A question we have been asked a lot over the years by investors and potential fleet customers is “how much will one of those purpose-built AVs cost?”. In most cases the intuitive expectation of the person asking the question is based on the cost of a “comparable” passenger car, van, or minibus plus maybe a premium of 10-50% for sensors and other specialized equipment. Although the expectation’s logic isn’t wrong, it misses the much larger influence the production volume has on vehicle cost.
Conventional passenger cars are a consumer product that, as soon as it has received type approval, can be sold to anyone in a very large market. Therefore, the design can be fully optimized for serial production and production can be ramped up quickly as soon as the car is on the market. But since the roll-out of AVs will happen in smaller pilot fleets that operate in limited areas, initial production volumes will be much smaller, and it will take years before annual production volumes of 10 000-100 000 vehicles will be reached. This leaves OEMs with the non-trivial dilemma that, on the one hand, if they develop a vehicle and production process that is optimized for full-scale serial production, the payback period until enough vehicles have been produced to pay off those initial investments is too long. On the other hand, if they optimize the design and processes for the small volume production that is maybe more realistic for the first two years of market roll-out, it will be difficult to achieve full cost coverage from selling the early low volume production vehicles to fleet customers, since the customers’ expectation concerning vehicle cost is based on experience from serial production passenger cars. To solve this dilemma, fleet customers and OEMs need to find a middle ground that requires a good understanding of the other’s requirements and boundary conditions. Fleet customers should accept higher prices during the early stages but base the long-term business case on serial production price levels. OEMs need to accept not to have full cost coverage early on and see the early deployment phase as an investment to create a proof of concept, generate important input to the development of their next generation of serial production vehicles and secure a larger initial market share.
