How much revenue can Google get from driverless cars?

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Answers (1)

This is an estimation question:

Step 1: Obtain Clarifications

1) Is the revenue analysis restricted only to US or entire world?

2) Do we have to consider usage of driverless car for personal as well as commercial use?

3) Is the revenue to be computed over a given number of years or one year?

Step 2: Main Equation

Assuming only the US market and only personal market

Total revenue from electric cars= Cars used for personal use  potentially sold by Google * Avg price of car

Cars for personal use=  # of households capable of buying an electric car * number of cars bought by a household

# of households capable of buying an electric car=  Total number of households * % of households earning a min of 100K/year

Total number of households in USA= US Population/Avg number of people in a household = 330M /4 = 82.5 M.

% of households with yearly income> 100K = 15%.

Thus total number of households capable of buying an electric car= 82.5 Mn * 15%=  12 Mn.

12 Mn will already have one car hence ~30% might be looking for a 2nd car over 5 years(healthy life of car)= Hence Number of household lookig for a second car over 5  years= 3.6 Mn

Assume 20% of these cars will be electric cars,  720K cars of which Tesla is the market leader hence assume Google will get a market share of 15%.

Thus market for Google= 15% of 720K *35K/car = 3.7 bn over 5 years or about 756Mn/year

Sanity Check- This number still seems be too big. We seem to have overestimated the number of households wanting to buy a car in an year.