For decades people have obsessed over the self-driving car, which was once reserved as only science fiction on the big screen, has now come to be reality. There are already several autonomous vehicles driving on the roads today by the firms developing the technology. However, it is conceivable that fully autonomous taxi services could be operational in some metropolitan cities as early as 2020. Las Vegas has been one of those cities that has been leading the effort and has digitized its roadway information for autonomous vehicles to navigate the city safely.

This exciting new industry is expected to be generating $10 Trillion in global revenue by 2030(1).  But who will benefit and what does it mean for auto makers like Ford and GM as well has the ride share companies Lyft and Uber? 

It is expected that there will be four main segments of participation within the autonomous market.

• Vehicle & Hardware Manufactures
• Platform Providers
• Ride Hailing Companies
• Owner/Operator of Vehicle

Vehicle & Hardware Manufacture:

The cost per mile to operate a personal vehicle is about $0.70 per mile. It is expected that with autonomous vehicles, that cost will go down to $0.35 per mile ₍₁₎. This will most definitely have an effect on personal vehicle ownership as people will find it more economical to utilize autonomous taxi services. This could essentially have a major effect on future auto sales and for those automakers that are not leading the way in this technology, they may find themselves struggling.  Many of the automakers today, such as Tesla, GM, Ford, Nissan, Jaguar, BMW and Volvo, have initiatives to bring AV’s to market by 2020 or 2021.

Major component manufacturers of the computational hardware and sensors that enable autonomous driving may be well positioned to profit. Companies such as Nvidia, Aptiv, Mobileye, Bosch, Continental, NXP and Cisco are leading the way in this area.

Platform Providers:

Companies such as Google’s Waymo, Baidu, Amazon, Aptiv are considered potential platform providers. Some automakers have also acquired firms or are working on their own platforms such as Volvo, Tesla, GM and Nissan.

These platforms will own the autonomous technology built into vehicles, offering even more value than the Uber and Lyft ridesharing platforms. It will still depend on how much control they retain, not only over both the autonomous driving sensors and software, but also over the data that the sensors gather on road conditions, obstacles, traffic, and near-misses. 

Ride Hailing Companies: 

These are the platforms such as Lyft and Uber, which will use the technology for attracting customers. About 5% of autonomous taxi revenues most likely will go to companies that originally generate the traffic. However, Uber, Lyft and DiDi will not be the only platforms that will be generating traffic going forward. There may be some tougher competition and companies that have a captive audience using voice recognition AI such as Amazon, Apple or Tencent which could easily enter this segment. Even Tesla has plans on operating its own ride hailing Tesla network.

Owner: 

The owner/operators of self-driving taxis are likely to grab the lion’s share of revenues. This group very well could include individual auto owners who want to connect their own Tesla or autonomous car on a ride hailing network , but my guess is, as self-driving taxis become an efficient and economical way to commute, you will see corporate fleets being maintained and managed by larger firms already in automobile business – companies like Avis and Enterprise.

• _{Ark Investment Management LLC.}