Economic and financial implications of autonomous vehicles

1. Economic andfinancial implications ofautonomousvehicles 2014 Ohio Transportation Engineering Conference October 29, 2013 Richard Mudge, Ph.D. Compass Transportation and Technology dick@compasstranstech.com (301) 529-3834

2. What’s the Deal with Autonomous Vehicles?  • Many articles in the press • Focus on safety benefits • US DOT focus on connected vehicles • Lots of speculation about impacts, but • Rarely part of long-range planning • A different approach: • Top-down point of view • Historical perspective

3. Brief History of Past Transportation Networks (1)  • Opening of Ohio and Mississippi Rivers by Corps of Engineers • Early 19th century • Infrastructure construction = 100 percent federal from general taxes (mostly import duties) • Infrastructure maintenance = 100 percent federal from general taxes • Vehicles = 100 percent private • Led to rapid development of the Mississippi Valley and land west of the Appalachians

4. Brief History of Past Transportation Networks (2)  • Transcontinental RR • Last half of 19th century • Infrastructure construction = private • Partially funded by land grants = at least 8 percent of US continental land mass given by federal and state governments • Federal government received rebates into the 20th century • Infrastructure maintenance = 100 percent private • Vehicles = 100 percent private

5. Brief History of Past Transportation Networks (3)  • Interstate Highway System • Mid 20th century • Infrastructure construction = state  DOTs • Funded by federal benefit taxes (90%) • Infrastructure maintenance =  state DOTs • Vehicle = 100 percent private • Changed US economic and social structure

6. Network Level Changes are Different • National scale investments have profound impact on economic growth and productivity • Interstate example • 50-60 percent annual rate of return over two decades • Creates a shift in supply and demand curves • Similar scale of impacts from internet and wireless telecommunications • Each has a different combination of public (federal and state) and private roles • The next big breakthrough will not look like the past

7. Current Situation • Highway planning and policy studies driven by “needs” • Focus on engineering costs – not economic returns • Large numbers do not guarantee action • Traditional funding sources are broken • Improving vehicle fuel economy – 54.5 MPG by 2025 • Lack of political will • Urban congestion is major economic problem • Determines access to jobs/labor/markets • Lack of reliability harms economy and individual lives

8. How Do We Solve This Problem? • New model: Autonomous vehicles • 100 percent private vehicle • Zero percent infrastructure investment • Connected vehicles (V to V) add value • V to I unfunded but not needed for AV • Reduce accidents – eliminate human error • Important side benefit = fewer non-recurrent delays • Reduce headways – more vehicles per lane per hour • 30-80 percent decrease in headways • Double capacity – or better. • How soon will the magic happen?

9. NHTSA’s Four Levels of Automation

10. Bosch’s View – Similar to Most Auto OEMs

11. Vehicle Technology • Related technology already being deployed • Dynamic cruise control • Lane tracking system • Automatic parking • Most car companies aim at NHTSA level 2 or 3 • GM, Mercedes, Tesla, BMW, Nissan etc. have announced start dates • Expressway traffic first • Google calls for Level 4 – fully autonomous

12. Overview of Benefits • Safety improved – many fewer highway-related deaths • Effective increase in roadway capacity due to reduced headways and fewer incidents • Financial implications • Significant drop in “needs” • Spending gap still remains, but should be in reach • Economic implications • Improve access to jobs/labor/markets • Productivity grows by 2 percent for every 10 percent increase in speed • Economic benefit of self driving vehicles could belarger than the Interstate!!

13. Implications for State DOTs • Medium and long-range plans need to recognize new vehicles • How soon will new vehicles deploy and what level of autonomous vehicles? • How large is improvement in capacity? • Funding gap shrinks as effective capacity grows • Implications for investments • Is transit a winner (last mile access) or a loser? • High Occupancy Technology Lanes as a way to speed roadway gains

14. Lots of Questions • What level of autonomous vehicles will we see? • Google world or OEM world – or both? • Will after market systems be important? • Are there early successes? • Shuttle buses • Urban runabouts – slow speed for local trips • High Occupancy Technology lanes • Truck pelotons – probably need dedicated space

15. More Questions • Connected vehicle important for full capacity gains • US DOT vision of V to V • Or cellular based systems • Need for after market devices • Given scale of benefits do public subsidies make sense? • Pace of deployment is key question • Will regulations help or hinder? • NHTSA process underway • State DMV regulations • Cost of vehicles

16. An Optimistic View of Exciting Times • Autonomous vehicles are part of a positive sea change in transportation • Autonomous vehicles could combine benefits of transportation and technology networks • There will be winners and losers, but risks of delay if we over analyze • Now is the time for state DOTs and MPOs to include autonomous vehicles as part of planning – implications for finance, investment, and public perception