Is Autonomation about to put disruptive innovation investors in the driver’s seat?
Robots that can transport people and parcels are set to reduce the cost of point-to-point travel to a tenth of the cost of a taxi today, making autonomous ridehailing the norm and personal car ownership the exception.
This was the headline messages conveyed by ARK-Invest’s Tasha Keeney at a webinar hosted by Nikko AM NZ last Friday. Keeney, a leading commentator on the future of autonomous transport in the US, was quick to point out that this revolution would not be confined to ground-based transport. Aerial drones, she said, will not just change the way we shop, but the way we travel and access services from food delivery to healthcare.
Adjusted for inflation, the cost to own and operate a personal car has not changed since the model T rolled off the first assembly line, at roughly 70 cents per mile. ARK estimates that through economies of scale, autonomous taxis will cost consumers 25 cents per mile, spurring widespread adoption.
“We expect that this will encourage two car households in urban areas to drop to one car; and one car households to go carless, bringing with it long overdue disruption.”
Keeney says autonomous ridehailing companies will likely be able to command platform fees exceeding 30%, changing the focus of the automotive industry to providing software as a service. ARK predicts that the winners in this space will therefore be the companies that are able to build the autonomous technology stack successfully; essentially those that enable the car to drive itself. And in this field Tesla is already way out in front, having the ability to learn from 20 million miles per-day of data provided by its current fleet of cars being driven around the world.
Keeney says that if today’s ridehailing platforms like Uber and Lyft want to survive, then they will need to partner with technology players. But even then, their future is not as bright.
“They won’t get the 20-30% platform fees that they’re getting off gross revenues from ride-hailing today. We think they might just get a few percentage points, basically by offering their customer base to the technology player.”
Through advancements in battery life and autonomous flight capability, the cost to deliver people and things by air is also declining dramatically.
“With drones able to deliver goods inside 30 minutes within a 10 mile radius for just cents in the dollar, we will see a reduction in the price of goods, as embedded delivery costs are removed, and a total change in shopping and food delivery habits,” says Keeney.
Creating widespread disruption to consumer behaviour, ARK believes that drones could push global ecommerce up from 14% of total retail sales at the end of 2019 to 60% by 2030.
“At 25 cents per delivery, autonomous parcel drone operators could be targeting a $115 billion market opportunity by 2030. We also believe that drones will cause an inflection in food delivery, particularly outside of the dense urban centres, and estimate that revenue from drone food delivery could total a similar figure within this same time frame.”
While transporting people by drone might seem like a crazy idea now, the technology is there today and Keeney envisages a not-too-distant future when an air taxi could deliver someone from mid-town New York to the airport for roughly the same cost as a taxi today.
“While the cost of taxis will come down with the advent of autonomous ridehailing, these ground vehicles will still face the issue of congestion. Therefore customers will have the choice of sitting in traffic for over an hour for $10, or paying for the advantage of arriving in less than a third of the time.”
Keeney says autonomous drones will also bring vital improvements to emergency care, allowing air ambulances to circumvent traffic to deliver treatment faster and in many cases more cheaply.
“In the US, roughly 350,000 cardiac arrests occur outside of hospitals each year, with only 12 per cent of the victims surviving. By decreasing response times, we believe drones could save up to 20,000 lives annually.”
The value of innovation
ARK believes that drone delivery platforms could generate roughly $275 billion in delivery revenues, $49 billion in hardware sales and $12 billion in mapping revenue by 2030. But even this pales in comparison to the potential of autonomous ridehailing, which ARK estimates could become a $9 Trillion industry by the end of the decade – making it bigger than the current auto manufacturing and energy industries combined today.
New Zealand investors can gain exposure to the companies that are pioneering these new technologies, as well as those in the fields of Robotics, DNA Sequencing, Energy sStorage, 3D Printing and Big Data, through the Nikko AM ARK Disruptive Innovation Fund. This can be accessed at Nikko AM’s roboadvice platform, www.goalsgetter.co.nz A recording of Tasha’s presentation is available to view here.