Apr 17, 2019

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

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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Situational awareness

Photo: Brett Carlsen/Getty Images

Catch up on today's biggest news:

  1. Mike Bloomberg offers to release women from 3 NDAs
  2. Wells Fargo to pay $3 billion to settle consumer abuse charges
  3. Bloomberg campaign says Tennessee vandalism "echoes language" from Bernie supporters
  4. Scoop: New White House personnel chief tells Cabinet liaisons to target Never Trumpers
  5. Nearly half of Republicans support pardoning Roger Stone

Wells Fargo agrees to pay $3 billion to settle consumer abuse charges

Clients use an ATM at a Wells Fargo Bank in Los Angeles, Calif. Photo: Ronen Tivony/SOPA Images/LightRocket via Getty Images

Wells Fargo agreed to a pay a combined $3 billion to the Justice Department and the Securities and Exchange Commission on Friday for opening millions of fake customer accounts between 2002 and 2016, the SEC said in a press release.

The big picture: The fine "is among the largest corporate penalties reached during the Trump administration," the Washington Post reports.

Bloomberg offers to release women from 3 nondisclosure agreements

Mike Bloomberg. Photo: Brett Carlsen/Getty Images

Mike Bloomberg said Friday his company will release women identified to have signed three nondisclosure agreements so they can publicly discuss their allegations against him if they wish.

Why it matters, via Axios' Margaret Talev: Bloomberg’s shift in policy toward NDAs comes as he tries to stanch his loss of female support after the Las Vegas debate. It is an effort to separate the total number of harassment and culture complaints at the large company from those directed at him personally. That could reframe the criticism against him, but also protect the company from legal fallout if all past NDAs were placed in jeopardy.