Autonomous and electric cars, connectivity, and ridesharing are changing the way auto industry players think about value chains, data analytics, and manufacturing.
Behind all the talk of robo-cars, electric vehicles, and increased car connectivity is a focus by major car companies on serving customers’ more intricate technological needs. In this episode of the McKinsey Podcast, senior partners Asutosh Padhi and Andrea Tschiesner speak with McKinsey’s Simon London about how four trends—autonomous driving, connectivity, electrification, and ridesharing—are paving the way for entirely new forms of mobility.
The car factory has been built by Swedish carmaker Volvo. The factory is “owned by Geely, financed by Geely, and operated by Volvo,” tells me the plant’s manager Benoit Demeunyck, a bearded Belgian with an imposing figure, especially when surrounded by smaller Chinese. Demeunyck has been mass-producing car factories for many years. Luqiao is the third he built in China, “after Daqing and Chengdu,” and it looks like there will be more.
How Volvo came to China is another platitude-defying story.
When Volvo’s former owner Ford was perilously short of money during carmageddon, Geely bought Volvo in 2010 for a bargain-basement $1.5 billion. It was one of those rare deals that worked all around. Ford came through alive, if not entirely unscathed (it also sold Jaguar Land Rover to India’s Tata, Aston Martin to private investors, and its controlling share in Mazda to Japanese banks.) Volvo was not dismantled and shipped-off to China, as many predicted.
Geely did not buy Volvo for its worn-out toolings, or its dated manufacturing lines from the Ford era. Geely bought Volvo for its ability to come up with class-leading, future-proof technology. Volvo engineers gave Geely a head-start in autonomous tech, and they developed the Compact Modular Architecture (CMA), a smaller but equally advanced version of Volvo’s acclaimed Scalable Product Architecture (SPA). Flexible and scalable architectures are the secret to success in the auto business. Volkswagen has MQB and MLB, Toyota has TNGA, Renault-Nissan-Mitsubishi has CMF-A, B, and C.
U.S. auto sales have hovered well north of replacement rates for several years now on the back of an improving labor environment and more importantly an extremely accommodating financing market characterized by $0 down, 0% interest loans to subprime borrowers, with perpetually longer maturities to help manage monthly payments…because if your monthly payment is $500 you can afford it, right?
In 2009, the southern Chinese city of Shenzhen rolled out its first electric city bus. As of May of this year, it had 14,500 of them on the road — and by the end of this month, the city plans to have an all-electric fleet. Shenzhen’s efforts are another example of how China is leading the way in transforming urban transportation.
Shenzhen’s effort is striking in its scope. The largest city bus fleet in North America is in New York City, whose 5,700 buses put it well ahead of Los Angeles, New Jersey, suburban Chicago and Toronto. These five fleets total 14,200 buses.
Shenzhen’s fleet of electric buses is bigger than the five largest North American bus fleets combined. Not their electric bus fleets — their entire bus fleets.
The world’s automakers are just starting to bet on an electric car future — and already, one of the most powerful people in the industry says that future belongs to China.
The Ford Motor Company said on Tuesday that it planned to introduce 15 battery electric or plug-in gasoline-electric hybrid car models in China by 2025. Speaking in Shanghai, William C. Ford Jr., Ford Motor’s longtime executive chairman, outlined why in an unusually blunt comment.
The kind of battery that powers electric vehicles is now the cheapest it’s ever been thanks to a global ramp-up in production.
Lithium-ion battery packs are selling at an average price of $209 a kilowatt-hour, down 24 percent from a year ago and about a fifth of what it was in 2010, a Bloomberg New Energy Finance survey shows. The rate has further to fall — reaching below $100 a kilowatt-hour by 2025, according to a report by BNEF analyst James Frith.
That’s a magic number for the electric car business. According to Frith, $100 is widely seen as “a tipping point in the adoption of EVs.”
New powertrain technologies, such as Hybrid Electric Vehicles, have a price premium which can often be offset by lower running costs. Total Cost of Ownership combines these purchase and operating expenses to identify the most economical choice of vehicle. This is a valuable assessment for private and fleet purchasers alike. Studies to date have not compared Total Cost of Ownership across more than two vehicle markets or analysed historic costs. To address this gap, this research provides a more extensive Total Cost of Ownership assessment of conventional, Hybrid, Plug-in Hybrid and Battery Electric Vehicles in three industrialized countries – the UK, USA (using California and Texas as case studies) and Japan – for the time period 1997–2015. Finally, the link between Hybrid Electric Vehicle Total Cost of Ownership and market share is analysed with a panel regression model.
In all regions the incremental Total Cost of Ownership of hybrid and electric vehicles compared to conventional vehicles has reduced from the year of introduction and 2015. Year on year Hybrid Electric Vehicles Total Cost of Ownership was found to vary least in the UK due to the absence of subsidies. Market share was found to be strongly linked to Hybrid Electric Vehicle Total Cost of Ownership through a panel regression analysis. Financial subsidies have enabled Battery Electric Vehicles to reach cost parity in the UK, California and Texas, but this is not the case for Plug-in Hybrid Electric Vehicles which haven’t received as much financial backing. This research has implications for fleet purchasers and private owners who are considering switching to a low-emission vehicle. The findings are also of interest to policymakers that are keen to develop effective measures to stimulate decarbonisation of the fleet and improve air quality.
