There are some amazing statistics regarding the lower operational costs driverless vehicles. Costs are likely to be reduced thanks to not paying for a driver/operator, less mechanical parts (so less wear and tear), electric power (likely) as opposed to gasoline, and greater vehicle efficiency due to smoother acceleration/deceleration and even better routing. Whether or not this all comes to fruition, someone will still need to pay for their operations. And, of course, someone (a person or an organization) will still plan on profiting from these operations. Here are some of the business models I’d expect to see:
- Individual Ownership: Though it’s my least favorite, I expect that individuals will continue to buy vehicles and automakers will continue to profit from these purchases. Many of these individuals will keep these vehicles only for their own use, which means the vehicles are sitting idle the majority of the time (similar to today). On the other hand, we’re already seeing companies (like GetAround) enable private vehicle owners to “lease” these vehicles for hours at a time; driverless vehicles will only make that easier for those willing to share.
- OEM Ownership: As Ford, GM, and other automakers recognize that private ownership is likely to decrease, many of them are looking at alternate business models. The most prevalent one we’re seeing forming today is the automaker/ride hailing service partnerships. Uber has established partnerships with Toyota and Volvo, Lyft has partnered with GM and Ford, Volkswagen has partnered with Gett, and the list goes on. While individuals will pay for the cost of each ride, both of these companies stand to profit.
- Private Businesses/Campus Owners’ Circulation: Similar to how Google is operating its own fleet of buses today, I expect to see more and more private business owners, developers, and college campuses provide transportation services in and around their campuses. Since less people will own cars, there will be a greater need for these circulation services. The business model for this arrangement could vary widely. Some businesses/campuses could pass the cost on to the riders, but many may absorb these transportation costs into their operating costs – especially if it reduces their parking footprint, increases the productivity of their workforce, or attracts more people to live/work at their site.
- Government: Government will continue to play an important role in mobility and driverless vehicles will be one “tool in their toolbox.” Government may continue to own vehicles (e.g., driverless shuttles integrated into their transit system), but they also may pay per ride (paying mobility companies or fleet owners) as they shift their business model. This will likely depend on the costs as well as their region’s mobility needs as the rest of the business models fall into place. I would expect the government to constantly be evaluating: “Are all neighborhoods getting equivalent mobility coverage?” “Does the unbanked population have access to mobility services?” Etc.
- Shopping Transportation: This is probably the newest concept amongst this list. As online shopping grows in convenience and affordability, brick-and-mortar stores will likely look for novel ways to entice people to their stores. Driverless vehicles could be the draw. It’s possible the shopping experience could begin and end in the car, including everything from customized/targeted advertising, personalized shopping, seamless payments, and “door-to-door service” (where a customer would never need to step outside if the vehicle literally pulls into the building!). The options are truly endless and, higher-end stores could see the operational costs of providing a driverless car service become a part of its marketing costs. Other stores may realize this is necessary for survival!
This list, of course, does not consider the cost of roadway infrastructure or who is going to pay for that, but that’s another discussion altogether! What other business models have I missed?
Those are very interesying concepts.
In the airport business, where we launched driverless vehicles (the TractEasy), I clearly see a race between two of those business models. Private operators reducing their cost of operation and increasing the safety and repetability of their service, gaining competitveness and infrastructures (airports) possibly looking at implementing those systems, reducing congestion but moreover controlling better the flows (and the assoicated graal : the on-time departure).
It is unclear to me which model will win. I believe the decision will be based on a mix of ‘time-to-market’ (the first in the place will have a severe competitve advantage) and local ‘balance of power’ where highly concentrated infrastructures may be managed by private operators (airline dedicated terminals) and highly competitive places will probably need to be structuredby the airport.
One thing is sure though, whatever business model is implemented it will be to the benefit of the passengers.
I like this breakdown, Lauren. Thank you! It’s great to continue reading your posts.
This question of “who’s paying” leads me to consider the follow-up question of “…and how much?” and not in the sense of how much a ride would cost, but rather how much is the Total Addressable Market worth today vs the TAM tomorrow?
What kind of future do OEMs envision? In general, they must acknowledge that, today, there are lots of individual owner-occupied cars that sit mostly under-utilized during the day, and that we are marching towards a world where cars are more utilized but there are less cars overall. In other words, the pie is shrinking.
If I were an OEM, and I made money by selling new cars, and I saw that the shift in technology is moving towards less demand for car ownership, I’d be looking to do what Ford is doing and diversify or innovate away from the traditional business model.
If the pie were to shrink, then I bet OEMs would be trying to figure out by how much. How many people would still own a car in a future where a subscription service might not make it necessary to own one yourself?