Getting a robotaxi in Wuhan

Could Wuhan in China be the start of the automated vehicle revolution? The technology company Baidu has a fleet of 500 driverless taxis (robotaxis) operating in the city. Baidu’s driverless taxi business operates under the name Apollo Go.

This is how a robotaxi works. You order your taxi online, and it arrives without a driver. There is an entry code on the tax door, and you put in the last four digits of your mobile number to get in. Then, you enter your destination online, and the taxi starts its journey, guided by an automated navigation system, sensors, and cameras. When you arrive at your destination, you get out, and robotaxi goes to pick up their next customer.

Robotaxis are cheap. The basic fare is 4 yuan(55 cents), which is well below 18 yuan ($2.48). This low fare gives robotaxis a significant competitive advantage in Wuhan’s taxi market and, as you would expect, the city’s taxi drivers are worried about the emergence of this low-cost competitor.

It is reported that 19 cities in China have robotaxi services or are piloting the service. If Wuhan and other cities become centres of robotaxis services that replace traditional tax services this could lead to structural unemployment in these places.

There are concerns about the safety of robotaxis with one vehicle hitting a pedestrian in Wuhan, although the evidence of safety is that robotaxis are much safer than ordinary cars. In terms of safety, regular car drivers in Wuhan do complain about robotaxis driving too slowly as they navigate the city’s streets.

The low price of robotaxis is good for consumers and it significantly increases their travel options as the market for this form of transport grows in Wuhan and in other cities in China. As more people use robotaxis they may use their own cars less and could even give up having a car. There could also be fewer people using public transport like buses and trains.

Outside of China, Elon Musk is preparing to launch Tesla’s robotaxi, Cybercab, at a price of under US$30,000. There are already four cities in the US with robotaxi operations: San Francisco, Phoenix, Los Angeles, and Las Vegas. If you add to this robotaxi services in Abu Dhabi and Singapore you can see the potential for global growth in the market.

What about the long term?

In the long term, the rise of robotaxis and autonomous vehicles raises some interesting possibilities. Businesses could use robotaxi-type delivery vehicles to move goods, which could make their supply chains more efficient and reduce their operating costs. 

If robotaxis becomes the dominant form of road transport, it could reduce the demand for cars because people could just use cheap robotaxis rather than own their vehicles. This would have significant implications for car manufacturers and associated industries.

Finally, imagine a world where car travel is completely dominated by robotaxis and autonomous vehicles using artificial intelligence to manage traffic systems. Would this mean the end of traffic jams and car accidents? Would it also mean a world where people no longer have to spend their time driving on a journey but sit back relax, watch a film or do some work? 

Some possible questions to discuss with a class

1. Do you think robotaxis are good for consumers?

2. How might the growth of the robotaxi market affect the demand for ordinary taxis, buses and trains?

3. How might 'robotaxi-type delivery vehicles' reduce business costs?

4. What effect might the growth of robotaxis and autonomous vehicles have on China's long-run aggregate supply curve?