No matter how closely together the cars can drive, as long as you have an engine and a crash-resistant shell around each passenger, it will never be as space-efficient was the 35' Gillig Advantage I am sitting in right now.

IMO the best application of self-driving cars in an urban landscape is last-mile demand for people who live outside the city, where it's not economical to run buses or trains. But inside a city proper, or even on a busy freeway, having one car per passenger takes up a lot of space that could be better used elsewhere, both while moving and while parked.

(Also, self-driving technology could be applied to buses and streetcars to reduce operating costs and expand frequency and range of service.)