When analysing the Telecommunications, Media and Technology (TMT) industries it is rare to be thinking about the strategies of the automotive industry. However, it is too difficult to ignore them particularly with the rise of software-based companies like UBER, UBER’s Rivals and Tesla, General Motors (GM) acquisition of ride-sharing service SideCar and the increasing presence of the automotive industry and CarTech at traditional TMT industry events like CES and MWC. These signs stand to reinforce that fundamental change is coming to the world of transportation.
What is interesting about the change in transportation is that it is arriving from a number of corners. For example, the growth of UBER and GM’s ride-sharing investment is about the shift from individually owned and operated transport to ‘transport-as-a-service’, while the cars on show at CES this month (like the Chevrolet Bolt) are challenging how cars are made. In parallel, Tesla, Google and UBER are working on removing the need for a driver at all (in their own unique ways). Put simply… the future of transport is changing in terms of the how, the what and the where.
The inevitability of a ‘driver-less’ future
Many are already predicting a future where these trends intersect: electric self-driving vehicles, summoned by our smartphones taking us anywhere we want to go. These three trends reinforce each other.
- Electric vehicles are designed with a higher fixed cost and low marginal costs which is perfect for ride sharing vehicles with high utilisation and a low cost per ride. The shorter range of electric vehicles is still a downside.
- A simpler drive train construction in electric vehicles (like Tesla’s) rearranges the parts so that what matters (e.g. PEM/Motor/Gears) in the engineering of the car is more easily serviced via a software update rather than a mechanical servicing. The link to software here is important as software companies are in many ways better suited to developing self-driving capabilities than traditional car manufacturers
- Finally and most importantly perhaps, a driver-less car by definition removes the driver. This is the largest cost for any ride sharing service. As people give-away driving cars this will reinforce the need for a ride-sharing platform like UBER
The future looks pretty set when you consider these factors. However there are a few valuable considerations to the feasibility of a driver-less future – the most interesting being when can we expect this future to arrive?
When can we expect a driver-less future?
There is an interesting parallel to be drawn to the PC/Mobile substitution trend we are currently witnessing (PC sales fell 10.6% in the last Quarter). However, the trend to ‘transport as a service’ is the exact opposite – car and truck sales are on the rise. Car and Truck sales in Australia were a record 1.6M, and each of China (21.1M), India (2M), UK (2.6M) and USA (17.5M) all experienced record sales years thought growth was stagnant in the US. These stats point to the fact that transportation won’t be changed overnight. So when can we expect a change?
Each of the three trends above have their own challenges which mean the when may be further out than we expect. Electric cars have been difficult to sell (except if it is a status symbol like Tesla’s high-end range) mainly due to the people buying based on the upfront cost rather than a total cost of ownership. And with oil prices at a low for the foreseeable future the total-cost argument remains a difficult sell.
Driver-less technology has 95% of the problem solved with highways/special ‘driver-less’ cities already showing promise. It is the 5% which is the hardest – the nuanced travel in existing towns and coping with road changes that still make complete autonomy a difficult proposition. In fact, regulators in California late last year publish regulatory guidelines that infer a ceiling on autonomous driving requiring all vehicles to have a specially-licensed driver capable of taking over a self-driving car in an emergency. This is a far-cry from Google’s vision of a fully autonomous vehicle.
Finally, ride-sharing has its own challenges – regulation, legality, consumer demand, consumer backlash and probably the most important cost per ride. The service is still too expensive to replace cars for most people, but were UBER or its equivalents ever to swap out drivers (the highest cost) the cost of going ‘car-less’ could be competitive far more quickly than anyone expects – particularly if you don’t yet own a car.
A driver-less future is inevitable but when is a little less certain. In some respects, it may only take the change of a regulation (e.g. Governments ruling that driving in the city limits of Sydney, Manhattan, London etc. be autonomous) to accelerate the change. In reality, like PC/Mobile or TV/Netflix substitution, the change is likely to be gradual – first hybrid cars, then assisted parking, followed by high-end electric cars that feel like the ‘real thing’ and next the ability to remove your hands from the wheel on major highways.
What continues to intrigue and requires a separate post is – who will be the leaders in a driver-less future? As outlined above – many of the players are making a claim from their own patch. The conditions appear to be in favour of the business(es) that can drive adoption of ‘transport as a service’ fastest with direct access to as many people as possible – in this respect “the future is already here, it’s just not evenly distributed“.