Our research suggests that the number of travelers who will opt for AVs in the future could be considerably larger than expected: about 50% of the respondents to our survey said that they would consider buying an AV. Our analysis also suggests that, over time, at least 40% of current train passengers will come to prefer taking an AV over the train. Resistance to AVs is concentrated among older drivers: according to our survey, 33% of those age 55 or older are not interested in them, as opposed to only 10% of drivers under age 35 who feel the same way. Thus, the percentage of those who are interested will probably grow.
Similarly, we expect this transition from rail to AV to occur sooner and faster in countries with a high population density (such as the Netherlands) as well as in countries with a high-quality road network (such as Denmark). Countries with tech-oriented consumers who relish new technologies (such as the US) are also likely to see an earlier and more rapid switch.
We expect AVs to constitute a tangible threat to passenger rail within the next one or two decades regardless of the rate of adoption. Trains will remain the least expensive mode of transportation during peak times in urban areas. But during off-peak hours and in rural environments, they will lose riders to AVs. Rail companies may even end up in a downward spiral: with reduced overall ridership, rail companies’ overall unit costs for all remaining passengers will escalate because of the inherently high proportion of fixed costs in operating a train network. This could trigger price increases or reduced schedules, which would result in a further reduction in ridership. The off-peak impacts of declining demand in rural areas could reverberate throughout the entire rail network, since it’s difficult to operate fewer off-peak trains without affecting the costs of peak trains.
With diminishing passenger volumes, retail revenues at railway stations, which can represent as much as 20% to 25% of a rail company’s revenue, could also drop. At a minimum, revenue would decline correspondingly with the decline in passenger volume. But retail revenue could fall more sharply if swift and wide-scale AV adoption prompts employers to relocate their offices away from train stations and closer to highways.
This isn’t to say that passenger and retail revenues would vanish overnight. But because of rail companies’ inherent fixed-cost structure, even relatively modest reductions in passenger volume could turn respectable profits into massive losses; for example, a 20% reduction in passenger volume could turn a 5% margin into a –10% margin.