Via Steve Crandall.
How safe should highly automated vehicles (HAVs) be before they are allowed on the roads for consumer use? This question underpins much of the debate around how and when to introduce and use the technology so that the potential risks from HAVs are minimized and the benefits maximized. In this report, we use the RAND Model of Automated Vehicle Safety to compare road fatalities over time under (1) a policy that allows HAVs to be deployed for consumer use when their safety performance is just 10 percent better than that of the average human driver and (2) a policy that waits to deploy HAVs only once their safety performance is 75 or 90 percent better than that of average human drivers — what some might consider nearly perfect. We find that, in the long term, under none of the conditions we explored does waiting for significant safety gains result in fewer fatalities. At best, fatalities are comparable, but, at worst, waiting has high human costs — in some cases, more than half a million lives. Moreover, the conditions that might lead to comparable fatalities — rapid improvement in HAV safety performance that can occur without widespread deployment — seem implausible. This suggests that the opportunity cost, in terms of lives saved, for waiting for better HAV performance may indeed be large. This evidence can help decisionmakers better understand the human cost of different policy choices governing HAV safety and set policies that save more lives.
Millennials don’t always buy cars. But when they do, they apparently buy SUVs.
“The floor at this year’s Los Angeles Auto Show will look a lot like America’s roads: full of SUVs,” the AP wrote this week. Car sales overall are actually slightly down this year, but SUV sales are up 6 percent.
The AP speculated that the boom in Wranglers and Explorers is the result of “a combination of low gas prices, growing millennial families, and a host of new models.”
But according to the authors of The Spirit Level, a book about the human costs of social inequality by epidemiologists Kate Pickett and Richard Wilkinson, skyrocketing SUV sales could also be tied to declining levels of social trust in U.S. society.
Fewer Americans now agree with the statement “most people can be trusted” than at any point in the past 40 years, and plummeting social trust tends to motivate individuals to make decisions that will protect their own family, class, or tribe.
Millions of Americans are wrestling with the impossibility of a traditional middle-class existence. In homes across the country, kitchen tables are strewn with unpaid bills. Lights burn late into the night. The same calculations get performed again and again, through exhaustion and sometimes tears.
Wages minus grocery receipts. Minus medical bills. Minus credit card debt. Minus utility fees. Minus student loan and car payments. Minus the biggest expense of all: rent.
In the widening gap between credits and debits hangs a question: which bits of this life are you willing to give up, so you can keep on living?
During three years of research for my book, Nomadland: Surviving America in The Twenty-First Century, I spent time with hundreds of people who had arrived at the same answer. They gave up traditional housing and moved into “wheel estate”: RVs, travel trailers, vans, pickup campers, even a salvaged Prius and other sedans. For many, sacrificing some material comforts had allowed them to survive, while reclaiming a small measure of freedom and autonomy. But that didn’t mean life on the road was easy.
My first encounter with one group of the new nomads came in 2013, at the Desert Rose RV park in Fernley, Nevada. It was populated by members of the “precariat”: temporary laborers doing short-term jobs in exchange for low wages. Its citizens were full-time wanderers who dwelled in RVs and other vehicles, though at least one guy had only a tent to live in. Many were in their 60s and 70s, approaching or well into traditional retirement age. Most could not afford to stop working – or pay the rent.
The “most advanced transit city in the west” is having growing pains.
The Mile High city punches above its weight when it comes to mass transit: Denver boasts the eighth-largest rail system in the United States, radiating out of what’s only the 19th most populous town.
That’s because of FasTracks. In 2004, with the hopes to cool congestion and brace for growth, Denver and communities in seven surrounding counties voted to expand public transit to the tune of $4.7 billion, adding 122 miles of commuter, light rail, and bus rapid transit lines across the region by 2018.
Since then, the Regional Transportation District has undergone a transformation: Where once only a few rail lines served a handful of suburbs, train tracks and BRT corridors now extend in all directions, from Boulder (28 miles northwest from Denver’s downtown) to Aurora (11 miles east) to Jefferson County (26 miles west), with Denver’s downtown Union Station serving as the central hub. Seven projects are complete, and five are still on the way.
But the expansion plan, which caused CityLab to once dub Denver “the most advanced transit city in the west,” has yet to translate into greater transit ridership, or even reduced use of cars. In 2006, then-mayor of Denver John Hickenlooper described a hope that the city would reach 20 percent ridership by 2020. But in 2016, only 6 percent of people in Denver used public transit as part of their commute to work.
In her powerful new book, “Nomadland,” award-winning journalist Jessica Bruder reveals the dark, depressing and sometimes physically painful life of a tribe of men and women in their 50s and 60s who are — as the subtitle says — “surviving America in the twenty-first century.” Not quite homeless, they are “houseless,” living in secondhand RVs, trailers and vans and driving from one location to another to pick up seasonal low-wage jobs, if they can get them, with little or no benefits.
