Annual report warns that driverless cars could disrupt AllState’s insurance business

In the annual report for 2015, which was just filed with the SEC, US-insurance company AllState warns that autonomous cars could disrupt their business model. This is the first time that such a risk has been mentioned in the risk section of their annual report.

The following statement appears on page 20 of AllState Corporation’s annual report for fiscal year 2015 as filed with the SEC using form 10-K on 2016-02-19 (link to download page):

Other potential technological changes, such as driverless cars or technologies that facilitate ride or home sharing could disrupt the demand for our products from current customers, create coverage issues or impact the frequency or severity of losses, and we may not be able to respond effectively.

The company clearly sees the combined risk of the introduction of autonomous vehicles – which will significantly reduce accidents – and increased adoption of mobility services (which will become much more convenient and cost-effective through autonomous vehicle technology). The company also realizes that it will be very difficult to compensate for the resulting losses to their business model.

Sources: AllState,, Kargas

Baidu expects autonomous buses to become first wave of self-driving vehicles

Chinese search engine Baidu has entered the race for self-driving vehicles in 2014. In a partnership with BMW, the company presented an early prototype of an autonomous car at the end of 2015. Baidu’s approach mimics Google in many ways: Like the first Google prototypes of 2010, the car uses the (aging) Velodyne 64 Lidar as its main sensor; Baidu’s approach also relies on detailed mapping which fits well with Baidu’s overall mapping strategy. Baidu also aims to diversify its business model by leveraging its know-how in artificial intelligence and has transferred its auto-related activities into a separate division, a move that Google started last year by restructuring into Alphabet. There are some differences: unlike Google, Baidu does not seem to put much emphasis on the sensors; they don’t seem to experiment with their own sensors and the configuration of sensors indicates that certain situations in which a car may find itself have not been considered yet.

Baidu’s vision of how self-driving vehicles will be adopted also differs somewhat from Google. Whereas Google has focused on individual cars, and is testing electric two-seaters which could easily become robotaxis, Baidu expects the first wave of self-driving vehicles to be autonomous buses or shuttles. In a recent online interview, Andrew Ng, Baid’s Chief Scientist, argued that buses which service a fixed route or a small defined region will be the best starting point. He expects a large number of such vehicles to be in operation within three years (= early 2019) and mass production to be in full swing within five years (= 2021).

Andrew Ng correctly pointed out that such autonomous buses operating on fixed routes or small regions  would have the advantage that care could be taken to ensure that the routes are well maintained, don’t have construction (or the construction site is clearly indicated in the map) etc.

Unfortunately, Andrew Ng’s argument, that driving on predefined routes would enable the vehicles to avoid “corner cases–all the strange things that happen once per 10,000 or 100,000 miles of driving” (source) is flawed. He argues, that machine learning can not prepare for these corner cases and that therefore driving in a restricted well-defined environment is the solution. Unfortunately, corner cases can happen anywhere; it is impossible to guarantee that on well-mapped and well-known routes strange situations can not occur. Pedestrians can suddenly appear in areas that are closed for pedestrians, obstacles may occur on a road, an oil spill can occur, the road can suddenly be flooded etc. Building software that can reliably handle even the most challenging situations is a hard task and needs to consist of a combination of machine learning, an enormous testing program (usually combined with knowledge acquisition and machine learning), careful and very extensive risk analysis and risk modeling, and purpose-built test scenarios which challenge the capabilities of the cars both in simulators and in staged test cases in the real world.

We have pointed out for the past five years that the switch towards shared mobility services based on fully autonomous vehicles will be the great transformation that self-driving car technology will bring. This is the reason why auto makers have been so reluctant to push fully autonomous driving and why it provides avenues for new entrants such as Google, Baidu, EasyMile, Bestmile, Zoox, potentially Apple, and others to capture a significant share of the world’s expenses for personal mobility. There are many reasons why the first fully autonomous vehicles to appear on our roads will be robo taxis or self-driving buses, not the least that many current projects focus on such autonomous mobility services. Examples are: WEPods (Netherlands), CityMobil2 (Greece and EU), One-North (Singapore), Sentosa (Singapore), EasyMile, (USA, California), Google self-driving pods (United States, California and Texas), Milton Keynes driverless pods, (United Kingdom), Ultrapods (United Kingdom), Bestmile (Switzerland), DeLijn, (Belgium), RobotTaxi (Japan), Baidu (China), Yutong Bus (China).

