Next-Generation Mobility in June

In the midst of the pandemic, and with the news cycle accelerating daily, it is easy to miss June’s mobility news. But June proved an extremely important month to the ongoing transformation of urban transportation. New partnerships were established, important acquisitions were announced, and several smart cities made important transportation-related decisions. All these actions validate the new mobility models presented in Transportation Transformation.

Let’s start with the news:

1. Grubhub was acquired by Just Eat Takeaway, Uber, which lost Grubhub, made an offer to acquire (and ultimately acquired) Postmates, and Amazon announced the acquisition of Zoox.
2. Volvo announced a partnership with Waymo to develop and deploy robotaxis, while Daimler announced a partnership with NVDIA around automated vehicle systems after dissolving its partnership with BMW.
3. VW stated its desire to partner with other companies around its car.software effort.
4. Didi indicated that it will deploy 1M robotaxis on its platform by 2030.
5. Recognizing the need for public/private partnerships Marin (just north of San Francisco) signed a partnership between its Public Transportation Authority and Uber that will enable Uber users to reserve seats in the agency’s vehicles. Also, in the process of enabling transportation modalities that facilitate social distancing without adding to congestion, various smart cities made relevant announcements. Barcelona added over 300K square feet of public space for bicycles and pedestrians. Brussels announced that it will add 25 miles of new bicycle paths, whereas Montreal is converting 200 miles of roads to bicycle lanes.

I consider this news important for the following reasons:

1. The commercial introduction of Autonomous, Connected and Electrified vehicles will be more expensive than originally planned and will take longer than anticipated until it can be monetized. With its acquisition of Zoox, Amazon is not only committing the $1B of the rumored acquisition price but, implicitly, an additional $10B to fund the work that will be needed over the next 10 years, a period that will be necessary before companies can bring autonomous vehicles operating at the speed of traffic to cities of interest around the world. GM and Ford reached a similar conclusion and accepted co-investors in Cruise and ArgoAI respectively. Volvo’s partnership with Waymo appears to have a similar motivation. The consolidation of private companies working in new mobility, both around vehicles and mobility services, will likely accelerate as many private companies fail to raise additional needed capital and large corporations realize that they can only achieve their objectives through acquisitions.
2. The introduction of robotaxis will not lead to the outright elimination of human-driven vehicles offering mobility services. Didi will deploy autonomous vehicles in areas where there is a shortage of drivers willing to offer ride-hailing services. Uber, Lyft and Grab that are also interested in introducing autonomous vehicle into their networks will use such hybrid models.
3. Even though demand for on-demand passenger transportation services continues to recover from its precipitous drop once the pandemic was declared, it remains depressed. At the same time the demand for goods delivery (restaurant meals, groceries, packages) services continues to increase rapidly as ecommerce becomes engrained to more population segments globally. It is not surprising that Uber acquired Postmates which enables it to further bolster its UberEats business and complement its passenger transportation. It could likely expand globally into grocery delivery starting with Latin America where it recently acquired Cornershop. Even with Postmates acquisition, however, which will place UberEats in second place after Doordash in terms of market share, the consolidation in the prepared meals delivery will need to be followed by business model transformation since these businesses are losing money, and addressing the classification of gig workers. I expect that more companies will enter the on-demand goods delivery market through acquisitions, partnerships, or by pivoting away from their existing model. Short- and long-haul goods delivery may also quickly emerge as the key use case for autonomous vehicles of various form factors, enabling autonomous delivery vehicles to be monetized faster than robotaxis. Along these lines we should also not that Aurora has started shifting from autonomous passenger vehicles to using its AV stack on long-haul trucks, while TuSimple, a startup pioneer of autonomous long-haul trucks, is in the market to raise a new big round following its successful trials with companies like UPS.
4. As I wrote in Transportation Transformation, the automotive ecosystem incumbents will need to partner with companies that possess the skillsets and technologies (software, data management, AI, etc.) that are critical to next-generation mobility. The moves by Volvo, Daimler, and the partnerships sought by VW’s car.software are further proofs of this reality. With their moves, Volvo and Daimler are placing in doubt their existing partnerships with Zenuity and Bosch respectively. The new value chains that are being established as part of next-generation mobility will include companies that are not traditionally associated with the incumbent automotive supply chain. Intel’s Mobileye and NVIDIA, but also several startups, are good examples of the transformation taking place. As these data-centric companies enter the new chains, data will become an important form of the value that will be exchanged among the partners under new business models.
5. Through its partnership with NVIDIA Daimler shows that it will be focusing more on vehicles with L2+ and L3 driving automation. This decision comes as UNECE released a regulation on Automated Lane Keeping Systems and is pertinent to vehicles equipped with L2 and L3 driving automation. While Daimler, and other companies taking a similar approach, may be able to monetize their investments in L2-L3 technologies earlier, their approach will not help them to offer vehicles with L4 driving automation sooner or with lower overall investments. Considered together with the previous point about the investments necessary for bringing autonomous vehicles to market, the decision is also indicative of a larger trend of corporations favoring short-term returns with lower risk over more expensive and longer horizon innovations that were favored in the recent past. While this trend is detrimental to startups working in technologies relevant to next-generation mobility, it also creates a big risk for incumbents because investors continue to show strong preference for innovative automotive companies, like Tesla. Tesla’s value is not only the result of its vehicle deliveries, but also additional monetization opportunities through services and data exploitation.
6. By abandoning its partnership with BMW, after closing its car sharing operation in North America and some European cities, and further shrinking its mobility services business, Daimler is re-focusing on selling vehicles. In this respect Daimler, like GM, Ford, and other OEMs before it is starting to migrate from being a Transportation Provider (Category D) to becoming just a Technology Adopter (Category B) OEM (see Chapter 3 in Transportation Transformation for a complete list of the OEM categories).
7. As I state in Transportation Transformation, the path to new mobility will require cities to transform and form public/private partnerships with mobility services companies and OEMs. Increasingly cities are realizing that partnering with on-demand mobility companies provides them with strong benefits including better utilization of their public transportation fleets resulting in better service, better economics because they can use their fleets in areas of high demand, modern software to manage their operations. To date, in the US alone, 120 cities are partnering with on-demand mobility services companies in an effort to augment their public transportation systems while saving money. Cities will also need to update and reconfigure/redesign their transportation infrastructures in order to accommodate the renewed consumer interest in walking and bicycling that is the result of avoiding ridesharing modalities, like subways. Long term, the pandemic’s impact on mobility will also be reflected in urban planning and design.

The research and analyses my firm has conducted over the past two years, as well as the models we have developed led me to state that I’m most concerned about the ability and willingness of automotive OEMs to undertake the transformations that will be necessary in order to become major factors in the urban transportation environment being created globally. The pandemic will make these decisions even harder as their existing business models will be further challenged providing them with less capital to fund these transformations.

Buy the book to learn about the various models under which smart cities, OEMs, and mobility services companies can collaborate.