Affordability of AI Self-Driving Cars

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By Lance Eliot, the AI Trends Insider

They’ll cost too much. They will only be for the elite. Having one will be a sign of prestige. It’s a rich person’s toy. The “have nots” will not be able to get one. People are going to rise-up in resentment that the general population can’t get one. Maybe the government should step in and control the pricing. Refuse to get into one as a form of protest. Ban them because if the rest of us cannot have one, nobody should.

What’s this all about?

It’s some of the comments that are already being voiced about the potential affordability (or lack thereof) of AI self-driving cars.

At the Cybernetic AI Self-Driving Car Institute, we are developing AI software for self-driving cars, and we get asked quite frequently about whether AI self-driving cars will be affordable or not. I thought you might find of interest my answer (read on).

When people clamor about the potential sky reaching cost of AI self-driving cars, you might at first wonder if people are maybe talking about flying cars, rather than AI self-driving cars. I mention this because there are some that say that flying cars will be very pricy and I think we all pretty much accept that notion. We know that jet planes are pricey, so why shouldn’t a flying car be pricey. But, an earth-based car that rolls on the ground and cannot fly in the air, nor can it submerge like a submarine, we openly question how much such a seemingly “ordinary” car should cost.

It is said that a Rolls-Royce Sweptail is priced upwards of $13 million dollars. Have there been mass protests about this? Are we upset that only a few that are wealthy can afford such a car? Not really. It is pretty much taken for granted that there are cars that are indeed very expensive. Of course, we might all consider it rather foolish of those that are willing to pump hard-earned millions of dollars into such a car. We might think them pretentious for doing so. Or, we might envy them that they have the means to buy such a car. Either way, the Rolls-Royce and other such top to-end cars are over-the-top pricey and most people not especially complain or argue about it.

Part of the reason that people seem to object to the possible high price tag on an AI self-driving car is that the AI self-driving car is being touted as a means to benefit society. AI self-driving cars are ultimately hopefully going to cut down on the number of annual driving related deaths. AI self-driving cars will provide mobility to those that need it, and that cannot otherwise achieve it, such as the poor and the elderly. If an AI self-driving car has such tremendous societal benefits, then we want to as a society ensure that society as a whole gets those benefits and that those benefits will presumably apply across the board. It’s a car of the people, for the people.

What kind of pricing then, for an AI self-driving car, are people apparently thinking of? Some that don’t have any clue of what the price might be are leaving the price tag unknown and thus it makes things easier to get into a lather about how expensive it is. It could be a zillion dollars. Or more. This though seems like a rather vacuous way to discuss the topic. It would seem that we might be better off if we start tossing around some actual numbers and then see if that’s prohibitive or not to buy an AI self-driving car.

The average transaction price (ATP) for a traditional passenger car in the United States for this year is so far around $36,000 according to various published statistics. That’s the national average.

When AI self-driving cars first get started a few years ago, the cost of the added sensors and other specialized gear for achieving self-driving capabilities was estimated at somewhere around $100,000. Meanwhile, since then, the price on those self-driving car specialized components aspects has steadily come down. As with most high-tech, the cost starts “high” and then as it is perfected and the costs to make it wringed out of the process, the price heads downward. In any case, some at the time were saying that an AI self-driving car might be around $150,000 to $200,000, though that’s a wild guess and we don’t yet know what the real pricing will be. Will it be a million dollars for an AI self-driving car? That doesn’t seem to be in anyone’s estimates at this time.

Of course, any time a new car comes out, particularly one that has new innovations, there is usually a premium price placed on the car. It’s a novelty item at first. The number of such cars is usually scarce initially, and so the usual laws of supply and demand help to punch up the price. If the car is able to be eventually mass produced, gradually the price starts to come down as more of those cars enter into the marketplace. If there are competitors that provide equivalent alternatives, the competition of the marketplace tends to drive down the price. You can refer to the Tesla models as prime examples of this kind of marketplace phenomena.

Will True AI Self-Driving Cas Be Within Financial Reach?

Suppose indeed that the first true AI self-driving cars in the low hundreds of thousands of dollars. Does that mean that those cars are out of the reach of the everyday person?

