Ford, GM and the Urban Mobility Game - Race is on and May the Best Disruptive Solution (Not Car!) Win

The past few weeks have been very interesting for the US auto industry as the two domestic giants are finally showing signs of taking on the Germans in the urban and intelligent mobility game. The reason I refer to the German OEMs specifically BMW and Daimler is that they spotted this trend (of mobility as a separate revenue opportunity) much earlier than others and have dedicated business divisions taking care of it. Daimler in fact has an ambitious goal to take its mobility subsidiary moovel Group (operating multiple mobility apps Moovel and RideScout) to a billion dollar entity by 2020.  

The ultimate end game here is to be a relevant player in the larger transportation game that will involve car-dependent and car-independent business models. An interesting study by McKinsey propagates that by 2030 such initiatives around urban mobility and connectivity based services could yield a new $1.5 trillion market.  But one catch here and the interesting one is that the same McKinsey report doesn’t forecast a decline in private car sales but rather shows a 2% improvement globally. Whilst the McKinsey report is interesting and outlines a new revenue opportunity, we at Frost & Sullivan have been analyzing this effort from its early days outlining roles that OEMs could take in this mobility ecosystem, infrastructure needed to bring these pieces together and most importantly the business model that will ultimately click with customers. But before delving deeper into that a recap of the most interesting announcement

• Ford has created a Ford Smart Mobility subsidiary that will operate out of HQ in Michigan and share operational responsibilities with the Mountain View tech center. Idea here is to commercialize and focus on the smart mobility experiments launched at CES 2015 (and others) and the first roll out will be the dynamic shuttle pilot in the Dearborn campus (a point to point multi-person ridesharing model using e-hailing technology). Creation of a separate subsidiary according to Ford allows them to divide and conquer and stay relevant current and for the future also allowing them to recruit talent from the technology side rather than brewing these efforts using their conventional folks. Also the interesting aspect with the dynamic shuttle program is that it uses a custom built Ford Transit van signaling a trend that this is one ways OEMs could use some of their vehicles in the future –custom designing vehicle and features for the shared mobility market. Two factors that we think will determine car designs of the future beyond what appeals to the conventional car buyer are city landscapes and shared mobility models it can support (BMW i3 because of its extremely low turning radius has a lot of potential across taxi and mobility space in dense urban centers).
• Ford launching the FordPass solution in April. I have talked about this in detail in my earlier blog - https://www.dhirubhai.net/pulse/fordpass-google-nhtsa-discussion-future-mobility-praveen-chandrasekar?trk=mp-reader-card. Idea is to develop a customer engagement tool that allows Ford a direct communication channel with the customer and allows them to push new services and features directly (e.g. the Ford CreditLink lease pilot in Austin – fractional ownership)
• Beyond the $500 million investment in Lyft and the Maven Carsharing launch, GM and Lyft’s announcement today to launch Express Drive that is targeted to bring more drivers to the Lyft program by giving them short term rentals (for a week). As outlined in an interesting Forbes article around the same, this is similar to what Lyft operates with Hertz in Denver and Las Vegas and what Uber operates with Enterprise in six cities. But the innovative part here is the direct involvement of a volume OEM in the mix and the possibilities it offers Lyft in the future. There was an interesting trend observed late last year when both GM and Ford were reported to be cutting back on sales to rentals (extremely low margin business - https://www.autonews.com/article/20151214/RETAIL01/312149962/gm-ford-cut-back-on-rental-sales;-asians-pick-up-the-slack)  to focus more on retail customers and build better residual value for vehicles with better content and improve profitability. The move by GM to induce vehicles into the Lyft side signals a commitment to the mobility market and along with Maven Carsharing service opens up many possibilities for GM to utilize the upcoming Bolt EV (packed with many innovative features besides the range) and in future its automated driving technologies.
• GM to buy Cruise Automation for undisclosed amount (Rumored at an insane $1 billion). GM here is again pursuing an inorganic angle to acquire cruise automated driving software and the 40 engineers behind it who will work with the newly formed GM autonomous driving team. One interesting observation here is the sheer amount of software only players (Sensor fusion and the overall algorithm) who have emerged for the automated driving arena. Cruise’s offer is currently the $10,000 RP1 system that utilizes stereo camera and radar to provide highly automated driving to customers (currently available for Audi A4/S4) along with its machine vision computation. The real deal here for GM is the availability of a completely working unit that they can utilize in a short period in its vehicles but also mixed with everything going on in the Lyft side would allow them to take this to the shared mobility markets as well.
• Ford’s recent effort with University of Michigan to develop algorithm that can recognize snow and rain and filter the information out of the LiDAR sensor feedback. Wondering why I inserted this here – remember that one major application area for fully autonomous driving will be in the shared mobility market (imagine a Ford Dynamic Shuttle that can operate point to point without a driver in the Ford campus) and overcoming these technology challenges are important for the roll out that will not only happen in sunny roads but in rainy and snowy weather. Again part of this is where Ford motor company comes in where it is trying to solve a technology challenge that will aid in the growth of Ford Smart Mobility.

All of these are interesting trends and developments but the key is outlining the real opportunity areas. Getting back to Frost & Sullivan’s work in this area, we believe there are some real opportunities here

• Building an ecosystem around mobility is important. The opportunity here is to assemble a host of players on a connected technology platform (like the FordPass) and offer choices to customers. Remember from one way Carsharing to round trip Carsharing to p2p Carsharing there are many models and many players in the shared mobility market and few applies better to certain cities. Experiments and pilots allow OEMs to collect data and run programs that are ideal but trying to build everything from scratch might not be the most economical model. And remember this is where M&A activities will intensify and those hard at work VC arms of OEMs will come into play.
• As a Service model will emerge meaning OEMs have a real opportunity at utilizing a host of partners to deliver content, services, features that allow them to make additional money. At the end of the day automakers are best known for making cars but this direct communication opportunity with the customer (this is where connectivity and unified digital platforms like Mercedes Me comes in) opens up new revenue streams for them. Designing for the shared mobility market means designing new maintenance programs, new vehicle access methods (e.g. Volvo) and interesting apps/services (e.g. Flightcar on FordPass). The sum total of this is what will lead to a huge market by 2025 or later.
• Designing for the Shared Mobility market. One interesting aspect that I picked on the Ford dynamic shuttle pilot is that the Ford Transit van is custom fit with USB charging slots, etc. The golden opportunity is to use these pilots and collect data and understand usage and other key trends that will allow OEMs to push new features to even its private customer base. A good example here is the on-going debate on smartphone base vehicle access systems that might replace keyfobs in the future. Machine learning can create wonders here.
• Connectivity as a Commodity. For all of these underlying opportunities to come true OEMs should start looking at high speed connectivity as a given. I know this is a bold statement but the business opportunities it provides across prognostics, backbone to the shared mobility solution and customer interaction through over the air updates far outweighs the cost.

If you are really interested in this space and want to hear and interact with the real movers and shakers of the urban and intelligent mobility space, Frost & Sullivan is hosting its annual intelligent mobility event in London in June. This is our 8th annual event focused on the mobility market with attendance from senior audience in the transportation and technology industries. Click here to know more - https://ww2.frost.com/event/calendar/intelligent-mobility/