More than a century ago, rail was king when it came to medium- and long-distance transportation. After the automobile arrived, however, travel by car surpassed travel by rail in only a few decades. Today, in many Western countries, rail claims just a 10% to 20% share (if that) of the passenger transportation market. In absolute numbers, though, the industry remains big. But the advent of autonomous vehicles (AVs) could well affect passenger rail travel as profoundly as did the automobile 125 years ago.
The thought of everyday travel by AV seemed far-fetched until recently. New participants in the automotive arena, such as Tesla and Google, along with a growing roster of OEMs, have made tremendous technological progress with AVs. Smaller tech companies and startups are rapidly joining the race to develop driving software and artificial intelligence for AVs. Several national governments are moving ahead with policy preparations and infrastructure planning. And public perception has changed dramatically. In a recent BCG survey of 5,500 consumers in ten countries, at least 50% of the respondents expressed interest in buying or riding in an AV.
A number of studies have been published on the potential impact of AVs in areas as diverse as urban planning, public safety, and parking. In a recent report, BCG concluded that these effects could be dramatic and largely beneficial, particularly in terms of increased safety, reduced road congestion, and more productive travel time. (See Revolution Versus Regulation: The Make-or-Break Questions About Autonomous Vehicles, BCG report, September 2015.) The report also suggested that AVs could capture market share from public transportation in urban and metropolitan areas. Until now, however, little has been written on the impact of AVs on passenger rail.
Making predictions is inherently problematic, and it’s especially so with a technology as complex and game-changing as that of AVs. AVs must maneuver through a gauntlet of obstacles, such as the unpredictable behavior of other motorists, road construction, and bad weather. Many in the industry believe that AVs will be highway-ready by 2020. However, most observers think that a fully autonomous vehicle, one that is completely safe for use in residential areas, where vehicles contend with pedestrians and children playing, won’t be a reality until 2025 at the earliest.
Who knows which predictions will be right? Considering the stunning pace of technological progress in the past few years—the innovations include self-parking, traffic-jam autopilot, and lane-keeping technology—and the intensive investments made by OEMs and suppliers, it’s hard to discount the optimists. Not to mention that disruptive technologies tend to take off increasingly quickly.
Our purpose is not to speculate on timing but to examine the “what if” possibilities. Let’s assume that at some point within the next 10 to 20 years, AVs will become commercially available and fully operational on urban and residential roadways. In this report, we explore the potential impact of AVs on the passenger rail industry: how AV use facilitates vehicle and ride sharing, the economics of passenger travel by AV versus by rail, and the effect of AV adoption on different types of rail service. Finally, to help rail executives prepare for various scenarios, we offer a high-level strategic agenda for the rail industry. We believe that rail executives should view AVs as a serious competitive threat, and we urge them to begin strategizing today about how best to confront this looming revolution in passenger transport.