The “workamper” jobs range from helping harvest sugar beets to flipping burgers at baseball spring training games to Amazon’s AMZN, -0.33% “CamperForce,” seasonal employees who can walk the equivalent of 15 miles a day during Christmas season pulling items off warehouse shelves and then returning to frigid campgrounds at night. Living on less than $1,000 a month, in certain cases, some have no hot showers. As Bruder writes, these are “people who never imagined being nomads.” Many saw their savings wiped out during the Great Recession or were foreclosure victims and, writes Bruder, “felt they’d spent too long losing a rigged game.” Some were laid off from high-paying professional jobs. Few have chosen this life. Few think they can find a way out of it. They’re downwardly mobile older Americans in mobile homes.
Last weekend, in the hours after a deadly Texas church shooting, Google search promoted false reports about the suspect, suggesting that he was a radical communist affiliated with the antifa movement. The claims popped up in Google’s “Popular on Twitter” module, which made them prominently visible — although not the top results — in a search for the alleged killer’s name. Of course, the was just the latest instance of a long-standing problem: it was the latest of multiple similar missteps. As usual, Google promised to improve its search results, while the offending tweets disappeared. But telling Google to retrain its algorithms, as appropriate as that demand is, doesn’t solve the bigger issue: the search engine’s monopoly on truth.
Surveys suggest that, at least in theory, very few people unconditionally believe news from social media. But faith in search engines — a field long dominated by Google — appears consistently high. A 2017 Edelman survey found that 64 percent of respondents trusted search engines for news and information, a slight increase from the 61 percent who did in 2012, and notably more than the 57 percent who trusted traditional media. (Another 2012 survey, from Pew Research Center, found that 66 percent of people believed search engines were “fair and unbiased,” almost the same proportion that did in 2005.) Researcher danah boyd has suggested that media literacy training conflated doing independent research with using search engines. Instead of learning to evaluate sources, “[students] heard that Google was trustworthy and Wikipedia was not.”
Americans are wary of driverless cars — 56 percent, according to the Pew Research Center, would prefer not to ride in one — and when I talked to Brewer, it occurred to me that some part of that hesitation might stem from who we assume will be producing them: Silicon Valley tech giants, the same stateless behemoths that have spent the last few decades barging into old-line industries like the Kool-Aid Man, destroying working-class jobs and leaving behind cold, modern efficiency. But maybe these skeptics could be persuaded to trust Detroit. After all, Brewer is right — self-driving cars aren’t smartphones. They’re two-ton projectiles that take your parents to the grocery store and your kids to soccer practice, that will need to make billions of computational decisions per second while moving at 65 miles per hour, that contain within them the power to extinguish human life. You kind of want them to take a while.
Leading Ford into this weird new era is Jim Hackett, who was named chief executive in May. Hackett, 62, is an oddity by Detroit standards. A design-minded aesthete in an industry dominated by gearheads and number crunchers, he spent two decades running Steelcase, a Michigan-based office-furniture company whose designers are often credited with — or blamed for — popularizing the open-plan office trend.
At a conference several years ago, Hackett struck up a conversation with Ford’s executive chairman, William Clay Ford Jr., who goes by Bill. He is the great-grandson of Henry Ford, and another auto-world misfit — an outspoken environmentalist who once ruffled feathers at Ford by speaking at a Greenpeace event. The two bonded over their shared vision of “smart mobility,” a fuzzy term, more common among urbanists than businesspeople, for creating a sort of harmony among land use, technology and transportation of all forms. Hackett joined Ford’s board of directors in 2013. In 2016, Bill Ford persuaded Hackett to lead Ford’s newly created smart-mobility unit, and about a year later, he tapped him to run the entire company.
Where are the Keys to the Kingdom?
Here below is a memo written by an auto industry veteran. He is offering special counsel to the US trade negotiators. The seasoned executive believes that getting China to open up requires tough talk. Open up or America will impose the same set of restrictive rules on Chinese firms in America that American firms face in China.
Call it good old-fashioned reciprocity.
This excerpt below comes from American Wheels, Chinese Roads, the book I authored in 2011.
The so-called retail apocalypse has become so ingrained in the U.S. that it now has the distinction of its own Wikipedia entry.
The industry’s response to that kind of doomsday description has included blaming the media for hyping the troubles of a few well-known chains as proof of a systemic meltdown. There is some truth to that. In the U.S., more than 3,000 stores did open in the first three quarters of this year.
Store Openings and Closings
Excluding grocery stores and restaurants
Starting your own business is about creating value for your customers. Technological advances will create massive value for users in every industry. Most of the past 2000 years were the agricultural era, and the development of technology and society was so low that it was impossible for the average person with life expectancy of 50 to 70 years to witness any significant advancement in technology, so it is only reasonable that there have been no waves of start-up in the past.
Few events in history had as much an impact as the Industrial Revolution and the Internet Revolution. So, it is no wonder that both eras witnessed a spate of innovations and start-ups. Right now, there is nothing as influential as the Internet. Artificial intelligence is dominating the second round of the Internet Revolution, and in the future we might see more advancements in life sciences and space technology.
The Internet is meant to connect. Through connections, efficiency is improved, and value is created and distributed through the industries. Taobao stands for connecting people with products, Baidu for connecting people with information, and Tencent for connecting people with one another… And I hope when people talk about connecting people with cars, they will think of DiDi. Connections form platforms, which then collect big data, and as a result we look to artificial intelligence to be more efficient in utilizing these data. This is why AI is the second round of the Internet Revolution.
