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Nelson Hsu
Nelson Hsu
Articles (105) 

Ford Reveals Plans for Autonomous Vehicles

Carmaker describes how its business model will change

September 22, 2016 | About:

In my last post, I discussed how the Department of Transportation (DoT) issued new guidelines for highly autonomous vehicles (HAV) paving the way for carmakers to introduce self driving cars to the mass market.

HAVs have the potential to decrease car deaths, traffic and oil consumption. Furthermore, they could lower transportation costs, empower people with disabilities, lower carbon emissions and spur massive economic activity.

As a result, there are many stakeholders who want HAVs sooner rather than later. So how soon could we see HAVs being produced in high quantities? In August, Ford (NYSE:F) announced plans to produce HAVs as soon as 2021. The company gave more details about its plans at a recent investor day presentation.

First, Ford intends to be a player in the Transportation as a Service (TaaS) industry. TaaS includes ridesharing services like Uber and Lyft as well as shuttle services like Chariot.

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In order for participation in the TaaS industry to make economic sense, it’s necessary for the company to drive down travel costs per mile, and that’s where autonomous vehicles come in. Ford plans to produce HAVs without steering wheels or pedals. Its goal is to deliver SAE Level 4 HAVs in volume by 2021. The DoT describes SAE Level 4 as a vehicle with an automated system that can drive and monitor the environment without human intervention, but the automated system can only operate in certain environments and under certain conditions. A hypothetical example would be if a Level 4 HAV was limited to driving in specific cities when it’s not snowing.

Currently, SAE Level 1 and 2 cars are in production which offer assisted driving and have features such as automated braking, lane keep assist and autopilot. The company will skip deployment of SAE Level 3 cars and instead deploy Level 4 HAVs to large urban markets. The difference between Level 3 and Level 4 is that Level 3 cars still require the human to take over occasionally.

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When comparing different modes of transportation such as taxis, car ownership and mass transit, you can see from the graphic below that taxis cost the most at $6 per mile. Most of the cost for taxis and Uber ride sharing is labor and fuel costs. With HAVs, Ford believes it can drive the cost to $1 per mile. The cost of an HAV is high, but what drives the cost per mile down is usage. Most cars sit parked and dormant 95% of the time.

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At its investor day, Ford Chief Technology Officer Raj Nair expressed the company’s belief that “under a pretty moderate adoption scenario, we projected autonomous vehicle sales could grow up to 20% of total vehicle sales by 2030. So you couple that along with the opportunity of not just manufacturing and selling the vehicles but participating in the transportation of the service opportunity, participating in the vehicle management as the service opportunity. You could see why this is such a large opportunity for Ford Motor Company.”

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In the graphic below, you can see Ford’s aggressive schedule. The company is developing and testing HAVs and plans to produce hundreds of thousands of self-driving cars by 2021.

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Disclosure: The author does not have a position in any stocks mentioned in this article.

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