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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