The annual FT car summits provide an opportune time to take the pulse of Automotive leaders. The FT’s Peter Campbell framed the situation the industry faces as a perfect storm of challenges. The immediate headaches include a drastic sales slowdown in China, the demise of diesel, trade wars, and Brexit uncertainty. Never mind the strategic questions thrown up by shifts towards electrification, connection, automation, and new ownership models.
Waiting for the sun
There was a general feeling of a revolution delayed at this year’s event. Despite the conference subtitle of ‘Navigating unprecedented change’, one of the subtle differences in tone this year was the conviction that although disruption was definitely coming, it wasn’t going to be as swift as the hype of last year suggested it might be. Last year it was clear that Autonomy had hit the top of the Hype Curve, as companies quietly shelved their target dates to launch Level-5 fully autonomous vehicles.
That’s not to say that activity is flatlining. This year the emphasis was on using advanced driver-assistance systems (ADAS) to make human driving safer. Electric vehicles (EVs) came under more scrutiny and while most still assume them to be the future, the presumption is of relatively slow adoption, with hybrids remaining the interim solution albeit for longer than expected. Some questioned the wisdom of the big bet on EVs. Hugo Spowers, the founder of a hydrogen fuel cell start-up claimed that ‘electric versus hydrogen is not a Betamax versus VHS situation. We need both electric and hydrogen. The optimum choice comes down to vehicle weight and hydrogen refuelling makes much more sense when thinking about millions of cars. It’s delusional to think we can recharge millions of EVs any time soon’.
Many speakers also poured cold water on the shift to vehicle sharing. Yes, more of it will happen, but not in the dramatic ways it has been breathlessly talked about before. Most industry figures were clearly thinking the future of the industry would emerge incrementally and be made up of a diverse range of coexisting solutions.
Andreas Tschiesner from McKinsey reminded a room of auto execs of the difference between their business model and that of Mobility as a Service (MaaS) operators, like Uber. McKinsey has calculated that car brands make 1c per passenger mile (ppm) from the cars they sell, while Uber is aiming for 15c ppm – once they can operate Robocars.
George Arison, Founder of Shift, a used car sales start-up, made a compelling case for the long term future of private car ownership and usage. He made three key points: First, that Europe has the best public transport in the world, yet it also has the highest density of car ownership. Second, in the Bay Area, California, perhaps the global epicentre of ride sharing, car sales increased at twice the rate of population rise between 2014 and 2016. Third, journeys peak drastically at rush hours, so it’s hard to imagine how a MaaS service could deal with such a variance of need, at scale, in a profitable way.
Of course, a used car salesman would say that. But Arison’s view found an echo in the public sector. Michael Hurwitz, Director of Transport Innovation, Transport for London was also sanguine about the threat posed by the new mobility disruptors. ‘Considering the billions being invested in mobility, from AVs to Micro mobility, the economics looks really tough. Public transport is subsidised by the state, the new mobility offerings are being subsidised by VCs and corporations. How and when will the money be made?’.
This scepticism is supported by a recent MIT study that looked behind the ‘hand-waving’ from the likes of Uber. It found that even with robots behind the wheel, ride-hailing will still be more expensive than conventional ownership on a per-mile basis. While labour costs are removed and insurance premiums reduced, the key problem is utilisation – for every mile driven with a passenger, there is another mile with no one in the back seat. Other costs that are overlooked are those associated with running teleoperations, in which human operators intervene to remotely steer taxis out of situations that have confused the robot driver.
Is data the new oil (or is it the new garbage)?
Much has been made of the Internet-connected car, and the services and data monetisation it will unlock. As vehicles are plugged into the network, more detailed questions are being asked about the benefits and risks. On a very practical level, a number of speakers mentioned the challenges of automotive companies attracting and retaining software talent, typically in their non-urban locations. Even tech companies in Silicon Valley are apparently having to contend with a data scientist sticking around for an average of only nine months.
Hurwitz was dismissive of big data hype and stressed the value of small amounts of relevant data, such as if more vehicles are skidding or swerving more than usual, which can indicate a situation that needs attention. He was critical about the lack of data sharing between mobility companies and cities – with the honourable exceptions of Ford and Waze. One tangible benefit he did cite, was a collaboration with Waze, where reminders are pushed out to remind drivers to check their fuel levels as they approach the Blackwall tunnel, which has reduced blockages in the tunnel.
Micheline Casey, Global Head of Data, at Ford Smart Mobility, had done the most thinking on the topic in the room. She was frank. ‘The whole industry can do a much better job of communicating to drivers what the value of connectivity to them is,’ she said. Giving examples of how data could improve safety, convenience and cost of ownership. Casey, briefly touched on how vehicles could also be used as sensors for ‘hyper-local’ conditions, like air quality or hail storms, providing aggregated and anonymised data to local services.
When quizzed about privacy policies, she confirmed that Ford will give its customers the option to opt-in and back out of data features and services. Summing up with three questions Ford Smart Mobility continually asked themselves:
1. Can we collect the data and what would we use it for?
2. What’s the value exchange for our customers in return?
3. How do we make it easy for them to opt-out of the data collection?
China has leap-frogged the incumbents in electrification
A recurrent theme of the conference was that complex problems cannot be tackled by one company or sectors. The shift to EVs being a case in point, from how to roll-out charging infrastructure to decarbonising the grid, cross-sector collaboration and coordination is required. There was a grudging acceptance that China had out-manoeuvred the rest of the automotive industry. It made a big bet investment in battery technology in the last decade, is currently in the midst of a large scale roll out of charging infrastructure and is wielding a big legislative ‘stick’ that makes it nigh-on impossible to buy a non-EV in Beijing today. Chinese state planning and investment have put its EV champions in pole position, while Western auto execs and politicians argue about standards and policy.
As I said at the beginning though, this was my take. I would be interested in your thoughts or comments on the state of play. Email me at email@example.com.