Tesla Motors Inc could be on the brink of selling an impressive number of its new Model 3 electric cars and that’s good news. Yet, the most exciting possibility for enormous profits for the firm and shareholders alike could come when Tesla’s electric cars are bought in bulk to form fleets for autonomous cities. Until recently the idea of safe, self-driving, environmentally friendly on demand transportation for the masses sounded like a science fiction fantasy. Today, plans are being made for the day this type of transportation becomes mainstream.
Yesterday, Morgan Stanley released a report entitled “Autos & Shared Mobility: The First Autonomous City”. If the firm’s predictions, which are based on very thorough research, turn out to be correct, cities could see fleets of fully autonomous vehicles on their public roads much sooner than most people think.
In fact, as firms and cities compete to be the first to roll out such a network, the future could be right around the corner.
Why cities want autonomous cars
Self-driving cars are proving themselves to be so safe that human driving could eventually be viewed as a safety risk. These cars eliminate many of problems that human drivers are susceptible to, such as driving while tired, distracted, or drunk, and they can correctly calculate distances from other vehicles and adjust their speed perfectly.
With the number of global fatalities caused by traffic accidents numbering 1.24 million in 2013, which equates to almost 3,400 deaths a day, government and regulatory bodies are calling for autonomous car implementation to be placed front and center as a matter of public safety.
Road safety isn’t the only thing that can improve with the large-scale implementation of shared mobility using autonomous electric vehicles. Besides the obvious benefits for the environment, such a move could also see a drop in road congestion, which costs workers a lot of travel time. This could result in higher productivity and an improved quality of life. It could also expand people’s residence options because they won’t have to live as close to city centers to avoid traffic.
President Obama said in his last State of the Union address that he’d like to see investments made to reduce carbon pollution, broaden transportation options, and integrate new technologies into the country’s transportation infrastructure. His 21st Century Clean Transportation System calls for a $2bn annual investment to launch “smart, clean vehicles” and pilot deployments of “smart autonomous vehicles.”
When you consider the fact that firms like Tesla and Alphabet Inc, who auto companies never worried about just a few short years ago, are now aggressively dominating the self-driving tech scene and have no vested interest in defending the status quo of traditional cars, the tide could well and truly be about to turn.
What would an autonomous city look like?
The Morgan Stanley report expects the first commercialized autonomous transport system to entail cars with no driver, steering wheel, or pedals. It will only have seats for passengers, who will hail the cars using ride-sharing apps. They expect these cars to have a limited range and speed, perhaps not exceeding 4 square miles and 25 miles per hour at first.
They believe the first cars will have an abundance of safety systems in place that could make them far more expensive than a regular car. They will likely be equipped with sensors, cameras, and other technology that will always be connected and constantly updated and improved. They also expect the cars in the system to be electric, which will ensure they can react in mere nano-seconds.
Morgan Stanley thinks a private entity will own the fleet at first and that they will guarantee the safety of the cars and insure them generously.
Why Tesla Motors Inc has the right elements to turn into a top shared mobility firm
For this reason, Tesla looks like a risky but potentially very rewarding investment because it addresses the top changes that will be seen in the car industry – namely autonomous driving, shared mobility, and electrification.
In fact, Morgan Stanley believes Tesla is in the best position of all the car makers to become a top shared mobility firm thanks to its expertise in vital areas such as battery and electric powertrains, car engineering and design, and autonomous car and software.
Expertise in autonomous cars and software
Shared mobility is largely about replacing error-prone human drivers with highly accurate and precise robots that perform the task far better than any human could. Tesla’s huge investment into developing autonomous tech is supported by a workforce that is more than 50 percent software and tech engineers.
Car engineering and design capabilities
Tesla’s Model S is the safest car that has ever been crash-tested by the National Highway Traffic Safety Administration (NHTSA), and it was given the highest overall rating in the history of Consumer Reports. If Tesla could accomplish all this with the first car they made from the ground up, future efforts are likely to be even more successful.
Electric powertrain and battery know-how
With the opening of its Reno Gigafactory, Tesla is expected to become a global leader in the production of lithium ion batteries. The shared economy model could be a key factor in the mass adoption of EVs. The lower number of moving parts in EVs enable them to provide the optimal powertrain for autonomous cars.
Emphasis on connectability
Tesla is the only car maker that can boast that 100 percent of its fleet is connected to the internet. This enables firmware updates to be executed that affect all aspects of driving. This connectability is a crucial part of the success of a shared model. After all, many ride-sharing firms are already giving their drivers smartphones for collecting data and communicating with passengers. In the case of Tesla, the car itself is the smartphone.
Confident and innovative leadership
Tesla has already shown the world that it is not afraid to take risks, and that is how true strides can be made in this realm. Elon Musk’s sense of urgency combined with his vision and focus on hiring the best experts can help the firm make real progress faster than anyone else.
The right infrastructure
Tesla has approached the car market in a much different way than traditional car makers that sell through dealerships. It has established a strong global network of service and charging stations, which are vital parts for supporting a shared electric fleet. The Morgan Stanley report says they believe that Tesla’s proprietary network might be as many as ten times bigger than that of their closest competitor.
Alphabet Inc could be another player, with its strong design abilities and its autonomous driving software standing a good chance of being licensed out to fleet owners. The firm’s Google Maps could also play a key role in both the navigation of the cars and users’ ability to hail them. Assets like Google Wallet and Android Pay could be used as forms of payment.
Even firms like GM are showing interest in novel areas of mobility, with its recent $500m investment in Lyft, and Ford, with its Smart Mobility Plan experiments testing new ideas. However, the traditional car makers could be held back by the need to satisfy their investors in the short term.
Cities not the only ones interested in a fleet of Tesla EVs
The idea of Teslas driving themselves all over cities is more than mere speculation on Morgan Stanley’s part. Last year, Tesla board member Steve Jurvetson said that Uber CEO Travis Kalanick told him that he’d be willing to buy half a million cars from Tesla if they were fully autonomous.
“Travis recently told me that in 2020, if Teslas are autonomous, he’d want to buy all of them. He said all 500,000 of estimated 2020 production, I’d want them all.”
“I’m not saying you’re all going to have robocars. But, for those of us who have a chance to be in one, there’ll be one of those epiphanies. You’ll never go back,” Jurvetson said. “I’ve been in these vehicles… several times, several different types… I’d trust my kids with them.”
He added that people would have the ability to call for an autonomous car and get one within 30 seconds for a cheaper price than mass transit. He said, “Every automotive maker is working down this path.”
If Morgan Stanley and Jurvetson are right, Tesla could play the starring role in an urban revolution, and it could benefit not just shareholders but the population at large.