Before we jump into the answer for that question, let’s clarify what I mean by true AI self-driving cars. There are levels of self-driving cars. The topmost level is Level 5. A Level 5 AI self-driving car is able to be driven by the AI without any human intervention. In fact, there is not a human driver needed in a Level 5 car. So much so that there is unlikely to be any driving controls in a Level 5 self-driving car for a human to operate even if the human wanted to try and drive it. In theory, the AI of the Level 5 self-driving car is supposed to be able to drive the car as a human could.

Let’s therefore not consider in this affordability discussion the AI self-driving cars that are less than a Level 5. A less than level 5 self-driving car is a lot like a conventional car, though augmented in a manner that allows for co-sharing of the driving task. This means that there must be a human driver in a car that is classified as a less than Level 5 self-driving car. In spite of having whatever kind of AI in such a self-driving car, the driving task is still considered the responsibility of the human driver. No matter whether the human driver opts to take their eyes off the road, which can be an easy trap to fall into when in a less than level 5 self-driving car, and if the AI were to suddenly toss the control aspects to that human driver, it is nonetheless the human driver considered to be responsible for the driving. I’ve warned many times about the dangers this creates in the driving task.

For my article about the levels of AI self-driving cars, see: https://aitrends.com/selfdrivingcars/richter-scale-levels-self-driving-cars/

For my framework about AI self-driving cars, see: https://aitrends.com/selfdrivingcars/framework-ai-self-driving-driverless-cars-big-picture/

For the dangers of co-shared driving and AI self-driving cars, see my article: https://aitrends.com/selfdrivingcars/human-back-up-drivers-for-ai-self-driving-cars/

We’ll focus herein on the true Level 5 self-driving car. This is the self-driving car that has the full bells and whistles and really is a self-driving car. No human driver needed. This is the one that those referring to a driving utopia are actually meaning to bring up. The less than level 5’s aren’t quite so exciting, though they might well be important and perhaps stepping stones to the level 5.

Now, let’s get back to the question at hand – will a true Level 5 AI self-driving car be affordable?

We can first quibble about the word “affordable” in this context. If by affordability we mean that it should be around the same price tag as the ATP $36,000 of today’s average passenger car in the United States, I’d say that we aren’t going to see Level 5 Ai self-driving cars at that price for likely a long time until after they are quite prevalent. In other words, out the gate, it isn’t going to be that kind of price (it will be much higher). After years of growth of more and more AI self-driving cars coming into the marketplace, sure, it could possibly eventually come down to that range. Keep in mind that today there are around 200 million conventional cars in the United States, and presumably over time those cars will get replaced by AI self-driving cars. It won’t happen overnight. It will be a gradual wind down of the old ways, and a gradual wind-up of the new ways.

Imagine that the first sets of AI self-driving cars will cost in the neighborhood of several hundreds of thousands of dollars. Obviously, that price is outside the range of the average person. No argument there.

But, that’s if you only look at the problem or question in just one simple way, namely purchasing the car for purely personal use. That’s the mental trap that most fall into. They perceive of the AI self-driving car as a personal car and nothing more. I’d suggest you reconsider that notion.

It is generally predicted and accepted that AI self-driving cars are likely to be running 24×7. You can have your self-driving car going all the time, pretty much. Today’s conventional cars are only used around 5% of their available time. This makes sense because you drive your personal car to work, you park it, you work all day, you drive home. Over ninety percent of the day it is sitting and not doing anything other than being a paperweight, if you will.

For AI self-driving cars, you have an electronic chauffeur that will drive the car whenever you want. But, are you actually going to want to be going in your AI self-driving car all day long? I doubt it. So, you will have extra available driving capacity that is unused. You could just chock it up and say that’s the way the ball bounces. More than likely, you would realize that you could turn that idle time into personal revenue.

See my article about the non-stop use of AI self-driving cars: https://aitrends.com/selfdrivingcars/non-stop-ai-self-driving-cars-truths-and-consequences/

Here’s what is most likely to actually happen.

