Driverless cars are the future, and the ugly battle to dominate the field is on

It’s big. It’s nasty. It’s the fight for dominance in the burgeoning market for driverless cars — and the service they’ll provide.

Alliances are forming. Competitors are bulking up. The gloves are coming off.

There are accusations of subterfuge. On Monday, U.S. District Judge William Alsup slapped restrictions on ride-hailing giant Uber’s driverless car research in a trade secrets civil lawsuit filed by archfoe Waymo, Google’s autonomous car project.

There are hints of criminality. Last week, the same judge referred Waymo’s allegations that Uber stole its proprietary technology to the U.S. Department of Justice for investigation.

There are questions of commitment. Even as nearly every automaker positions itself for a future of self-driving cars, the board of Ford is putting pressure on Chief Executive Mark Fields to justify his big bet on the driverless future, implying some think it might not be worth the financial risk.

The driverless economy is one few economic sectors with huge growth potential, now that the bloom is fading on consumer electronics.

Tens of billions of dollars are at stake, maybe hundreds of billions, according to market analysts.

“It’s a huge market, but there are a lot of people who feel they have a right to compete — the tech companies, the automakers, the suppliers,” said Mark Wakefield, head of the auto practice at consulting firm AlixPartners.

Add in driverless ride-hailing services, and the total could reach a trillion dollars or more, Tasha Keeney of ARK Invest said.

The most powerful weapon, along with the cash to make use of it, is intellectual property.

“When you own the I.P. for autonomous technology, that’s a huge asset,” Keeney said. “That’s who’s going to own the economics of this market.”

And who stands to gain the most? Whoever is first to market, Keeney said. That’s because data collection is crucial to perfecting robot car technology, and the sooner technology hits the road, the more data stream back to improve the systems.

Which explains the bare-knuckles nature of the Waymo-Uber battle.

Waymo’s suit, filed in February, accuses Uber of knowingly using stolen trade secrets to “cheat” its way into the market.

The judge on Monday ordered Uber to keep Anthony Levandowski, the alleged thief, away from any work on lidar, a light-beam technology considered key to the development of autonomous vehicles.

Levandowski was considered a star in the self-driving industry and key to Uber’s effort to replace human drivers with robot cars. Levandowski left Waymo last year and started Otto, a driverless truck company, where he soon grabbed headlines for testing driverless big rigs in Nevada. In August, Uber bought his company for $680 million and made him head of driverless cars.

Before he left Waymo, Levandowski downloaded 14,000 documents — an action that doesn’t appear to be in dispute. While Waymo claimed 121 trade secrets were stolen, Alsup said in his order Monday that only some of them might have been used by Uber. He cited two examples but most of the detail was blacked out in the public document.

“Uber likely knew or should have known that Levandowski had taken and retained possession of Waymo’s confidential files,” the judge wrote.

The judge rejected Waymo’s request to block Uber’s work on lidar technology — but said it must continue without Levandowski, or any purloined data.

A court-appointed special master will inspect Uber work sites to ensure compliance.

Uber was also ordered to conduct a thorough investigation of the case, including interviews with anyone who might have been involved, and report back to the court June 23.

Alsup dismissed the patent claims and said only “some” of the trade secret claims hold merit.

Uber positioned the order as a victory. “We are pleased with the court’s ruling that Uber can continue building and utilizing all of its self-driving technology, including our innovation around lidar,” a spokeswoman said.

Anything short of shutting down its research could be considered a win for Uber, which has been hammered this year on controversies including a lawsuit claiming workplace harassment and the revelation that it used a program called Grayball to deceive local authorities about how its service was being used.

Replacing its drivers with robots is “existential” to Uber’s future, founder and Chief Executive Travis Kalanick said last year.

“The entity that’s in first, then rolls out a ride-sharing network that is far cheaper or far higher-quality than Uber’s, then Uber is no longer a thing,” he said last year.

Kalanick, meanwhile, will have to prove that he can guide Uber into that driverless future.

Uber will survive, said Evan Rawley, a professor at Columbia Business School. “People want a clean, safe, cheap ride that comes quickly and gets them where they’re going.”

But Kalanick? “The capital markets are not going to be quite as forgiving,” Rawley said. Investors, he said, may “demand a change in strategy and perhaps a change in the executive ranks.”

