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Cheaper rides make the market bigger
Falling costs
Hardware costs usually fall 30 to 40% per generation, and the cost of autonomous driving software is expected to come down as well. The Lucid midsize car being built with Nuro for Uber would be a $60,000 to $70,000 car. At those prices, the cost of transportation can come down for the population.
Vehicles do more work
Each autonomous vehicle probably drives three to four times what a human does, so one AV does substantially more work. Traditional carmakers now see Level 4 driving as much closer than they thought and are investing in L4-ready systems. Production is in the hundreds and thousands now and is expected to reach tens of thousands, then hundreds of thousands.
Delivery math
Delivery follows the same math. A drone that cuts a 25 to 30 minute delivery to 10 to 15 minutes would be cheaper, faster, and better, and reliability and safety are expected to improve along with cost.
Why does cheaper transport raise demand?
Economists describe how sensitive demand is to price as elasticity. When a service gets cheaper, existing customers use it more, and people who could not afford it start using it. The nineteenth-century economist William Stanley Jevons observed a version of this in his 1865 book The Coal Question, finding that more efficient steam engines increased total coal use.
Why do hardware costs fall each generation?
Engineer Theodore Wright reported in 1936 that the cost of building airplanes fell by a steady percentage each time cumulative output doubled. The pattern is called Wright's law and has been applied to products such as solar panels and batteries. BloombergNEF reported that average lithium-ion battery pack prices fell about 90 percent between 2010 and 2020.
How does Level 4 differ from Level 2?
SAE International's driving-automation standard, first published in 2014, defines six levels from 0 to 5. At Level 2, the car steers and controls speed but a human must watch the road at all times. At Level 4, the system does all the driving within set conditions, such as a mapped area or good weather, and no human is expected to take over.
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