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And while we're talking about cars …

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And while we're talking about cars ….

Much has been made of the development of self-driving vehicles, as much because few can really believe the idea of being driven to and fro with no human intervention. We have a keener interest than most because our portfolio company, Alphabet is joining the rush to commercialise self-driving technology in competition with the likes of Uber and Tesla.

Alphabet has been quietly working away on self-driving cars for about a decade, and has just announced plans to scale up its on-road testing — it has already logged over 3 million driverless miles on US roads — with real customers. Alphabet's self-driving division, Waymo, is putting 500 Chrysler minivans on the streets of Phoenix and inviting locals to join a trial that would give them free rides to and from work, or anywhere else in the city.

While there are lots of hurdles to clear before self-driving cars hit the road en masse, the technology is progressing quickly. With this rapid progress, automobile manufacturers like BMW, Toyota and Fiat Chrysler are taking an increasing interest and self-driving cars may appear on our roads sooner than many think.

The implications of self-driving cars are vast. Who needs a car park close to work if your car can drive you there, park itself miles away, and pick you up later? The average motor vehicle is used only 5-10% of the time. Self-driving taxi fleets could materially increase car utilisation and significantly reduce the number of cars in each city. Why own a car when you can just order one, at a fraction of the cost of a traditional taxi, and it will appear at your door?

Transportation in the US accounts for over 15% of the average household budget, for an asset that is used only 5% of the time. Freeing up the household budget from the cost of owning and running a car would allow consumers to spend more in other areas, like entertainment and travel. It would also free-up daily commute time which would positively impact productivity, not to mention quality of life.

 

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