This research identifies a new source of failure to make accurate affective predictions or to make experientially optimal choices. When people make predictions or choices, they are often in the joint evaluation (JE) mode; when people actually experience an event, they are often in the single evaluation (SE) mode. The “utility function” of an attribute can vary systematically between SE and JE. When people in JE make predictions or choices for events to be experienced in SE, they often resort to their JE preferences rather than their SE preferences and overpredict the difference that different values of an attribute (e.g., different salaries) will make to their happiness in SE. This overprediction is referred to as the distinction bias. The present research also specifies when the distinction bias occurs and when it does not. This research contributes to literatures on experienced utility, affective forecasting, and happiness.
In real life, in the natural course of conversation, it is not uncommon to talk about a person you may know. You meet someone and say, “I’m from Sarasota,” and they say, “Oh, I have a grandparent in Sarasota,” and they tell you where they live and their name, and you may or may not recognize them.
You might assume Facebook’s friend recommendations would work the same way: You tell the social network who you are, and it tells you who you might know in the online world. But Facebook’s machinery operates on a scale far beyond normal human interactions. And the results of its People You May Know algorithm are anything but obvious. In the months I’ve been writing about PYMK, as Facebook calls it, I’ve heard more than a hundred bewildering anecdotes:
The emergence in the United States of large-scale “megaregions” centered on major metropolitan areas is a phenomenon often taken for granted in both scholarly studies and popular accounts of contemporary economic geography. This paper uses a data set of more than 4,000,000 commuter flows as the basis for an empirical approach to the identification of such megaregions. We compare a method which uses a visual heuristic for understanding areal aggregation to a method which uses a computational partitioning algorithm, and we reflect upon the strengths and limitations of both. We discuss how choices about input parameters and scale of analysis can lead to different results, and stress the importance of comparing computational results with “common sense” interpretations of geographic coherence. The results provide a new perspective on the functional economic geography of the United States from a megaregion perspective, and shed light on the old geographic problem of the division of space into areal units.
“Karen,” who prefers that we don’t use her last name, lives in a Silicon Valley Hooverville: a line of Jaycos and Winnebagos, Pace Arrows and Tiogas, parked along the side of El Camino Real. Spanish explorers blazed the trail (its name translates to “the royal highway”) to connect their missions as they were colonizing early Alta California; now the road runs amid the luxe campuses of tech companies, spreading their own kind of cultural hegemony.
In this stretch through Palo Alto, six lanes of suburban traffic whizz by Stanford’s manicured soccer fields, stadium, and wooded jogging paths. Like much of Silicon Valley, the area somehow feels both harried and tranquil, a pastoral pressure cooker that squeezes out anyone who can’t keep pace with its strangulating cost of living. Those inside the RVs are reminded of how they’re being left behind by each passing car that oh-so-slightly jars their home. Whoosh. Whoosh. “It’s like getting hit in the head,” as one resident puts it. “Not real hard—but just hard enough, to where you just want it to stop.”
Over the last year, many companies have ended their liberal work-from-home policies. Firms like IBM, Honeywell, and Aetna joined a long list of others that have deemed it more profitable to force employees to commute to the city and work in a central office than give them the flexibility to work where they want. It wasn’t supposed to be this way—at least according to Norman Macrae.
In 1975, when personal computers were little more than glorified calculators for geeks and the Internet was an obscure project being developed by the United States government, Macrae, an influential journalist for The Economist who earned a reputation for clairvoyant prophesies—including the fall of the Soviet Union and the rise of Japan—made a radical prediction about how information technology would soon transform our lives.
Macrae foretold the exact path and timeline that computers would take over the business world and then become a fixture of every American home. But he didn’t stop there. The spread of this machine, he argued, would fundamentally change the economics of how most of us work. Once workers could communicate with their colleagues through instant messages and video chat, he reasoned, there would be little coherent purpose to trudge long distances to work side by side in centrally located office spaces. As companies recognized how much cheaper remote employees would be, the computer would, in effect, kill the office—and with that our whole way of living would change.
Making a city where most trips are done on bikes requires utterly discarding conventional car-centric ways of thinking about transportation. Over the last 60 years, Amsterdam’s leaders, planners and designers have by trial and error created a template for a city where bikes are the dominant force in transportation planning and design. That template has five essential characteristics; skip or short-change any one of them and your city of bikes won’t work as well.
1. All streets are bike streets
In most cities, the network of bicycle tracks and lanes is far sparser than the overall street network for vehicular traffic. In Amsterdam, the street network map is the bike network map. Almost all streets in the city have excellent bike facilities of one type or another. What is extraordinary is that in Amsterdam you are more likely to need a specialized car map than a bike map, since many streets have limited or no car access.
