Robotaxi, ADAS Growth Fueled by Falling Tech CostsRobotaxi, ADAS Growth Fueled by Falling Tech Costs

The costs and hassles of owning a personal vehicle in cities is a driving factor in bullish forecasts in robotaxis and autonomous-driving technology, says the McKinsey Center for Future Mobility.

“For 50% of the population in larger cities, it does not make economic sense to own a car anymore,” says Philipp Kampshoff of McKinsey.

Increasing consumer demand for robotaxis, autonomous ride-hailing vehicles and roboshuttles as the cost of purchasing and insuring personal vehicles rises and the cost of technology falls over the next decade (a forecasted 80% decline) favors companies playing in the autonomous-driving tech space.
McKinsey notes market capitalization of a group of ADAS companies it follows in an index was up 169% from March 2023 to March 2024, compared with a decline of 51% for a cluster of electric-vehicle-tech companies the consultancy also follows.

According to the firm’s surveys, 37% of respondents say they would expect to pay less for traditional taxis and ride-hailing companies such as Uber and Lyft, while 41% say they would expect to pay more.

Safety and security is the No.1 roadblock to consumers adopting driverless livery or hands-free driving. However, McKinsey says autonomous vehicles currently drive about twice as far as personally owned vehicles before involvement in an accident with injuries.

Data, though, has a hard time breaking through what adds up to emotional resistance to giving up control on open roads. That contrasts with travelers’ comfort with riding in the driverless shuttle trains, for example, that operate inside airports.

Robotaxis are being hyped by Tesla Motors CEO Elon Musk, whose company is trying to sell the technology and vehicles around the world.

In October 2024, Tesla introduced the Cybercab, a fully autonomous 2-seat vehicle without a steering wheel or pedals. The company aims to price the Cybercab at a cost below $30,000, with production slated to begin in 2026.

Throughout 2024, Tesla tested a ride-hailing service in the San Francisco Bay Area, allowing employees to summon vehicles equipped with the latest Full Self-Driving (FSD) software via a prototype app. These vehicles operated with safety drivers present. Tesla plans to launch a paid ride-hailing service in California and Texas in 2025, pending regulatory approval.

The regulatory landscape for autonomous vehicles in the U.S. is evolving. The Trump Admin. has signaled intentions to streamline federal approval processes for self-driving technologies, which could benefit Tesla's deployment plans. However, significant technological and legal challenges remain, including proving the safety of Tesla's self-driving systems and navigating insurance and liability issues.

The various forecasts of robotaxi growth seem to belie reality. Prevailing forecasts indicate the market could grow from an estimated $400 million in 2023 to about $45.7 billion by 2030, with a compound annual growth rate of about 91.8%, according to Global Market Insights.

To date, New York City is the only market in the country that is testing congestion pricing. Several other U.S. cities have considered or are exploring congestion pricing to manage traffic congestion and fund public transportation improvements: San Francisco, Los Angeles, Seattle and Portland, OR.

Average annual auto insurance premiums grew 18% in 2024 after a 5% hike in 2023 and 15% in 2022. That trend, making urban vehicle ownership less attractive, is getting worse for consumers as the cost of vehicle replacement keeps climbing.