The New Mobility, Part Two: Ecosystem Impact
Leonidas Quentzel is an analyst with Fabernovel. In the first installment of this two-part series, he offered an overview of the key stakes shaping the future of automobiles. In Part Two, he takes a look into the implications these changes are having on the transportation ecosystem.
Changing Ecosystem, Changing Players
In addition to the emergence of new OEMs (Google, Apple, Tesla), many new players will come into the game and others become obsolete. New startups such as Elegus with new battery technology or SPLT with its ride-sharing technology will have a considerable impact on the ecosystem. More companies in the same space can be discovered in the most recent Techstars Mobility batch. Some of these players might be balanced by M&A in the automotive sector, buying communities or technologies, but the fact remains that with software eating the car industry, many new entrants are to be expected.
However, other players might actually have to change business models. Some immediate examples are repair shops (who most likely will not be able to do all the repairs needed on Google-manufactured cars). Will existing mechanics' shops be able to repair the hardware in autonomous cars? If not, Google will have to set up its own repair shops.
Another industry which might see change is the activity around leases for buying cars. This model is suited for individuals or small companies to buy cars. What if Benedict Evans’ vision turns out to be true and huge asset-owners start monopolizing ownership? They will not rely on local banks to get consumer or business loans.
One last change is of course players reinventing themselves and testing different ways. Ford is going social with its new Trip Planner, a social application. We observe the beginning of a convergence between business models, and this is going to become a stronger phenomenon.
But the real change will be in the relationship between stakeholders. In a concentrated property model or a car sharing model, the end consumer is no longer the insurance client, the repair is no longer in the hands of the repair shop, the carmaker might not even remain the manufacturer... In the insurance space, a question one could ask is whether products will remain the same but be addressed to different customers, or whether products will change but be addressed to the same customers.
Let’s look at the following example: If an insurance company was to rethink its offer, would it opt for a singe car-based insurance product and sell it to the car sharing service, or would it offer a driver-based/any vehicle policy and offer it to the driver himself?
Another real change in business relations is the shift from B2C to what could become largely B2B. Indeed, if Uber were to buy 500,000 cars from Tesla by 2020, Tesla would of course see its main outlet change, and would have to change its whole perspective on approaching given markets.
Modern ties are reshaping the way large OEMs think about innovation. A recent CB Insights report showed how OEMs have started working with startups, investing massively at all stages. General Motors has engaged in 10 deals since 2010.
Finally, the fact that players in the space have started to collaborate is fairly new. As an obvious example, German automakers coming together to acquire Nokia Here (Nokia’s mapping technology) for $3B and mutualizing intellectual property is remarkable.
Public transportation is at a crossroads
Finally, the first element in urban mobility that self-driving cars might take to the grave is public transportation, especially for commute routes involving several different transportation types. For example, people taking the train for 30 minutes and a bus for the last few miles might now go the last few miles using a self-driving car. This is not very revolutionary. What is, however, is that if municipal agencies want to keep the prerogative of offering citizens mobility, we actually might see municipal agencies buy and operate fleets of autonomous cars. If we think of it, the state has tremendous capital resources, and traditionally engages in low-risk / highly regulated activities. Ten years from now, we might have a network of autonomous cars run by the San Francisco Municipal Transportation Agency. The state might eventually be the “large balance-sheet” player Benedict Evans envisions.
Conclusion: Decentralizing Mobility?
The fundamental thing to keep in mind is that self-driving cars might have a huge impact on players we picture as disruptors today. Some of the most recent players we think of as being disrupting the mobility space might themselves get disrupted. In a recent TechCrunch article, Pristine CEO Kyle Samani declared that the self-driving car would break Uber’s business model. The explanation for this is that Uber’s model is based on “localized marketplaces of supply and demand for drivers”, which create very strong network effects and eventually give Uber a dominant position. In Samani’s vision, self-driving cars, by being available 97% of time, result in supply outstripping demand, rendering Uber’s ability to create liquidity of supply and demand useless.
Of course, this is very theoretical, assuming Uber’s model remains exactly identical in an ecosystem where men are replaced by software-driven cars. What is interesting is the rapidity of innovation in the mobility space: we already talk of the death of companies who just started disrupting the space. Indeed, the pace has never been this rapid. And what’s more is that disruption in the car space might actually come from external sources of innovation.
For instance blockchain technology: One of the ways self-driving cars could cause the end of Uber is by allowing the service to be decentralized. Each user could order a car (owned by another person not using it) nearby by sending a transaction to a distributed blockchain which would be stored inside the cars themselves, which is similar to having a bitcoin client running on each car. Cars would be connected to one another in a P2P architecture, for instance using a sidechain, and each car could inform the others that it has accepted a specific request for pickup. If by chance self-driving cars don’t lead to centralized ownership, they might actually decentralize mobility.