The internet will survive longer than the Web will. GOOG-FB-AMZN will still depend on submarine internet cables (the “Backbone”), because it is a technical success. That said, many aspects of the internet will lose their relevance, and the underlying infrastructure could be optimized only for GOOG traffic, FB traffic, and AMZN traffic. It wouldn’t conceptually be anymore a “network of networks”, but just a “network of three networks”, the Trinet, if you will. The concept of workplace network which gave birth to the internet infrastructure would migrate to a more abstract level: Facebook Groups, Google Hangouts, G Suite, and other competing services which can be acquired by a tech giant. Workplace networks are already today emulated in software as a service, not as traditional Local Area Networks. To improve user experience, the Trinet would be a technical evolution of the internet. These efforts are already happening today, at GOOG. In the long-term, supporting routing for the old internet and the old Web would be an overhead, so it could be beneficial to cut support for the diverse internet on the protocol and hardware level. Access to the old internet could be emulated on GOOG’s cloud accessed through the Trinet, much like how Windows 95 can be today emulated in your browser. ISPs would recognize the obsolence of the internet and support the Trinet only, driven by market demand for optimal user experience from GOOG-FB-AMZN.
Perhaps a future with great user experience in AR, VR, hands-free commerce and knowledge sharing could evoke an optimistic perspective for what these tech giants are building. But 25 years of the Web has gotten us used to foundational freedoms that we take for granted. We forget how useful it has been to remain anonymous and control what we share, or how easy it was to start an internet startup with its own independent servers operating with the same rights GOOG servers have. On the Trinet, if you are permanently banned from GOOG or FB, you would have no alternative. You could even be restricted from creating a new account. As private businesses, GOOG, FB, and AMZN don’t need to guarantee you access to their networks. You do not have a legal right to an account in their servers, and as societies we aren’t demanding for these rights as vehemently as we could, to counter the strategies that tech giants are putting forward.
The fully computer-driven car is supposedly imminent. Is driving dead? We take a close look.
The German executive has had a soft spot for China ever since visiting the country 20 years ago to study the language. His wife is Chinese, and he is never shy to show how fluent he is in Mandarin. Yet he was well aware of China’s shortcomings — including its dangerous levels of air pollution.
Listening to the three air purifiers humming in his office every hour of every day, Kirchert had little doubt that a day would come when Beijing would not be able to tolerate more gasoline engines on its streets — especially given Beijing’s support for cleaner cars.
So when he met his former colleague Carsten Breitfeld in Hong Kong one day at the end of 2015, it did not take long before the two began talking about the potential of electric cars. Breitfeld is a world-renowned expert in electro-mobility and headed BMW’s plug-in hybrid i8 program as the German automaker’s vice president.
By the spring of 2016, the two had launched an electric vehicle startup, Future Mobility (now called Byton), in China.
Understanding the law is an essential piece of AV programming, but it is not a valid safety standard, let alone a minimum one. It is not enough not to cause accidents — not unless AVs are the only cars on the road. AVs must equally be able to avoid collisions, even when not their fault. What Mobileye has actually proposed is a liability standard, and it is far below current strict product liability standards, and even reasonable care. (PART FOUR.)
Most significantly, the white paper reveals a crack in the veneer of inevitability that the industry has thus far projected, and the crack goes straight to the core of its viability. Mobileye is afraid that without forward-looking rules-based safety (rather than historical data- and performance-based safety), AVs will never be able to scale to the tens of millions of cars, and may wind up being “simply a very expensive science experiment.”
App downloads and revenue hit record levels in the third quarter of 2017, according to a new report out this morning from App Annie. Downloads across the two major app stores, Apple’s App Store and Google Play, reached nearly 26 billion worldwide – up 8 percent over the same time last year. That figure doesn’t include reinstalls or app updates, only new downloads. In other words, it paints a picture of the app economy’s true growth, rather than including downloads from people who were just grabbing a new version of an existing app, or re-downloading an app they had previously installed.
In addition, app revenue reached a record of nearly $17 billion, App Annie said.
How much cheaper will it be to hail a driverless taxi than to own a car in the future? A lot, according to the financial services firm UBS.
UBS forecasts that taking “robotaxis”—i.e., self-driving taxis—will be half as expensive per kilometer as owning a car in the future. The firm expects to see widespread adoption of robotaxis in urban areas starting around 2030. It estimates that the typical household could save €5,000 a year (about $5,875) by switching to robotaxis in the future.
UBS thinks the shift toward electric vehicles alone will reduce the fees robotaxi companies charge by 15%-20%. It expects the “robo” part—aka, getting rid of human drivers—to cut user costs by another 25%. UBS is also counting on competition to drive down prices.
Last year, we published an exclusive report revealing that Tesla was working on a new car insurance program, which it started offering to its customers in Australia and Hong Kong. Tesla executives have since been talking about working more closely with insurance companies as self-driving technology improves.
Now we learn that Tesla is preparing to launch the same program in North America.
It’s called InsureMyTesla and it features custom insurance plans for the automaker’s electric vehicles underwritten by insurers partnering with Tesla.
In Hong Kong, Tesla is partnering with AXA General Insurance and in Australia, the automaker released its new plan with QBE Insurance.
Now Electrek has learned from sources that Tesla partnered with Liberty Mutual Insurance Company and Aviva to offer the service in the US and Canada respectively. They are getting ready to launch the programs and start marketing them to customers.
The idea of getting customers to subscribe rather than purchase products outright has been an appealing one for companies in many markets. From the provider’s perspective, creating a recurring revenue stream is good for business and helps to add some predictability for planning purposes. For certain businesses such as software, recurring subscription revenue can be hugely important to help fund ongoing development and product improvement.
