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 another 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 teleoperations (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 a robot, and manually pushing performance cars to their limits on racetracks.
Will A Driverless Car Take Away My Keys?
hen I recently read that driverless car may be on the road in less than five years, I first spouted a variation of Charlton Heston’s angry response to gun control: You’ll have my steering wheel when you “pry it from my cold, dead fingers.”
It seems that with each click of our smartphones, computers and tellingly named remotes, we technologically recede a bit further from our world. We’re approaching the point that manually driving an automobile may be one of the last vestiges of our rapidly dissipating sense of control over our lives.
The prospect of putting my life solely in the “hands”
of a programmed machine seemed suicidal — physically and existentially. I’m not alone. According to AAA, 75 percent of drivers said they would be unwilling to ride in fully autonomous cars.
Granted, I don’t hesitate to ride in the back of a cab, putting my life in the hands of complete strangers who tend to drive helter-skelter through dense traffic as if they’re playing a video game. I routinely entrust my safety to bus drivers, railroad engineers and jet pilots without a qualm. But I trust them because they have some skin in the game. I’m betting that our shared survival instinct will keep us safe.
No sooner had I channeled my inner Charlton Heston, however, than my wife pointed out: “But you’re always complaining about other drivers. You should welcome driverless cars.”
As usual, she was as irritatingly accurate as my cellphone’s GPS directions. My first reaction to driverless cars was probably as rash as Connecticut drivers, ranked second worst in the nation, according to a survey by the insurance company EverQuote.
Every day, I gripe about drivers texting, eating, grooming, gabbing, daydreaming, speeding, tailgating and raging, all while I’m supposed to be paying attention to the road. And my own aggressive driving may be sufficient grounds for supporting Mark Twain’s observation: “The claim that man is a reasonable animal is in dispute.” The truth is that too many of us drive on our own automatic pilot, set on “careless.”
Further, after my boasting about survival instincts keeping us safe,
I must admit these reflexes often trigger a fight or flight response. Too many drivers toggle erratically between anger and fear, aggression and caution, gas and brake. According to AAA, 80 percent of drivers experienced road rage in 2016 resulting in 425 deadly encounters. Otherwise sane and rational people turn cars into deadly weapons and driving into a game of Russian roulette.
Overall, in the past several years, annual U.S. traffic fatalities rose with over a million injuries; and in 2016 more than 40,200 people were killed, a 6 percent increase over the previous year. Things are not getting better.
And despite laws against driving and holding cell phones, The National Safety Council reports that 1.6 million crashes each year are caused by cellphone use; 33,000 injuries result from accidents while texting. Though we all know it’s a deadly behavior, we irrationally persist.
An 11 percent increase in pedestrian deaths last year also was attributed to distracted drivers. Last December, five Connecticut pedestrians were killed within a 24-hour period. Distracted driving prompted Connecticut to propose a bill to increase fines, and in April the state initiated a month-long enforcement crackdown.
Further fueling the danger,
drunken driving accounts for one in every three traffic fatalities. In Connecticut alone, according to the National Highway Traffic Safety Administration, of the 266 traffic fatalities in 2015, drunk drivers caused 39 percent. And according to a new report by AAA, 63 percent of drivers who died in crashes in Connecticut tested positive for drugs.
AAA also reports that, with the exception of teen drivers, senior drivers have the highest crash death rate per mile driven. Unwilling to give up their autonomy, many seniors continue to drive despite their diminished vision, reflexes and coordination.
Actually, an autonomous car
could liberate us from our illusion of self-control. We could stop fooling ourselves that we can multitask and drive safely. We can accept the fact that driverless cars will provide attention and focus to the distracted; responsibility, to the careless; prudence, to the lead-footed and aggressive; and skill, to the inexperienced. It will minimize road rage and its deadly outcomes. And it will give greater autonomy and control to senior and disabled citizens.
So, on second thought, I will channel another variation of Charlton Heston’s position on gun control: “Cars don’t kill; people do.” This may be the most reasonable argument for removing people from the deadly automobile-human equation.
Thomas Cangelosi lives in Avon.