Five key impediments to a successful self-driving car strategy

The auto industry increasingly recognizes the threats and opportunities associated with self-driving cars. Unfortunately several impediments stand in the way of formulating and implementing a strategy for dealing with self-driving car technology and its impacts:

1) Time: lack of urgency

Although the competition in autonomous car technology has heated up considerably over the last 2 years, most industry experts continue to expect a slow adoption curve which could easily span two to three decades. Unfortunately, adoption of self-driving car technology (level 4 and up) will be much faster than traditional adoption rates of new technologies in the auto industry. A key accelerator is the enormous net benefit of the technology not just in terms of safety but also as increase of available personal time, competitive position (for companies and countries) and a significant decrease of costs (labour, fuel, insurance, capital). As a consequence there is much less time to formulate a sound strategy for self-driving cars.

2) Shared auto industry perspective clouds impact analysis

Shared convictions and experiences make it much more difficult for the industry (including their consultants) to think through fundamental, deep, disruptive changes in the architecture of mobility. Whether it is the joy of driving, the importance of brand for the consumer, the assessment of the legislative and regulatory environment, the consumer’s propensity to use shared self-driving mobility services or the likely business models, industry insiders tend to reinforce a perspective on the impact of self-driving cars that remains much too close to the current model, experiences and structure.

3) Lack of understanding for self-driving car business models

For many years, the auto industry has recognized a trend towards shared mobility services. Automakers understand that self-driving fleets will accelerate this trend. But they seem to spend very little effort to think through the dynamics of this market (which differs fundamentally from the traditional car-sharing and mobility-brokering markets), the way that shared mobility services will operate and compete, the regulatory environment that will emerge around fleet oligopolies, the differences between urban and long distance shared self-driving mobility services or the cost structure, maintenance strategy and model mix for such services.

In addition, there are many other business models besides shared fleets which may provide opportunities related to self-driving car technology which established players need to carefully consider, evaluate and prioritize.

4) Relationship between electric vehicles and self-driving cars not understood

In parallel to the self-driving car phenomenon the auto industry is involved in the switch towards alternative propulsion modes. But the relationship between self-driving car technology and alternative fuels is widely overlooked: Because self-driving cars will change mobility patterns (increase of urban mobility services, changes in long-distance travel patterns) and self-driving fleet vehicles will be able to refuel autonomously (or nearly-autonomously), the context for the adoption of alternative fuels changes dramatically. Battery range will become much less important; rather than optimizing cars for maximum range they will be optimized for an optimal range with respect to the mobility pattern which they are used for. When fleets carry a larger share of traffic the dimensioning of an adequate charging infrastructure becomes much easier and much more economically viable. Thus autonomous vehicle technology will serve as an accelerator for the introduction of electric and alternative fuel vehicles.

5) Fear of cannibalization / resistance to change

Any organization that faces major change and must consider the effects of a disruption of its primary business model will encounter tremendous internal resistance. Those who see the writing on the wall will hesitate to become advocates of (painful) change because internal opposition is fierce, uncertainty abounds and – as a result – career risks are high. It is useful to seriously study other industries and companies which had to face disruptive change. One of many examples is Kodak, a company that had developed the first digital camera already in the Seventies and brought the first digital camera to the market in 1995. There may be some parallels to the auto industry, which has a multi-decade history of developing technologies for self-driving cars. But Kodak hesitated far too long to adapt and rethink its business models, fearing cannibalization of their very profitable film camera business. When their profits began dwindling, it was too late. The auto industry cannot afford to make the same mistake.

Learn more

For more on this topic please join us at the upcoming 1-day seminars on self-driving cars in Frankfurt (March 23) and Auburn Hills (May 16). The seminar will be run by Dr. Hars and will help to develop a better understanding and analysis of implications of self-driving cars. More info…