For automakers that have endured some spectacular market cycles over the years, the prospect of stable monthly revenue is particularly enticing. As automobiles become more software-defined, the prospect of continuous recalls to update bugs and security vulnerabilities is something of a nightmare scenario if automakers can’t charge customers for those fixes.
Only a few weeks after unveiling their first prototype electric truck, Cummins, better known for their diesel engines, announced that they acquired the battery pack/electric drivetrain manufacturer Brammo to strengthen their electrification effort.
Brammo has been building electric drivetrains and battery packs for years, but it was better known for its performance electric motorcycle, the Brammo Empulse R, until it sold its motorcycle business to Polaris which incorporated it into its Victory Motorcycles brand.
With advances in technology and growing consumer acceptance, the automobile industry’s electric-powered future is in sight. But what are the business implications for manufacturers as the world flips the switch from combustion to battery?
Spurred in part by existing and proposed emissions legislation that could sharply increase the cost of manufacturing internal combustion engines, as many as one billion battery electric vehicles (BEVs) could be on the road throughout the world by 2050. Under that scenario, by mid-century BEVs would comprise as much as 90% of all vehicle sales.
According to a new Morgan Stanley report, the effects of this shift will be dramatic for automakers but they will be far from the only industry disrupted, with opportunities and challenges throughout the automotive supply chain. How this transition plays out will have significant impact on component suppliers, semiconductor manufacturers, commodities, chemical producers and players in capital goods.
Volvo will use its new Polestar brand to take on Tesla’s Model 3 with a long-range electric car offered under a subscription service in 2019.
The Swedish carmaker has spun out Polestar into a separate electrified marque to focus on high performance cars and drive the group into fully electric vehicles.
On Tuesday the company announced plans for the first three vehicles under the name, and details of a new all-inclusive pay-monthly service that it believes reduces the “hassle” of car ownership.
“We’re entering an era in which data can be used to solve all sorts of the most pressing problems, but only if there’s trust in how that data has been handled,” Ms Rometty told me in a phone interview last week. “We see ourselves as stewards of clients’ data. And we don’t need to be regulated to do the right thing. We’ve been doing the right thing for a hundred years.”
The comment was a clear swipe at Google and Facebook, both of which have been fined by national privacy watchdogs for their data collection methods, as well as a reference to new UK and EU regulations, such as the General Data Protection Regulation, that will make it tougher for companies to process, sell, or allow third-party access to personal data without consumers’ explicit consent. But it was also a new kind of marketing pitch: in a world in which most economic value is going to intellectual property, we are not only going to protect that value, we are going to offer a greater share of profits from it to clients.
How would this work in practice? IBM, which serves mainly other businesses and governments, is now pitching the fact that they won’t keep any proprietary data in their servers for more than a specified contract period, and that the informational wealth garnered from using artificial intelligence to analyse that data would be owned by the clients themselves. For example, if a national health service gave IBM health records, the company could not then monetise information about the fact that certain populations in certain parts of the country have higher than average cancer rates.
In contrast, Uber Technologies Inc. was built on competitor obsession. The startup created tools to scrape data from other ride-hailing companies; Uber employees went slogging to recruit away drivers; when Uber weighed which laws to bypass, it looked to which ones competitors were breaking. Travis Kalanick, Uber’s former chief executive officer, has exhibited deep paranoia—even his closest advisers have acknowledged as much privately. This is a man who is said to have believed that Uber’s India competitor, Ola, might have framed an Uber driver for rape, a crime for which the driver was convicted.
Kalanick admired Jeff Bezos and even crafted a list of corporate culture values for Uber in the model of Amazon.com Inc. But Kalanick had a slightly different order of priorities. He put “champion’s mindset” higher on the list than “obsession with the customer.”
Judging from General Motors Co.’s test cars and Elon Musk’s predictions, the world is headed toward a future that’s both driverless and all-electric. In reality, autonomy and battery power could end up being at odds.
That’s because self-driving technology is a huge power drain. Some of today’s prototypes for fully autonomous systems consume two to four kilowatts of electricity — the equivalent of having 50 to 100 laptops continuously running in the trunk, according to BorgWarner Inc. The supplier of vehicle propulsion systems expects the first autonomous cars — likely robotaxis that are constantly on the road — will be too energy-hungry to run on battery power alone.
Electric vehicles no longer seem like a futuristic fever dream, but they remain a rarity on most American city streets, accounting for less than 1 percent of the nation’s auto sales, according to the automotive website Edmunds.com.
Yet, when future auto historians look back, they may pinpoint 2017 as the year electric vehicles went from a promising progressive fad to an industry-wide inevitability.
Related: [Death of gas and diesel begins as GM announces plans for ‘all-electric future’]
The tipping point, experts say, follows three developments, each rippling outward with economic and cultural consequences.
Shortly after taking over Uber Technologies Inc. in September, Dara Khosrowshahi told employees to brace for a painful six months. U.S. officials are looking into possible bribes, illicit software, questionable pricing schemes and theft of a competitor’s intellectual property. The very attributes that, for years, set the company on a rocket-ship trajectory—a tendency to ignore rules, to compete with a mix of ferocity and paranoia—have unleashed forces that are now dragging Uber back to down to earth.
