Shared mobility is the new paradigm for vehicles. Autonomous cars. Self driving cars. Whatever name you want to give to them, cars that can drive themselves are what everyone in the car business is talking about. Why? It’s simple economics. As much as Tesla Motors has transformed the auto industry, it is possible the real revolution in automobiles is how we use them.
It seems like just yesterday that Uber practically invented the idea of an internet based ride hailing service. It created an entirely new market where none existed before. That has driven a sea change in how people think about automobiles. Particularly in urban environments, pay as you go may be far cheaper than the total cost of monthly payments, insurance, maintenance, fuel, repairs, and parking.
Doing the math, urban dwellers may decide it is far cheaper to own one car instead of two, or not to own a car at all. That shift in attitude has car makers worried. Volkswagen announced recently that it is devoting more of its energy to electric and self driving cars. BMW also says that autonomous car technology will be the new focus of its “i” division.
Now, The Motley Fool reveals a startling study from a team of analysts at Morgan Stanley headed by Katy Huberty. They say the shared mobility market worldwide will be worth $2.6 trillion annually by 2030. That’s money they say people will pay to companies like Uber and Lyft to take them where they need to go when they need to go there. It is also money that will not be used to purchase private automobiles.
That’s the idea that is driving the development of autonomous driving cars. That’s why Apple has recently invested $1 billion in China’s ride hailing service Didi Chuxing, which already provides rides for 11 million Chinese patrons every day. Volkswagen has pumped $300,000,000 into Israeli company Gett. General Motors snapped up self driving start-up Cruise Automation for $1 billion this year and poured another $500,000,000 into Lyft. Google is now working with Chrysler on self driving minivans.
The car companies will still make automobiles, but many of those vehicles will be sold to shared mobility networks, not individuals. In fact, many automakers are thinking about at all that lovely money going to someone else and wondering how then can get in on the action themselves.
Where does Tesla fit in to this picture? So far, it has been content to manufacture electric automobiles and sell them to private owners. Is it possible that it has overlooked the changes that are waiting to sweep over the industry? After all, it has gotten nearly 400,000 reservations for its Model 3, a car that won’t even be available for another 18 months.
The answer may lie in an enigmatic statement by CEO Elon Musk during the Q&A session following last year’s Q2 earnings call. Just prior to that meeting, Uber’s CEO announced that if Tesla could build an autonomous car by 2020, his company would buy all of them. Analyst Adam Jonas asked Musk if Tesla had any plans of its own in that regard. Elon got a “cat that ate the canary” look on his face and offered an evasive “on advice of counsel” type of response that may have revealed more than anything he could have said orally.
Would a company that has developed the most advance autonomous driving system in history overlook all the market possibilities its technology will make possible? Not very likely. The real question is, who will pay all that money to get to work and back when machines do everything for us?
Self driving cars will eliminate the need for human drivers. Other machines will do almost any task a person can do. If there are no jobs left for humans to do, there will be no income to pay for all those mobility sharing services. How will Kate Huberty and her team pay their rent when machines take over the stock analysis business? So far, that’s a question few people are asking. But anyone who has seen Disney’s movie WALL-e can see where this is going.