How Much Does It Cost To Operate An Autonomous Vehicle?
By: Henrique Povedano
Tags: Uber, Waymo, San Francisco, Autonomous Cars, Technology

Almost nothing. Self-driving cars are insanely cheaper to operate than a normal car

The Origin, a self-driving car with no steering wheels or pedals, designed by GM-owned Cruise

This is the first in a series of stories in which I will show you just how HUGE the impact of AVs will be in our lives.

We’ll begin by looking at how much it would cost for a self-driving car to take you from Downtown San Francisco to Ocean Beach, on the city’s western end — and how this compares to the costs that an Uber or Lyft driver would face on the same trip.

Before we start, let’s agree on how to calculate these costs

First, we’ll only include variable costs, that is, those that occur directly as a result of the ride. We’ll ignore fixed expenses like software development, because they are not causally linked to the trip.

Second, we’ll include the following variable costs: electricity, depreciation, insurance, cleaning, maintenance, and driver cost. We won’t include customer service cost, as these are harder to estimate, and usually low.

Third, we’ll choose the Cruise Origin as our benchmark for AVs. The Origin has no steering wheel or pedals, and is expected to be released in 2023 by Cruise, a General Motors-owned company. Even if you wanted to, you couldn’t drive it, so it’s the quintessential autonomous vehicle.

Fourth, our non-AV benchmark will be an Uber driver riding a Chevy Bolt. The Bolt is electric, and choosing an electric car allows for a fairer comparison, as the Origin is battery-powered too.

Fifth, we will focus on cost, and not on price. Cost is a measure of the resources that are consumed when making the drive, and is straightforward to calculate. Price is how much the service provider (Uber or Cruise) will charge you for the ride, and is more complex to determine.

Sixth: We’ll assume that both cars have a 60% utilization, which is approximately what we see in New York City. They’ll be driving with a passenger 60% of the time, while the other 40% will be “empty” miles in which the cars will be driving to pick up a new passenger or waiting for a new call. We’ll assume that the 40% is all driving, and that there is no “parking” involved.

Finally, we’ll use estimates and common sense when we cannot find reliable data for any given cost component.

Alright, now that we have set the ground rules, let’s dive into the costs.

San Francisco, California, and our simulated ride, from the Civic Center to the Dutch Windmill at Ocean Beach

COST BREAKDOWN

Electricity

Our trip from Downtown to the Beach is 5.7 miles long (or 8.5 miles including the “empty” distance driven to the next passenger).

The Origin will probably need around 29 kwh / 100 miles (similar to the Bolt), so that’s 1.65 kwh for the trip. We’re only missing the electricity cost, which in San Francisco is about $0.25 per kwh. That gets us to $0.41 for the trip, and adding the “empty” distance to the next rider, 3.8 miles, we get to $0.62.

That’s pretty cheap. If you drove this same route with a Chevy Malibu, which does about 24 mpg, it would cost you about 1.41 cents at the current California gas price of $4.5 / gallon.

But remember: our Uber driver has an electric Chevy Bolt and gets the same 62 cents. So the AV cost advantage is not really related to the electricity cost.

Tie between Uber and Cruise at 62 cents

2. Depreciation

This is where the Origin starts pulling ahead. According to Cruise, the Origin will cost about $50,000 and last about one million miles before it needs to be retired. That’s a lot more than the useful life of the Bolt, which is 400,000 miles.

Quick math shows that the depreciation cost per mile is 5 cents per mile ($50,000 / 1,000,000) and that the depreciation cost for our trip to the beach is then 5.7 * 5 = 29 cents, or 44 cents with 60% utilization.

If we drove the Bolt, which costs the driver $33,000, the cost would be 71 cents. Advantage Origin.

Cruise beats Uber, 44 cents vs. 71 cents

The San Francisco Civic Center, our starting point

3. Insurance

This is another cost line where AVs will crush competition, if we make one simple assumption: that self-driving vehicles will never be at fault for a traffic accident.