In summary, Baidu’s focus on self-driving buses adds weight to the expectation that shared mobility services based on driverless pods and buses will drive the initial adoption of autonomous vehicles. Both self-driving cars and buses have to solve the problem of autonomous driving and the same technology can applied for both application scenarios. This is why the technology which Google currently refines with their 53 self-driving cars can easily be transferred into self-driving buses and shuttles and why Baidu’s current prototype is not yet a bus but rather a converted BMW. Those pioneers who solve the problem of fully autonomous driving will find enormous business potential for self-driving taxis, self-driving shuttles, self-driving consumer cars, trucks and machines. The race is on!

Self-driving cars will be a potent weapon to combat climate change

Although world leaders have reached a ‘historic’ agreement on climate change at the Paris Summit, good solutions to reduce greenhouse gas emissions remain hard to find. Fortunately – and counter-intuitively – self-driving cars have the potential to significantly reduce the ecological footprint of transportation:

The transportation sector is a major polluter and it is the economic sector with the biggest net effect on climate change. While some other sectors (such as industry and power generation) emit more greenhouse gases, these industries also emit other substances that lead to cooling (aerosols of sulfate, nitrate and others).

Of course, self-driving cars will not reduce the number of trips or kilometers traveled. On the contrary: self-driving cars have the potential to significantly lower the total cost per kilometer traveled and are thus likely to induce people to make more trips. As we have shown in other papers, self-driving taxis and buses will emerge rapidly and offer mobility services for local and long distance traffic with great convenience and at extremely competitive prices because they can achieve much higher utilization rates than private cars (which stand idle more than 94% of the time), and because autonomous fleet vehicles will be engineered for the minimization of total cost of ownership and for the maximization of useful life.

Most urban self-driving taxis will be fully electric for reasons that are not primarily environmental but that are still good for the environment: Electric motors offer safety advantages (they can be used for emergency braking and to some degree for emergency steering). They are also much more durable (an electric motor easily lasts 1 million kilometers), less expensive and less complex than conventional engines. In addition self-driving taxis that operate in local traffic will not need huge battery packs when average trip sizes rarely exceed 15 kilometers and when they can drive themselves to the next high efficiency charging station as needed. Their batteries won’t be sized to last a whole day; they will need to be just large enough to service a little more than the trips of the morning peak – after which they can recharge.

There can be no doubt that self-driving taxis and buses will change the nature of urban mobility. Much more short-distance travel than today will occur in small, lightweight, extremely energy efficient self-driving taxis. Although this may lead to a certain increase in total miles traveled, the following effects combine to reduce greenhouse gas emissions:

  1. Self-driving taxis will be mostly electric which reduces carbon emissions (approximately 25% less emissions compared to internal combustion engine)
  2. Self-driving urban taxis will be smaller and much lighter than the average car which further reduces energy consumption per kilometer
  3. Self-driving taxis reduce demand for private cars and therefore reduce the sizable greenhouse gas emissions during vehicle manufacturing which are typically more than 10% of total life-cycle emissions of a car. According to some estimates, a self-driving car-sharing vehicle or taxi can eliminate 7 to 10 private cars. What a potential for greenhouse gas reduction in auto manufacturing!
  4. Self-driving taxis facilitate multi-modal travel (taking an autonomous taxi to the train or bus station, continuing with bus or train, using an autonomous taxi for local transport at the destination)
  5. Self-driving taxis facilitate ride sharing especially during peak hours and on certain routes.

On the other hand, the effect of self-driving taxis on public transport is not yet clear. There is both the risk that some local trips which are taken by public bus today will migrate to self-driving taxis and the opportunity to capture a much larger share of the mobility demands with self-driving scheduled and on-demand buses and mini-buses – potentially in multi modal combinations. The potential benefits are large and there will certainly be a place for efficient self-driving mobility services using self-driving buses and mini-buses. Concerns that new mobility solutions centered around self-driving taxis and mini-buses will be less environmentally efficient than current scheduled buses are not warranted because today’s scheduled buses are not very good for the environment during off-peak hours when they travel near-empty.