Uber faces at least five criminal probes from the Justice Department—two more than previously reported. Bloomberg has learned that authorities are asking questions about whether Uber violated price-transparency laws, and officials are separately looking into the company’s role in the alleged theft of schematics and other documents outlining Alphabet Inc.’s autonomous-driving technology. Uber is also defending itself against dozens of civil suits, including one brought by Alphabet that’s scheduled to go to trial in December.
eff Baxter’s sunflower-yellow Kenworth truck shines as bright and almost as big as the sun. Four men clean the glistening cab in the hangar-like truck wash at Iowa 80, the world’s largest truck stop.
Baxter has made a pitstop at Iowa 80 before picking up a 116ft-long wind turbine blade that he’s driving down to Texas, 900 miles away.
Baxter, 48, is one of the 1.8 million Americans, mainly men, who drive heavy trucks for a living, the single most common job in many US states. Driving is one of the biggest occupations in the world. Another 1.7 million people drive taxis, buses and delivery vehicles in the US alone. But for how long? Having “disrupted” industries including manufacturing, music, journalism and retail, Silicon Valley has its eyes on trucking.
Google, Uber, Tesla and the major truck manufacturers are looking to a future in which people like Baxter will be replaced – or at the very least downgraded to co-pilots – by automated vehicles that will save billions but will cost millions of jobs. It will be one of the biggest changes to the jobs market since the invention of the automated loom – challenging the livelihoods of millions across the world.
The first subscription tier starts at $2,000 a month and allows users to summon a 718 Boxster, Cayman S, Macan S or Cayenne on demand. For $3,000 a month, drivers get access to 22 different Porsche models. Registration, insurance and maintenance costs are covered, though subscribers still have to pick up the tab for fuel. They can swap for as many different models as desired during the month.
Porsche is looking for a way to reach younger consumers whose shopping and transportation habits have been shaped by Silicon Valley giants like Uber Technologies Inc. and Airbnb Inc. It’s following in the footsteps of General Motors Co.’s Cadillac, which launched its Book subscription service in January, and Care by Volvo, which combines lease, insurance and maintenance into one monthly payment.
General Motors announced on Monday that it had acquired Strobe Inc., a small California startup that has been developing a sub-$100 solid-state lidar for self-driving cars.
The terms of the deal were not announced but, given that Strobe was seeking only US $15 million in a funding round as recently as May, it is unlikely to be anywhere near the reported $680 million Uber paid for some of Waymo’s lidar team as part of its ill-fated Otto purchase.
Strobe looks to be a much better deal all around. The 12-person company is only three years old, and uses innovative frequency-modulated lidar technology first invented by its founder, Lute Maleki, at his previous firm called OEwaves.
Ford CEO Jim Hackett mentioned the automaker’s investment in Autonomic during a presentation to investors last week. The 15-month-old company is developing “an open platform for transportation” on which Ford plans to build new in-vehicle and mobility-related services with a variety of partners, Hackett said.
If Ford elects to build its own ride-hailing or fleet management businesses, the Autonomic software platform could enable digital payment processing and customer identification, as well as directing the flow of data between the vehicle and the customer, according to a source familiar with the automaker’s plans.
Using the Autonomic software platform as a base, along with data from the vehicles, Ford and its partners then could build and charge consumers for products and services, said Marcy Klevorn, Ford president of mobility.
Klevorn cited FordPass as an earlier example of a software platform that has enabled Ford to provide digital services to subscribers, from parking to payments.
CEO Elon Musk has said Tesla faces six months of “production hell” as it ramps up production of its much-awaited Model 3, but the devil may have arrived early.
Musk introduced the Model 3 on July 28 amid much hoopla at its Fremont, CA, assembly operations. Dressed casually and smiling broadly, Musk unveiled 30 Model 3s and said production would begin in August with 100 cars rolling off the line, rising to 1,500 in September and steeply upward to 20,000 in December.
But Sears faced another existential crisis in the 1970s and 1980s, and that time, it failed to adjust. The decline of manufacturing (and manufacturing jobs) hit both its most devoted consumers and the value of its real estate near steel towns. The blue-collar families Sears counted on to buy “utilitarian Sears pants and dresses … were a fading force in the marketplace,” Raff and Temin write. What’s more, other stores had chased Sears into America’s middle-class suburbs—sometimes, they even snuggled up to Sears locations in the same strip malls—erasing the company’s geographical edge.
This second existential crisis called for a second strategy shift. But, lacking the vision of General Wood, Sears’s leadership made several grave errors that doomed the company.
First, Sears determined that it didn’t need to do anything to change its business. It simply needed more businesses. After all, its leaders must have thought, if a company that started selling only watches could get into car parts, and a hardware company could get into insurance, why couldn’t a watch-and-cars-and-hardware-and-insurance company get into, well, anything? Since it was the 1980s, anything, in this calculation, meant “financial services.” As the company’s head of strategy said in 1980, “There is no reason why someone shouldn’t go into a Sears store and buy a shirt and coat, and then maybe some stock.”
Eager to become America’s largest brokerage, and perhaps even America’s largest community bank, Sears bought the real-estate company Coldwell Banker and the brokerage firm Dean Witter. It was a weird marriage. As the financial companies thrived nationally, their Sears locations suffered from the start. Buying car parts and then insuring them against future damage makes sense. But buying a four-speed washer-dryer and then celebrating with an in-store purchase of some junk bonds? No, that did not make sense.
