A world shaped by autonomous technology - Economic disruption in the transport sector - a case study - MSCI
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THEMATIC INSIGHTS
A world shaped by
autonomous technology
Economic disruption in the transport
sector – a case study
msci.com
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Contents 04 Overview 06 A wave of disruption for the auto industry and beyond 10 Autonomous technology and the mobility ecosystem 14 Conclusion 2 msci.com msci.com 3
A world shaped by autonomous technology
Overview It seems that transportation may now
be entering another period of innovation.
Superior economics as well as increased
convenience could soon encourage
widespread consumer adoption of
Transportation serves a fundamental economic function, and historically,
autonomous (electric) cars. Adjusted for
transportation innovations have both foreshadowed and enabled
inflation, the total cost to own and operate
fundamental economic transformations. In the late 1800s, the Sears’
a personal car has changed little since the
catalog could not have transformed retail without the railroad.1 Likewise, in
Model T first rolled off the assembly line.
the 1920s, without the widespread adoption of tractors and the Model T, the
In comparison, it has been estimated3
agricultural workforce could not have so easily moved to the cities. Again,
that, at scale, autonomous taxis may cost
after the Second World War, the internationalization of business followed
consumers as little as USD 15 cents per
the jet turbine; the globalization of manufacturing necessitated standardized
kilometre. In this model, autonomous
shipping containers; and the growth of the suburbs with their superstores
taxis allow a ten-fold increase in vehicle
supported road system expansion and widespread ownership of relatively
utilization and thus enable a huge
inexpensive cars.2
reduction in the price of point-to-point
travel alongside a significant shift in
consumer behaviour. The taxi would then
grow to dominate personal mobility, with
associated deep economic and societal
impacts. In that scenario, over the next
5-10 years, autonomous electric taxis
would have a profound impact on global
health and would disrupt the auto industry
and associated industries.
1 “History of the Sears Catalog,” Sears Brands LLC, March 21
2012, Sears Archives.
2 “Two Prime Movers of Globalization: The History and Impact
of Diesel Engines and Gas Turbines“, Vaclav Smil, Cambridge,
MA: MIT 2010; “Why have containers boosted trade so much?”,
Economist, May 22 2013; “The Interstate Highway System”
Jean-Paul Rodrigue, 2016, Hofstra University
3 “A Better Understanding of ARK’s Autonomous Taxi Model”,
Tasha Keeney, March 2019, ARK Invest.
4 msci.com msci.com 5
A world shaped by autonomous technology
Exhibit 1:
The price of personal mobility – 1871 to 2024E
Source: ARK Invest
Cost Per Mile of a Personally Owned Vehicle
2019 (Dollars)
A wave of
$1.70
disruption for the
$0.70 $0.70 $0.70 auto industry
and beyond
$0.25
1871 1934 1950 2016 2025 Let us examine these arguments half the cost of a personal car, half
in more detail to better understand the cost of a short flight, and close to
how autonomous electric vehicle many public transit modes, as shown
technology could cause a wave of in Exhibit 2.8 As a result, autonomous
More broadly, within the transport sector, robotaxis could reduce the cost
disruption beyond the auto industry. taxis could quickly come to dominate
of point-to point-mobility discontinuously in the US, potentially taking USD
ARK Invest forecasts that if battery urban personal transportation, leaving
150 billion in annual demand per annum from ride-hailing, short-haul flights
system costs were to decline as little economic need for personal
and public transit.4 If robotaxis were to dominate urban transit, then ARK,
projected, the subsequent fall in vehicles. This is the driver for ARK’s
for example, estimates US auto sales to drop from 17 million units today
electric vehicle prices would be estimate that, for example, US auto
to roughly 10 million by 2030.5 Knock-on effects would hit traditional auto
enough to trigger mass market sales fall from 14 million units today to
insurance (cutting total annual premiums by half) and the auto loan market
electronic vehicle (EV) adoption.7 just 10 million over the next 10 years.9
(the legacy vehicle fleet, worth USD 2.6 trillion,6 would face material write-
Autonomous driving systems could
downs). Oil demand could then peak much sooner than currently forecast
also boost vehicle utilization and lower
as electric vehicle mileage grows. 7 ARK Invest “Big Ideas 2019”, “Big Ideas 2020”
the cost of transportation overall: 8 Assumes short-haul flights are less than or equal to 700 miles.
robotaxis may cost consumers just 9 “Bad Ideas Report: The Industries That Could Be Disrupted by
Innovation”, ARK Invest, October 2020; Lutz, Hannah.
