Automakers envision a business model for AVs: selling miles, not cars

Raphael Gindrat

A blue car sitting atop a pile of money — Illustration: Sarah Grillo/Axios

If AVs eventually dominate the car industry, automakers could start charging for miles travelled instead of vehicles sold — potentially a much bigger revenue opportunity.

The big picture: Automakers and tech companies are investing in AV technology because it offers, among many things, a new revenue stream if people shift from owning vehicles to buying access to transportation.

Background: Currently automakers make $512 billion selling about 17 million vehicles per year, for an average of around $30,000 each.

Meanwhile, ride-hailing costs about $2.50 per mile, including driver labor, according to estimates from Ford and from GM.

How it works: There are some 260 million cars on U.S. roads, traveling an average 3.9 trillion miles per year.

At 60 cents per mile (AAA's estimate of vehicle operating costs in the U.S.), this represents a $2.37 trillion revenue opportunity today, if all miles were converted to AV services.
If automakers indeed shift their business model to operate autonomous mobility services, there's room to earn a tidy profit and still charge far less than ride-sharing companies.

The bottom line: The Center for Automotive Research found that "OEMs and venture capitalists expect innovative mobility services will start yielding double-digit profit margins, much higher than the 4% to 9% automakers' core business currently generates" — up to 20%.

Raphael Gindrat is co-founder and CEO of Bestmile, which has developed a fleet-management platform.

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Automakers envision a business model for AVs: selling miles, not cars

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