San Jose Mercury News: Staking a claim in the auto industry’s evolving technology
February 10, 2017
Show all

The Aftermarket Analyst, April 2017

The Future of the Automobile

It’s the topic at the forefront of everybody’s thinking. There’s nothing worse for the bottom line than getting stuck at the back of the pack, or to have not even gotten started in the first place. But when everybody has an opinion, and everybody has an angle with regards to automobiles and autonomy, how do you decide to whom you should listen? Are you persuaded by the futurists who promise a mobility utopia? Or are you persuaded by the less enthusiastic because we’ve been promised things before that haven’t panned out and you don’t want to get your hopes up? Can seemingly opposing viewpoints both be correct? In a word: yes. In two words: why not?

It all comes down to what it is you’re talking about when you talk about autonomy. Some people envision relaxed drives up and down the interstate not having to pay attention between on and off ramps, maybe reading a book, watching a movie, or getting some sleep. Some people envision reinventing urban areas and returning concrete jungles back into something more natural. Some people envision an electric revolution where the internal combustion engine is banished to the ash heap of history.

You’ve probably heard some variation of theme that the future will be “shared, autonomous, and electric.” McKinsey & Co. adds “connectivity” to the mix to account for vehicle-to-vehicle, vehicle-to-infrastructure and vehicle-to-human communication. It’s a useful formula that helps to make sense of a question that is as broad as the ocean is deep: “what is the future of the automobile.”

Urbanization and the Sharing Economy

All over the world, the most dramatic population growth is occurring in urban areas. And all over the world, car ownership among urban dwellers is lower than non-urban population groups and that poses a problem and an opportunity. Urban dwellers still need to move around, hence the birth and growth of car-sharing and ride-sharing services. Barring calamity, that trend is likely to continue and many of the new mobility companies are staking their futures on autonomous vehicles (AVs) as the solution to labor costs and congestion.

The best guess for when the first wave of commercially-viable AVs will be available is the early 2020s. They will be limited to settings where the infrastructure has been upgraded to handle them and they will exist exclusively in fleets where the manufacturer or owner can keep a close eye on performance and reliability. They’ll work on some roads and in some conditions and drivers will still be required to intervene from time to time, hopefully not as often as every .8 miles though.

This is a step in the shifting ownership model. People seeking more value for their dollar could potentially save thousands each year by not actually owning the vehicles they use and new businesses will continue to sprout to meet that need.

Electrification and Autonomy

Some industry watchers say you cannot separate electrification from autonomy, but depending on who you talk to, electric cars are either the most beloved or the most hated powertrain. The Pro camp points to the environmental benefits and performance and the fact that autonomous tech works best with electric powertrains. The Not-So-Pro camp points to the public’s lack of enthusiasm for plug-in EV’s and hybrid vehicles. Or they’re fans of hydrogen or Natural Gas Vehicles.

And then there’s the infrastructure question. Some say the power grid will be just fine and some people say it will struggle to meet the demand of an electric and autonomous world. The answer depends on where you live and if your governmental leaders have prepared for it. Consumers won’t be happy with regular brownouts. The electrified and autonomous future is going to require careful planning between the public and private sectors.

A lesson from the past that serves as a useful object lesson is the modernization of Paris. Napoleon III hired Baron Georges-Eugene Haussmann in 1853 to remake Paris. The plans included improving infrastructure, widening streets and adding green space. Haussmann was dismissed in 1870 but the work carried on until the 1920s, roughly 70 years after it began.

Connectivity

Some of the more exciting advances in autonomy are occurring in the vehicle-to-vehicle and vehicle-to-infrastructure domains. Cars will need to know what roads to avoid, whether there’s a storm coming, where to go to re-charge, or if the vehicle in front of it just slammed on its brakes because of debris or pedestrians. What if the start-stop system knew the traffic light was about the change and restarted the engine so you didn’t have the lag when you depressed the accelerator? Ultimately, a car will only be as good as how well it communicates with other cars and the surrounding infrastructure and how well it learns from its surroundings.

Implications for the business end

A robust mobility ecosystem has developed in Silicon Valley. The next step is for it to mature. As Capstone has said, not all of the companies building AVs today will be building AVs in 10 years. Emerging companies will be aggregatable into multi-company enterprises that will serve as the platform for autonomous transportation. The days when Detroit viewed Silicon Valley as an existential threat are long gone. The race towards a self-driving future isn’t about just one thing. It’s about many things working in concert. That maturation process needs to happen for consumers to have confidence in the systems underlying AVs.

Steeped in the character of the problem

You’ve probably heard the Dwight Eisenhower quote “plans are worthless, but planning is everything.” He went on to say the reason planning is important is to keep yourself “steeped in the character of the problem that you may one day be called upon to solve–or to help to solve.” You can extrapolate, prognosticate and pontificate all day long about what’s in store for the automobile and mobility, but if you haven’t thought about it and planned for it, you might find yourself left behind.


Recently Announced Automotive Aftermarket Transactions

2017Q1 Precedents


Selected Public Company Capitalization and Operating Figures03-29-2017 Public Comps