The currently most overlooked aspect of self-driving vehicles is their effect on medium and long-distance travel in areas with sufficient population densities. Whereas today many people choose their own vehicle for distances between 100km and 500km self-driving taxis and self-driving buses make it much easier to provide excellent, extremely cost efficient long distance mobility services. When urban taxis at both origin and destination guarantee painless individual personal mobility and when small or medium-size autonomous buses provide long distance travel at extremely low rates which are much lower than the cost of traveling in a private car, then greenhouse gas emissions can be reduced very significantly. Although only a small percentage of all trips are more than 100km in length, these trips represent a large share of the total distance traveled in private cars and therefore have a large and easily overlooked potential for reducing greenhouse gas emissions.

The big advantage of self-driving car technology is that it can accomplish several benefits at the same time: It increases the options for individual mobility and lowers the cost of individual mobility because of new driverless mobility services which through increased sharing, more efficient use and quicker adoption of alternative fuels reduces greenhouse gas emissions. Nobody will have to abandon their cherished car but the joint actions of the large group of less or only moderately affluent consumers who value the flexibility and cost-saving associated with self-driving mobility services will inexorably lead to a reduction of greenhouse car emissions. It is time for the political leaders searching for solutions to combat climate change to take notice!

US Secretary of Transportation: driverless cars all over the world by 2025

Anthony Foxx, Secretary of Transportation visited the Frankfurt Auto Show together with his colleagues from the G7 and German Chancellor Merkel. In an interview with German newspaper Frankfurter Allgemeine Zeitung, he stated that he is very optimistic with respect to driverless cars and expects to see them in use everywhere in the world within 10 years. He wants to accelerate the process for the introduction of new technologies such as self-driving cars and avoid the current legislative delays of five or six years. Of, course safety must always be assured.

The Frankfurt Auto Show clearly demonstrates how much more seriously politicians and the auto industry are taking autonomous car technology and the changes that they will bring.

Source: Frankfurter Allgemeine Zeitung, 2015-09-19

Chinese company unveils prototype of self-driving bus

After three years of development, one of the leading Chinese bus manufacturers Yutong has sent the prototype of a self-driving city bus on a 32 km long circuit on an intercity road between Zhengzhou and Kaifeng in Henan Province. The bus drove the whole track in regular traffic without any human assistance, attained a peak speed of 68 km/h, passed 26 traffic lights and was able to change lanes and overtake autonomously. This is a significant accomplishment and clearly puts Yutong on the map for autonomous driving.

The bus is equipped with many sensors, including camera and Lidar. Two Lidar sensors are strategically placed in the middle of both sides of the car. This is the best way to monitor the adjacent lanes and mimics the approach Google has taken on their driverless pods (where the side Lidars protrude like the mirrors of conventional cars).


Image source: Yutong, 2015.

The company’s press release points out that significant additional development is required. No further information about the timeline for the introduction of such a bus was provided.

Self-driving buses are very promising and will be a key ingredient of future mobility. On demand-buses will be able to service the complex mobility demands of our societies much better than today’s mix of scheduled buses, trains, and individual cars. They will lower the cost, resource consumption and ecological footprint of mobility. Because significantly lower costs will prompt many travelers to use buses on medium to long-distance trips instead of cars, these buses will increase the effective capacity of highways when measured in people-miles.


Source: Yutong Bus Company, Dailymotion video

Update 2016-02-21: The bus traveled between Zhengzhou and Kaifeng in Henan Province. The approximate route can be looked up on Google maps.

Autonomous vehicles could reduce Australian road infrastructure growth by a factor of three!

A report issued by Australian telecommunications company Telstra shows that autonomous vehicles could save Australia billions of dollars in traffic infrastructure investment. With conventional vehicles, the capacity of the road network would need to more than double (to 250%) over the next 35 five years to accommodate increased mobility demand. Self-driving cars, however, use the road more efficiently and require less road capacity. Based on the assumption that autonomous vehicles will be introduced into the market by 2020 and their adoption will grow linearly until all vehicles can drive autonomously twenty years later the study finds that road capacity demands will peak around 2033 at a level 50% larger than today’s road infrastructure and then decline towards today’s road infrastructure levels by 2039.

