Tesla Inc (TSLA.O) was the No. 1 EV maker worldwide in 2022, but China’s BYD (002594.SZ) and others are closing the gap fast, according to a Reuters analysis of global and regional EV sales data provided by EV-volumes.com.
In fact, BYD passed Tesla in EV sales last year in the Asia-Pacific region, while the Volkswagen Group (VOWG_p.DE) has been the EV leader in Europe since 2020.
While Tesla narrowed VW’s lead in Europe, the U.S. automaker surrendered ground in Asia-Pacific as well as its home market as the competition heats up.
Reuters Graphics
The most significant challenges to Tesla are coming from established automakers and a group of Chinese EV manufacturers. Several U.S. EV startups that hoped to ride Tesla’s coattails are struggling, including luxury EV maker Lucid (LCID.O), whose shares plunged 16% on Thursday after disappointing sales and financial results.
Over the next two years, rivals including General Motors Co (GM.N), Ford Motor Co (F.N), Mercedes-Benz (MBGn.DE), Hyundai Motor (005380.KS) and VW will unleash scores of new electric vehicles, from a Chevrolet priced below $30,000 to luxury sedans and SUVs that top $100,000.
On Wednesday, Mercedes used Silicon Valley as the backdrop for a lengthy presentation on how Mercedes models of the near-future will immerse their owners in rich streams of entertainment and productivity content, delivered through „hyperscreens“ that stretch across the dashboard and make the rectangular screens in Teslas look quaint. Executives also emphasized that only Mercedes has an advanced, Level 3 partially automated driving system approved for use in Germany, with approval pending in California.
In China, Tesla has had to cut prices on its best-selling models under growing pressure from domestic Chinese manufacturers including BYD, Geely Automobile’s (0175.HK) Zeekr brand and Nio (9866.HK).
China’s EV makers could get another boost if Chinese battery maker CATL (300750.SZ) follows through on plans to heavily discount batteries used in their vehicles.
Musk has said he will use the March 1 event to outline his „Master Plan Part 3“ for Tesla.
In the nearly seven years since Musk published his „Master Plan Part Deux“ in July 2016, Tesla pulled ahead of established automakers and EV startups in most important areas of electric vehicle design, digital features and manufacturing.
Tesla’s vehicles offered features, such as the ability to navigate into a parking space or make rude sounds, that other vehicles lacked.
Tesla’s then-novel vertically integrated battery and vehicle production machine helped achieve higher profit margins than most established automakers – even as bigger rivals lost money on their EVs.
Fast-forward to today, and Tesla’s „Full Self Driving Beta“ automated driving is still classified by the company and federal regulators as a „Level 2“ driver assistance system that requires the human motorist to be ready to take control at all times. Such systems are common in the industry.
Tesla earlier this month was compelled by federal regulators to revise its FSD software under a recall order.
Tesla has established a wide lead over its rivals in manufacturing technology – an area where it was struggling when Musk put forward the last installment of his „Master Plan.“
Now, rivals are copying the company’s production technology, buying some of the same equipment Tesla uses. IDRA, the Italian company that builds huge presses to form large one-piece castings that are the building blocks of Tesla vehicles, said it is now getting orders from other automakers.
Musk has told investors that Tesla can keep its lead in EV manufacturing costs. The company has promised investors that on March 1 they „will be able to see our most advanced production line“ in Austin, Texas.
„Manufacturing technology will be our most important long-term strength,” Musk told analysts in January. Asked if Tesla could make money on a vehicle that sold in the United States for $25,000 to $30,000 – the EV industry’s Holy Grail – Musk was coy.
„I’d probably be asking the same question,“ he said. „But we would be jumping the gun on future announcements.“
Securing Driverless Cars From Hackers Is Hard. Ask the Ex-Uber Guy Who Protects Them
Two years ago, Charlie Miller and Chris Valasek pulled off a demonstration that shook the auto industry, remotely hacking a Jeep Cherokee via its internet connection to paralyze it on a highway. Since then, the two security researchers have been quietly working for Uber, helping the startup secure its experimental self-driving cars against exactly the sort of attack they proved was possible on a traditional one. Now, Miller has moved on, and he’s ready to broadcast a message to the automotive industry: Securing autonomous cars from hackers is a very difficult problem. It’s time to get serious about solving it.
Last month, Miller left Uber for a position at Chinese competitor Didi, a startup that’s just now beginning its own autonomous ridesharing project. In his first post-Uber interview, Miller talked to WIRED about what he learned in those 19 months at the company—namely that driverless taxis pose a security challenge that goes well beyond even those faced by the rest of the connected car industry.
Miller couldn’t talk about any of the specifics of his research at Uber; he says he moved to Didi in part because the company has allowed him to speak more openly about car hacking. But he warns that before self-driving taxis can become a reality, the vehicles’ architects will need to consider everything from the vast array of automation in driverless cars that can be remotely hijacked, to the possibility that passengers themselves could use their physical access to sabotage an unmanned vehicle.
