Cashing in on the “Passenger Economy”
Buckle your seatbelt, it’s going to be a lucrative ride for next-generation mobility systems. A recent study by Intel and Strategy Analytics predicts emerging autonomous vehicle and smart city technologies will create a new “Passenger Economy” that will grow to $800 billion in 2035 and reach nearly $7 trillion by 2050. The total, which includes direct money-making ventures and indirect savings—increased productivity from less time spent driving and cost savings derived from improved safety—is more than the projected 2017 combined gross domestic products of Japan and Brazil.
That’s a lot of mobility moolah up for grabs and everyone from carmakers and suppliers to tech companies, retailers and service providers are scrambling for their piece of the action. The Intel report splits its 2050 forecast between consumer-oriented ($3.7 trillion) and business-to-business ($3 trillion) applications. These so-called mobility-as-a-service systems will transform a range of industries as consumers increasingly embrace ride-hailing and car-sharing alternatives, and automakers look to replace traditional vehicle sales with application and content revenue.
But the transformation won’t be easy. Just ask former Ford CEO Mark Fields, who was fired in May for failing to clearly articulate and advance the company’s new mobility strategy. Despite overseeing record company profits, setting a 2021 deadline to launch a fully autonomous vehicle and forming a Smart Mobility subsidiary, Fields’ efforts were deemed slow and unfocused by critics. Wall Street’s skepticism was reflected in a 40 percent drop in Ford’s stock price over the past few years, which was exasperated when Ford’s market value was eclipsed by Tesla, even though the electric vehicle maker has yet to turn a profit.
For now, it’s all about dreaming big and selling the sizzle. Forget for a moment the technical, regulatory, logistical and societal complexities that need to be overcome to make self-driving cars a reality, and just imagine the possibilities of turning drivers into passengers and vehicles into flexible businesses and service platforms. In the future, Intel says, transportation will be treated like commercial real estate with highly specialized purposes and ownership models—including transportation services negotiated into employee compensation packages and for autonomous vehicles to be among the amenities offered by hotel chains to business travelers.
Rather than new brick-and-mortar locations, retailers will look to expand their operations via “mobile stores” that deliver goods and services directly to the consumer. This would help them reduce operating costs and compete against third-party delivery services such as UberEATS. Current service companies, meanwhile, could become more mobile: think of self-driving beauty salons or even on-the-go doctors’ offices. Lyft reportedly is evaluating such “experience pods” that can be quickly reconfigured for multiple applications.
Delivery trucks are expected to be among the first applications for autonomous and shared vehicles. Walmart is launching a grocery delivery service using drivers from Uber and Lyft, and Uber made what it claims was the world’s first driverless cargo run last October when 50,000 cans of beer were trucked from a brewery to a warehouse. Using autonomous trucks to deliver high-frequency items to consumers from local distribution centers promises to improve efficiency, reduce costs and expand delivery hours, Intel notes.
Amazon aims to take the concept even further. It envisions aerial fulfillment centers that dispatch delivery drones and are resupplied by airship. Other companies also are starting to partner with drone makers to explore autonomous last-mile delivery and expand on Amazon Dash’s “anticipatory shipping” of non-durable goods. Back on the ground, people who aren’t quite ready to give up their keys may turn to group ownership models or rent out their car when it isn’t in use—which can be as much as 92 percent of the time—to offset traditional ownership costs.
The ultimate winners in the Passenger Economy are expected to be service providers rather than transportation specialists. Intel says companies should focus on building relationships and providing personalized customer experiences—something that’s always been easier said than done. How to best get there from here is the $7 trillion question.
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