The study clearly shows that infrastructure planners need to adjust their estimates of road network growth to the advent of self-driving cars. With these cars governments can  reduce road infrastructure spending by billions of dollars. It is time to fundamentally rethink the current approach to infrastructure planning!

Impressive as the potential savings identified in the study are, additional effects may further reduce infrastructure needs: The study did not consider impending structural changes in mobility: Autonomous vehicles will lead to an increased use of mobility-on demand services which change the distribution of trip patterns during the day and increase ride sharing in various forms. Both effects will further reduce the peak load on our roads.

It is time to seriously consider the implications of self-driving cars. Rather than investing in concrete and asphalt, governments should accelerate the adoption of autonomous car technology today. This lowers accident rates, reduces the ecological footprint of mobility and increases the competitive position of first-adopter countries.

Google restructures for its bet on self-driving cars

Google has announced a major corporate restructuring where all Google shares are transferred into Alphabet, a holding company. The new structure is much better suited for Google’s self-driving car ambitions – which may quickly grow into a billion dollar industry . This restructuring is a well calculated move to position Google for the road ahead into self-driving cars/driverless mobility, robotics etc.

It shows how serious Google is about making a major impact in fields outside of its ‘traditional’ internet-centric business.  It is also interesting that Google’s announcement carefully avoids mentioning those activities with the highest revenue potential – such as self-driving cars. Instead they just speak of much smaller activities in Life-Sciences (glucose-sensing contact lenses), longevity and drone delivery.

The Alpha-bet is indeed – as the founders indicate in their announcement - a major bet on the future. A decade from now  Alphabet’s revenues from mobility and robotics could eclipse Google’s web business.



Misconceptions of autonomous cars

Self-driving cars are a rapidly evolving technology which only a few years ago was still considered science fiction. In such a dynamic context, quick intuitions can be very misleading and misconceptions about the technology, its impact, and the nature of the innovation process abound. In a short article we examine the following four misconceptions:

  1. Driver assistance systems will evolve gradually into fully autonomous cars
  2. The first models of fully autonomous cars will be targeted to the consumer and will be available for purchase
  3. It will take decades until most of the vehicles on the road are capable of autonomous driving
  4. Self-driving cars are controlled by classical computer algorithms (if-then rules)

Driverless car revolution: Buy mobility – not metal

driverless-car-revolutionA new book by Rutt Bridges examines the impact of autonomous vehicle technology on mobility. It is an excellent read, a thought-provoking book which paints a very detailed picture of the future of mobility. It is a wake-up call for the auto industry and a must-read for anyone involved with transportation policy.

Book description:

Imagine a future without congestion, car crashes, smog, or road rage. It’s coming sooner than you think. Summoned with an Uber-like smartphone app, driverless cars will revolutionize transportation. For less than bus fare you’ll enjoy the quiet, comfortable door-to-door service you’d get from a personal chauffeur. A chauffeur that is never distracted, never tired or testy, and always knows the fastest and safest route to get you where you’re going. No cash, no tipping, no crowds, no congestion – just hop in, enjoy the ride, hop out, and be on your way. These cars will be electric: quiet, clean, and so safe that deaths and disabilities will be rare. Instead of dealing with road rage and the frustration of bumper-to-bumper traffic, you’ll be free to text, Facebook with friends, or get a head start on your workday. Since you can cut your cost in half by riding with another passenger, seamlessly arranged by your mobility provider, traffic congestion will slowly fade away.
Owning a car means car payments, insurance, registration, maintenance, gas prices, smog, tickets, accidents, finding parking, and dealing with the stress of traffic. Buying miles instead of metal means you’ll save thousands a year for your dream vacation, the kids’ college education, or buying a home of your own. In addition to lowering stress and regaining the use of 5% of your waking hours, putting an extra $5,000 a year in people’s pockets will compel this change.
Driverless Car Revolution explains the benefits for people of all ages, from kids through seniors, plus the disabled, the working poor, tourists and other special groups. The book also discusses the economic disruption of major industries as well as potential geopolitical upheavals – all the pieces of the puzzle, and how they fit together.
Fasten your seatbelt, engage, and prepare to join the Driverless Car Revolution.

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