By all accounts, one of the most talked-about topics at this year’s Consumer Electronics jamboree in Las Vegas was self-driving cars, currently one of the most hyped of the tech scene. Self-driving cars offer the promise of a vision of the future that has been imagined for decades. There isn’t a single major auto manufacturer who has not got onto the bandwagon, for fear of being left behind. This is resulting in a complex web of relationships and partnerships between car manufacturers, Tier 1 OEMs, technology startups, major technology companies, all vying to bring self-driving cars to market.
Indeed, this activity is not limited to companies involved in building the cars themselves. This activity extends to all aspects of road transportation, from cities through to traffic management companies, parking companies, and major vehicle operators such as car rental firms and haulage companies.
So what is the pot of gold that all these players are chasing? What is worth the $80 billion invested by 2016, and who knows how much more in 2018? Whilst the technologist in me is intrigued and excited, will the future really happen? And if so, why?
It’s all about partnerships
The first thing that is obvious when looking at the main players in the self-driving car space, is that no-one is really going alone. With the possible exception of Apple, (of which not much is really known) and Tesla, all other players have very public strategic partnerships to complement their capabilities.
The key players are:
- Automotive Manufacturers – Know how to make cars. Do not want to be left behind, and so ‘need to be doing something’
- Technology Giants – After conquering the home, smartphone, tablet, home, and all forms of media consumption, these now see the car as one of the few untapped frontiers, a black hole that needs filling.
- Automotive OEMs & Tech Companies – These provide the nuts and bolts. As the technology demands of self driving cars become more complex, auto companies will struggle to keep up and develop the technology themselves and will resort to greater use of self-driving platforms
- Ride hailing companies – At the moment, these services all rely on low-paid drivers. Their business models become much more scalable if they are no longer need to rely on drivers.
The web of interactions is complex and changes day-by-day. Here is a snapshot of what some of the key players are doing.
It is not coming to your car (yet!)
In the long run, self-driving cars have the potential to completely overhaul how people buy cars – moving from a model of car ownership and leasing to one of purchasing a service. The first steps of this are already visible. Volvo have launched the “Care by Volvo” car subscription service with its new XC40 SUV. Here, you are able to buy a service for a monthly fee that involves configuring the car, servicing and maintaining it, upgrading it, sharing it with friends. You don’t own the car, you subscribe to a service, something Volvo is consciously seeking inspiration from the likes of Netflix.
What is Care by Volvo? Subscription service guide
Care by Volvo is the brand’s new premium subscription service. It aims to make customers’ lives easier by taking out the hassle of car ownership and offering a number of other bonuses at the same time. It’s a bit like a mobile phone contract where most of your costs are bundled into one figure.
Why it will definitely happen
The economics on car ownership are clear. On average, cars in private ownership spend 96% of their time parked on the street. Given the capital expense required for a car, that is a dreadful utilisation rate. Rental cars produce money for their companies on anything between 60-80% of the time. If this were not the case, these businesses would not be viable. This brings us to the nub as to why there is so much interest in self-driving cars. There is a lot of value to be gained by driving utilisation of cars up from 5% of car ownership closer to the 60% mark of car rental companies. The only way to achieve this is through some form of self-driving model.
Why you may not own one anytime soon
From a purely economic perspective, ignoring challenges that need to be overcome in the space of regulation, safety and customer acceptance, there is one major stumbling block – cost. Most self-driving car initiatives make use of Lidar, effectively a laser-based radar system to map out in real-time a 360 degree view of what is going on around the car. Lidar is at the heart of the self-driving battleground. Waymo (owned by Alphabet – i.e. Google) and Uber are fighting a vicious lawsuit on IP theft relating to Lidar. There is a consensus that in order to have safe self-driving cars operating on motorways (or freeways, depending where you are), the current performance of Lidar systems is not yet good enough. Range, speed and accuracy all need improving. However, even then, the cost remains prohibitive for individual car ownership. Lidar systems on their own cost around $80,000, with the current cost of a self-driving car being put at around $300,000-400,000. Of course, costs will reduce as the systems are mass produced and companies benefit from manufacturing at scale, but we are clearly an order of magnitude away from widespread private ownership.
Lidar just got way better-but it’s still too expensive for your car
Velodyne The iconic spinning laser sensors atop autonomous cars may be making their final turns. Velodyne, the world’s market-leading lidar manufacturer, has built a new device that sees further and in more detail than any lidar sensor currently on sale, in a package a fifth the size of its previous high-resolution device.
It will therefore be a while before you or I will own a fully autonomous self-driving car. However that misses the point. Why own a fully self-driving car, just to leave it parked on your drive or outside the office. The potential of self-driving cars is only realised when the vehicle is doing more useful stuff when it is not transporting you, which means that the whole model of car ownership will be turned on its head.
Taxi Companies and Ride Hailing
Given the cost of self-driving cars, this is where most of the activity is. According to Morgan Stanley, although in 2016 ride hailing accounts for only 4% of kilometres travelled, this will grow to more than 25% by 2030. As cities are increasingly choked by congestion and harmful emissions, it will become increasingly more economical, and indeed, convenient to buy a ‘ride’ rather than to own and maintain a car. At the moment, the operational cost, i.e. the cost-per-mile of an Uber or Lyft, remains higher than driving your own car. Remove the driver from the equation and the situation is reversed. These two factors, the cost to the end user, and the operational cost per mile can be transformed by autonomous ride-hailing systems.
This is what is underpinning Uber’s sky-high valuation, and why most efforts into autonomous vehicles is focusing on ride-hailing and ride-sharing. The front-runners are Waymo, owned by Google which is focusing its initial efforts on a driverless taxi service, while GM are planning to launch a taxi service based on its electrically-powered Chevy Bolt, and technology from its Cruise acquisition.
