How soon will self-driving cars impact how you get to work and your home from a night on the town? Automakers, ride-sharing firms and tech startups are forging loose alliances in an effort to advance self-driving technology and claim a piece of what is expected to be a multi-billion-dollar business. General Motors (GM) plans to have its self-driving cars ready for a ride-share service within two years as the automaker looks beyond traditional car ownership for new tech-driven sources of revenue.
After spending more than a year putting the pieces in place to launch a robotaxi business, GM recently shared it expects to have a fleet of self-driving cars in operation in 2019. The automaker or a partner could run the sharing service. Ride-sharing services on the roads now, including those offered by Uber Technologies Inc. and Lyft Inc., cost consumers about two dollars to three dollars a mile. GM estimates these companies pay their drivers the equivalent of about three quarters of revenue. Take away driver costs and the rates could drop to below one dollar a mile, according to Kyle Vogt, chief executive officer of Cruise Automation that develops the software for GM’s self-driving cars.
GM President Dan Ammann told analysts and investors last month that GM’s plan to get self-driving cars to market in large numbers could drop the costs of ride-sharing under one dollar a mile by 2025. Once that happens, he said, 75 percent of the miles people drive could be through sharing or hailing services. That’s a $1.6 trillion market, which is 300 times larger than today.
GM’s challenge will be getting its share of the revenue, explained Morningstar Inc. analyst David Whiston in a Bloomberg interview. Picking a partner likely would mean having to split earnings. If the automaker runs its own business, it’ll have to deal directly with consumers and beat out competitors who will have been in the market for years.
To get there, GM is lowering the costs of self-driving cars both by building out its manufacturing capabilities and supply base and finding better technology. Lidar systems that use laser technology to give vehicles a view of the road now cost about $20,000, Vogt said. GM is switching to lidar units developed by Strobe, a company the automaker acquired this year, which will cost $300 apiece.
Uber, Lyft and Waymo
The outlook for when GM thinks it’ll have a self-driving service ready roughly coincides with an Uber milestone. Uber plans to buy up to 24,000 self-driving cars from Volvo, marking the transition of the U.S. firm from an app used to summon a taxi to the owner and operator of a fleet of cars. Volvo said in a November statement it would provide Uber with its flagship XC90 SUVs equipped with autonomous technology as part of a non-exclusive deal from 2019 to 2021. Should Uber buy all 24,000 cars, it would be Volvo’s largest order by far and the biggest sale in the autonomous vehicle industry, giving Uber, which is losing more than $600 million a quarter, its first commercial fleet of cars.
Waymo, the autonomous car unit of Google parent Alphabet Inc., last month said it’s about to start chauffeuring people in Fiat Chrysler minivans without safety drivers manning the steering wheel. Not to be outdone, Uber’s rival Lyft struck a research partnership with Waymo. Lyft also secured deals with Ford Motor Company and startups Nutonomy and Drive.ai to incorporate self-driving cars into its fleet.
GM’s new focus, Volvo’s agreement with Uber, Lyft’s with Ford and Waymo show the pressure on automakers to avoid becoming obsolete in a world of increased automation. It also shows ride-services companies feel compelled to start automating to cut driver costs and turn profits. Hopefully, this pressure also increases the quality of riding experiences and safety for passengers.
(Photo: Uber Testing Self-Driving Car, Flickr)