Charlie MillerWHITNEY CURTIS FOR WIRED
“Autonomous vehicles are at the apex of all the terrible things that can go wrong,” says Miller, who spent years on the NSA’s Tailored Access Operations team of elite hackers before stints at Twitter and Uber. “Cars are already insecure, and you’re adding a bunch of sensors and computers that are controlling them…If a bad guy gets control of that, it’s going to be even worse.”
At A Computer’s Mercy
In a series of experiments starting in 2013, Miller and Valasek showed that a hacker with either wired or over-the-internet access to a vehicle—including a Toyota Prius, Ford Escape, and a Jeep Cherokee—could disable or slam on a victim’s brakes, turn the steering wheel, or, in some cases, cause unintended acceleration. But to trigger almost all those attacks, Miller and Valasek had to exploit vehicles’ existing automated features. They used the Prius’ collision avoidance system to apply its brakes, and the Jeep’s cruise control feature to accelerate it. To turn the Jeep’s steering wheel, they tricked it into thinking it was parking itself—even if it was moving at 80 miles per hour.
Their car-hacking hijinks, in other words, were limited to the few functions a vehicle’s computer controls. In a driverless car, the computer controls everything. “In an autonomous vehicle, the computer can apply the brakes and turn the steering wheel any amount, at any speed,” Miller says. “The computers are even more in charge.”
An alert driver could also override many of the attacks Miller and Valasek demonstrated on traditional cars: Tap the brakes and that cruise control acceleration immediately ceases. Even the steering wheel attacks could be easily overcome if the driver wrests control of the wheel. When the passenger isn’t in the driver’s seat—or there is no steering wheel or brake pedal—no such manual override exists. “No matter what we did in the past, the human had a chance to control the car. But if you’re sitting in the backseat, that’s a whole different story,” says Miller. “You’re totally at the mercy of the vehicle.”
Hackers Take Rides, Too
A driverless car that’s used as a taxi, Miller points out, poses even more potential problems. In that situation, every passenger has to be considered a potential threat. Security researchers have shown that merely plugging an internet-connected gadget into a car’s OBD2 port—a ubiquitous outlet under its dashboard—can offer a remote attacker an entry point into the vehicle’s most sensitive systems. (Researchers at the University of California at San Diego showed in 2015 that they could take control of a Corvette’s brakes via a common OBD2 dongle distributed by insurance companies—including one that partnered with Uber.)
“There’s going to be someone you don’t necessarily trust sitting in your car for an extended period of time,” says Miller. “The OBD2 port is something that’s pretty easy for a passenger to plug something into and then hop out, and then they have access to your vehicle’s sensitive network.”
Permanently plugging that port is illegal under federal regulations, Miller says. He suggests ridesharing companies that use driverless cars could cover it with tamper-evident tape. But even then, they might only be able to narrow down which passenger could have sabotaged a vehicle to a certain day or week. A more comprehensive fix would mean securing the vehicle’s software so that not even a malicious hacker with full physical access to its network would be able to hack it—a challenge Miller says only a few highly locked-down products like an iPhone or Chromebook can pass.
“It’s definitely a hard problem,” he says.
Deep Fixes
Miller argues that solving autonomous vehicles’ security flaws will require some fundamental changes to their security architecture. Their internet-connected computers, for instance, will need “codesigning,” a measure that ensures they only run trusted code signed with a certain cryptographic key. Today only Tesla has talked publicly about implementing that feature. Cars’ internal networks will need better internal segmentation and authentication, so that critical components don’t blindly follow commands from the OBD2 port. They need intrusion detection systems that can alert the driver—or rider—when something anomalous happens on the cars’ internal networks. (Miller and Valasek designed one such prototype.) And to prevent hackers from getting an initial, remote foothold, cars need to limit their “attack surface,” any services that might accept malicious data sent over the internet.
Complicating those fixes? Companies like Uber and Didi don’t even make the cars they use, but instead have to bolt on any added security after the fact. “They’re getting a car that already has some attack surface, some vulnerabilities, and a lot of software they don’t have any control over, and then trying to make that into something secure,” says Miller. “That’s really hard.”
That means solving autonomous vehicles’ security nightmares will require far more open conversation and cooperation among companies. That’s part of why Miller left Uber, he says: He wants the freedom to speak more openly within the industry. “I want to talk about how we’re securing cars and the scary things we see, instead of designing these things in private and hoping that we all know what we’re doing,” he says.
Car hacking, fortunately, remains largely a concern for the future: No car has yet been digitally hijacked in a documented, malicious case. But that means now’s the time to work on the problem, Miller says, before cars become more automated and make the problem far more real. “We have some time to build up these security measures and get them right before something happens,” says Miller. “And that’s why I’m doing this.”
What I imagine I could’ve been doing on my way to college instead of holding a steering wheel for nine hours. (Not actually me)Volvo
I went to college nine hours away from home — easily doable in a day’s drive, but tedious nonetheless.
On one trip through the cornfields of Indiana, I remember turning to my friend wondering why we hadn’t figured out cruise control for steering wheels. I had already been cruising at a steady 70 m.p.h. for hours with my feet on the floor. Why did I have to touch the steering wheel to keep it in the lines too?
Less than six years later, the answer is that I don’t have to touch the steering wheel anymore. Self-driving cars are here, and they’re arriving faster than many predicted.