The private company, valued at $68 billion, is burning cash as it keeps fares low to put pressure on Lyft and other competitors.

Some investors are already growing impatient with Kalanick, who is under pressure to bring in a strong No. 2. After a viral video that showed Kalanick insulting an Uber driver from the back seat of the car, the executive publicly admitted he needs to “fundamentally change as a leader and grow up.”

A criminal investigation in the Waymo case will only darken the clouds hanging over Kalanick. The judge’s Justice Department referral “is not a good sign for Uber,” said Robert Milligan, an attorney at Seyfarth Shaw in Los Angeles. “You don’t normally see a judge make a criminal referral in a trade secrets case.”

“Travis and the Uber board have to come out and own this problem,” said Grayson Brulte, a autonomous vehicle consultant in Beverly Hills.

Kalanick couldn’t have been happy to learn Sunday that archfoes Waymo and Lyft had signed a deal to collaborate on autonomous technology through pilot projects and product development. Already, Lyft and General Motors are using the new Bolt EV as a test vehicle for driverless cars.

Waymo is a leader in driverless technology. Lyft is the No. 2 ride-hailing company in the U.S. GM, which owns a major stake in Lyft, is an automobile manufacturing behemoth.

The partnership underlines the need for Uber to survive the trade-secrets case unscathed. Without an automobile fleet of its own and without competitive driverless technology, all Uber has in the long run is its name recognition — for better or worse — and the passenger data behind its app.

As featured in the May 16, 2017 edition of The Los Angeles Times

Credit Card Companies Boost Interest in Mobility Finance

Mastercard is expanding its relationship with General Motors Co., to allow for online payments for multiple services — including Maven carsharing — evidencing that credit card companies are beginning to understand that mobility finance is the next frontier for revenue.

And those companies that do not collaborate with mobility services will be behind the times, Grayson Brulte, president of Brulte & Co., told Mobility Finance.

Credit card companies are recognizing the financial opportunities within mobility. Mastercard, for example, is involved in many mobile services and even works with Uber and Lyft to help drivers get paid faster, a Mastercard spokesperson told Mobility Finance.

Mastercard and General Motors initially began their partnership in 1992 with the GM Rewards Card program where customers could use their cards for everyday purchases and earn points that could be used toward purchasing a GM vehicle. Now, that partnership has expanded to allow any credit card holder to order and pay for service parts and accessories, Maven carsharing services, OnStar guidance, security and data plans, and OnStar Go, using Mastercard’s payment gateway, the companies announced on Tuesday. The gateway enables fast and secure electronic credit and debit card processing for any major credit card.

For OnStar Go, the idea is that drivers can pay for everyday items from inside their vehicles, through the OnStar Go enabled dashboard.

“The overarching thing you are seeing in the marketplace is when paying for carshare services, ACH [Automated Clearing House] and checks are going away,” Brulte said. “We are moving to a cashless society.”

Transactions involving credit cards or ACH are both electronic funds transfers (EFTs). However, ACH draws on funds in checking or another similar bank account. In theory, there may not be enough money in a person’s account to cover an ACH, while a credit card guarantees funds to the merchant (within a person’s credit limit). With a credit card partnership, mobility companies are setting themselves up for future ongoing payments.

GM will likely roll out an autonomous subscription service based on its Cadillac by Book monthly subscription program, Brulte said. And when it does, it will be based on credit cards — no more ACH bank payments or lease payments.

This is currently seen with partnerships that American Express has with both Uber and Daimler.

“American Express has a longstanding partnership with Uber,” Leah Gerstner, vice president of public affairs and communications for Amex, told Mobility Finance. “Members can earn 2-times Membership Rewards points on U.S. rides when using an eligible American Express Card.”

American Express also has an exclusive in-app experience for its Platinum Card Members, she said, where members receive Uber VIP status automatically and can unlock exclusive perks, discounts, and giveaways where available.

For Daimler, there are two separate American Express programs in the U.S. available through Mercedes-Benz and Mercedes-Benz Financial Services, which both launched in 2011.

And in Germany, Daimler offers a MercedesCard through Visa, which has bonus offers for car2go customers. In this case, car2go is integrated into the MercedesCard where registration and the first ride are free, Mary Beth Halprin, director of corporate communications for Mercedes-Benz Financial Services, told Mobility Finance. Additionally, customers can redeem bonus points for car2go credits in the MercedesCard bonus portal.

