It is nigh on impossible to raise the subject of future mobility without focussing on four key megatrends: connected, autonomous, shared and electric (CASE).
That acronym has served as a banner for the automotive industry’s ambitions for some time now, but as those technologies approach commercialisation, is the industry ready for the changes they may bring? This was the focus of a panel discussion among industry stakeholders at M:bility | California, a two-day event hosted by Automotive World in San Jose.
“We have to look at the trends that have affected, and are affecting the automotive industry, and that leads us to those four letters: the CASE trends,” said Alexandre Marian, Managing Director, San Francisco at Alix Partners. “For the past ten years, we have seen these trends disrupt the auto industry, and that will surely continue for the next ten to 15 years.”
An existential crisis
The role of the automaker is changing. Once the focal point of the industry, the world’s leading vehicle manufacturers are now working with a wide array of partners to make CASE technologies viable. In some cases, competitors are even working hand-in-hand to survive.
I think everyone is realising that this meal is too big for anyone to cook alone
“I don’t want to say there is consolidation, because that has a negative undertone. But there are certainly ecosystems forming around mobility,” said Martta Lystila, Senior Director of Zenuity’s Silicon Valley Tech Hub. “Automakers and Tier 1s are coming together and forming different alliances—I think everyone is realising that this meal is too big for anyone to cook alone.”
The partnership between Daimler and BMW is a case in point, with the German automakers recently combining their mobility services through a joint venture. Clearly, even the big names need to adapt their core business to keep up with start-ups. “Automakers used to be at the centre of that ecosystem, with everybody else following their lead,” said Marian. “They were the ones selling cars and owning the brands, but that dynamic is changing dramatically as a result of the CASE trends.”
Automakers have a very particular set of skills—skills that have been acquired over a significant period of time. Vehicle design and assembly, along with system integration, is the bread and butter of the established automaker, but software competency and fleet operations are areas where they may struggle. This, said Marian, does not leave them well positioned when it comes to tackling mobility as a service (MaaS). “The challenge of going from a hardware mindset to a software mindset is a big deal,” he affirmed.
“There will be some automakers that do really well, but others are really going to struggle,” added Daniel Florence, Chief Operating Officer at Sixt USA.
Over the air
Automakers are used to developing products gradually, often over a period of several years, before launching to the public. However, in the world of software, even a year is considered a lifetime, and vehicle manufacturers run the risk of releasing vehicles that feel out of date.
There will be some automakers that do really well, but others are really going to struggle
“Car makers are used to a linear development cycle, but in software, it is about continuous improvement,” explained Jason Stinson, Co-Founder and Chief Technical Officer at Renovo. “They need to get used to continuously making the product better. It cannot be the case that you leave the service centre and your car is immediately out of date.”
It may take time for the industry to become comfortable with this new way of working, but the awareness is there at least. “I think the new entrants have woken up the incumbents,” said Lystila. “They have created a buzz, and issued a real wake-up call.”
Zenuity, she added, is trying to mirror the working style of an ‘agile software company.’ The company was formed out of a joint venture between Volvo Cars and Autoliv in January 2017 to develop advanced driver assistance and autonomous driving software.
A case for profitability
Electrified, connected and autonomous vehicle technologies are all key components to a wider aspiration: shared mobility. Most major automakers by now have created some form of mobility service offering, but the list of success stories remains extremely brief. Ford’s closure of Chariot may be the best example of the struggles in making money from the mobility business today. Part of the issue, said Marian, may be due to the fact that there is a focus on revenue and not profitability.
“The service operators have two main stakeholders to manage: the drivers and the users. However, the pricing equation at the moment does not make sense,” he explained. “But will robo-taxis capture that lost revenue because there is no requirement for a driver? Or will they find a path to profitability before that—this really needs to be sorted out.”
“The focus for all of those companies right now is not on profitability, it’s on growth,” agreed Stinson. “But once you take the driver out and achieve cost parity, the growth numbers make sense.”
We believe all of this will be a bigger sea change for society than the introduction of the Internet
There is also the elephant in the room to address: the cost of the car. Robotaxis may remove the need for a driver, but with all of that hardware on board they will be significantly more expensive to launch. “With all of those sensors, you have a much higher CAPEX,” said Lystila.
Arguably positioned as a world-leading test bed for autonomous driving programmes, Marian believes California is “completely focussed” on crafting the future of driverless vehicles. However, he suggested that there are more pressing megatrends to address. “Right now, the trend that is mostly affecting automakers is electrification,” he explained.
Is society ready?
All of this raises another question: is society ready for the changes these technologies may bring? Most consumers will only be vaguely aware of CASE mobility, and adoption of robo-taxis may prove a very gradual process. “It will take time to get the consumer comfortable in that kind of space,” said Lystila.
The panel recognised that ultimately, the future of mobility will have far wider implications than the automotive industry. As Florence put it: “We believe all of this will be a bigger sea change for society than the introduction of the Internet.”
