Ivan McKee MSP is this week presenting a series of five articles on the issues surrounding automation. This is the third in the series

THE status of the car you own and drive is often seen as a visible mark of your success. The automotive industry understands this well, encourages it, and markets accordingly. Initially self-drive vehicles may continue to follow the same ownership model.

However very quickly the economics of ownership will start to transform. If instead of paying for parking at my workplace my car can operate as a self-drive taxi while I’m at work, and generate more revenue than it costs me to buy and run the vehicle, why would I not take advantage of this free transport? This could well be one of the new growth industries.

Perhaps the next step in the ownership model is I buy a “virtual” vehicle, or a share in one. It, or a vehicle of the same model, is available to take me where I want to go when I need it, but because I share with other drivers in the pool the capital cost to me is significantly lower. Car clubs are still tiny, but perhaps self-drive will make them mainstream. Indeed perhaps a whole range of ownership models could emerge, ranging from a pay-as-you-go taxi-style service to a full ownership of a specific vehicle – which I may or may not chose to rent out on a day-to-day basis.

Research and development investments in autonomous vehicle technology have been significant, and manufacturers will expect to recoup these costs. But self-drive cars could ultimately be cheaper to manufacture than traditional vehicles. The cost of lidar – laser sensors, the eyes of a self-drive car – has reduced by 90 per cent in three years. And there are significant cost savings in designing out the driver interface – steering wheels, pedals, windscreens, mirrors. Autonomous vehicles of the future will probably be a comfortable pod design – think back of a limo – as different from today’s cars as from a Model T Ford.

Wear and tear and fuel consumption will also be reduced, and vehicle life extended, without an erratic driver pressing the brake and accelerator pedals in a non-optimal fashion.

The marginal cost to run a vehicle is a small part of the current cost of a traditional taxi, and will be less so for an electric self-drive vehicle without the biggest cost – that of the driver. And with many owners trying to rent out vehicles to take advantage of effectively free ownership, we can expect that the market will find an equilibrium point that provides cost-per-mile rates far below current taxi fares, but also gives car “owners” transport that is far cheaper than currently so.

However this scenario will not happen automatically. Corporations – be it manufacturers, taxi businesses, or Uber-style operators – will try and maximise their profits from the system rather than allow the market to translate those into lower transport costs. There is a need for government to understand this model, its implications and how we can reap the maximum societal benefits from it.