Brands as an Autonomous Vehicle Service
In the future we will subscribe to an autonomous vehicle brand as a service as opposed to owning and garaging an autonomous vehicle.
In the future we will subscribe to a vehicle brand and summon autonomous vehicles on-demand from our smartphones which will arrive in 2 to 3 minutes.
2 to 3 minutes is the “magic pickup time” according to Marc Andreessen. If autonomous vehicles cannot arrive in this time frame, there will be a dramatic drop-off in demand and usage. This drop-off in demand would cause the entire program to be underutilized therefore resulting in a negative domino effect that would impact the entire service.
Wisely recognizing the negative domino effect and industry research, which is projecting that up to 1 out of 10 cars sold in 2030 will be a shared vehicle, traditional car manufacturers are transforming into mobility companies. The goal of the traditional car manufacturers is to model the behavior of how vehicles with drivers are used as a mobility service in a variety of circumstances.
Circumstances such as which are the most common routes in a city? What types of vehicles are used for the service and on which days? What happens when it rains or the sun is out? Are different vehicles used? In January in Southern California is there an uptick in SUV usage when ski season is in full effect in the mountains? Or is it the opposite?
These are just a few of the questions that traditional car manufacturers will have to fully understand in order to properly develop and launch an on-demand autonomous vehicle brand as a service.
To achieve this goal traditional car manufacturers are making strategic investments in transportation network companies to co-develop the future of transportation. In January, General Motors invested $500 million in Lyft while Volkswagen invested $300 million in Gett.
Furthering their bet on autonomous mobility, General Motors purchased Cruise Automation for over a $1 billion in March with the deal closing in May. While General Motors has been aggressively leveraging their balance sheet and deep knowledge of cars to become a leader in autonomous mobility, others have been taking note.
Apple recently invested $1 billion in Chinese ride-hailing service Didi Chuxing. The investment by Apple is two-fold. One, it’s a clear signal that Tim Cook and company are doubling down on China. Two, Apple is indeed working on an autonomous car that could be manufactured and initially launched in China.
Angelo Zino, an equity analyst at S&P Global Market Intelligence summed up the investment as, “We think the investment makes sense as it should help improve Apple’s relationship with the Chinese government amid regulatory concerns.”
Mr. Zino is correct and further states, “We view the connected car space as a major growth opportunity for Apple and this investment could help the company with those initiatives.”
While Mr. Zino highlights the connected car, in my view that is just the tip of the iceberg as Apple currently has $181 billion of cash and investments (April 2016) in reserve overseas. The overseas cash reserve could tapped to fund the development and deployment of an autonomous vehicle service in China.
Furthermore, over 200,000 people die a year as a result of road accidents in China according to the World Health Organization. This number is more than four times the death toll from such accidents published by the Chinese government.
By removing the driver from the car, roads in China will become safer and the rate of fatalities from road accidents will fall as on-demand autonomous vehicles become prevalent on the roads of China.
This makes the investment in Didi Chuxing a shrewd political move. Apple could be viewed in some corners as helping to reduce the number of fatalities from road accidents with the introduction of an on-demand autonomous vehicle brand as a service powered by Didi Chuxing.
While Apple is making strategic investments in China to further their business interests and General Motors purchased an autonomous vehicle startup, other companies are taking a more holistic approach to the future of autonomous vehicles.
Volkswagen through their investment in Gett is working on developing a Porsche chauffeur service in the world’s largest cities. The premise for the Porsche chauffeur service is to model the behavior of how subscribers use the service and gather data on routes through deep learning. When Porsche feels comfortable with the logistics and autonomous hardware, the chauffeurs will be removed and the Porsche chauffeur service will become autonomous.
Klaus Froehlich, BMW AG’s head of development recently told Bloomberg in an interview, “the company that manages to offer driverless ride sharing cheaply and first will dominate this market. It’s a business proposition worth billions in profits that will cost billions to develop.”
Research released by McKinsey & Company in January 2016 projects that shared mobility, connectivity services, feature upgrades and new business models could expand automotive revenue pools by 30% adding up to $1.5 trillion in new revenue for companies.
On-demand autonomous vehicles will reshape global transportation forever and create fortunes for forward-thinking entrepreneurs and billions in new revenue for businesses.