But the problem with the Coldwell Banker and Dean Winter acquisitions wasn’t that they flopped. It was that their off-site locations didn’t flop—instead, their moderate success disguised the deterioration of Sears’s core business at a time when several competitors were starting to gain footholds in the market.
Many decades after Sears had left Montgomery Ward, its old competitor, in the rural dust, another retailer was budding in small-town America. Its name was Walmart. Located on cheaper rural land than Sears, often paying cheap wages, and selling cheaper goods for cheaper prices, Walmart’s innovation seemed to be, well, a talent for cheapness. But its secret weapon was information technology. Walmart managed its supply chain with extraordinary precision. Its distribution centers were ingeniously located in central locations to optimize for efficient delivery to its stores.
Here are two facts that defy logic: By the end of the year, electric-car maker Tesla Inc. will have burned through more than $10 billion without ever having made 10 cents. Yet companies around the world are lining up to compete with it.
Almost 50 new pure electric-car models will come to market globally between now and 2022, including vehicles from Daimler AG and Volkswagen AG. General Motors Co. raised the stakes Monday by pledging to sell 20 all-electric vehicles by 2023, including launching two new EVs in the next 18 months. Even British inventor James Dyson is getting into the game, announcing last week that he’s investing two billion pounds ($2.7 billion) to develop an electric car and the batteries to power it.
The reasons for chasing Tesla are part city hall, part show business. Regulators in Beijing have laid out a plan to mandate electric vehicle production in China, while California requires carmakers to build more EVs or be forced to buy credits from rivals. At the same time, Tesla Chief Executive Elon Musk and his sleek cars have captured the imagination of Americans to the point where consumers and investors are throwing money at his Silicon Valley company.
The warning of his boss was as clear as it was painful: “In the coming six months, we will go through the production hollows,” said Tesla CEO Elon Musk at the end of July. Mus handed over just the first 30 copies of his new model3 model car, with which the Californian car manufacturer wants to conquer the mass market.
Autoproduktionsprofi Peter Hochholdinger, the Tesla middle of 2016 from Audi , Musks’ clairvoyant clause might have remained in the memory. In spite of all the preparations, in spite of the decades of experience of Hochholdinger in large-scale production, Tesla had to publish troubling figures recently: just 260 copies of Tesla’s Model 3 were delivered in the third quarter – not even 4 cars per workday. If you want to roll up the world market like Musk, there should be a few more cars on the road. 1500 it should actually be according to Tesla announcements.
PSA Group officially returned to the U.S. late Tuesday at an event here, but it is not coming back as a traditional automaker.
The French vehicle manufacturer launched its mobility services platform, Free2Move. The app connects car-sharing, ride-hailing, bike-sharing, public transit and other transportation services, allowing customers to plan short and medium-distance trips from one app.
The automaker, which makes Peugeots and Citroens, announced in April that former TrueCar and Nissan exec Larry Dominique would lead the company’s re-entry into the North American market.
“I’m confident Free2Move will play a significant role in the way we all consume transportation in North America,” Dominique said. “The brand has already proven itself around the world as an equal to Peugeot, Citroen and Vauxhall.”
The first question concerns barriers to entry. Small publishers, lacking the marketing and data analytics resources of bigger ones, have been at a disadvantage in building paid businesses. That is one reason why so many have instead stuck with ad-funded news.
If Google or others provide technology and data analysis fairly cheaply, they will level the playing field. It will become easier for an array of niche publishers to find their markets amid the clutter. So far, there have been few subscription entrants similar to The Information, a technology news publisher founded by a former Wall Street Journal reporter. This may change.
Breitfeld sees the German carmakers’ answer to the expected surge in electric car demand – putting an electric motor in a conventional car – as a mistake. He believes it leaves the industry vulnerable to a ‘Nokia moment’: when a new player uses a transformational design to seize control of an established market, as Apple’s (AAPL.O) iPhone stole a march on Finnish mobile phone giant Nokia a decade ago.
“Tesla was pathbreaking with its electric car, and that’s what everybody is seeking to develop now. The next step is the connected car, which gives consumers a completely new digital experience. That’s equivalent to a step from the Nokia to a smartphone,” Breitfeld said.
Breitfeld is so convinced of this that he left his job at BMW in 2015, where he was part of a small team working on clean sheet electric cars – a project that caught the attention of Apple.
BMW and Apple explored a partnership on cars in 2014, but ultimately went their separate ways.
Since then German carmakers have worked hard to marginalise the influence consumer electronics and technology companies could have over their vehicles, jointly buying digital mapping firm HERE as a way to reduce the industry’s dependence on maps provided by Apple and Google (GOOGL.O).
Breitfeld says this defensive approach means carmakers are failing to take advantage of consumer electronics innovations.
By contrast, Byton vehicles are designed to take advantage of the “passenger economy”: watching movies, chatting with friends or surfing the Internet while in your car.
“Apple created a platform and profits from every transaction made with their objects. We will offer content for our consumers,” Breitfeld said of his strategy to make money from selling movies and other entertainment or services.
“For this you need a completely different architecture and computing power,” Breitfeld said.
Carsten Breitfeld links.