The pace at which a self-driving car went from myth to reality has caused all sorts of problems, from a talent shortage in the field to a sudden arms race in trying to build the best self-driving car on the market. Uber’s CEO Travis Kalanick called it „existential“ for the company to develop its own driverless car technology.
Yet, there’s still a large distinction — and years of development — between the self-driving cars hitting the streets today and the driverless cars that we dream of in the future. Most „driverless“ cars today still have a driver in the front seat. Teaching a car how to drive itself (even with a driver on hand) is just the important first step.
Dreams of driverless
It’s hard not to be seduced by the images of driverless cars.
Even Larry Page is rumored to be working on a flying car so we all finally get one step closer to“The Jetsons“ future we’ve envisioned.
However, what’s not acknowledged is just how hard it is to get cars to that point. When I asked Uber’s Kalanick just what’s holding truly driverless cars back, he laughed because there’s just so much — and a lot of it just that the technology hasn’t even been developed. A self-driving car shouldn’t freak out at a four-way intersection or turn off every time it goes over a bridge.
To get in a self-driving car today, it feels like having cruise control, but for the whole car. The autopilot keeps the car’s speed steady, it stays evenly inside the lines, and maintains the proper following distance. The only way to experience a self-driving car is to either own a Tesla or live in Pittsburgh and magically hail a self-driving Uber.
After taking a ride in Otto’s self-driving truck, I explained the experience to my 92-year-old grandmother as being in a plane: You have a licensed driver who does take off and landing, or in this case, getting onto the interstate, but then once it’s clear, you just set it to autopilot.
While having „self-driving cars“ in the hands in the public is a huge milestone, it’s just the beginning in the path to full autonomy.
Truly driverless cars remain years away — but still closer than you think. Ford, for example, plans to roll out its first fully autonomous carsfor ride-sharing by 2021. Google is aiming for 2020 , and Tesla is planning to make its vehicles part of car-sharing networkonce its cars are fully autonomous.
The impacts of that will be widely felt. Merrill Lynch predicted in a 2015 report that driverless taxis like Ubers will make up 43% of new car sales by 2040. The Boston Consulting Group also wrote in a 2015 report that driverless taxi sales are bound to incline. The BCG predicts that 23% of global new car sales will come from driverless taxis by 2040, which will result in a decline in vehicle ownership in cities.
Before we get to driverless though, we need to perfect self-driving. To do that, that means putting real self-driving cars to the roads in a test. That’s why they are here and happening now. Driverless will come next.
Legendary car designer Henrik Fisker launched his comeback with the Force 1 in January — a $230,000 luxury sports car.
But Fisker isn’t planning on stopping with the Force 1. He’s already designing the next car to sell under his new company, VLF Automotive, based in Detroit. And the car designer is interested in pursuing electric cars again and ones with autonomous features down the road.
„What is the next vehicle out there in terms of electric cars and autonomous driving?“ Fisker told Tech Insider. „I’m spending a lot of time in that area and what that means in the future.“
Fisker said he’s interested in designing electric cars, as well as vehicles with autonomous features, but he declined to comment on whether or not he would ever actually pursue either one.
Before the Force 1, Fisker got his name in the car industry as a designer for BMW, Ford, and Aston Martin. He did initial design work for the Tesla Model S sedan. But when he broke off to design a hybrid dubbed the Fisker Karma, Tesla filed a suit alleging he copied some of Tesla’s technological innovations for the Karma.
An arbitrator eventually ruled in favor of Fisker. But Fisker Automotive went bankrupt in 2011, making the Karma a distant memory. Although Fisker Automotive went bankrupt, the Karma is a big reason Fisker is interested in entering the electric car market.
A new kind of electric car
„I’m passionate about it because when I brought out the Fisker Karma, it was clear people thought, ‚Well, an electric car, even with a range extender, can be sexy and amazing,'“ he said. „Obviously, we had a major battery problem and that’s what brought Fisker Automotive down. But today we have the battery technology that has gone a lot further.“
Fisker said he wants to design a car that isn’t a traditional electric, four-door sedan. Fisker said he would want to „make a completely new car, with new proportions and a different design.“
„We still haven’t seen any cars take advantage of the electric powertrain in terms of how you proportion an electric vehicle versus traditional vehicles,“ he said. „Yes there’s electric cars, but they haven’t really done it in a beautiful way.“
Fisker would also want the electric car to „truly move the needle,“ he added.
That sounds similar to what secretive, electric car start-up Faraday Future is going for. Faraday Future teamed up with Aston Martin to make „a range of next-generation connected electric vehicles.“
Faraday Future’s concept car.Rob Ludacer
The start-up is also using a Variable Platform Architecture (VPA) — a modular platform designed specifically for electric vehicles. The technology allows the chassis to be easily adjusted by changing the lengths of the rails and other structures:
Using a VPA allows Faraday Future more flexibility in designing a variety of cars.
Autonomous cars will completely change car design
Electric powertrains, though, aren’t the only technology reshaping car design.
Fisker said that autonomous cars excite him because they open up all kinds of new opportunities for new ways to design a car.