“If you go to Amex.com/travel, and book a car or flight, you get 5-times points,” Brulte said. “Will you see that if you sign up for mobility subscription service? Will you get those bonus points every month? When you start talking 5-times extra points, that’s a healthy way to drive consumer adoption of mobility services.”

As featured in Mobility Finance on May 4, 2017

Baidu Invests in Auto Lending Site as Potential Platform for Autonomous Cars

Baidu Inc. — together with Tencent Holdings and JD.com — announced yesterday an investment of $1 billion in Bitauto Holdings

Baidu Inc. — together with Tencent Holdings and JD.com — announced yesterday an investment of $1 billion in Bitauto Holdings, an e-commerce site for automobile users, manufacturers, and dealers, providing a potential platform for the Chinese search engine’s autonomous vehicle technology.

The investment will go towards Bitauto’s financing subsidiary Yixin Capital. The funding is aimed at growing Bitauto’s business in online auto finance and related transactions, a spokesman said in a published report.

This investment is the latest in a series of funding Bitauto has raised as the company seeks to be China’s largest online car financing platform. And Baidu’s investment is strategic as it positions itself to be a provider of autonomous vehicle operating systems, according to a company statement. Baidu recently announced it will make its operating system for self-driving cars free in hopes of speeding up development of autonomous driving and draw carmakers to its services. The company previously formed a self-driving car team in Silicon Valley back in April 2016, focused on research, development, and testing.

It’s a “tremendous” investment, Grayson Brulte, president of Brulte & Co, told Mobility Buzz. “It is a clear indication that Baidu is working on some kind of autonomous vehicle service.”

Traditionally, Chinese avoid taking out loans to buy cars, instead opting to use cash, according to a 2015 study conducted by Deloitte Consulting. In comparison, more than 80% of cars are financed in the United States. However, Deloitte expects 50% of cars to be financed in China by 2020 as automakers aggressively push financing to increase sales. Chinese consumers finance about 27% of cars as of 2015, according to the study.

“China’s car market remains primarily a cash market, but it is starting to move to credit,” John Lawler, head of Ford Motors Co. operations in China, said in a published report. “It’s a demographic and generational phenomenon. Those people who finance cars are primarily younger buyers.”

Establishing credit is also a quick way to build growth, especially for an economy, Brulte said. In the case of China, where the government exhibits a strong sense of control over the growth of the economy, influencing citizens to move beyond cash stimulates the economy as people buy more items and can buy higher priced items since they will pay it off in installments.

For Bitauto, the economy’s move toward credit is significant since the company also offers financing and is looking to grow that part of its business. Baidu is likely to market its autonomous technology instead of developing its own cars, Brulte said, and use Bitauto as a means of assuming the liabilities of owning and maintaining autonomous vehicles. And, since self-driving cars are likely to be very expensive — too expensive for ownership — it is likely Bitauto and Baidu will set up a subscription model for ownership and that Bitauto may provide financing for those subscriptions, he added.

“They may provide financing for a subscription for an autonomous vehicle, but it depends on how much the government will let this happen,” he said. The communist Chinese government is often noted for stepping in to stop or prevent a free market — more often blocking foreign companies from operating in China as a means of bolstering Chinese businesses and the government itself. But, back in June 2013, China’s central bank cut the amount of money auto financing firms needed to set aside as reserves, in a bid to stimulate the economy.

The push by automakers to direct consumers to finance is part of their strategy to make up for sliding margins on new-car sales in China, where more companies are cutting prices to encourage buyers. Buying a vehicle in China has historically been more expensive than American or European markets, often leading to many Chinese people purchasing luxury cars such as BMW, Porsche, and Mercedes-Benz, from those markets and shipping them to China in a black market that has faced a crackdown from U.S. prosecutors.

Other key sources of revenue for OEMs in China include maintenance and repairs, vehicle leasing, and sales of accessories and parts.

Overall, global carmakers also have been funding their financial units’ expansion by selling off their loans in the form of asset-backed securities to firm up their operations in China, freeing up money they can then use to lend to Chinese consumers, according to a report.

As featured in Mobility on April 21, 2017

Traditional Insurance Companies Need to Evolve for Mobility

The traditional business days of car insurance are “numbered,” as the on-demand sharing economy continues to rise, Grayson Brulte, president of Brulte & Co., told Mobility Buzz, which is why several auto insurers are looking into rideshare coverage.

