THERE is a critically important dialogue going on across the extended global automotive industry about the future evolution of transportation and mobility. This debate is driven by the convergence of a series of industry-changing forces and mega-trends, Deloitte LLP said in its new publication titled “The Future of Mobility”. The study noted that “innovative technologies are changing how companies develop and build vehicles. Electric and fuel-cell powertrains tend to offer greater propulsion for lower energy investment at lower emission levels. New, lightweight materials enable automakers to reduce vehicle weight without sacrificing passenger safety.” Further breakthroughs are advancing the introduction of autonomous vehicles; increasingly, daily news reports suggest that driverless cars will soon become a commercial reality. “We have already seen rapid advances in the ‘connected car'— innovations that integrate communications technologies and the Internet of Things to provide valuable services to drivers. Vehicles outfitted with electronic control modules and sensors that enable vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) communications can proactively suggest re-routings to avoid road hazards and call for assistance in the event of an accident.” Soon, cars will routinely gain precise-enough awareness of where they are in relation to other vehicles and potential hazards to take preemptive action to avoid accidents. Simultaneously, young adults, along with urbanites, are gravitating toward a model of personal mobility consumption based on pay-per-use rather than upfront purchase of a capital asset, which fundamentally challenges today's consumption model centered on personal ownership of cars. All told, a system that has been well established for a century is on the verge of a major transformation that could result in the emergence of a new ecosystem of personal mobility. Today's debate centers on whether the extended automotive industry will evolve incrementally toward some future mobility ecosystem or whether change will occur at a more radical pace and in a highly disruptive manner. “No one knows the full scope and magnitude of the changes that are to come, what they entail, or how they will evolve, yet these forces have the potential to alter current industry structures, business models, competitive dynamics, value creation, and customer value propositions. We may be on the threshold of change as great as any the industry has ever seen,” Deloitte said. There's no mystery about why we pay such close attention to the ups and downs of the auto industry —its extended value chain is an essential engine of global economic growth. In the United States, the sector generated $2 trillion of annual revenue in 2014)—11.5 percent of US GDP — from auto manufacturers, suppliers, dealers, financial services companies, oil companies, fuel retailers, aftermarket services and parts, insurance, public and private parking, public-sector taxes, tolling and traffic enforcement, medical care, and others. “At Deloitte, we've been engaged in a deep and broadly ranging study of the extended auto industry, the economics of alternative future states, and the potential impact of each on related industries. We have concluded that change will happen systematically—a rising tide, not a tsunami. At no point will the world be presented with a Manichean choice and collectively decide to plunge all-in to a system of driverless, pay-per-use travel—or else to change nothing at all. Rather, the new personal mobility ecosystem will likely emerge unevenly across geographic, demographic, and other dimensions, and evolve in phases over time. There are two profoundly different visions of the future of mobility. Fundamental differences center around whether today's system of private ownership of driver-controlled vehicles remains relatively unchanged or whether we eventually migrate to a driverless system of predominantly shared mobility. There is also a critical difference about the pathway forward. The “insider” view believes that today's system can progress in an orderly, linear fashion, in which the current industry assets and fundamental structure remain essentially intact. The “disrupter” view envisions a tipping-point approach to a very different future, one that offers great promise and potential societal benefits. Within the high-tech community, companies are working to arrive at something radically different than today's system of personally owned driver-driven passenger automobiles. According to this perspective, which we label the disrupter view, a new age is dawning, featuring fully autonomous cars accessible on demand. Progress toward it might be measured at first, but before long, a tipping point will occur, after which the momentum of change could gather speed. Imagine a world where the following statements are all true:
* Vehicles hardly ever crash. Autonomous operation removes the cause of almost all accidents: human error. * Traffic jams are rarities, thanks to sensors allowing for less space between vehicles and guidance systems with real-time awareness of congestion. * Energy demand drops, since smaller mass and weight allow cars to be propelled by more compact, efficient, and environmentally friendly powertrains. * Trip costs plummet, with average cost per passenger mile dipping from today's $1 per mile to approximately 30¢ per mile, thanks to dramatically higher rates of asset utilization * Infrastructure is funded by charges for actual usage, since connected-car technology allows systems to precisely calculate personal road use. * Parking lots disappear, as the rise of autonomous-drive and car-sharing models diminish need. * Law enforcement ceases to concern itself with traffic, since autonomous vehicles are programmed not to exceed speed limits or otherwise violate traffic laws. * Speed of deliveries quickens and costs decrease through the rise of fully autonomous networks of long-haul trucks that can operate for more extended time periods and cover longer distances with lower labor costs. * Seamless multimodal transportation becomes the new norm, as greater system interoperability enables consumers to get from point A to point B via multiple, connected modes of transportation on a single fixed price charged on a single payment system.
Much of the technology already exists to turn this vision into reality, and disrupters are working toward implementing it, catalyzing the transformation. Google's driverless cars have already driven more than 1 million miles in autonomous mode, and the company is running pilot and testing programs with small fleets of fully autonomous vehicles in Mountain View, California, and Austin, Texas. Less technologically dazzling but equally disruptive—and far more mature—are car-sharing and ridesharing: The movement that started with Zipcar has more recently spawned the ridesharing concepts of Uber and Lyft; Uber alone delivers 1 million trips per day worldwide and is growing rapidly. Still, these industry-changing technologies may fail to reach transformational scale — or at least fail to do so within a strategically relevant time frame. Insiders, heavily invested in the current auto industry, see change evolving slowly toward a future that retains its roots in what exists today. We see the major auto companies pursuing strategies that address the converging forces incrementally, creating future option value while preserving flexibility. These industry players' efforts and investments are yielding a steady stream of benefits for customers. For example, in introducing connected-car technology, manufacturers offer drivers many of the benefits associated with autonomous drive without fundamentally altering how humans currently interact with vehicles. Automakers are experimenting and inventing, and have passionate voices within their ranks describing much-altered futures. Most have set up offices in Silicon Valley to gain greater proximity to technology development and early-stage funding. Among the noteworthy examples of forward-thinking initiatives are Ford's mobility projects, BMW iVentures, Daimler's engineering advances in intelligent driving, and Cadillac's “super cruise” functionality. In addition, public-private partnerships such as the recently opened Mcity in Ann Arbor, Michigan, provide a platform to enable more efficient and effective automated vehicle (and feature) testing. This approach is consistent with historic norms, in which automakers invest in new technologies—e.g., antilock brakes, electronic stability control, backup cameras, and telematics—across higher-end vehicle lines and then move down market as scale economics take hold. In our ongoing conversations with auto-industry leaders, they repeatedly and collectively argue that outsiders simply do not appreciate the sheer complexity of developing a vehicle today, the challenge of introducing new advanced technologies into a vehicle's architecture, or the rigor and inertia of the regulatory environment. All of this encourages incumbents to believe that they can be at the center of actively managing the timing and pace of these converging forces. But the interplay of the converging forces of change may be less predictable and lead to faster upheaval than they think. Automakers might be overestimating how much power they have to manage the course of future events. — SG
