I recently received an email that included the statement: “All of the major car companies have a stake in the ride market either in partnership or in leading new ventures.”

This certainly sounds right, and many take this to mean BigAuto sees the writing on the wall about the rise of robo car/ride sharing. Of course. But there are two interpretations.

  1. BigAuto imagines a possibly significant decline in car-buying and replacement by an explosion in buying robo-rides and they are desperate to retain their position.
  1. BigAuto imagines the possibility of a massive, independent robo car/ride share market and they are smart to hedge their bets and consolidate a new position.

These two are not the same. The robo car/ride share market is massive even if not a single car owner quits owning — in fact even if car ownership were to continue growing! There is already a huge existing ride-buying market: taxi + bus + carshare + car rentals, etc., and this is super-ripe for disruption because altogether these are one massive, inefficient mess.

I know, I know — the car ownership market is also a massive, inefficient mess, but car owners like their wasted-asset mess far more than ride buyers like theirs. The ride buyer market is far riper than is the car buyer market. And BigAuto knows it.

If you asked Bill Ford or Mark Fields (Ford) or Martin Lundstedt (Volvo) they would each respond: “Yeah, they’re both true. Especially the second one.”  Ghosn weighed in here, next day.

Cars get made and sold (by BigAuto) either way. Sure, the fancy, well-appointed, car that one buys personally and parks idle 95% will be a better instantaneous sale for BigAuto than would one drab fleet car sold to Lyft or Hertz or Morgan Stanley, but if they own a direct slice of that ride market (instead of just being a supplier), (say by buying a piece of Lyft) they are better off since they participate in the entire value chain. The service. The data. The Attention. The transit subsidies. This is what Adam Jonas (Morgan Stanley) is telling us.

So to the degree robo-mobility 2035 turns out to be dominated by, or even just significant for, non-ownership, the better off BigAuto is, but only if they invested heavily on the ride-side. Otherwise they lose. The only way BigAuto can survive while not investing in the ride market is if that market stays at the relatively more modest level it is now (taxi + bus + carshare + rental, etc). But if the ride-side eats ownership, too — which many hope and pray for — then the BigAutoRideInvestor wins even bigger.

So BigAuto players place combination bets on many squares of the roulette table.

The only way the new (non-BigAuto) player can win is to supply many in BigAuto. If a firm develops Artificial Intelligence systems for a dozen car manufacturers they win (tick Mobileye). The only one betting the farm on just himself is Elon Musk, because he is a BigAuto wannabe AND an AI player, and who is not doing so badly in the face of either BigAuto or AI Gogglerilla. Musk is the outlier, and while he thinks about ride-market ideas, he seems lower-key about this, mostly focussing on the vehicle consumption market. And for my money, since most people’s stated and revealed preferences still select for ownership, if Musk can crack the $30,000 AV and later the $25,000 AV, and with additive manufacturing in 2035, the $20,000 AV, his will be the Model T of 2035. Maybe sooner. You’ll really need to pray for your city, then.

You pray because for most of the century after we overwhelmed our cities with horses, we diligently prepared our cities for the automobile. We were rewarded with cities overwhelmed by cars. If we reshape our cities especially for privately owned AVs, history will repeat itself. Humans consume more of what is easier, more convenient, cheaper, more plentiful. Musk knows that. He could drive price down as Henry Ford did, using printers this time, as the big new lever, rather than assembly lines. Many will see this as virtuous, because of his EV manifesto. (People often see electric as more virtuous than sharing. I am not suggesting that Musk believes that fallacy, but he knows most people do — see why this is not so, here on pages 59-63.)

We would be hasty, indeed, to assume BigAuto is predicting that automobility in the coming decades will unquestionably be about sharing vehicles and cars. But they will do well however the final buy/share mix settles.

 

Leave a Reply