Toyota is launching a London start-up to develop its technological expertise in ride hailing and vehicle sharing. John Ellis, former global technologist for Ford and author of The Zero Dollar Car, believes that sharing autonomous vehicles will be economically irresistible.

The American Automobile Association calculated that it costs an average of USD8,469 a year to own and operate a car, including depreciation, maintenance and fuel.

Yet cars spend most of their time parked. “It’s the second largest purchase you’ll ever make, yet it has the lowest utilisation rate of anything you potentially own,” he says. Electric vehicles boost the case for sharing: they have higher initial prices but lower maintenance and fuelling costs.

Analysts at Boston Consulting Group reckon that the cost of using a shared, autonomous electric vehicle could fall to 70 US cents per mile, significantly less than the average USD1.20 a mile it costs to run a private car.

Cost of shared EV

A future in which cars are mostly shared, not owned, would look rather different.

No longer at the wheel, riders will need to be entertained. That insight has prompted carmaker Renault to acquire a 40 per cent stake in Pedriel, a glossy magazine publisher. Knowing exactly where potential customers are, combined with the ability to ask them to make diversions to spend money, may prove highly attractive to advertisers, too.

Autonomous vehicles are likely to change the built environment, but precisely how depends on how they are used. Boston Consulting Group estimates that by 2030 shared, autonomous electric vehicles will account for nearly 25 per cent of all car passenger miles travelled in the US.

More sharing would mean fewer suburban home garages, says Mark Wilson, professor and programme director of urban and regional planning at Michigan State University, allowing higher population densities. More efficient and safer computerised driving should require fewer lanes of traffic, allowing more space for pedestrians and cyclists.

On-demand vehicles will see more or less continuous use, Wilson says, dramatically reducing the need for parking and allowing these sites to be redeveloped for businesses and residential use, reviving city centres. Lowered demand for parking in newly built real estate could also substantially reduce construction costs.

But if most people prefer to ride alone, for reasons of security or privacy, things could go the other way. Hands free, passengers may be prepared to commute further distances, resulting in further-flung commuter developments. Those longer commutes, as well as driverless trips to car-parks where vehicles can wait for the return home, could increase road use and congestion. Experience tells us that supply can induce its own demand.

Electric and autonomous vehicles will undoubtedly change industries and cities profoundly, but exactly how they do this depends on how we choose to use them. Wilson observes that in the early 1990s the internet was seen as a technical development.

"When you look at the internet today and things like free speech or e-commerce, then you realise that most of what the internet is about is social impacts," he says, which very few accurately predicted. "I see an exact replay for autonomous vehicles."