For example, self-driving vehicles allow car makers to totally rethink the interior design of a vehicle. Fisker didn’t give specifics, but we’ve seen automakers experiment with building sofasand TVs into the interiors of autonomous cars.
„No one right now has any particular advantage in this space because no one has done it before. No one truly understands what the consumer wants,“ he said. „I just generally think the technology is enabling new ventures to take a new shot of what a car is.“
So when could we see a car from Fisker with autonomous features? Fisker is remaining hush on the subject.
„I’m definitely thinking about it,“ he said. „And it’ll probably be in the next two to three years that we’ll see the biggest changes in the car industry, maybe ever.“
Ethical question leaves potential buyers torn over self-driving cars, study says
Faced with two deadly options the public want driverless vehicles to crash rather than hurt pedestrians – unless the vehicle in question is theirs
A self-driving Lexus SUV, operated by Google, after colliding with a public bus in Mountain View, California, in February 2016. Photograph: AP
In catch-22 traffic emergencies where there are only two deadly options, people generally want a self-driving vehicle to, for example, avoid a group of pedestrians and instead slam itself and its passengers into a wall, a new study says. But they would rather not be travelling in a car designed to do that.
The findings of the study, released on Thursday in the journal Science, highlight just how difficult it may be for auto companies to market those cars to a public that tends to contradict itself.
“People want to live a world in which everybody owns driverless cars that minimize casualties, but they want their own car to protect them at all costs,” Iyad Rahwan, a co-author of the study and a professor at MIT, said. “And car makers who offer such cars will sell more cars, but if everybody thinks this way then we end up in a world in which every car will look after its own passenger’s safety … and society as a whole is worse off.”
Through a series of online surveys, the authors found that people generally approve of cars that sacrifice their passengers for the greater good, such as sparing a group of pedestrians, and would like others to buy those cars, but they themselves would prefer to ride in a car that protects its passengers at all cost.
Several people working on bringing self-driving cars to market said that while the philosophical and ethical question over the two programming options is important to consider, real-life situations would be far more complex.
Brian Lathrop, a cognitive scientist who works on Volkswagen’s self-driving cars project, stressed that in real life there are likelihoods and contingencies that the academic example leaves out.
“You have to make a decision that the occupant in the vehicle is always going to be safer than the pedestrians, because they’re in a 3,000lb steel cage with all the other safety features,” said Lathrop, who was not involved in the new study.
So in a situation in which a car needs to, say, slam into a tree to avoid hitting a group of pedestrians, “obviously, you would choose to program it to go into the tree,” he said.
A spokesman for Google, whose self-driving car technology is generally seen as being the furthest along, suggested that asking about hypothetical scenarios might ignore the more important question of how to avoid deadly situations in the first place.
The problem seems to be how to get people to trust cars to consistently do the right thing if we’re not even sure we want them to do what we think is the right thing.
The study’s authors argue that since self-driving cars are expected to drastically reduce traffic fatalities, a delay in adopting the new technology could itself be deadly. Regulations requiring self-driving cars to sacrifice their passengers could move things forward, they write. But, in another catch-22, forcing the self-sacrificing programming could actually delay widespread adoption by consumers.
Susan Anderson, an ethicist at the University of Connecticut, and her husband and research partner, Michael Anderson, a computer science professor at the University of Hartford, believe the cars will be able to make the right call.
“We do believe that properly programmed machines are likely to make decisions that are more ethically justifiable than humans,” they said in an email. “Also, properly programmed self-driving cars should have information that humans may not readily have,” including precise stopping distance, whether to swerve or brake, or the likelihood of degree of harm.
How to get those cars “properly programmed”? The Andersons, who were not involved in the study, suggest having the cars learn from or be given “general ethical principles from applied ethicists”.
Own, share or subscribe: Car ownership in the self-driving era
Fast-forward 20 years. Driverless cars coast around every street in the country without a human driver behind the wheel. They’ve reached market saturation — the technology is as commonplace as cruise control is today.
The rise of self-driving cars leads to a host of questions, of course, but for the moment let’s focus on just one: Will you still be able own a car? Would you even want to? I mean, why buy when you can take an autonomous pod everywhere for far less?
Thing is, the answer to that question isn’t a simple yes or no. But finding the answer is rooted in trends happening right now.
Companies like Lyft have partnered with General Motors to incentivize people out of car ownership with sweetheart rental deals, which may actually work. On the flip side, high-end carmakers — at least the ones I’ve spoken to — don’t see car sharing as a part of their future business.
When looking at the picture of car ownership in the driverless era, several scenarios become apparent.They range from outright ownership to pay-per-ride transportation (AKA „mobility as a service“) with a few options in between. With that in mind, let’s start at the top and work our way down.
1. Full ownership
Today, aside from a few current car-sharing programs, the vast majority of cars are used only by their owners, and not shared, at least not in a structured way. Even after the widespread implementation of driverless tech, the direct-sales business for top-end brands like Bentley, Lamborghini and Aston Martin won’t change. Right now, the average car sits unused 94% of its life. Likely, a Bentley sits idle even more than that — probably nearing the 99% mark, as the average Bentley buyer owns around nine other vehicles in addition.
Holographic butler Bentley concept.
