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The AA was once used by unions and politicians as an example of how private equity harms businesses it buys. The UK roadside recovery service now looks like an example of what the industry does right. With the AA’s turnaround well under way, private equity owners TowerBrook, Warburg Pincus and infrastructure investor Stonepeak are considering a return to the public markets.
Investors who remember the AA’s last stint as a listed company will find a rather different business this time around: revenue has grown at an annual rate of 11 per cent since 2021 when AA was taken private. It has a fifth more customers, a tenth more operating profit and net debt has fallen to a more manageable 4 times adjusted ebitda. Financially, at least, the breakdown specialist has been rescued.
But the terrain is changing, thanks to electric vehicles and robotaxis. Self-driving cabs threaten the traditional roadside recovery business in three ways. First, they crash less. Google-owned Waymo claims, in a study done with insurer Swiss Re, that its autonomous vehicles generate 88 per cent fewer property damage claims than human-driven cars. That is bad news for the AA’s and RAC’s accident assistance businesses.
Mechanical breakdowns should plague robotaxis less, too. Most autonomous fleets are electric: such vehicles are already proving more reliable. German automobile association ADAC estimates EVs experience breakdowns around 40 per cent as often as petrol and diesel cars.
Third is the impact of having fewer cars to break down in the first place. Robotaxis address the oft-touted fact that private cars spend the vast majority of their time parked. True, autonomous vehicles would get much heavier usage: not only would they be shared among passengers, but by moving to where demand is they would also avoid dead time between rides. In the US, self-driving cabs already cover roughly five times the annual mileage, and that is only set to increase as their use becomes more commonplace.
But as connected fleets, robotaxis are constantly probed to spot faults early and drive themselves to a depot before breaking down. Moreover, recovery services would have to bargain not with individual households but with giant fleet operators like Google and Tesla.
This is a challenge that will play out over decades rather than a couple of years. Around two-thirds of UK vehicle miles are driven outside cities, where autonomous ride-hailing is unlikely to gain traction quickly. The AA foresees only 150,000 robotaxis on the road by 2045 in the UK. It should hope that forecast isn’t too rosy, otherwise it won’t just be passengers that need assistance.
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