And Slice Labs, an insurance startup, is no exception.

Slice Labs developed a pay-per-use rideshare insurance app that it is now testing with 50 rideshare drivers. The startup plans to roll out the app — and begin issuing policies — in two cities by the end of the second quarter, Tim Attia, Slice’s chief executive and co-founder, told Mobility Buzz.

Slice bills its product as a first-to-market platform that protects the rideshare drivers while covering the liability associated with ridesharing. The Slice policy is valid for the entire time the driver is logged onto the rideshare app.

Because of Slice’s unique model, it has garnered attention from reinsurance group Munich Re, which shares the risk by purchasing policies from other insurers to limit the total loss to the original insurer.

New York, N.Y.-based Munich Re is attempting to figure out how it can “disrupt its current model” so that it does not go out of business, Brulte told Mobility Buzz. “I think more insurance companies will have to figure that out.”

Many auto insurers including Geico, Allstate, and Farmers Insurance have started offering or testing rideshare-specific insurance in select markets in recent months. However, most of these policies are not on-demand, but extensions of auto insurance policies designed to ensure drivers have coverage until they accept a ride.

Rideshare drivers need to be covered, but purchasing an annual policy — which is the typical option offered by some of the large auto insurers — is not always cost-effective, especially for drivers that only drive 15 hours per week, for example. “We wanted to make it easy, and add a policy with the same experience as an annual policy,” but provide drivers with a pay-per-use policy, Attia said.

Slice and Munich Re have agreed to an ongoing roll-out of products and territories, according to a published report. Slice will supply the technology platform to deliver the products directly to the consumer, and it will also handle the service and processing of claims. Slice’s automated underwriting rules are agreed upon by Munich Re.

As featured in Mobility on April 20, 2017

Porsche is the One to Watch in the Driverless Race

An expert in the driverless market has earmarked Porsche as the company to watch in the automated car race

Grayson Brulte, the co-founder of Brulte & Company and Autonomous Tomorrow, told Driverless that the luxury car company were the underdogs in a highly competitive and specialized field.

One company to keep an eye on is Porsche. Volkswagen Group is an investor in Gett and the company is preparing to use the Gett platform to offer a Porsche chauffeur service in select cities around the world. The service will be used to model an on-demand Porsche autonomous vehicle service.

Brulte’s comments come after Porsche CEO Oliver Blume told German newspaper Westfalen-Blatt in 2016 that the company would not be morphing into a driverless entity because it’s better “to drive a Porsche by oneself.”

Nevertheless, Gett is receiving a cool $300 million investment from the German company in March, which could help to propel the Volkswagen Group into its own automated ride-sharing service down the line. Volkswagen and Porsche merged their manufacturing companies in 2011 to form an “Integrated Automotive Group.”

Last year the BBC reported that Porsche would be launching an electric model, a plug-in hybrid of the 911 version, which would hit the market as early as next year.

Volkswagen have been relatively open about their ambitions, with Matthias Müller, the Chairman of the Board of Management of Volkswagen Aktiengesellschaft, stating that the Germanic giant aimed “to become one of the world’s leading mobility providers by 2025.” Müller said:

“Within the framework of our future Strategy 2025, the partnership with Gett marks the first milestone for the Volkswagen Group on the road to providing integrated mobility solutions that spotlight our customers and their mobility needs.” — Matthias Müller, the Chairman of the Board of Management of Volkswagen Aktiengesellschaft

However, there is a lot of competition in this field, with Tesla, General Motors Co. (GM), Google, Apple, Ford, Lyft, and Uber all vying to be top dog.

Meanwhile, Brulte suggests that there won’t be just one winner in this increasingly crowded driverless arena. Indeed, he maintains that there will be “multiple winners after a series of bankruptcies, mergers and consolidations.”

That’s no surprise, given the ongoing drama between Uber and Google affiliate Waymo, who are suing Travis Kalanick’s company for data fraud.

However, Brulte did have an idea about who would be the apparent champions.

“Waymo and Tesla will emerge as clear winners in the early days of autonomy,” he told Driverless. “As autonomy evolves, look for OEMs to partner with software platforms such as Gett to offer a consistent branded autonomous vehicle service experience.”

As featured in Driverless on April 18, 2017