Image: Bentley
To the luxury car buyer, there’s nothing more luxurious than owning a $400,000 car that you virtually never use — whether it drives itself or not. Moreover, there’s nothing luxurious about sharing a car. Even with the introduction of autonomous driving (something Bentley has said it is working on), the ownership model will likely never change.
But it will shrink. Ownership in all other parts of the market will likely drop considerably, as the following models expand and take hold.
2. Fractional ownership
At the launch of the CT6 sedan, I chatted with Cadillac President Johan de Nysschen about the how the brand will tackle car sharing and autonomy.
Speaking broadly, de Nysschen imagined a world in which luxury brands like Cadillac would offer not just a traditional sales model but rather a brand-wide subscription model. He likened this to a model already offered in the private jet market called fractional ownership.
Cadillac CT6
Image: Nick Jaynes/Mashable
In the world of jets, fractional ownership means you buy equity in an aircraft brand rather than buy a single jet. Of course, the price you pay depends on how much you intend to use the jet. However, the benefits of fractional ownership over outright ownership are many. For example, maintenance, fueling, hangar costs and other private jet ownership headaches are handled by the brand, rather than the customer.
De Nysschen hypothesized that Cadillac could implement a similar system. For a nominal monthly fee, every morning an autonomous Escalade could arrive at your home and drive you to work. If you were feeling sporty on a Saturday morning and wanted to do some track driving, however, you could — with a touch of a Cadillac app — order up an ATS-V to take you to a nearby racing circuit.
Of course, just like with fractional jet ownership, fractional car fee scales would increase with the amount you intend to use the brand vehicles.
This way, you’re not just investing in a single vehicle but rather a brand as whole. Along with not needing to insure, park or maintain the car, you also wouldn’t have to worry about fueling it — a benefit de Nysschen hypothesized Cadillac would put into effect for customers even before autonomy becomes prevalent.
The model has some clear benefits. Not only does it give the fractional owner flexible access to a fleet of vehicles, but it still allows the customer to invest in and identify with a single brand. In other words, you’ll still be able to one-up your neighbor.
High-income neighborhoods of the future, just like today, will be still lined with Mercedes-Benzes, BMWs and Cadillacs. Instead of being rooted in single vehicles at individual residences, however, the latest and greatest company offerings will simply roll into your driveway on a daily basis.
3. Own + share
The next level isn’t so much as a step down from fractional ownership as a step sideways. That’s because I see it also suiting luxury buyers, but those who are a bit more tied to the traditional car ownership concept. I call it the „own + share“ level.
For this example, let’s use Volvo as the brand and the XC90 as the vehicle, since it will likely be one of the first fully autonomous cars sold to customers. When it goes on sale, you’ll likely still be able to go into a dealership and get a lease on a $55,000 Volvo XC90 full-size SUV and drive it away (or rather, have it drive you away).
Self-parking Volvo XC90
Image: Volvo Cars
However, instead of letting the car sit idle in your driveway at night or your parking structure at work, you’ll be able to opt into a Volvo car-sharing program. Or, the program might not be manufacturer-affiliated — ride-sharing companies like Uber and Lyft may end up handling programs like these.
Think of it in the same way as leasing a condo in Aspen that you don’t use much of the time. You still own the car, but when you’re not using it, it’s autonomously driving and chauffeuring people around. Intriguingly, this model is already being implemented — sans autonomy, of course.
BMW is running one in Seattle right now called ReachNow that offers chauffeur-driven services, valet vehicle delivery service, short- and long-term rentals as well as peer-to-peer car sharing. Now, imagine the cars could drive themselves, removing human drivers from the equation altogether.
This would be a happy medium between brand fractional ownership and full-blown car sharing. People who feel — for whatever reason — tied to owning a car still can. However, when they’re not using it, the car is out there making (or saving, depending how you look at it) money that can counterbalance the costs of ownership like fuel, insurance and maintenance.
Autonomous Volvo XC90
Image: Volvo Cars
4. Mobility services
We’re finally down to the market where the majority of city-dwelling Americans will likely find themselves: mobility as a service. This includes the newly founded Maven from General Motors and Ford’s FordPass app.
While both offer different services, both aim for the same goal: to monetize getting people from A to B without having to sell them a 3,000-pound lump of steel.
That means — for a monthly fee — a mobility service app will get you where you need to go, whether that’s utilizing a shared car, hopping in a Lyft (a part of GM’s Maven), or riding an electrified Ford-branded bicycle to the train station (a pilot mobility solution tested by Ford).
Unlike fractional ownership or own + share, these services will be less about investing in a car, brand or quietly competing in an automotive cold war of one-upmanship with your neighbor. Instead, they’ll be about getting you places as efficiently and cheaply as possible, but still a step or two above public transportation.
Unlike the brand-driven fractional ownership, since Maven won’t be sexier in any way than FordPass (I assume), these services will be made and broken not by branding but by customer experience. They’ll also be driven by price. Think about it the way some people choose Amazon Prime over Hulu.
5. Pay per ride
We now come to the bottom rung of future mobility: pay-per-ride companies like Uber or Lyft. However, if you consider them in another light, these companies could be at the top of the pyramid, too, because — based upon current company models — they’re a great equalizer. Everybody uses them.
