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If you define a "car" as "a separate enclosed vehicle for every passenger or party", then the geometric fact about all cars, self-driving or not, miniaturized or not, is that they take vastly more space per passenger than effective public transit. This will not be a problem in low-density suburbs, but cities, by definition, are places with relatively little space per person. Self-driving cars will certainly improve the efficiency with which cars use space, so they will shift the calculus somewhat. But the bottom line will still be that if you want two crash-safe metal walls between every two strangers going down the same street, you will need a lot more space than if those two people can sit next to each other on civilized public transit.
You will also need vastly more metal and equipment, which means that the self-driving-car-replaces-transit fantasy involves massive industrial production with severe consequences for energy security and greenhouse-gas emissions.
As for the idea that somehow these cars will replace buses but not rail, this may be true around the margins.
What are the benefits for each? Drawbacks? You decide!