4 ARK Investment Management LLC; “Public Transportation Facts” American Public Transportation USD 0.15 per kilometre, less than https://www.spglobal.com/platts/en/market-insights/
Association, 6 Oct. 2020; “Consumer Airfare Report: Table 1 - Top 1,000 Contiguous State City-Pair latest-news/metals/010621-us-2020-auto-sales-slide-15-but-
Markets” US Department of Transportation. recovery-stronger-than-expected
5 Wagner, I. “U.S. Vehicle Sales 1978-2019.” Statista, 16 July 2020, www.statista.com/statistics/199983/us-
vehicle-sales-since-1951/.
6 ARK Invest; “2019 Used Car Industry Report” Niada.
6 msci.com msci.com 7
A world shaped by autonomous technology
Exhibit 2: Exhibit 3:
Modes of transportation price per mile Annual Economic Loss From Auto Deaths By Country
Source: ARK Invest Source: ARK Invest
$4.00 100
$3.50
$3.00 80
$2.00
$2.00 60
$ Billions
$1.17
$1.00 $0.70 $0.58 $0.55 40
$0.33 $0.25 $0.23 $0.23 $0.22 $0.17
$0.00 20
Ridehail
Private Plane
Short-Haul Flight
Medium-Haul Flight
Taxi
Used Personal Car
Commercial Plane
New Personal Car
Ferryboat
Autonomous Taxi
Commuter Rail
Commuter Bus
0
China
India
Japan
Mexico
Italy
France
Rusia
Germany
South
Korea
USA
UK
If consumers shift in this way from sheets”.10 Both consumers and lenders Every year automobiles claim more than erosion would likely be uneven - young
personal cars, then loan service could would need to write down these assets, 1.2 million lives globally at an economic drivers who pay the highest premiums
reduce and defaults rise on auto loans. causing corporate stress and undermining cost of hundreds of billions of dollars.12 (even with dash cams and blackbox
The risks to auto loans would have a wealth effects in consumption. This immediate direct public health gain discounts) would likely become early
knock-on effect for the asset-backed would be bolstered by the reduction in adopters of autonomous technology.14
Auto insurance rates could also fall.
securities derived from the pool of urban pollution and carbon emissions.
According to ARK Invest, robotaxis
liabilities, which could undermine the 10 ARK Invest; “Motor Vehicle Loans Owned and Securitized,
would not only be less expensive than ARK estimates that roughly 57% of all Outstanding.” FRED, 7 Oct. 2020,
prevalent purchase models in the global
personal transportation, but also safer automotive miles traveled in the US will 11 “Mobility As-A-Service: Why Self-Driving Cars Could Change
auto ecosystem. The familiar finance Everything,” ARK Invest, Tasha Keeney, October 2017
(accident rates forecast to drop by more be autonomous in the next 10 to 12 years 12 Calculated by ARK Invest using data from the National Highway
plan-based rotation into new models Traffic Safety Administration, WHO, Worldbank and Wolfram
than 80%). The majority of the US car and that non-autonomous miles traveled Alpha, see “Mobility As-A-Service: Why Self-Driving Cars Could
would break down in such a scenario with Change Everything,” ARK Invest, Tasha Keeney, October 2017
accident fatalities are young people. The will drop by nearly 40%.13 As shown in the
a sharp reduction in the residual value of 13 “Auto Insurers Should Fear: Autonomous Driving Networks Are
economic impact of this tragic loss of life figure below, traditional auto premiums Near!”, ARK Invest, Nicholas Grous, May 2019.
