But that still doesn't address the problem facing most large cities: gridlock. Whether the cars are automated or not won't drastically change that (although it may well reduce arterial traffic clogs due to accidents and rubbernecking) because there are still more cars than the roads can handle.
I really don't know why California is pursuing this. Planes are entirely valid solution to the problem of travelling between LA and SF. Why spend billions on an alternative that's going to take twenty years?
If anything, spend the money on public transport to reduce reliance on cars. The situation is decent in SF, poor in the Valley (Caltrain covers a limited area and runs quite infrequently) and woeful in LA. The 101 out of SF tends to be a car park at certain times (although not as bad as LA).
The big problem is that LA isn't really space-constrained. It has the ocean on the west but has sprawled far north, south and east. People like their big homes and that's a recipe for disaster when it comes to public transport. The only places public transport seems to work at all are those areas densely population or that have existing infrastructure (eg the commuter belt around NYC). But Dallas? Atlanta? LA? Chicago? Very limited public transport.