We all generally agree that the advent of the AI self-driving car will spur the ridesharing industry. In fact, some say that the AI self-driving car will shift our society into a ridesharing-as-an-economy model. This is why the Uber and Lyft and other existing ridesharing firms are so frantic about AI self-driving cars. Right now, ridesharing firms are able to justify what they do because they are able to connect together human drivers with cars to those that need a lift. If you eliminate the human driver out of the equation, what then if the ridesharing firm doing? That’s the scary proposition for the ridesharing firms.

This all implies that ridesharing-as-a-service will now be possible by the masses. It doesn’t matter if you have a full-time job and cannot spare the time to be a ridesharing driver, because instead you just let your AI self-driving car be your ridesharing service. You mainly need to get connected up with people that need a ridesharing lift. How will that occur? Uber and Lyft are hopeful it will occur via their platform, but it could instead be say a Facebook wherein the people are already there in the billions. This is all going to be a big shakeout coming.

Meanwhile, you buy yourself an AI self-driving car, and you use it for some portion of the time, and the rest of the time you have it earning some extra dough as a ridesharing vehicle. Nice!

This then ties into the affordability question posed earlier.

If you are going to have revenue generated by your AI self-driving car, you can then look at it as a small business of sorts. You then should consider your AI self-driving car as an investment. You are making an investment in an asset that you can put to work and earn revenue. As such, you should then consider what the revenue might be and what the cost might be to achieve that revenue.

Self-Driving Car Revenue Potential Opens Door to Affordability

This opens the door towards being able to afford an otherwise seemingly unaffordable car. Even if the AI self-driving car costs you say several hundreds of thousands of dollars, which seems doubtful as a price tag, but let’s use it as an example, you can weigh against that the revenue you can earn from that car.

For tax purposes (depending on how taxes will be regulated in the era of AI self-driving cars), you can usually deduct a car loan interest when using a car for business purposes (the deduction is only with respect to the portion of it used for business purposes). So, suppose you use your AI self-driving car for 15% of the time, and the other 85% of the time you use it for your ridesharing business, you can deduct the car loan interest normally for the 85% portion.

You can also do deductions for tax purposes, sometimes using the federal standard mileage rate, or also with actual vehicle expenses including:

  •         Depreciation
  •         Licenses
  •         Gas and oil
  •         Tolls
  •         Lease payments
  •         Insurance
  •         Garage rent
  •         Parking fees
  •         Registration fees
  •         Repairs
  •         Tires

Therefore, you need to rethink the cost of an AI self-driving car. It becomes a potential money maker and you need to consider the cost to purchase the car, the cost of ongoing maintenance and support, the cost of special taxes, the cost of undertaking the ridesharing services, and other such associated costs.

These costs are weighed in comparison to the potential revenue. You might at first only be thinking of the revenue derived from the riders that use your AI self-driving car. You might also consider that there is the opportunity for in-car entertainment that you could possibly charge a fee for (access to streaming movies, etc.), perhaps in-car provided food (you might stock the self-driving car with a small refrigerator and have other food in it), etc. You can also possibly use your AI self-driving car for doing advertising and get money from advertisers based on how many eyeballs see their ads while people are going around in your AI self-driving car.

And, this all then becomes part of your budding small business. You get various tax breaks. You might also then expand your business into other areas of related operations or even beyond AI self-driving cars entirely.

One related tie-in might be with the companies that are providing ridesharing scooters and bicycles. Suppose someone gets into your AI self-driving car and they indicate that when they reach their destination, they’d like to have a bicycle to rent. Your ridesharing service might have an arrangement with a firm that does those kinds of ridesharing services, and you get a piece of the action accordingly.

Will the average person be ready to be their own AI self-driving car mogul?

Likely not. But, fear not, a cottage industry will quickly arise that will support the emergence of small businesses that are doing ridesharing with AI self-driving cars. I’ll bet there will be seminars on how to setup your own corporation for these purposes. How to keep your ridesharing AI self-driving car always on the go. Accountants will promote their tax services to the ridesharing start-ups. There will be auto maintenance and repair shops that will seek to be your primary go-to for keeping your ridesharing money maker going. And so on.

In that sense, there will be a ridesharing-as-a-business business that booms to help new entrepreneurs on how to tap into the ridesharing-as-a-service economy. Make millions off your AI self-driving car, will be the late night TV infomercials. You’ll see ads on YouTube of a smiling person that says until they got their AI self-driving car they were stuck in a dead-end job, but now, with their money producing AI self-driving car, they are so wealthy they don’t know where to put all the money they are making. The big bonanza is on its way.

