In times of mass disruption, it is often only after industry emerges out the other side that it realizes it’s been disrupted. Take Uber and Lyft, for example. When those services launched, the taxi industry did not consider them a threat. Today, Uber and Lyft are not only disrupting the taxi industry, they are starting to own it.
According to Tony Seba, author and futurist, those two companies now account for 20% of all vehicle miles traveled in San Francisco; in 2009 that total was 0%. Seba also cited the examples of AT&T, Kodak and the horse and buggy during his opening keynote address at FreightWaves’ Transparency18 conference at the Georgia International Convention Center in Atlanta.
Seba began his address to the more than 700 attendees by telling the story of the horse-and-buggy in New York City in 1900. He showed a picture of a road with a single car among all the horses. Just 13 years later, a picture of that same road had one horse among a sea of cars.
“If anyone had stood on a stage in 1900 and said [cars would disrupt the horse], they would have called them insane,” Seba said. “That is a technology disruption.”
Seba went to note that AT&T asked McKinsey & Co. in 1985 to predict what the cell phone market would be in 2000. McKinsey came up with 900,000 units. AT&T sat on the sidelines initially and watched other companies dominate the 109M unit market. The same happened to Kodak, he added, saying that it was Kodak that developed the first digital camera. By 2012, the company had filed bankruptcy. “Kodak invented the digital camera, but yet they couldn’t disrupt themselves,” Seba related.
Fast forward to the year 2021, and Seba believes the convergence of electric and autonomous vehicles will be the tipping point that turns American society from one dominated by car ownership to one dominated by a new service, something called Transportation as a Service (TaaS).
“Why did Apple make the iPhone in 2007 and not 2005,” Seba asked. “It’s because the technologies that made the $600 iPhone possible converged in 2007.”
The same thing is now happening in 2018, he said, and it will reach its tipping point around 2021 as it radically changes American society.
“So what happens in 2021? …that day the cost of transportation [per mile] goes down 10X?” he said. “Every time 10X occurs, it causes a disruption. Every single time.”
By 2030 Seba believes 95% of passenger miles will be on electric and autonomous vehicles and the U.S. automotive fleet will shrink 80%. Additionally, the demand for individually owned vehicles will drop 70% and 80% to 90% of the current parking lots in America will be vacant.
“For the first time in over a century since the horse-and-buggy, American cities are going to be redesigned,” he said.
The reasons for this is the pace of technology advancement and a dramatic lowering of costs. The cost of Li-ion batteries dropped an average of 14% over 15 years, but since 2014, that drop accelerated to 16% and then 20%. Twenty new factories for producing the batteries will come online by 2021 versus just three that existed in 2014.
“People told me that costs can’t keep dropping by 16% and they were right,” Seba said. “It’s now 20%.”
Battery costs aren’t the only thing dropping. Lidar, an essential radar system for autonomous vehicles, has dropped in price from more than $60,000 in 2012 to just $250 per unit in 2018. A super computer needed to operate all the systems in an electric and autonomous vehicle, costs $50M in 2000 for a 1 teraflop system, but now an 8-teraflop system is $600.
In general, electric vehicles are ten times cheaper to charge than a gas car is to fill over five years, Seba said. It also has only 20 moving parts, compared to about 2,000 parts for a gas model, reducing maintenance costs. And with powertrains designed to work for 500,000 miles or more, the electric vehicle provides a significant cost advantage.
By 2021, Seba predicts the average American family using the TaaS model, would save over $6,000 per year by not owning a car. “Everyone will have access to cheap transportation for the first time in history,” Seba said.
“We are on the cusp of the largest, the most consequential disruption in transportation history,” he added. “And at that tipping point (2021), if you are not ready, you are out.”
He added that the way we view transportation today is similar to another point in history. “We’re all essentially driving typewriters on wheels and if you don’t know what a typewriter is, I’ve made my point,” he said.
Seba concluded his talk by taking aim at critics who don’t believe we are in a technological revolution. “This not a transition, as the experts would have you believe,” he said. “This not an energy transition, this is a technology disruption.”