Let me start with bad news: the automotive industry as we know it is dying fast and the impact on our world will be devastating. The traditional car – that has been one of the strongest designers of life in the 20th century – is going to be extinct before 2050. Horses were replaced by automobiles in less than 20 years and automobiles will be replaced by ACES (autonomous, connected, electric & shared) vehicles before 2050. Just like there are still horses around for sports and recreation, there will still be automobiles. But not for daily commute.
This giant ACES shift is the reason why nexxworks is organizing the Future of Mobility Tour in San Francisco in December. What I want to accomplish in that week as the guide of the tour, is to confront people with the speed and impact of these changes. I want them to experience how a whole new ecosystem is going to re-write society and people’s behaviour and as such maybe all 20th century business models for that reason. It is the brewing of a perfect storm. And we are going to visit the very brewery: Sillicon Valley.
ACES is here
Automous vehicles just need loads of data (Waymo has billions of data-miles and so has Tesla), loads of computing capacity (we all know Moore’s law) and better visual aids to ‘scan’ the small data of the direct environment. Waymo has announced its autonomous taxi business in California before the end of the year and both Uber and Lyft expect most of their rides to be autonomous by 2025-2030. The fact that Toyota invested heavily in Uber’s self-driving capabilities, is the very proof that autonomous vehicles are inevitable.
Connected vehicles are nothing new. European car manufacturers are working on a joint platform to connect cars. Connecting cars will speed up the introduction of autonomous vehicles, and will overcome the biggest hurdle for fully autonomous traffic, which is the transition period during which autonomous vehicles are going to need to deal with the unpredictable human drivers. The introduction of 5G will speed up this process.
Electrical it will be. After denying the death of the Internal Combustion Engine (ICE), after bashing the electrical car for years, after fighting it and arguing in vain, all traditional automotive brands are now speeding up their efforts to meet the changed customer needs and to introduce electrical cars. The aim is to kill the ICE before 2030. Volvo, Jaguar, Porsche, Audi, VW… all made this U-turn.
Shared. The sharing or collaborative or shortcut or no-more-middle-man or platform economy has been introduced and exploited by companies like Uber, Airbnb, Instacard, Liquidspace, Lending Club and is now conquering the world of mobility. Uber and Lyft may still be a taxi company, but their final goal is to become ‘The’ Mobility as a service app.
In San Francisco more and more people are using the acronym FACE instead of ACES: With the F of Fleetization. When vehicles are to be shared, it will no longer be individuals that own them, but fleet owners. That may be Uber, but then their business model would have to change dramatically, as they will have to buy the fleets, it may be Toyota, or Leaseplan, or Apple, or Amazon or a completely new player.
New markets, new rules and new players: this is exactly the essence of our trip to San Francisco.
I like this quote by Kevin Kelly: ‘It is an open market, there are no specialists yet and there is a lot of low hanging fruit.’ I am obsessed by the biggest change in society in ages, and that is the reason I firmly believe that the Future of Mobility Tour is important for all business leaders. I hope it will inspire them to jump into this new world to develop new businesses now that space is still open.
1. The Impact of fleetization
Any company can still become the dominant fleet owner, but that shift from personal ownership to fleets will have a major impact on many related businesses.
Insurance companies will not only be facing limited to no accidents, but will have to deal with fleet-owners and their purchasing departments instead of consumers. The same goes for auto repairs. Auto dealerships are going to disappear very fast. Not only because of the e-sales of cars, but because of the simple fact that cars will no longer be bought in regional showrooms. That will also have an impact on the real estate business as thousands of car showrooms will come to the market that were built to serve only this one purpose. As such banks will be affected as well, first because we will no longer loan to buy a car and second because they have been granting long term loans on assets like car dealer showrooms and parking lots that may be not that valuable in the end. Fleet owned cars will have to have as limited downtime as possible to optimize return on investment. Our consumer owned cars are being parked for 90% of the time. Parking lot owners will be heavily affected as their business model will disappear at lightspeed. One of the biggest money makers for airports, cities and hospitals is parking money. They still have the time to anticipate.
Disruption of business always leads to new opportunities. Garages take 15-50m2 of floorspace in our houses that will be no longer be needed. Once consumers no longer have to spend space and money on their cars, this will lead to a tsunami of refurbishments. On average we need 4 public parking spaces per car and we have designed our cities around the car. Major new infrastructure building projects will be executed. All this will involve banks, cities and construction companies. Fleets will run on algorithms to optimize return on investment. Fleets will combine transport of goods and people, different sizes and ways of transport, will optimize demand and supply, price and availability of energy… Big Data and AI companies will develop tons of business cases and software companies will develop software as a service cloud based platforms for shared mobility. Engineering companies will develop robots to clean, maintain, charge and check fleet owned vehicles. Tire companies will develop tires with different technical features as today. Parking lots may be transformed into hubs where people can switch vehicles or ways of transport and where cleaning, maintenance and powering the vehicles can be organised.