GM says it will launch a robot taxi service in 2019
GM says it will have a ride-sharing service featuring its line of self-driving Chevy Bolts ready to go by 2019. That would place the No. 1 US automaker ahead of its main rival Ford, which has said it plans to unveil its own self-driving car without pedals or a steering wheel by 2021.
Deliveries
In addition to moving people in our towns and cities, vehicles also move goods, many of which on ‘last mile’ deliveries to homes. This represents the more ‘utilitarian’ end of the self-driving spectrum, and includes all those companies with a road-based customer-facing delivery network. There are two types of companies looking at this. Logistics specialists such as FedEx and DHL clearly have a strong interest in reducing the cost of delivering to the home. One of the most advanced companies in this space is in fact Deutsche Post DHL, who are teaming with GPU manufacturer Nvidia to kit out its fleet of electric delivery trucks with self-driving capability. The benefits here are obvious, extend automation beyond the distribution centre through to the delivery network. How this will work in practice, is yet to be seen, as a human operator will still be required to physically deliver the package to the recipient’s home.
Self-Driving Delivery Trucks Could Be Hitting City Streets Next Year
Deutsche Post DHL Group is partnering with Nvidia and auto supplier ZF to deploy a test fleet of autonomous delivery trucks next year.
The second group of companies with an interest in this space are those that make extensive use of home delivery services. This is an area where Toyota is very advanced. At CES this year, Toyota unveiled a partnership with Uber, Mazda and Pizza Hut to shape the direction of its e-Palette vehicle platform. This will act as a common mobility platform to allow companies to roll-out automated delivery services.
Haulage Companies
Outside towns, goods are delivered in larger heavy goods vehicles, or more simply, trucks. Here two, autonomous vehicles can have an impact on an industry’s economics. A preview of the shape this might take was provided by a the recent announcement by Tesla of its Semi electrically-powered haulage truck. This has the capability to ‘convoy’, by which up to three trucks drive in close proximity to each other with the lead truck providing guidance to the others who follow it autonomously. While this doesn’t mean that trucks will be driving fully autonomously, or indeed that drivers will not be required in the following two trucks, it does bring significant advantages to the haulage operator. When in convoy mode, presumably drivers can rest and therefore not use their maximum driving hours allowance. Additionally, when in a close-proximity convoy, the lead truck punches a hole in the air for the others to follow, dramatically reducing the drag and improving the efficiency of the overall journey, further reducing the cost-per-mile. In the haulage industry, autonomous driving is all about reducing costs and improving safety.
Tesla Semi has the technical capability to convoy today
Tesla founder Elon Musk revealed at the Tesla Semi unveil that the truck can work in a convoy mode, with a three-truck convoy beating not only traditional diesel trucking, but also rail transport in terms of a cost per mile price.
Impact on Cities
Indeed, as this trend continues, the OECD estimates that the number of cars need in cities would decrease by up to 80-90%. Part of the change, and indeed, the enabling infrastructure is the creation of ubiquitous fast-charging points. Fuel stations will make place for fast-charging points, and this is an area where rapid developments are taking place. In Europe, BMW, Ford, Daimler and Volkswagen have teamed up to provide a network of high-power charging points across Europe, in an initiative under a brand called “Ionity”.
There are two ways that cities can evolve in response to this trend. The more positive vision is a reduction in the infrastructure required to support cars, particularly in on-street parking and dedicated parking lots. As self-driving taxis or pooled cars will autonomously go from one job to the next, they will not need to park near the travellers’ destination, which is often in the costliest part of the city. This will mean that all these parking spaces can be converted in social, public or commercial amenities, thereby making the cities more liveable and pleasant.
The alternative view is that as the cost of individual transport decreases, more people will opt for using cars over mass transit systems such as buses and metros. Coupled with an increase in automated delivery systems, this risks exacerbating traffic congestion. The challenge cities will need to manage is how to cope with a decrease in the demand for parking, and a simultaneous increase in traffic on the roads.
Wired magazine recently interviewed a number of urban planners on this topic, and what stood out is how potentially far-reaching the impact of the move to self-driving cars will be on our cities, and how unprepared most cities are for this change.
8 Experts Predict How Self-Driving Cars Will Transform Your city
Elon Musk says every new Tesla comes with all of the hardware needed for fully autonomous driving. He is hardly alone in trying to spare humans the tedium of car operation. Audi, GM, Google, and Uber are among the many companies working toward the day when autos do everything and you’re just along for the ride.
And there’s more…
So far we have looked on the key industries that stand to make dramatic efficiency gains on the back of self-driving technologies. However the impact will be felt more widely amongst a broader set of industries, particularly those that support the transportation industry. I am thinking of insurance companies, energy companies (electricity generation, transmission and distribution), the petrochemical giants, public transportation and mass transit. This will have a knock-on effect on the regulatory environment for transport and all these associated industries. A big topic, perhaps one for another post..
Read more:
- https://www.morganstanley.com/ideas/car-of-future-is-autonomous-electric-shared-mobility
- https://www.itf-oecd.org/urban-mobility-system-upgrade-1
- https://arstechnica.com/tech-policy/2018/01/why-analysts-put-gm-and-waymo-far-ahead-of-tesla-in-driverless-car-race/
- https://techcrunch.com/2017/11/07/tencent-is-reportedly-testing-its-own-autonomous-driving-system/
- https://blog.cometlabs.io/263-self-driving-car-startups-to-watch-8a9976dc62b0
- https://techcrunch.com/2017/10/12/waymo-self-driving-safety-report/