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If AVs eventually dominate the car industry, automakers could start charging for miles traveled instead of vehicles sold — potentially a much bigger revenue opportunity.

 

 

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The big picture: Automakers and tech companies are investing in AV technology because it offers, among many things, a new revenue stream if people shift from owning vehicles to buying access to transportation.

 

Background: Currently automakers make $512 billion selling about 17 million vehicles per year, for an average of around $30,000 each.

 

  • Meanwhile, ride-hailing costs about $2.50 per mile, including driver labor, according to estimates from Ford and from GM.

 

How it works: There are some 260 million cars on U.S. roads, traveling an average 3.9 trillion miles per year.

 

  • At 60 cents per mile (AAA’s estimate of vehicle operating costs in the U.S.), this represents a $2.37 trillion revenue opportunity today, if all miles were converted to AV services.

 

  • If automakers indeed shift their business model to operate autonomous mobility services, there’s room to earn a tidy profit and still charge far less than ride-sharing companies.

 

 

The bottom line: The Center for Automotive Research found that “OEMs and venture capitalists expect innovative mobility services will start yielding double-digit profit margins, much higher than the 4% to 9% automakers’ core business currently generates” — up to 20%.

 

This story originally appeared in Axios.

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