Regardless, these companies will likely operate similar to self-driving cars as they do with human-driven vehicles. The biggest difference being that Uber and Lyft will own the cars, rather than utilizing privately owned vehicles. Heck, Uber is rumored to have ordered $9.6 billion worth of Mercedes S-Class sedans.
However, as I suggested above with own + share, pay-per-ride companies could employ privately owned driverless cars, but I suspect the best business plan will be for the companies to own their own vehicles.
Whether Uber and Lyft own the cars or draw on private self-driving fleets, you’ll still be able to call up a car to your location and for a fee get to where you want to go.
General Motors and Lyft Inc. announced a long-term strategic alliance to create an integrated network of on-demand autonomous vehicles in the U.S.
Image: General Motors
Intriguingly, Lyft CEO Logan Green told me he imagines diversifying the ride experience in the future — beyond simply phasing in autonomous cars. Green envisions themed Lyft ride options. For example, Bostonians on the way to a Celtics game could opt for a Celtic-themed Lyft Line. Along those lines (pun intended), people could also choose a singles-themed ride coordinated with Match.com, for example.
Though Uber and Lyft might one day offer subscription services in addition to the pay-per-ride model, I suspect paying as you go will dominate, which could be the cheapest option for those who don’t need a regular mobility plan.
No longer the headline
Although I laid these examples from a most- to least-expensive structure, at least for the foreseeable future, these options will be available at all pricing levels.
By that I mean Chevrolet will likely continue to offer competitively priced (albeit autonomous) Silverado pickups to customers in rural Oklahoma, for example. That’s because a car-sharing or a mobility plan like Maven simply isn’t feasible when your nearest neighbor is 20 miles down the road.
Additionally, Bentley might well offer a fractional ownership plan in addition to its traditional bespoke sales model. Elite customers could desire a ground mobility plan similar to their private air travel experience.
Broadly, this all demonstrates that, although the mechanics of self-driving cars dominate headlines today, it’s the world after autonomy becomes commonplace — when driverless tech isn’t the headline anymore —- that will prove truly intriguing.
In this era, many more of us will be able to cast aside the idea of investing in a car for the next 11 years. Rather, we can just think about where we want to go and what we want to do we get there.
It should be pretty clear by now that Apple (NASDAQ:AAPL) is very seriously considering making an electric car, having hired upwards of a thousand auto engineers. What’s completely up in the air is whether the company will actually release one or not. And no, it won’t look like the unicycle Apple Ride that the company teased last year.
As management debates this question internally, here is the most important argument on why Apple might be better off staying on the sidelines.
„A destroyer of capital“ Easily the most prominent reason is the sheer capital intensity of the auto business. This is a well-known characteristic of the auto industry, but it’s worth exploring in detail.
Last year, Fiat-Chrysler CEO Sergio Marchionne put out a detailed presentation, aptly entitled „Confessions of a Capital Junkie,“ arguing (again) for continued consolidation of the industry, in part citing severe overlap in development costs that could save the industry billions of dollars if they were shared. Combined with all of the capital required to manufacture vehicles, the auto industry is plagued with low returns on capital and low valuation multiples.
FCA
A group of industry veterans discussed the argument on Automotive News, and while there was consensus about the industry’s problems, there are no easy solutions. In no uncertain terms, Bob Lutz acknowledged, „The automobile business is a destroyer of capital.“
Apple has plenty of capital, but probably isn’t anxious to begin destroying it.
Apple’s newest investing metric: „gobs of money“ Cook was recently asked if Apple can afford to spend freely to explore new areas without commercializing products (in the context of its auto hires), to which he replied, „But once we start spending gobs of money — like when we start spending on tooling and things like that — we’re committed.“ When pressed further on whether or not hiring those auto engineers qualified as „gobs of money,“ Cook answered, „No. I wouldn’t call it gobs of money.“
Apple indeed has many gobs of money (roughly a millionty gobs by my count), and is also spending heavily on both capital expenditures and research and development. In fact, you might not realize that Apple spends more in both of these categories than incumbent Detroit automakers General Motors (NYSE:GM) and Ford (NYSE:F). Tesla’s (NASDAQ:TSLA) figures are also relevant as a neighboring Silicon Valley company just entering the auto market.
Company
Fiscal 2015 R&D
Fiscal 2015 Capital Expenditures
Apple
$8.1 billion
$11.2 billion
General Motors
$7.5 billion
$7.8 billion
Ford
$6.7 billion
$7.2 billion
Tesla
$718 million
$1.6 billion
DATA SOURCE: SEC FILINGS.
While Apple spends heavily on capital expenditures, the key difference here is that it earnssignificantly higher returns on invested capital, since Apple scales to incredible unit volumes.
Company
Return on Invested Capital (TTM)
Return on Assets (TTM)
Apple
29.6%
19.4%
General Motors
10.7%
5.2%
Ford
5%
3.4%
Tesla
(21.6%)
(12.8%)
DATA SOURCE: MORNINGSTAR. TTM = TRAILING 12 MONTH.
