Massive
opportunities in urban transportation are emerging as the industry transitions
from per-vehicle to per-mile economics
Growing up, I dreamed of owning cars I would be proud to
wax, polish, and cruise around my neighborhood. Today, I dread the prospect of
being weighed down by a rapidly depreciating hunk of plastic and metal. Now all
I want is a pleasant transportation experience.
Millennials share my sentiment toward vehicle ownership, and many of
them are embracing the convenience of ride sharing.
The trillion-dollar auto industry is being turned on its head.
Automotive companies are getting squeezed as car sales drop and newcomers eat
their margins.
As part of this shift, the industry is transitioning from
per-vehicle to per-mile economics. Historically, the automotive industry has
been measured by how quickly it assembles cars, pushes them to customers, lends
money against them, and collects money to maintain and upgrade them.
Tomorrow, the industry will be measured by how many miles
it moves passengers, and how much margin it generates on every mile traveled.
Vehicles will travel
3.17 trillion miles in 2017 — a 7.8% increase from five years
ago. The trend will continue: The rise of electric vehicles and
automated driving mean we can expect a lower environmental and labor impact, as
well as lower prices.
Automakers should not worry about being put out of
business. Some will not survive the evolution. A but a number of them
will be key players in tomorrow’s per-mile realm. Some will become white-label,
commodity producers of vehicles for Uber, Lyft, or Zoox fleets. Others, such as
GM, Audi, and BMW, may choose to compete with the ride-sharing giants and
operate their own fleets.
Which
businesses are positioned to capture the majority of the dollars for the many
billions of miles driven? A few possibilities:
·
Insurance: Robo-taxi technology has almost
arrived. So far, there isn’t a legal framework in which an operator can offer
autonomous services. Such a framework would help to set limits on the
liabilities of passengers, operators, and technology vendors. When the limits
of those liabilities are known, insurers can design and offer policies for each
group. Startups will need to take a leadership role in helping insurance
companies model the risk of computer vision, AI and other technology
malfunctioning. Given the expectation of slower auto sales, incumbent insurance
companies should be delighted to pursue this nascent market, which could turn
into the bulk of their business someday.
·
Compliance: Limiting operators’ liabilities will
require strict safety regulation compliance. These regulations could
include building and running simulations on the AI, as well as monitoring and
auditing tele-operations (i.e., humans remotely overseeing the autonomous
vehicles).
·
Distribution: Today, Uber and Lyft own the primary
channels to ridesharing. Their vast network of drivers and colossal cash
coffers have allowed them to lock down the industry and squash competitors. So
far, neither of them is building their own vehicles. Traditional automakers
have an opportunity to rethink the experience of passengers, as well. If they
start from first principles, they will find themselves designing and building
very different vehicles than what they’ve made in the past. New and emerging
companies, such as Zoox (disclosure: my firm is an investor), are being built
from the ground up to design and operate sophisticated transportation robots
for this new era of driverless transportation.
·
In-vehicle services: Forget mobile devices; “driverless” is
the new platform. Highly personalized, rich environments can be created to
stimulate and engage with passengers. Voice interfaces can tune the experience
in the vehicle, and serve as a concierge for not only that a single trip or a
series of trips over multiple vehicles and in multiple locales. Imagine tours
provided by robotic cars that “know” passenger tastes, preferences, and
previous destinations. Your driverless tour guide showing you around
Bangkok “knows” your preferences from your prior tours in Rome and Sao Paulo.
They can tap into your social media profile to recommend dining, shopping and
entertainment experiences.
·
Autonomous technology: It is well-established that companies
who build unique technology that enables autonomous driving are positioned to
reap massive benefits. Non-auto-tech companies are seeing the opportunity and
snapping up innovative companies. Intel paid a premium for MobileEye and
positioned itself as a major Tier 2 automotive supplier. The channel that Intel
acquired through this purchase will enable Intel to sell many other
technologies, such as chips, sensors, and software, into the automotive supply
chain.
Trillions
of dollars worth of new opportunities abound in the coming era of autonomous
travel. If history has taught me anything, it’s that this new paradigm will
spur entirely new ways of living that we haven’t yet considered. As for myself?
As
a gearhead, I’m most looking forward to getting from A to B by robot, and
manually pushing performance cars to their limits on racetracks.
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