Automakers are in a complex relationship with Transportation Network Companies (“TNC’s”) such as Lyft and Uber. In a way, Uber and Lyft and Uber are both competitors and customers. The Uber and Lyft of today do not own vehicles. Their driver’s own them and in the short run, auto manufacturers will likely start producing customized vehicles for TNC drivers. In the long run or as soon as the level-5 driverless cars come on the scene, Uber and Lyft may have no choice but to go into the auto manufacturing business.
The Uber and Lyft of today are a quasi-technology company and quasi transportation service provider. They are not one to the exclusion of the other. The transportation industry, as far as the transportation of persons by ground involves 3 parties: the driver, the customer/passenger and the 3rd party intermediary that puts them together. Once the autonomous vehicle takes the driver out of the picture, Uber and Lyft will have no choice but to embrace a new business model that involves ownership of vehicles
Owning and operating a fleet of automated vehicles is vastly different from operating an app-based demand-responsive company that facilitates transportation of persons. Technological advances in transportation have made it inevitable for Motor City to move into Silicon Valley, just as the power of fleet ownership will force TNCs into partnership with vehicle manufacturers.
TNC’s are well on their way to making their vehicles more “passenger centric” by creating a comfortable and seamless passenger experience — as opposed to today’s driver-centric vehicles. Passengers do not have to concentrate on driving and as such, there will be an increased focus on entertainment, infotainment and connectivity within existing vehicles. This effect of vehicles being more passenger centric will become even more pronounced when we have driverless vehicles. TV, audio, media, video games, video conferencing and high-speed Internet will become more commonplace.
The auto manufacturing industry is already working on the autonomous vehicle, which may place them in a better position to create their own ride-hailing service. They have the experience with vehicle creation and ownership and Uber has shown the world the way to creating a ride-hailing service for on demand ground transportation. But why would big auto create its own ride hailing platform when they can partner with Uber or Lyft. The big auto manufacturers already have name recognition and capital to make the leap and the driverless vehicle will not embroil them in the never-ending saga of whether Uber’s drivers are employees or independent contractors. This is an issue that has the potential to cause Uber to implode, especially in California, its home state. The decision in Dynamex makes that potential crystal clear.
All this points toward an era of transition where automakers, TNCs, software companies and other innovators in media and infotainment, such as Vugo, will operate in cooperation and some competition simultaneously. Over the next 5-10 years, they will all fumble their way through a convoluted series of new partnerships and alliances.
Regardless of whether to own or manage a fleet of vehicles, administrators are going to use and monetize their assets to the fullest. That means doing more than just connecting passengers with vehicles. It means finding new ways to unlock hidden value based on the information, communications, processing capabilities and physical location of those assets and the customers that use these vehicles. The cumulative result will be a fundamental shift in the business model for existing manufacturers and tech companies because a new business model is growing which involves the convergence of data consumption and advertising. The vast frontier of in vehicle advertising and infotainment will create new capabilities and business models that do not quite exist yet in the consumer-produced transportation system of today
When driverless vehicles arrive, they will dramatically lower the cost of conveying physical things and create more opportunities for integrating entertainment and advertising into the transportation experience. Inside passenger vehicles, entertainment and retail will turn into major revenue streams. More lucrative will be the ability to monetize the process of physically bringing people together through dynamic pooling. All these services will also act as a platform for data gathering — helping companies build more sophisticated customer profiles and better understand tastes and preferences which will help advertisers target audiences even better that google already does. Since we all use computers on a regular basis, google has a semi-captive audience. What could be more captive than taking a trip in a vehicle from point A to point B and having ads targeted to you based upon a variety of data driven factors.
This new wave of creative destruction is likely to devastate traditional auto manufacturing and is poised to disrupt the business of car services. At the same time, mobility is the perfect hedge. While the profits of auto manufacturing might stagnate, the total revenues in the mobility space might well dwarf anything that currently exists. That is why Big Auto and many others are already betting on mobility. Investments are already in the billions. The rising masses of mobility patrons will create an opportunity for proprietors at a scale the world has never seen. The repercussions for our society and labor sectors will be far-reaching. The proprietors of tomorrow will sell trips and services rather than horsepower, and those services will be delivered more efficiently than ever before. Patrons will consume these services in new configurations. Mobile computing and human-dependent transportation have been a toxic cocktail from a safety standpoint, leading to distracted driving and more frequent car crashes.
On the other hand, automakers may be more determined to stop the rush to automation and focus more on the software inside the vehicle because technology can be far more profitable than auto manufacturing making. Unless auto manufacturers are well positioned, they may discourage regulatory approvals of level-5 vehicles, or they could create roadblocks to their usage by having their army of lobbyists put the proverbial brakes on the movement towards automation.
Either way, there is great hope for the future. New technology and new consumer demands already have us on the road toward a more technologically dynamic, less environmentally destructive and safer transportation system. Getting there depends largely on policy leadership over the coming 5 to 10 years — and a willingness of societies to bid farewell to the past and embrace the future of technology. History has taught us that if you don’t embrace technological change, you will become the next Kodak.