Transport - How will the disruption play out?

The Disruption of Transportation

During the 2020s, key technologies will converge to completely disrupt the foundational sectors that underpin the global economy; energy, transport and food & agricultures, and with them every major industry in the world today. The knock-on effects for society will be as profound as the extraordinary possibilities that emerge.

By 2030, within 10 years of regulatory approval of autonomous vehicles (AVs), 95% of U.S. passenger miles traveled will be served by on-demand autonomous electric vehicles owned by fleets, not individuals, in a new business model we call “transport-as-a-service” (TaaS).

In common with other technology-driven disruptions, the shift to TaaS will be non-linear and follow an S-curve, where TaaS will become progressively cheaper and improve its functionality, while ICE vehicles will become ever more expensive to operate and harder to use. 

When you combine autonomy, electric drivetrains, deep connectivity and supercharging, you’ve got — for the first time ever — an almost fully electric/digital system that can move atoms, not just bits.

As human drivers are replaced, congestion will ease and the possibility of integrating other electric forms of transport (scooters, drones, and bikes) will emerge. Together, these disruptions will deliver a transportation system 10x cheaper and far more efficient than the one it replaces. As the speed of transport improves in congested areas, this new system will create possibilities to change where we live and work, transforming the layout of cities and towns. Its impact will ripple out across trains, logistics, aviation, oil, climate change, and geopolitics. Just like the internal combustion engine car did 100 years before them, new modes of transportation will restructure culture, entertainment, and commerce.

Key Implications of the Disruption

Economic

• Choosing TaaS (Transport as a Service) over IO (Independently owned vehicles) will lead to a four-to ten-times reduction in costs. We know of no other market where a 10x cost differential has not led to a disruption.
• Demand for new vehicles will plummet: 70% fewer passenger cars and trucks will be manufactured each year. 
• The transportation value chain will deliver 6 trillion passenger miles in 2030 (an increase of 50% over 2021) at a quarter of the cost ($393 billion versus $1,481 billion).
• Oil demand will peak at 100 million barrels per day by 2020, dropping to 70 million barrels per day by 2030.
• Conventional energy and transportation industries will suffer substantial job loss. Policies will be needed to mitigate these adverse effects.

Environmental

• The TaaS disruption will bring dramatic reductions or elimination of air pollution and greenhouse gases from the transport sector, and improved public health.

Geopolitical

• The geopolitical importance of oil will vastly diminish and the speed and scale of the collapse in oil revenues may lead to the destabilization of oil-producing countries and regions.

Read more about the implications of the transportation disruption in depth on p8-9 of our Rethinking Transportation report

This very significant cost differential will be the key driver for rapid and widespread TaaS adoption for car owners. Potential car buyers will stop buying new cars. This will drive a vicious cycle, where we will see a steep decline in the production of new cars, and in revenues and profits for ICE producers, factories and distributors, in addition to a loss of economies of scale and higher manufacturing costs for ICE vehicles.

Beyond the specific cost structure advantages, there is something more profound happening here. When you take away 99% of accident risk, it changes the scalability of TaaS. When you take away not just the maintenance cost, but unexpected downtime, it enables high availability. But most importantly, there is a paradigm shift happening where vehicles are becoming servers.

We can digitally monitor A-EVs with near-perfect accuracy, and soon we will be able to control them remotely. Human training and human error are no longer paramount. And costs are coming down by a significant percentage year over year for the first time.

Choices for Decision Makers

But this future is by no means predetermined. Indeed it cannot be achieved by technological progress alone

Investors and policymakers will face choices in the near term that will have lasting impact. At critical junctures, their decisions will either help accelerate or slow down the transition to TaaS.

Our research is a call to leaders across society – public and private – to see what is really happening, to understand the implications, and to redefine the way we all do business, invest, and organize society.

Read p48-55 of our Rethinking Transportation report for policy recommendations and key findings for decision makers

Read the RethinkX 2020-2030 Action Plan for the future on p67-74 of our Rethinking Humanity Report.

Published on 10/07/23