2. The impact of autonomous cars
It is obvious that millions of jobs will become redundant. Anybody who makes money with a steering wheel in the hands whether it is professional driver or driving instructor, is an endangered species, but this is only the tip of the iceberg. An autonomous vehicle brings us from A to B whenever we need it and should not look like a car, but can take whatever shape and function. Why would we endure all the hassle of flying a plane for a commute that is only one night away, when we can sleep over in a vehicle that offers even more comfort than a business class airplane cocoon? This is not only disruptive for airliners and hotels, but as a autonomous vehicle can be an entertainment room, a restaurant, a meeting room, a shop, etc. This, in its turn will impact the entertainment business, restaurants, office space and retail. Once again real estate will be affected as retail A-locations (accessibility, parking lots etc…) are highly defined by human driven cars. The function and functionality of public transport will no longer be any different from fleet owned autonomous vehicles. Deliveries will be done by the same vehicles that are used to transport people and will affect delivery services. Optimized fleet owned autonomous vehicles will not only reduce or eliminate traffic and traffic jams, their life time cycles are way longer (compare it to planes or trains) and so the number of newly bought vehicles on a yearly basis will fall dramatically. This will kill at least 50% of the traditional automotive brands or even more and indirectly the whole automotive ecosystem.
No more car accidents will not only affect insurance companies and car repairs, but with 3500 deadly victims in traffic on a daily basis, one of the strange side effects of this evolution towards zero accidents is a lack of organ donors, which will affect healthcare.
Hotels like Hilton will dive into the space of autonomous vehicles, retail and airline companies, entertainment companies, marketing agencies,… but also Apple, Samsung, and why not Nike or Starbucks, Amazon,… Vehicles will be designed in a completely new way. Interior design companies will become important. Hundreds of high-tech companies that build the ‘senses’ of the car to capture the environment into data, that build the AI, like Fyuse and drive.ai will try to enter this new industry as will all companies that develop algorithms. Infrastructure for self-driving cars is completely different than for human driven ones and will urge for re-designing our cities, retail and public life in general. All this will create a brand-new ecosystem of big, medium and small businesses.
3. The impact of connected cars
Still a lot of opinion leaders or business people do not believe that there will be autonomous cars on public roads soon. There are 5 reasons why they are mistaken.
1. Is about (not) fully understanding how artificial intelligence works. An artificial intelligence is not as holistic and flexible as human intelligence, but outperforms humans in one specific field. That can be ‘driving a car’. People still believe that an AI is ‘programmed’ and do not see how one can program a car on public roads and they are quite right, except for the fact that this is not how the AI of autonomous vehicles works. The AI is trained in 3 combined ways. Part of it is programmed, part of it is trial and error in virtual reality, part of it is imitation learning. Tesla e.g. uses the autopilot function as a constant shadow pilot gathering data to feed the central data-centre. With billions of miles of real data and billions of miles of virtual data, the AI is better trained than any human driver.
2. Automotive vehicles will be fleet owned and not privately owned. Therefore they do not need to have level 5 autonomy, which means that these vehicles can be used anywhere under all circumstances. Level 4, which allows a car to be fully autonomous in a certain area (e.g. San Francisco) so that roads can be ‘programmed’ into the brain of the vehicle, will do the trick and level 4 is where the most sophisticated cars are right now.
3. Connected cars will update that information all the time and in real time, just like Waze does right now peer-to-peer. This will not only make sure the ‘programming’ of the environment is up to date, but that all ‘flows’ are optimised.
4. Vehicles will be connected to the infrastructure of the city and to all other types of vehicles or users.
5. Connected cars will solve the incompatibility between rational autonomous vehicles and human driven cars, as it remains very difficult for an AI to ‘calculate’ how its actions will impact human drivers.
Connectivity is the very cornerstone to FACE or ACES. Fleets or Shared mobility will only become reality once all vehicles are connected all the time collecting and sharing data. 5G connectivity will be a necessary asset, and so telco companies are highly involved. There will be new business models and an increasing importance of datacentres and cyber security.
4. Impact of Electric
Traditional brands have developed cars based on the engineering of the internal combustion engine. The development of a new powertrain used to be very expensive and pay back cycles used to be pretty long. An electrical car is like a PC. The components are simple and quite generic and make all investments, development centres and many production units of the existing industry redundant. The traditional workforces will be way too big as will the number of production plants. Not only the traditional brands will be impacted by a huge reshuffle of their P&L sheets, as assets will be turned into liabilities overnight, but this will also be the case for oil companies that have ‘money’ in oil reserves that may not have the same value in the future as demands will drop dramatically. This will affect banks, the stock exchange, the world economy and even global political stability.
It will be fairly easy to start a new brand, the entry costs are limited : components will be on the market and the main differentiator will be design, function and route to consumer. Vehicles will be batteries on wheels. Development, production and distribution of batteries will be driving this new industry for the next decades. Energy utility companies will have to develop and invest in renewable electric energy and are going to make use of these batteries on wheels to serve as both usage and stockage of energy. Supply and demand will be far more complicated as it is today for that reason. In this new space, the game of ones and zeros will be the core, as algorithms will manage the new flows of energy. Powering electric cars and replacing traditional gas stations by docking stations for fleet owned and autonomous electric cars is one of the future challenges that has led to new companies such as Chargepoint.
This list of challenges and opportunities that the new mobility will create, is far from complete. All I have described here is already around. All those new technological economical and even political forces and new business models are shaping a brand new world of which no one can predict where it will really lead to.
What I know for sure is that one day we will have bought our last ICE vehicle and one day we will have bought our very last car. The next generation will never buy another car and may never drive one, except maybe for pleasure in the weekend on a closed circuit. What I know for sure is that the Future Of Mobility will affect all of us. It will create major opportunities for entrepreneurs that dare to develop business models for The Day After Tomorrow.