Wait, what? That’s kinda hard to believe, right? Well, it’s closer to the truth than you may think. Data from Waymo — Cruise’s Google-owned competitor — can help us.

Waymo’s cars drove 6.2 million miles autonomously around Phoenix, Arizona, from January 2019 to September 2020. During this time, the firm’s cars were involved in 47 collisions and, according to the company, nearly all of those were not Waymo’s fault. How many does “nearly all” mean? Waymo doesn’t specify, but I’m guessing no more than 2 or 3. Which would basically mean 4–6% of all accidents. That’s very close to ZERO, and, to simplify, we’ll call it zero.

What type of insurance do app drivers and Cruise need?

With this controversial but credible assumption, we can move on to understand the two insurance policies we might need:

Liability coverage for app drivers: California requires Uber drivers to carry $1 million in liability insurance to cover the passengers and property involved in an accident. This covers accidents where the insured Uber driver is to blame for the accident, so the Origin doesn’t need it.

California requires Uber drivers to carry $1 million in liability insurance to cover the passengers and property involved in an accident. This covers accidents where the insured Uber driver is to blame for the accident, so the Origin doesn’t need it. Uninsured /underinsured driver: When someone other than the app driver is responsible for the accident, the coverage above does not apply. But maybe the other party at fault doesn’t have insurance, and can’t pay for the damages of the crash. To guard their users against such risk, Uber offers this “uninsured driver coverage”, even though this is not required by law. Cruise should too, because as long as there are bad drivers sharing the road with the Origin, this risk still exists.

How much does all of this cost? According to Allstate, which offers insurance to app drivers in California:

Liability coverage adds up to $1,248 per year for 50,000 miles, or 14 cents for our 5.7-mile trip, 21 cents with the “empty” miles. Again, Cruise doesn’t have to pay for this, but Uber drivers do.

Uninsured / underinsured coverage costs $360 a year for 50,000 miles → 4 cents for our trip, or 6 cents including the “empty” miles. Both Cruise and our Uber driver need to pay for this.

Cruise beats Uber, 6 cents vs. 27 cents

Ocean Beach, our destination, on the city’s Western End

4. Maintenance

The Origin and the Bolt need to be maintained from time to time so they can safely tranport passengers. There is no data available on how much it will cost to maintain the Origin…but we do have a good estimate for the Bolt. That comes from Edmunds, a well-known car-review portal.

We also know that, as a rule of thumb, the more it costs to build a car, the more it costs to maintain it. And we know the Origin’s and the Bolt’s production cost: $50,000 and $29,000, respectively. (You’ll pay $33,000 for a new Bolt because GM and the dealer need to make a profit, but $29,000 is what it costs to make it).

Now for the actual cost: Edmunds expects you to spend $3,021 on maintenance for every 75,000 miles driven on your Bolt, or 23 cents for our trip, 35 cents with the “empty” miles. The Origin costs 72% more to produce, so we’ll just assume that the maintenance costs are 72% higher → 60 cents including the “empty” miles.

Uber wins, with 35 cents, vs. 60 cents for the Origin

5. Cleaning

From time to time, Uber drivers need to vacuum and wipe the vehicle’s floor and seats to keep it looking and smelling fresh. Less often, they will wash the outside too, to give the vehicle that shiny new car look.

How often do they do it? The Uber sub-reddit seems to indicate once a day for the interior, and a once a week for the exterior. The same would apply for Cruise, as their passengers will still demand a spotless vehicle.

For the costs, let’s assume that a car drives about 150 miles per day:

Interior cleaning: 15 minutes per day + $1 of cleaning products per day. With a cleaner costing about $20 / hour, that comes to $6 / day, 4 cents a mile → 35 cents per trip with “empty” miles

Exterior: A standard cash wash is about $30, or 3 cents per mile → 25 cents per trip

The total adds up to 40 cents per trip, which is a lot! More than insurance, and almost the same as electricity.

