General Motors President Dan Ammann (center) with Lyft Inc. co-founders John Zimmer (right) and... [+]
Lyft is the second-largest ride-sharing company in the United States behind Uber; it first became known for the pink fuzzy mustaches that its drivers attached to the front of their cars. GM’s investment in the startup goes beyond a simple expansion of Lyft's service areas. In addition to providing rental and connectivity services to Lyft drivers, GM and Lyft will collaborate on development of a network of autonomous vehicles that can be summoned on-demand through the Lyft app. The two companies plan to leverage GM’s leading efforts in the development of autonomous vehicles with Lyft’s network that is already operating in more than 190 cities.
Ride-sharing leader Uber is following a similar path, independent of any current automotive OEMs. Early in 2015, Uber launched an autonomous vehicle development program of its own from a base in Pittsburgh adjacent to Carnegie Mellon University. Uber hired many of the CMU researchers who had been working closely with GM for more than a decade, including during the DARPA Grand Challenge program from 2004-2007.
The investment in Silvercar by Volkswagen unit Audi is not as far reaching at this time. Silvercar was launched in 2012 in Austin, Texas, with the goal of using technology to radically simplify the airport car rental process. Rather than force customers to choose from an array of vehicles and insurance options and stand in line before doing paperwork, Silvercar has a fleet of identical, well-equipped Audi A4s. A car can be reserved from any of the 12 airports currently being served using either Silvercar's website or a smartphone app.
Silvercar Audi and smartphone app (image credit: Silvercar)
When the customer arrives at the airport, they simply scan the code on any of the available cars to unlock it and then drives away. Similar to Uber and Lyft, payments are handled automatically through the app using an on-file credit card. The company charges a flat daily rate that includes everything but local taxes. As Silvercar grows, Audi’s leadership position in autonomous technology could make the service even more convenient, allowing customers to summon the car directly to the arrivals area of the airport, or anywhere else as needed.
There are a number of reasons why automakers are so interested in partnering with these upstart transportation providers despite their love/hate relationship with traditional rental companies. As autonomous driving technology develops, there is an increasing probability that at some point in the future, human driving may be outlawed, at least in densely populated urban areas. Even if people are allowed to continue driving in a world where the percentage of the population living in urban areas and megacities is on the rise, the cost and difficulty of parking is likely to reduce the rates of individual ownership.
The cost of vehicle ownership is also rising in part thanks to the proliferation of technology to manage safety, emissions and energy efficiency. While monthly payments have been somewhat kept in check, this is happening in part by stretching out loan terms, with 72-, 84- and even 96-month car loans becoming more common. With car loans becoming more like home mortgages at the same time that technological advances are speeding up obsolescence, this will likely pose a problem for automakers.
Moving from individual ownership to more convenient and affordable vehicle as a service models that provide access to autonomous vehicles when needed without the hassle of parking, fueling or charging is likely to be very appealing to many people. If as expected, Ford announces a partnership with Google during the International CES in Las Vegas this week, it will almost certainly include a similar component as will Apple’s approach if it decides to move into the transportation business.
Finally, moving to a vehicle as a service approach will also provide automakers a path around their entrenched franchise dealer networks by taking direct to customer sales out of the equation entirely. Without the need to actually sell the vehicles, manufacturers will have greater flexibility and control over pricing while also providing customers with the flexibility to choose different vehicle types depending on their needs on any given day.
The auto industry has traditionally been extremely cyclical, lurching from boom to bust and trying to anticipate the time of those busts can be extremely costly for a company that gets it wrong. With the whole business model on the verge of transformation, for once these companies are trying to anticipate what is going to happen beyond the next few quarters and be ready when the future arrives.
