Several of the most high-profile mobility technology companies are increasingly betting their futures on the dream of autonomous robotaxis, which seems to have become an alluring story for investors. With Tesla's traditional auto manufacturing and sales model facing slackening demand and Uber's core ride-hailing business facing slowing growth and numerous headwinds, Silicon Valley's most prominent mobility disruptors seem to require self-driving technology to justify their heady valuations. But, technological challenges aside, are autonomous taxis actually the economic holy grail that they are made out to be by the companies and investors leading the assault on traditional automobility?

A new paper from Ashley Nunes and Kristen D. Hernandez of MIT's Center for Transportation and Logistics shows that the robotaxi faces a tough path to replacing the privately-owned, human-driven vehicle, suggesting the technology may not be the silver bullet that Uber, Tesla and others hope. Their research looks at San Francisco, one of the markets that's been targeted by several autonomous drive companies, and finds that "assuming current market conditions persist - HAV [Highly Automated Vehicle] technology struggles to achieve price parity with CDV [Conventional Driven Vehicle] ownership."

This finding flies in the face of years of assumptions that AVs would be significantly cheaper to operate than CDVs, largely derived from the early work on shared AV mobility pioneered by Lawrence Burns and others at Columbia University's Earth Institute [PDF here]. Those findings came from a more abstract approach to the problem, showing global mobility costs could be reduced by replacing private car ownership with a shared autonomous fleet made up of specialized vehicles leveraging electric drive and much-reduced vehicle mass (since AVs presumably won't crash or need to carry a whole family). Reduced fleet size, vehicle consumption and parking costs contributed to the eye-popping finding that AVs would cost just $2 per day in both ownership and operation costs.

The new MIT study takes the opposite approach: rather than imagining the global efficiencies of a radically reimagined mobility system, Nunes and Hernandez take real-world vehicle ownership and taxi company data and forecast the cost of introducing robotaxis into this status quo. What they found is that CDV total cost of ownership is a remarkably low 72 cents per mile, whereas the high licensing, insurance, cleaning and safety oversight costs associated with autonomous taxis combined with the low (52%) utilization rate of the current taxi fleet means robotaxis are likely to cost between $1.58 and $6.01 per mile.

Surprisingly, this economic challenge doesn't come from the high capital cost of an autonomous vehicle which the authors model at $15,000, which they admit is "unrealistically low." Instead, costs associated with taxi medallions ($250,000), insurance ($9.600 per year), and safety oversight by remote teleoperation employees ($211,662 per year) add the most significant costs. Due to this cost structure, economies of scale top out at around 10 autonomous taxis at a cost per mile that is still well above that of a CDV, leaving only two strategies open to robotaxi operators: shared ridership sufficient to boost utilization by some 30% over current taxi levels (a challenge, the authors note, given that "consumers show a strong aversion towards for-hire high occupancy travel") or a 37% reduction in profits.