If you look at Tesla’s figures, this is what Apple should expect from its capital investments in the early years of building electric cars. Getting into the auto industry would inevitably dilute these profitability figures in a meaningful way.
(Domestic) cash is king Another important consideration is the location of Apple’s capital. Apple’s foreign reserves are well documented. Since Apple currently makes the vast majority of its products abroad via contract manufacturers, it is able to utilize those foreign reserves for the product tooling and manufacturing infrastructure. At the end of last fiscal year, Apple had $8.7 billion (net of depreciation) worth of long-lived assets in China.
But it wouldn’t be realistic or viable for Apple to manufacture vehicles in China and ship them home. An electric car weighing thousands of pounds is logistically quite different than a smartphone that fits in your pocket. Most automakers perform final assembly near the end market.
We don’t know what manufacturing model Apple would pursue, though. Contract manufacturing does exist in the realm of autos, but it’s not prevalent. For example, Magna Steyr assembles vehicles for Daimler Mercedes-Benz and BMW, and Rousch assembles prototype self-driving cars for Alphabet (domestically, no less, but in very small volumes).
If Apple pursued a similar contract manufacturing model (which Cook has hinted at), it would still likely purchase its own equipment like it does in its current model — that equipment just resides within partner facilities. There’s no avoiding the capital requirements, particularly as you increase volume expectations. And based on Cook’s comments above, the point of no return is when the company decides to start investing in tooling and manufacturing infrastructure.
However, Apple’s domestic reserves are primarily used to fund its capital return program, so committing to domestic manufacturing infrastructure would put pressure on its domestic cash position. Apple could continue raising debt to bolster domestic cash — the company enjoys extremely low costs of capital — but it would still be highly preferable to use foreign cash since most of it just idles anyway.
Itchy trigger finger It would be incredibly expensive to develop, manufacture, and launch an electric vehicle, which is partially why many traditional automakers historically disdained EVs and other alternative fuel vehicles so much, often referring to „compliance vehicles“ with great hostility. GM’s famous killing of the EV1 is the quintessential example, although GM has changed its tune under CEO Mary Barra, who recently declared that „your petrol-fueled car will become a thing of the past“ and has prioritized EV development in a big way.
All of this being said, capital efficiency is likely a secondary concern to Apple. The company has never been a follower of traditional resource allocation policies taught at business schools, even though Cook has a traditional MBA. Apple’s primary goals have always been to make great products that have a positive impact on people’s lives and the world at large. That’s especially true if Apple believes that it can help bring positive change to an industry (such as its efforts in TV).
In many ways, the auto industry is stuck in the past, particularly on the distribution side with antiquated dealer protectionist laws, and Apple has an opportunity to help catalyze its modernization. The company is also a big believer in climate change and environmental sustainability, adding to how an Apple EV would have a positive impact on the world.
Despite the high costs, I bet Cook pulls the trigger.
For investors, the attempts by many of the tech industry’s most powerful incumbents to disrupt the auto industry make for some exciting, and potentially lucrative, opportunities.
For the auto industry, the barbarians are at the gate.
A BMW logo is seen at the North American International Auto Show in Detroit
This understandable tension underscores much of the back-and-forth between the technology and automotive communities at the moment.
Initially friendly and collaborative, relations between the two industries have turned increasingly adversarial as each develops its own self-driving cars.
Take, for example, tech giant Apple and luxury automobile standard-bearer BMW — one-time potential collaborators whose relationship appears likely to turn increasingly competitive, as a recent move by the automaker demonstrates.
BMW unveils now tech-heavy strategy
Earlier this month, BMW’s new CEO, Harald Krueger, announced an important official shift in the company’s strategy, one that clearly seeks to counter the looming competitive threats from the likes of Apple, Alphabet, and Tesla. Claiming, „We will lead the BMW Group into a new era,“ he said the company’s plans now involve launching additional versions of its i-Series of electric vehicles, including a model dubbed iNEXT.
The iNEXT will feature BMW’s forthcoming electric powertrain and lightweight body materials, and will feature an optional self-driving mode. The company will also place a greater emphasis on in-car software and services. Mobile software giants like Apple, Alphabet, andBlackBerry have each tried to consolidate market share in the budding market for smart-car software, but BMW remained largely mum on the topic in its strategy presentation.
BMW’s iNEXT vehicles won’t reach market for at least five years, which largely mirrors the product launch schedule at tech firms like Apple. This raises the possibility of a glut of electric, fully autonomous cars reaching market at roughly the same time: Google, for example, hopes to have its autonomous vehicles ready for market by then. Only Chinese search giant Baidu has an appreciably earlier target launch date for its autonomous driving project — 2018 — though its applications may be relatively limited early on.
REUTERS/Robert GalbraithA hybrid Toyota Prius is electrically charged at a municipal charging station near City Hall in San Francisco, California August 6, 2009.
Circling the wagons
BMW’s moves could signal the end of its relationship with Apple, with whom the German auto giant has held meetings in the past. As recently as last July, Reuters reported that Apple and BMW had met to discuss potentially working together to realize their electric-vehicle ambitions. However, Reuters said, caution on BMW’s part led to a cooling of sorts. BMW likely wishes to avoid simply becoming another parts supplier for Apple, a la Apple’s infamous assembly partner Foxconn.
