It is possible the “on-demand economy” was misnamed. It revolves less around getting what you want, and more around not getting what you do not want. People do not have to buy expensive services when they are able to use them only when needed for a lower price. This concept of post-ownership is changing the cable TV market. Instead of spending money on packages filled with channels they do not want, people subscribe to HBOGo, or Hulu, or Netflix, or any other unbundled service that allows them the same access without the ownership. It is a model that is increasingly common as consumers look to “unbundle” from traditional packages – and it is a model that the automotive industry seems poised to follow.
In the not-too-distant future, car ownership may dwindle as different transportation options come online. Rather than being a disaster for OEMs, this presents a unique opportunity to dominate a new business model in much the way HBOGo now dominates its market: by continuing to offer a great product, but in a new format. A self-driving, car-sharing future is increasingly probable, and OEMs can thrive in this model using powerful artificial intelligence, algorithms and over-the-air (OTA) technology to deliver on-demand car services. Recent tests of an Uber self-driving car point the way.
Uber’s Self-Driving Tests in Pittsburgh
It is hard to believe, but only a few years ago most people had not even heard of Uber, the ride-hailing service. It is now a key part of the on-demand economy (and a key part of every flailing startup’s self-description: “We’re Uber for archery buffs!”). It holds an enormous market share, averaging nearly 25,000,000 more rides per month than Lyft last year and boasting a $70 billion valuation – allowing it to invest heavily in plans for the future.
That future began to take rough shape in Pittsburgh in mid-May when Uber announced it was testing a self-driving vehicle. Uber’s interest in this technology is a long-standing one; they have been working on the project in their Advanced Technologies Center for more than a year. That they have come this far – barely in business a half-decade ago; at the forefront of new technology now – is a testament to the power of an idea.
And the idea seems to be that, just as people want freedom of choice with cable packages, they also want flexibility in terms of transportation. Uber is betting that the next model of car “ownership” will closely follow the lines of their current business model, but with a self-driving fleet that is always in motion and not dependent on human drivers. GM, which recently entered a partnership with Lyft, seems to be preparing for the same outcome—along with Tesla, which has announced their ambitions in moving into buses.
OTA and the Development Model for OEMs
There is a very bright future here for OEMs. The GM/Lyft model is instructive, since Lyft, like Uber, does not design its own cars. For their tests, Uber used a hybrid Ford Fusion which they retrofitted into a self-driving vehicle. If Uber wants to have a fleet of cars without relying on their current model (contracted employees with their own vehicles), the company will have to produce its own designs, buy and retrofit a fleet of cars, or partner with an OEM. (And in fact, Toyota announced it has made an investment in Uber.)
The post-ownership economy will, for OEMs, follow several different overlapping models. None of these are exclusive, and all could be utilized by an OEM in one form or another.
- Moving Toward the Fleet Model. The on-demand aspect of Uber is its most appealing feature, and OEMs could adopt that and establish their own fleets on the road. This would move competition to the service level, with consumers won over by the fact that Automotive Company X has a better platform than Company Y, for example. This would be a great opportunity for OEMs to use their decades of experience to deliver what drivers want.
- Partnering With Local, Regional, or National Driving Services. In this model, an OEM would sell their cars to a specific private vendor, who would use the vehicles for their own self-driving fleet. Each vendor might have a wide variety of cars, or maintain exclusive deals with certain companies. This model would in many ways match current dealership models, where OEMs sell cars to vendors who then offer them to customers.
- Licensing Cars To Municipalities. In this model, self-driving cars essentially become a form of public transportation, as city governments use the model to easily and securely transport citizens, minimizing the need for parking lots, meters, and other inhibitors of smart development.
No matter the model, a key part of the competition will be each company’s self-driving capabilities. People will essentially be paying for which self-driving service works best. If consumers prefer one service, vendors will want to buy or lease from the OEMs that use it. It becomes an arms race, and the quicker cars can be updated with the latest technology, the better it will be for business. Companies will need a strong OTA platform that can harness and analyze big data and transform it into action.
There is not a company or a model that will not rely on OTA solutions to keep their fleets healthy, smart, and competitive. It is a necessary part of the future. HBOGo knows that nobody can watch Game of Thrones on their phone on the bus without a reliable wireless structure. OEMs may soon feel the same way about an OTA platform. Unbundling and connecting to the on-demand economy in the form of autonomous fleets is the future of automotive, and it is a future that, much like the past, can be set by long-standing industry leaders – and their new tech partners.