FUTURE FOCUS: The dawn of autonomous vehicles in the Middle East

Published: 28 October 2020 - 6:03 a.m.

Giovanni Moscatelli, BCG managing director and partner and Jukke Malvalehto, principal at BCG

What role do autonomous vehicles have to play in the future of Middle East’s logistics sector?

Powerful trends in technology are driving mobility innovations that promise to revolutionize urban mobility in ways that create enormous opportunities for communities and their people and businesses. Shared, autonomous, electric vehicles promise increased safety and utilization as well as cost effectiveness. Intelligent traffic systems support cities in steering vehicle flows more smoothly.

Intermodal booking platforms allow customers to choose the best option for their needs. On mid-to-long-distance routes and difficult last-mile conditions, autonomous delivery vehicles enable significant cost efficiency.

Emerging mobility solutions will benefit some metropolises more than others depending on the suitability and mobility ecosystem of each individual city – with the KSA and UAE likely to benefit most in the region from autonomous mobility-on-demand (AMoD) with the adoption of AVs and robo-shuttles to rejuvenate public transport services.

Technologies and new business models already under development can substantially transform and improve urban transportation in the region—and by direct extension, livability—while providing new opportunities for the private sector. It is a powerful and exciting starting point for a truly transformative revolution on our city streets.

What are the barriers? For example, how can companies justify investing huge amounts in autonomous vehicles when the economy is in the state it is.

Although Autonomous Vehicles could transform urban mobility, enthusiasm toward them has cooled because they will not be available at scale for at least another decade and could exacerbate urban sprawl or traffic volume if they appear independently of suitable regulations and polices. Despite the current skepticism, however, AV pilot programs continue to attract investment.

BCG conducted extensive AV research alongside the University of St. Gallen (HSG), Switzerland's leading business educational institution, to determine the extent to which self-moving cars can revolutionize urban mobility. As per BCG and HSG findings, the major obstacle facing the KSA and UAE is new and developing public transport systems. This is because, at present, higher congestion in metropolitan areas stems from such systems. It's important to note that Riyadh and Dubai's respective populations are currently over seven million and three million and continue to rise every year – emphasizing the underlying need to introduce sustainable public transportation systems to overcome this barrier.

How will autonomous vehicles impact on the environment?

Mass adoption of self-driving technology will result in tremendous economic and societal benefits, and with it, far-reaching implications for automotive companies and other players in the value chain. Car-centric giants such as Riyadh and Dubai, which are spread out and have developing public transportation systems, would benefit from robo-shuttles and AVs.

As these would replace private cars, BCG and HSG have concluded that annual fatalities and total parking areas would decline by 37 percent and 35 percent, respectively. Traffic volume would drop by four percent, energy consumption by 12 percent, and transportation costs by 13 percent, while journey times would also decrease by 3 percent.

However, while some automakers and tech companies plan to launch AVs by the mid-2020s, it will most likely take cities several more years to fully prepare for them – meaning such benefits will not come to fruition until the early 2030s. Both Riyadh and Dubai stand to capitalize, and the development of AVs could make their respective urban environments greener, more flexible, and help support sustainable transportation systems.

Is the technology for autonomous vehicles already here? If so, what is holding it back?

While the AV technology is already revolutionizing urban mobility, every place is unique and can benefit from intelligent and well-resourced experimentation. Cities should focus on creating a seamless, hassle-free travel and payment experience.

Though AVs will reduce the numbers of cars and overall travel times across cities as a whole, the effect is not evenly distributed, with concentrated downtown areas potentially seeing a deterioration in traffic flow. City and state governments can intervene to encourage sharing of AVs and avoid significant substitution for mass-transit systems, which remain essential for urban mobility throughput.

An ambitious regulatory framework with a mix of positive and negative incentives will encourage transit ridership. A positive incentive might be reallocating funds from capital to operating expenses to promote the expansion of on-demand transit. Negative incentives could include new taxes on personal-vehicle usage and non-pooled ride sharing along with congestion pricing, in line with what large cities such as Singapore, London, and (soon) New York are doing.

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