More broadly, this exemplifies the natural tension currently playing out between automakers and tech companies today. Though virtually everyone sees a massive economic opportunity in revolutionizing the transportation of people and goods around the world, the automotive and technology industries each, by and large, lack a core expertise the other possesses.
Apple’s software is used and beloved by hundreds of millions of people around the world, but at present, it lacks the requisite manufacturing skills to bring its Project Titan to market at scale. Conversely, BMW produces millions of cars annually, but lacks expertise in developing software and services.
Both industries are hard at work poaching talent from each other in an effort to cover their knowledge gaps, which has led to the arms-race scenario we see playing out in the headlines. So while BMW’s more revolutionary EVs won’t reach the market for at least five years, the company’s recent moves speak to the broader continued race to shape the future of the auto industry.
SAN FRANCISCO/DETROIT—Google’s self-driving car team is expanding and hiring more people with automotive industry expertise, underscoring the company’s determination to move the division past the experimental stage.
The operation now employs at least 170 workers, according to a Reuters review of their profiles on LinkedIn, the business-oriented social network. Many are software and systems engineers, and some come from other departments at Google.
More than 40 of the employees listed on LinkedIn have previous automotive industry experience, with skills ranging from exterior design to manufacturing.
They hail from a wide range of companies, including Tesla Motors Inc, Ford Motor Co. and General Motors Co.
For a look at the composition of Google’s self-driving car team, Google has not disclosed details about the size or composition of its self-driving car team, and Johnny Luu, spokesman for Google’s car team, declined to comment.
The team could have additional members who do not publish profiles on LinkedIn.
Google has said previously that it intends to ready the technology for a marketable self-driving car by 2020, but it may never manufacture vehicles itself.
The tech giant is more likely to contract out manufacturing — much like Apple does with iPhone — or to license technology to existing car manufacturers, automotive industry experts said.
Licensing would follow the model Google has used with its Android operating system for mobile devices.
In the past four weeks, Google has advertised nearly 40 new positions on the team, and many are related to manufacturing.
The team currently has six people with such experience, including purchasing, supplier development and supply chain management.
Hires with manufacturing skills could help Google find and coordinate with a partner to build a vehicle, said Paul Mascarenas, a former Ford executive who is president of FISITA, the International Federation of Engineering Societies.
Google is also engaged in discussions with federal and state regulators about how to revise motor vehicle safety standards to accommodate autonomous cars.
The competition for technical talent is intensifying as tech and automotive companies race to build driverless vehicles.
Beyond Google, the players include Tesla, established car makers such as Daimler AG and GM and, and technology companies such as Apple Inc and Uber Technologies Inc.
Google’s team is being assembled by John Krafcik, an industry veteran who previously headed Hyundai Motor Co’s U.S. operations and is an expert in product development and manufacturing. Krafcik joined Google in September 2015.
Another senior executive with previous automotive experience, Paul Luskin, was hired last month as operations manager, according to his Linkedin profile.
An engineer with stints at Jaguar Cars, Ford and Japanese supplier Denso Corp, Luskin most recently was president of Ricardo Defense Systems, a unit of Britain’s Ricardo PLC, according to the Linkedin profile.
Google hired industry veteran Andy Warburton in July to head the vehicle engineering team, according to his Linkedin profile.
Warburton spent two years as a senior engineering manager at Tesla and 16 years as an engineering manager at Jaguar.
A third auto veteran, Sameer Kshisagar, joined Google in November as head of global supply management on the self-driving car team. Kshisagar is a manufacturing expert who previously worked for GM, according to his Linkedin profile.
Luskin, Warburton and Kshisagar did not respond to requests for comment.
Google’s self-driving car group also has tapped people with experience beyond the auto industry, including aerospace (Boeing, SpaceX, Jet Propulsion Lab) and electronics (Intel, Samsung, Motorola), according to LinkedIn profiles.
Krafcik and Chris Urmson, director of the car team, have said they want to forge partnerships with established automakers and others to build vehicles. Krafcik made a public pitch for alliances at an auto industry conference in Detroit in January.
However, Google may have to look farther than the auto industry to find a manufacturing partner, said Raj Rajkumar, a Carnegie-Mellon University professor who advises companies on self-driving car development.
The tug-of-war over who controls — and profits from — the stream of user data in self-driving cars is „an inherent and fundamental conflict“ between Google and traditional automakers, Rajkumar said.
Instead, Google may choose to build its own engineering and design prototypes, then partner with a Chinese automaker or an Asian contractor such as Hon Hai Precision Industry’s Foxconn Technology Co that wants to enter the automotive field, several experts said.
Michael Tracy, a Michigan-based auto manufacturing consultant, said Google sees the potential of several different revenue streams from its self-driving technology, including licensing its mapping database and vehicle control software, as well as an integrated package of software, sensors and actuators that would form the backbone of a self-driving vehicle.
The least likely prospect is that Google will manufacture its own vehicles, Tracy said, due to the massive expenditures required and the stiff competition from established automakers.
TheIdea – The Innovation Agency 