If I were to be super rigorous, I’d say that the Origin has a small disadvantage over the Bolt: its exterior sensors, like LIDARs, cameras and radars, need constant cleaning, because it relies on them to “see” the road and drive safely. How often is this required? Maybe once a week? Maybe never because they have some “auto-cleaning” function? Not sure.

But we know that the Origin is already going to be cleaned once a day, so the marginal cost of cleaning the sensors would be very small. It’s just a matter of spending an extra 2–3 minutes wiping them. We’ll call it not relevant for our calculations.

Uber and Cruise tie at 60 cents per trip

Waymo’s vehicles like this adapted Jaguar have been roaming the streets of San Francisco for a while. Notice the driver inside, who can still take over if needed. This won’t be possible — or hopefully needed — in the Origin

6. Driver cost

You guessed it: it’s zero for Cruise. The company is spending a lot of money on developing its self-driving software, but this is a fixed cost. Once the program is installed in the car, it doesn’t cost anything more to take passengers from one point to another.

For an Uber driver, it’s a different story: Everytime they ride, they expect to earn a wage. It’s how they make a living, afterall. So there is a cost here. We’ll calculate it based on the trip length, utilization rate, and on the wage that a driver would demand. Let’s dive into the math:

The trip would take 31 minutes at the SF downtown average speed of 11 mph…

…but the drivers expect to be paid for more than just these 31 minutes. They are only carrying a passenger 60% of the time they are working, but also want money for the other 40% of the time. If we didn’t factor this time in, we’d get a much lower pay, one at which drivers would prefer to work somewhere else. Factoring in the 40%, the actual duration of the trip is 52 minutes.

At $16.32 per hour, which is the San Francisco minimum wage, these 52 minutes cost $14.06, vs. ZERO for Cruise. That’s an insane advantage. Let’s discuss it below.

Cruise beats Uber, $0 to $14.06

COST SUMMARY, PRICING AND IMPLICATIONS

Cost summary

Adding up everything, the total cost for an Uber driver to move you from the Civic Center to Ocean Beach comes to $16.60. Out of this total, $2.54 comes from non-driver costs, and $14.06 from the driver.

Summary of all trip-related costs. The ‘Driver’ line is the main difference between the two alternatives

For a self-driving vehicle, the cost for the same trip is $2.31, all from non-driver costs. That is 86% lower than the Uber driver.

86% is A LOT. Like really a lot. It’s all the more significant because transportation is a very significant expense to all of us. The average American family spends $9,600 on transportation a year, the second highest budget category behind housing. Imagine if I told you that in 10 years, all houses would cost 86% less. You’d call me crazy, for sure.

Pricing

But let’s remember that it’s one thing to calculate the variable cost of the ride, and another one to calculate how much Cruise or Waymo will charge us for it. They are companies and want to maximize their profits, so we can expect to pay more than $2.31.

Exactly how much? This will be the subject of my next post. To calculate the price, I will borrow concepts from microeconomics like demand curve, marginal revenue and profit maximization. Another key aspect of price calculation is the variable cost of the ride — and this is the reason why this text focuses on variable costs.

But while we are still not sure about the final price, one thing is certain: it will be much cheaper. This brings powerful implications to the transportation world as we know it.

What does this lower cost even mean? Implications

At the very least, lower prices will drive a lot more people to use AV ride-hailing services vs. other alternatives like buses, the subway, or even walking or cycling.

More demand means more cars on the streets, and potentially more traffic jams. But it’s not all bad: it also means less public space reserved to parking, as AVs will either be parked in their company’s garage when they are charging or undergoing maintenance work, or not parked at all.

To understand exactly how much more traffic, or how much less parking space is needed, we’ll first need to understand how many people will use AVs. And this number depends on how much Cruise or Waymo will charge for their services.

So see you on our next post about pricing!