internal combustion engine (ICE) used- 14 “Bad Ideas Report: The Industries That Could Be Disrupted by
is therefore huge: at least USD 77 billion (excluding autonomous vehicles) could Innovation”, ARK Invest, October 2020
vehicles. Loans totalling USD 1.2 trillion
per year in lost economic contributions.11 drop roughly 55% from an expected peak
support roughly USD 2.6 trillion in vehicles
This amount is equal to the entire GDP of of USD 266 billion in 2023 to $122 billion
on US roads today, with the balance of
New Hampshire. by 2030. Moreover, customer and profit
USD 1.4 trillion on consumer “balance
8 msci.com msci.com 9
A world shaped by autonomous technology
Exhibit 4: Exhibit 5:
Total US Auto Premiums Collected (Inflation Adjusted) Oil Demand Forecast
Source: ARK Invest Source: ARK Invest
$ 110
300 100
90
250
80
200
70
150 60
100 50
40
50
2035
2034
2033
2032
2031
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
0
BP Oil Demand Forecast (Mb/d) ARK Oil Demand Forecast with EV Adoption (Mb/d)
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
ARK Oil Demand with Autonomous and EV Adoption (Mb/d)
ARK Auto Premiums Forecast ARK Autonomous Vehicle Premiums Forecast
Finally, the USD 4 trillion oil industry share of total mileage. Today, the capacity
supporting ICE vehicles has likely utilization of a personal car in the US is
peaked.15 Battery system cost declines less than 5%, 10 times less than the 50%
could lower EV sticker prices to levels that is forecast for robotaxis.18 Although
below those of their gas counterparts we believe EVs will account for roughly
during the next two to three years, 15% of the installed base in 2025, electric
stimulating EV demand to the upside miles could total roughly 40% of total
(especially while external regulation passenger auto miles traveled.
pressures e.g. auto makers in Europe).
While the EIA forecasts EV new sales
15 “Bad Ideas Report: The Industries That Could Be Disrupted by
penetration of 2% in 2022,16 ARK Innovation”, ARK Invest, October 2020
expect to see up to 20%.17 In this way, 16 “Annual Energy Outlook 2019 with Projections to 2050.” US
Energy Information Administration.
inexpensive electric robotaxis could 17 ARK Invest “Big Ideas 2020”
start to account for a disproportionate 18 ARK Investment Management LLC, Average Annual Miles per
Driver by Age Group.
10 msci.com msci.com 11
A world shaped by autonomous technology
Autonomous
technology
and the mobility
ecosystem
When assessing autonomous technology generate roughly USD 70 billion in earnings
and its impact on the mobility ecosystem, by 2030. As the equity market begins to
the challenge for investors is to assess who discount the opportunity accumulating to
will extract the economic rent. That means autonomous platform providers by 2030,
both directly in relation to the switch to EVs ARK Invest forecasts that their aggregate
but also as to the changes in social behavior enterprise value could scale UD 3.8 trillion
and those players who may control access in 2025.20 Exhibit 6:
to ecosystem. ARK Invest, for example, ARK Believes That Autonomous Ride-Hailing Platforms Could Generate More Than $1 Trillion
In Operating Earnings Annually by 2030
has forecasted autonomous ride-hailing 19 “Mobility As-A-Service: Why Self-Driving Cars Could Change
Source: ARK Invest
platforms should generate over USD 1 Everything,” ARK Invest, Tasha Keeney, October 2017
20 ARK Invest “Big ideas 2021”
trillion in operating earnings by 2030.19 Operating Earnings Across The Autonomous Value Chain
Platform providers, or companies that own (Billions USD)
the autonomous technology stack, will likely
1,200
gather the lion's share of the profits. Hence,
auto manufacturers with successful EV
platforms that partner with autonomous
technology providers could generate roughly
USD 250 billion in earnings by 2030. Fleet
owners that own, house, and maintain
autonomous ride-hailing vehicles could 190 250
40 70
5
2025 2030
Platform Provider Auto Manufacturer Fleet Owner
12 msci.com msci.com 13
A world shaped by autonomous technology
Conclusion
The growth in sophistication of autonomous technology
is a key driver for the disruptive changes it is bringing to
the mobility ecosystem. Moreover, it is illustrative of the
impact of robotics and automation more generally on many
other areas of social and industrial activity in the coming
years. The case study we have sketched here focused on
how autonomous electric vehicles could lead to profound
industrial, financial market and social change. But that
story is mirrored in the effect that autonomous technology,
robotics and industrial innovation could have in the
manufacturing, energy and materials sectors, for example.
MSCI would like to thank ARK Invest for
useful discussions and insightful analysis
of this megatrend, which have greatly
facilitated the preparation of this document.
14 msci.com msci.com 15
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