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End of fossil fuel-run vehicles in sight, says Stanford study

LiveMint logoLiveMint 15-05-2017 Amrit Raj

New Delhi: Purchase of vehicles run on fossil fuel will stop completely by 2030, according to a study by Tony Seba, an economist with Stanford University.

Reason: Seba believes that electrification and transport as a service (TaaS) will sweep across transportation industry. In his report, Rethinking Transportation 2020-2030, which is the talk of board room meetings in the auto industry and green energy enthusiasts, released on Monday, Seba said that some of the key stakeholders will face sudden demise.

“We are on the cusp of one of the fastest, deepest, most consequential disruptions of transportation in history,” Seba said in a report, a copy of which is with Mint.

Individual vehicle ownership, especially of internal combustion engine (ICE) vehicles, will enter a vicious cycle of increasing costs, decreasing convenience and diminishing quality of service... By 2030, within 10 years of regulatory approval of autonomous vehicles (AVs), 95% of U.S. passenger miles travelled will be served by on-demand autonomous electric vehicles owned by fleets, not individuals, in a new business model we call ‘transport as-a-service’ (TaaS),” Seba said.

Seba believes TaaS will offer vastly lower-cost transport alternatives—four to 10 times cheaper per mile than buying a new car and two to four times cheaper than operating an existing vehicle in 2021.

The TaaS disruption will have enormous implications across the transportation and oil industries, decimating entire portions of their value chains, causing oil demand and prices to plummet, and destroying trillions of dollars in investor value—but also creating trillions of dollars in new business opportunities, consumer surplus and GDP growth, he added.

Here are some of his key findings:

* The number of passenger miles will increase from 4 trillion miles in 2015 to 6 trillion in 2030.

* The cost of delivering these miles will drop from $1,481 billion in 2015 to $393 billion in 2030.

* The size of the US vehicle fleet will drop from 247 million in 2020 to 44 million in 2030.

* Annual manufacturing of new cars will drop by 70% during the same period.

* Annual manufacturing of new ICE mainstream cars sold to individuals will drop to zero. Car dealers will cease to exist by 2024.

* Huge opportunities will emerge in vehicle operating systems, computing platforms and TaaS fleet platforms.

* Global oil demand will drop from 100 million barrels per day in 2020 to around 70 million barrels per day in 2030.

* The price of oil will drop to around $25 per barrel.

* Oil prices might collapse as soon as 2021.

* Car insurance will be disrupted by a 90% fall in the insurance costs incurred by TaaS users, which is driven by the elimination of theft and sharp reductions in insurer costs for liability, injury and vehicle damage.

* Internal combustion engine vehicles will be eliminated from fleet by end of 2030s at the latest.

“Given that the average age of a vehicle on the road is 11.5 years, we can expect that ICE cars sold before 2023 must be replaced by the mid-2030s. This means that the remaining ICE vehicles will be eliminated from the fleet before 2040,” Seba said.

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