The fair price of self-driving software

In just a few years, some companies, which are working on self-driving software for private use or to be licensed to others, will have to decide how to price it.

Enrique Llanes

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Photo by engin akyurt on Unsplash

In a recent interview with Sandy Monroe, Jim Farley, Ford’s CEO told Sandy that when he left Toyota to move to Ford, he had to sell his Prius. At that moment the car had the HOV sticker that would allow him to drive in the carpool lane and it saved him 5 minutes every day. He was able to get $5,000 more because of the sticker.

Self-driving software value

This makes me think how much people would be willing to pay for the autonomous driving software that car and technology companies will provide them in a few years.

It is very difficult to asses this price as it is more dependent on how much people will be willing to pay than in a classical cost plus margin scheme.

Car usage varies widely between different people. Some people use their vehicles a few times a week for a few minutes and others rely heavily on their cars for long trips and multiple hours a day driving. According to Business Insider citing the AAA, the average American drives around 50 minutes per day.

If Jim Farley’s car was worth $5,000 extra for a 5 minutes per day time saving, we could extrapolate that an autonomous driving software would be worth $1,000 per minute driven per day, or, on average, $50,000.

And here comes the difficulty. How do you measure this benefit for all the different uses a car can have among different driver profiles?

Of course, very few casual drivers would be willing to pay $50,000 extra for the feature, but probably most professional drivers would, as also some people who spend several hours per day in their cars.

Those drivers might be willing to free this much time while in the vehicle paying an extra amount on the car purchase price. If the average car lasts, according to the Bureau of Transportation. eleven years, that would be around $4,500 per year and it would double the price of the vehicle’s purchase price.

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Enrique Llanes

4X Top Writer // Tesla fan. Technology enthusiast. AI will change the world. Madrid.