This approach of being a solo entrepreneur to afford an AI self-driving car is only one of several possible approaches. I’d guess it will be perhaps the most popular.

I’ll caution though that it is not a guaranteed path to riches. There will be some that manage to get themselves an AI self-driving car and then discover that it is not being put to ridesharing use as much as they thought. It could be that they live in an area swamped with other AI self-driving cars and so they get just leftover crumbs of ridesharing requests. Or, they are in an area that has other mass transit and no one needs ridesharing. Or, maybe few will trust using an AI self-driving car and so there won’t be many that are willing to use it for ridesharing. Another angle is that you get such a car and do so under the assumption it will be ridesharing for 85% of the time, but you instead use it for personal purposes 70% of the time and this leaves only 30% of the time for the ridesharing (cutting down on the revenue potential).

Meanwhile, there are some other alternatives, let’s briefly consider them:

  •         Solo ridesharing business as a money maker (discussed so far) of an AI self-driving car
  •         Pooling an AI self-driving car
  •         Timeshare an AI self-driving car
  •         Personal use exclusively of an AI self-driving car
  •         Other

In the case of pooling an AI self-driving car, imagine that your next door neighbor would like an AI self-driving car and so would you. The two of you realize that since the neighbor starts work at 7 a.m., while you start work at 8 a.m., and the kids of both families start school at 9 a.m., here’s what you could do. You and the neighbor split the cost of an AI self-driving car. It takes your neighbor to work at 7 a.m., comes back and takes you to work at 8 a.m., comes back and takes the kids to school by 9 a.m. In essence, you all pool the use of the AI self-driving car. There’s no revenue aspects, it’s all just being used for personal use, on a group basis. This could be done with more than just one neighbor.

The pooling would then allow you to split the cost of the AI self-driving car, making it more affordable per person. Suppose you have 3 people and they decided to evenly split the cost, this would make it so that you’d only need to afford one-third of whatever the prevailing cost would be of an AI self-driving car at that time. Voila, the cost is less, seemingly so. But, you’d need to figure out the sharing aspects and I realize it could get heated as to who gets to use the AI self-driving car when needed. It’s like having only one TV and it might be difficult at times to balance the aspect that someone wants to watch one show and someone else wants another one – say you need the AI self-driving car to take you to the store, while the kids need it to get to the ballpark.

In the case of the timeshare approach, you buy into an AI self-driving car like you would if buying into a condo in San Carlo. You purchase a time-based portion of the AI self-driving car. You can use it for whatever is the agreed amount of time. Potentially, you can opt to “invest” in more than one at a time, perhaps getting a timeshare in a passenger car that’s an AI self-driving car, and also investing in an RV that’s an AI self-driving vehicle. You would use them each at different times for their suitable purposes. With any kind of timesharing arrangement, watch out for the details and whether you can get out of it or it might have other such limitations.

There’s the purely personal use of an AI self-driving car option too, which we started this discussion by saying it might be too much for the average person to afford. Even that is somewhat malleable in that there are likely to be car loans that take into account that you are buying an AI self-driving car. The loans might be very affordable in the sense that there’s the collateral of the car, plus the AI self-driving car if needed can be repossessed and then turned into a potential money maker. The auto makers and the banks and others might be willing to cut some pretty good loans to get you into your very own AI self-driving car. As always, watch out for the interest and any onerous loan terms!

Well, before we get too far ahead of ourselves, the main point to be made is that even if AI self-driving cars are priced “high” in comparison to today’s conventional cars, it does not necessarily mean that those AI self-driving cars are only going to be only for the very rich. Instead, those AI self-driving cars are actually going to be a means to help augment the wealth of those that see this as an opportunity. Not everyone will be ready or willing to go the small business route. For many, it will be a means to not only enjoy the benefits of AI self-driving cars, but also spark them towards becoming entrepreneurs. Let’s see how this all plays out and maybe it adds another potential benefit to the emergence of AI self-driving cars.

Copyright 2018 Dr. Lance Eliot

This content is originally posted on AI Trends.