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The automotive industry faces its biggest threat in well over a decade. Is it set up to respond?
The automotive industry is facing its biggest – perhaps only – real threat in well over a century. And, like bad luck, these things tend to come in threes.
The challenge that electric cars bring would be enough of a game changer without the imminent arrival of self-driving cars and the advent of ride-sharing. Has the automotive industry been caught on the hop? And more crucially, how do established car brands effectively manoeuvre themselves into a position to embrace this seismic industry shift?
The year 2020 is predicted as D-Day for the industry, this is the year that we reach peak oil usage and the point at which that usage will begin to decline. Imperial College London’s study predicts the confluence of these three technologies at this point. The subsequent decline in oil usage will be due, in most part to the arrival of viable electric vehicles and commercial transport innovations.
How we get around is going to change profoundly in the next five years, despite some reluctance from both manufacturers and consumers to get behind the new technologies. It’s because the next steps are so disruptive that many manufacturers have been slow to take the necessary steps towards our future. It’s only recently that these companies have begun to see that their survival is based on embracing this technology.
The sharing economy is here to stay
Services such as Uber and Lyft signal a huge shift in the way we get around. Just a few years ago, the idea that you’d summon a ride from your mobile was considered the stuff of Orwellian dystopia. Now Uber is the proprietary eponym for a taxi.
Uber is already testing autonomous vehicles across the US and Lyft has formed an alliance with Google to develop self-driving vehicles. It’s a simple business model: with no driver to pay, profitability goes up and pricing becomes more competitive. While a rollout might be a few years away, the idea that people will drive for a living will become increasingly archaic.
And the more viable and affordable these journeys become, the more car manufacturers are going to have to do to persuade people to buy a car for personal use, electric or otherwise.
Late to the game
Tesla is now the fourth largest automaker in the world. That’s a profound statement in itself. Many car manufacturers have been slow to respond to Tesla’s success, often without an electric offering within their range or an electric version of a standard car with a paucity of marketing dollars to spend on it. Other car companies have focussed on building exceptional, performance hybrids, such as the Ferrari La Ferrari, McLaren P1 and Porsche 918 Spyder.
Most car manufacturers are now looking at autonomous cars because there’s a chance that once these hit our roads, no one will want to own a ‘normal’ car. A new RethinkX report, co-authored by Tony Seba, a Silicon Valley entrepreneur and Stanford University lecturer, suggests that two to three years after the tipping point where autonomous cars start to become the norm, vehicle prices will crash as people give up their cars.
This is only the beginning, the report says: “By 2030, within 10 years of regulatory approval of fully autonomous vehicles, 95% of all U.S. passenger miles will be served by transport-as-a-service (TaaS) providers who will own and operate fleets of autonomous electric vehicles providing passengers with higher levels of service, faster rides and vastly increased safety at a cost up to 10 times cheaper than today’s individually owned vehicles.”
Manufacturers will have to become a TaaS company to survive. All major car companies say they will have fully autonomous vehicles by 2021, with some such as Tesla and GM saying they’ll be ready to go much sooner.
The human problem
One of the biggest hurdles the autonomous market needs to overcome is the human element. There are tests happening across the world to test the viability of both autonomous vehicles and semi-autonomous ones, which regulators call level 3 automated driving. The problem with the latter is the hand-off, where the car goes from being completely computer-controlled to needing input from a driver – usually in an emergency or crisis situation.
Because this is such a difficult aspect of self-driving cars to navigate, manufacturers are skipping this step all together, looking for other options down the road towards fully autonomous vehicles. The kind without any steering wheel or pedals.
Trent Victor, senior technical leader of crash avoidance at Volvo, criticised Tesla’s Autopilot system saying it was unsafe. In an interview with The Verge, Victor said the level 4 concept they were trialling was better as taking over control was only optional. If the car doesn’t get the input it needs, it takes the safest action possible, usually pulling over in a layby or on the hard shoulder.
“That’s a really important step in terms of safety, to make people understand that it’s only an option for them to take over,” says Victor. Volvo is also “taking responsibility for crash events, and we’re also programming it for extreme events like people walking in the road even where they’re not supposed to be. There’s a massive amount of work put into making it handle a crash or conflict situations.”
The carnage to come
Once we get used to TaaS and autonomous vehicles, car ownership will go into free fall, which means bad things for dealerships, insurance companies, mechanics, and manufacturers who failed to read the road ahead. The cost per mile for electric vehicles will be so low that petrol and diesel cars will be rendered obsolete and the only owners of these internal-combustion-engine (ICE) vehicles will be enthusiasts.
When you combine the low, low cost of electricity with the simplicity of calling an autonomous car using your smartphone for less than it would cost to get a bus, it makes sense that this is the future. Comparatively, it’ll be so expensive to own a car that people will start to give them up as they realise just how easy it is to get around.
Transport-as-a-service will happen almost overnight as all these elements come together. Cheap, durable, electric, self-driving vehicles that can be hailed with the touch of a button. It’s this confluence of technology that is going to vastly disrupt the automotive industry as we know it. But there are signs of an industry that’s preparing to pivot. Major automotive brands like BMW and Mercedes-Benz are working directly with technology companies they’d once have seen as rivals, building platforms not only for their own vehicles, but with the ambition to provide industry standards and plug and play hardware and software that will change the industry as a whole for the better.
This is the age of auto-disruption as automotive manufacturers shift their thinking away from unit-shifting to becoming technology disrupters and pioneers, taking the lead themselves in the fight for market share in this new dawn for automotive. Look at Jaguar Land Rover’s significant investment in Lyft as a barometer for the way the industry is actively facing change.
The question is: are you really ready?
Innovation is clearly a major piece of the automotive puzzle. But the rest of the answer is easy to find. It’s within the legions of brand fans that already own your cars. Will electric see the end of the throbbing V8? Will autonomous driving be the end of a stirring country drive through never-ending, tree-lined S-bends? There will always be enthusiasts. There will always be those who want to get from A-B with as little input as possible. The key is to ensure you talk to your fans, but more crucially that you listen to them. Broadcasting will never give you all the answers. Open up your customer dialogue and let them help shape your future.
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