2025 - Market Insights: Autonomous Mobility
AUTONOMOUS MOBILITY: As technological barriers diminish, shared autonomous vehicles have transitioned from experimental concepts to practical solutions. What steps are necessary to boost their adoption?.
Shared autonomous vehicles (AVs) are now operational in over ten cities globally, including Beijing, Oslo, Phoenix, and San Francisco. More deployments are anticipated as AVs with level four capabilities—able to perform most functions autonomously—become more advanced.
A dual mission: Affordability and profitability
It’s a balancing act. Shared autonomous mobility must be either less expensive or more convenient than traditional urban transport options to attract users, yet the pricing must be sufficient for all stakeholders in the value chain to profit. Achieving both goals simultaneously can be challenging.
Vehicles
This category encompasses all costs and depreciation for a single self-driving system with level four capabilities. Currently, these costs represent about 20 percent of total expenses, or $1.64 per VMT, but could decrease by approximately 85 percent by 2035. Key factors driving this reduction include:
Greater vehicle utilization. Significant cost savings are anticipated from increased usage of shared AVs with level four capabilities, driven by higher consumer adoption, improved utilization, expanded operational areas, and enhanced dispatching algorithms.
AV technology. Companies are likely to manufacture some system components, such as sensors and high-performance computers, at larger scales, reducing costs. Additional savings may arise as engineers simplify the hardware and software for AV kits, potentially using fewer sensors and lower storage and compute capacities. Software and data requirements may also become less complex, with optimizations in algorithm performance and software update processes to minimize maintenance and repair needs. Despite lower costs, these simplified AV kits should maintain or enhance performance.
Purpose-built vehicles. These vehicles and their AV kits are designed for longevity. Companies will focus on designs that minimize wear and downtime, potentially utilizing replaceable batteries optimized for specific use cases.
Local Operations
One-time and ongoing costs for location-specific operations include expenses for operation-design-domain mapping, algorithm localization, and validation efforts. Providers should also allocate budgets for fleet management, charging infrastructure, launch management, and other infrastructure-related costs. Currently, local operations account for about 50 percent of the total cost of shared autonomous mobility, or approximately $4.14 per VMT.
Future Mobility
Increasing fleet size could enable companies to benefit from economies of scale, reducing local operational costs. Additionally, local operational costs may decrease by about 70 percent by 2035 through various improvement initiatives. Enhancements in daily operations are expected to yield the most significant benefits, with key strategies including automating charging and cleaning processes, standardizing sensor maintenance and repair, forming partnerships with existing mobility and infrastructure operators to share facilities, and minimizing “empty” miles by optimizing hub locations and deploying vehicles based on data. Providers might also consider enhancing access to rideshare networks and platforms to maximize customer convenience and rider volumes.
Beyond daily operations, providers may also lower local costs through improved R&D and launch management. For example, they could establish specialized teams with experience in managing launches across multiple locations to oversee future initiatives. Efficiency in data collection, performance simulations, and other R&D tasks could also be enhanced.
Global deployment
Global deployment costs, such as those for launch management teams, currently represent about 30 percent of the total cost of shared autonomous mobility, or $2.40 per VMT, but could potentially decrease by around 85 percent by 2035.
Similar to local operations, advancements in AV technology are a significant factor in cost reduction. Companies may reduce central data and compute requirements as their scale and efficiency improve, and they may also lower hardware costs through optimized sourcing. In daily operations, providers can cut costs by refining algorithms, optimizing vehicle-control-center processes, and enhancing operator interfaces—actions that will reduce the need for vehicle-control-center operators to intervene during rides.
At present, most shared AV providers operate on a relatively small scale and cover limited areas. As they expand their scale and geographic coverage, they may benefit from centralizing certain functions, such as finance, procurement, HR, and legal, which could be more cost-effective than maintaining independent groups at each location. Companies may also explore options for automating or offshoring some central tasks.
Safety: Enhancing systems while building consumer trust
Handing over vehicle control to an autonomous system necessitates significant trust in the underlying technology. Compounding concerns, recent media reports have highlighted several incidents where AVs acted erratically in traffic, were involved in accidents, or harmed pedestrians. Regulators are closely monitoring developments, and reporting requirements may become increasingly stringent.
As shared AV operators seek to scale their operations, they must address persistent safety concerns. Companies are continuously enhancing safety by refining their AV hardware and software through improved algorithms and extensive testing and validation. Leaders are increasingly recognizing safety as more than just a technical challenge, with some establishing dedicated safety organizations and frameworks in collaboration with third parties to elevate safety standards.
Enhanced governance and reporting mechanisms could also foster trust in AV safety. For instance, companies could maintain regular communication with policymakers regarding significant developments or collaborate with regulators to create standardized frameworks for monitoring and tracking the safety of self-driving systems.
Accessibility: Ensuring that all groups can utilize AVs
As shared AV ridership increases, operators must ensure equitable access for populations with limited driving capabilities. Some early leaders are already reducing barriers for older adults and individuals with disabilities through:
Barrier-free vehicle designs. Providers ensure that certain vehicles in their fleet are wheelchair accessible, promoting greater independence for riders.
Partnerships. Community organizations advocating for individuals with disabilities have collaborated with shared-AV operators to help shape and test accessible ride-hailing services.
With such accommodations, utilizing a shared AV could become as convenient as owning a private vehicle or hailing a taxi. For older individuals and those with disabilities, this service could enhance independence and reduce isolation by facilitating more frequent outings.
What technology trends are influencing the mobility sector?
For underserved populations with limited transportation options, shared AVs could offer an additional affordable transportation alternative if prices continue to decline. For example, they may operate in areas where human rideshare drivers often refuse rides due to safety concerns or other issues. Incremental routes for AVs are less costly to implement than for driver-based services, enabling providers to scale their operations more rapidly.
Sustainability: Further emissions reductions
Most autonomous fleets consist of battery electric vehicles (BEVs). Shared BEVs generate 85 to 98 percent fewer emissions per passenger mile traveled compared to private diesel vehicles. A recent McKinsey analysis indicates that companies could reduce current BEV emissions by approximately 71 percent by implementing improvements throughout the entire vehicle life cycle, from design to operations (Exhibit 3). Supply chain enhancements, such as utilizing green components and energy, could contribute to about 42 percent of this reduction (or 11 grams of CO2 per passenger kilometre).
However, while shared AVs may depend on electric batteries, their increased usage could worsen road congestion and increase the number of “deadhead” miles—those without passengers. To ensure that shared fleets maximize sustainability benefits, regulators and industry leaders must recognize and address these potential challenges.
Although shared AVs are now a reality, they still attract attention, even in cities where they are well established. For these vehicles to achieve scale and expand into new areas, stakeholders must focus not only on technological advancements but also on affordability, safety, accessibility, and sustainability, ensuring profitability for all businesses in the value chain. Many OEMs and others are already working to enhance these aspects, and their efforts could position shared AVs as a vital component of urban mobility.
Hugo Pearson is a Partner at Lion Group
❯ Lion Global Capital Partners