The Future Of The Auto Industry In One Chart
As evangelized in [Back to the Future Part II](http://www.imdb.com/title/tt0096874/), 2015 is supposed to be the year of hoverboards and flying cars (Note: If you don’t know what we’re talking about, stop reading this post and go watch the entire BTTF series now). Sadly, 2015 will probably not be the year of flying [DeLoreans](http://en.wikipedia.org/wiki/DeLorean_DMC-12), or more appropriately, flying MINIs. With that in mind, we asked our readers last month in [what ways could MINI innovate](https://www.motoringfile.com/2015/03/17/opinion-how-could-mini-innovate/). Coming with up with a tangible answer on such an open-ended question is difficult, but Morgan Stanley Analyst Adam Jonas has provided a context that could help us think further about this matter.
Mr. Jonas believes that the sharing economy and autonomous driving are the forces shaping the automotive industry for the near future. He illustrates his concept of “shared autonomy” in a simple and elegant chart:
– The horizontal axis describes the transition from individual to shared vehicle ownership, while the vertical axis outlines the transition from human to autonomous driving
– The first quadrant corresponds to the current state of the car industry, characterized by 35 automakers competing globally and low vehicle usage (i.e. one hour per day on average)
– The second quadrant shows the beginning of a revolution, where individuals have started to move away from car ownership in favor of ride-sharing services like Uber. At maturity, these services are “so cheap that only rich people own cars”
– The third quadrant describes a time where drivers are able to release the control of their vehicles to computers
– The last quadrant is Jonas’s shared autonomy of “roving fleets of completely autonomous vehicles in operation 24 hours a day, available on your smartphone”
This last phase is truly fascinating and closer to reality than we might think. While the technology to achieve this vision is ramping-up at a rapid pace, the legal and security frameworks needed to make this possible will be the biggest obstacle. Aside from that, some of the benefits of this setup cannot be overstated; the cost of travelling from A to B will be marginal, death on roads will be drastically reduced, and traffic could become a thing of the past.
On the other hand, where does it leave enthusiasts like us? It sounds like human-driving will become highly restricted and cost-prohibitive. Also, what does it mean for premium/specialty car manufacturers like MINI? During one of the latest episodes of the excellent [a16z Podcast](http://a16z.com/tag/podcasts/), [Marc Andreessen](http://en.wikipedia.org/wiki/Marc_Andreessen) depicts a future where fleets of self-driving cars will be owned by hedge-funds: “they will spend a billion dollars on a fleet of self-driving cars and bid-them out to services like Uber and Lyft” ([27:50](http://soundcloud.com/a16z/a16z-podcast-securitys-painful-prominence-and-why-there-is-no-turning-back-with-marc-andreessen)). What kind of cars do you think a hedge-fund manager will get? A mass-market brand or a niche product? Startup L. Jackson has the beginning of an answer:
The car of the future will be owned by fleet managers, summoned by Ubers, driven by robots, & feel like a train. Where does Apple fit there?
