In a world with Uber and Lyft, it’s interesting to consider whether it’s still worth owning a car or if it’s easier to just hail a ride from your phone.
Luckily, a Deutsche Bank market research team led by Rod Lache and Tim Rokossa took a look at this question.
In a a recent note to clients, the Deutsche Bank team examined the cost of vehicle ownership today, the cost of “on-demand mobility” today, and the estimated cost of a driverless taxi in the future for the top 20 largest metro areas.
Overall, the cost of vehicle ownership in those metro areas presently averages $0.90 per mile, although there was a lot of variation by city: The NYC/Tri-State area was the most expensive at $1.53 per mile (with a whopping $3.10 per mile in Manhattan), while St. Louis was the cheapest at $0.67 per mile.
Deutsche Bank then used the cost of Uber and Lyft’s base non-shared ride offering as a proxy for “on-demand mobility,” and found that the average was $1.54 per mile in the top 20 metro areas. Deutsche Bank estimates that for options like UberPool, where customers can share the ride with strangers, the cost was an estimated 20%-50% cheaper.
Although the average price per mile is higher for Uber/Lyft than the average cost of vehicle ownership, Deutsche Bank found that for about 14% of households in high density urban core areas (or 4.2% of total households in the broader metro areas) it might be cheaper to use the basic versions of Uber or Lyft instead of owning a car.
Basically, for some people who live in city centres like Manhattan, ditching a personally owned car in favour of ride sharing apps might make financial sense. But, even if it is cheaper for some, many people will still prefer owning cars for convenience, flexibility, family necessities, and longer distance trips.
Deutsche Bank also estimated what driverless taxis might cost in the future in these same metro areas using some back-of-the-envelope calculations, and they concluded that it is likely that costs for users will decline even further.
“Without human drivers we estimate that on-demand mobility companies, without [dynamic ride sharing] noted above, will be able to generate a 20% ROIC at $0.89 per mile; close to the $0.90 per mile average cost of operating a car in the top 20 US [metro areas],” the team wrote (emphasis ours).
In other words, based on Deutsche Bank’s assumptions and estimates, using driverless taxis in the future might cost about the same as owning a vehicle in major US urban areas.
For a good visual, check out the chart shared by the Deutsche Bank team comparing the cost per mile of various transportation options in the top 20 metropolitan areas.