Self-driving cars: The next revolution (by KPMG)

The Status Quo:

The High Cost of Mobility The desire to go where we want whenever we want has been a powerful market force for centuries. And the automotive industry has been—and continues to be—a critical component of the U.S. economy, employing 1.7 million people (across manufacturers, suppliers, and dealers) and providing $500 billion in annual compensation, as well as accounting for approximately 3 percent of GDP.2 But mobility is increasingly expensive and inefficient. First, of course, is the total cost of vehicle ownership, which can bring the price of a $21,000 car driven an average of 15,000 miles per year to more than $40,000 over five years—for a machine that sits unused on average, almost 22 hours out of every day.3 We also pay heavily to build and maintain our roads. The U.S. Department of Transportation (USDOT) estimates that new construction of four-lane highways in an urban area costs between $8 million and $12 million per mile. Even resurfacing that road, at an estimated $1.25 million per mile, can be daunting for cash-strapped governments. The average American commuter now spends 250 hours a year behind the wheel of a vehicle; whether the value of that time is measured in lost productivity, lost time pursuing other interests, or lost serenity, the cost is high. Today, those commuters inch along during rush hour traffic; they drive in circles around city streets looking for parking spaces; and, according to a report published by the MIT Media Lab, “In congested urban areas, about 40 percent of total gasoline use is in cars looking for parking.”4

Safety and the Human Toll

We pay in other important ways. In 2010, there were approximately six million vehicle crashes leading to 32,788 traffic deaths, or approximately 15 deaths per 100,000 people. Vehicle crashes are the leading cause of death for Americans aged 4–34. And of the 6 million crashes, 93 percent are attributable to human error.5 The economic impact of crashes is also significant. More than 2.3 million adult drivers and passengers were treated in U.S. emergency rooms in 2009. According to research from the American Automobile Association (AAA), traffic crashes cost Americans $299.5 billion annually.6 The pursuit of improved vehicle safety has spurred the National Highway Traffic Safety Administration (NHTSA) to focus attention on self-driving vehicles. As NHTSA’s Associate Administrator for Vehicle Safety, John Maddox, explained in early 2012, the goal is not merely to make self-driving vehicles as “safe” as human drivers, who, as the evidence shows, are not very safe at all. The goal is to develop “crash-less” cars.7

Driving Demographics

Will people willingly cede control to a machine and give up driving their own car? For baby boomers, especially, turning 16 and getting a driver’s license was a rite of passage. But demographics are changing, as are attitudes towards driving. Younger generations, the ones who grew up with game consoles and smart phones, are not so in love with cars. They live perpetually connected lives, and while they may have the same desire for mobility on demand, some see the act of driving as a distraction from texting, not the other way around.8 Their antipathy towards driving may be a good thing, given these statistics: Distractions account for 18 percent of crashes with injuries, and 11 percent of drivers under age 20 involved in crashes with fatalities were reported to have been distracted.9 This group—members of the “Gen Now” generation (see Figure 2 below)—are not rushing to get driver’s licenses the way baby boomers did. In 1978, nearly half of all 16-year-olds and 75 percent of all 17-year-olds had licenses; by 2008, those numbers had dropped to 31 percent and 49 percent, respectively.10

kpmg figure 2

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