— Startup L. Jackson (@StartupLJackson) February 15, 2015
<p>What these articles often fail to take into account is a realistic time scale. To keep things in perspective, the average light vehicle (cars and light trucks) last 15 years and this is increasing. To “flush” the non-autonomous fleet will take about 3x that time. So, what’s really expectable for the technology?</p>
<p>1) Permeation of autonomous tech into the manned vehicle fleet. This is automatic lane tracking, self-parking, fancy cruise control etc. Happening now, based on customer comfort.</p>
<p>2) Selected commercial controlled environments: Like ports, shipping hubs etc. Best is when an autonomous fleet can work in a localized geographic location. Happening now, based on economic savings justifying the investment.</p>
<p>3) Selected autonomous allowed corridors. This will be like an HOV lane, but probably will not be limited like a HOV lane or a private toll road. These will be transit corridors where the road is good enough, and the need high enough, to allow the tech to run. Not yet, and most of these forward looking vision statements lack a realistic path to thier postulated eventual new paradigm.</p>
<p>There is lots of the infrastructure where for whatever reason, the current systems aren’t good enough to be allowed free reign. Bad or no lane markings, single lane and the like.</p>
<p>Another thing article like this tend to forget is that just pointing out that there is an efficiency available in the marketplace doesn’t mean that it will happen. Look, we all know that if there were no smoking the total cost savings to society would be massive. But many still smoke. There may be huge saving to be had by autonomous driving, but a lot of people won’t want to drive, or won’t be able to buy an autonomous vehicle, and they will drag technology crossover out for decades, or longer.</p>
<p>Oh, and on the Apple car… I was at an event where Bob Lutz was speaking last Saturday. he’s at an age where he can say whatever he wants (to be honest, that has always been his style). He commented on Apple. He asked why would a company that has a very high margin, vertically integrated market ever want to invest in, and compete in, a very low margin, non-integrated market? He did point out that they have more than enough money to do so, but that he would tell them it was dumb, and would advise against it. He takes all this buzz as trying to own the human interface of automotive tech convergence. The Apple Car is just speculative BS…..</p>
<p>Very interesting points.</p>
<p>I haven’t had a chance to listen to Jonas’s analysis so I can only speculate. I agree with you, I don’t think in that timeframe all non-autonomous cars will be “flushed”, but I’m sure the future alternative available in this state, will be a real viable option.</p>
<p>I also agree on your infrastructure comment. In fact, I pointed out in a recent post that disruption in the automotive space is unlikely to happen without a profound change to roads (<a href="https://www.motoringfile.com/2015/03/17/opinion-how-could-mini-innovate/" rel="ugc">https://www.motoringfile.com/2015/03/17/opinion-how-could-mini-innovate/</a>). Sadly, not a lot of readers joined the conversation.</p>
<p>In regards to Apple, Lutz’s argument is not viable. Apple is not in high-margin businesses, Apple is able to commend high-margins thanks to its manufacturing prowess and because it is committed to a business strategy of scarifying market share to maintain pricing power. The iPod, the iPhone and the Mac are great examples of that (i.e. the mp3, smartphone and PC market are all low-margin businesses). That obviously doesn’t mean they would be successful at selling a car, if that is indeed what they intend to do. I’m with @startupljackson on that front. Given the model described in this post, I don’t know where an Apple car would fit…</p>
<p>@Alex, there are so many points of conversation on this topic.</p>
<p>IMHO, the road to an Apple vehicle and Autonomous Vehicles will likely prove to be very long. In the case of AVs it’s already proving to be enormously complicated. Hell, just look at the roadblocks Jeff Bezos has experienced in the States moving <em>packages</em> (not people) around the US with RC vehicles (yes, I know: drones). He had to set up testing facilities in Canada to get that done.</p>
<p>On the Apple Car, the road that might eventually lead to an actual Apple vehicle will first pass through vehicle-related developments such as better battery technology in Apple products, enhanced Apple Maps, and CarPlay on steroids.</p>
<p>On Autonomous vehicles, a total AV invasion is simply not imminent. Increasingly <em>autonomous technology</em> in manned vehicles will take over the world long before AVs do, and it’s elephant in the room during enthusiastic discussions about Autonomous Vehicles (AVs).</p>
<p>My intent with this post is not to actually focus on Apple. In fact, I’m not sure what would their place be in the model described above. I’m on the same line as @startupljackson for now.</p>
<p>I agree with you, an environment dominated with AVs is not the immediate future, but it will happen. Will it be in our lifetime? It’s difficult to say. For me the problem is not technology, but the legal, infrastructure, and security framework.</p>
<p>Apple fits in by requiring a macbook to sync with and an iTunes account.</p>
<p>Syncing to an actual computer is optional. You’ve been able to use iPhones, iPads and iPod Touches entirely off of the iCloud service (computer free) for several years now.</p>