Where are cars headed?

I recently had the chance to talk with Bloomberg West about the 2016 edition of Mary Meeker’s influential report on internet trends, and in particular the increasing “computerization” of cars. It was a great discussion (you can watch the whole thing here; the relevant section begins at 25:53), and it touched on many of the issues we’ve been thinking deeply about when it comes to the future of mobility.

At the highest level, the emergence of cars-cum-computers enables two critical trends that we see shaping the mobility ecosystem in the coming years. The first is the rise of shared, rather than personally owned, mobility. The fast-growing ridesharing and carsharing service providers rely on the ability to connect customers with on-demand transportation, quickly, accurately, and securely. The second key trend, the adoption of autonomous vehicles, is even more contingent on the speed of technological innovation. How soon self-driving cars become a reality will largely be a function of how quickly we can create technical solutions to our thorniest driving problems, like bad weather—and erratic (human) driver behavior.

The combination of shared mobility and autonomous vehicles, along with other forces like new electric powertrains and changing attitudes about car ownership, will radically change the ways people and goods move about. There’s a lot of uncertainty that accompanies any transformation this big. And the strategic challenges for players in the mobility ecosystem are complex; this isn’t checkers or even chess, it’s Go. So what should companies be thinking about? It will vary, of course. will face different challenges than insurance companies or auto finance providers. But there are a few cross-cutting questions that I think many business leaders in the extended automotive industry should be grappling with: 

• What happens to “asset light” business models in the future of mobility? Many of the disruptive technology players that have emerged in recent years are premised on owning very few physical assets. It’s become almost cliché—a sure sign of truth—to note that major retailers own no inventory, major hospitality providers own no hotels, and major taxi companies own no cars. Indeed, several of the patterns of disruption we’ve identified in the economy more broadly display this feature.

  But what happens to a ridesharing provider like Uber, which relies on its drivers owning cars, when there are no drivers? While some individuals may be willing to “rent out” their personal autonomous vehicles, we suspect that in many places fleets of shared autonomous vehicles, owned by commercial fleet operators, will dominate—hardly an “asset light” approach. Will today’s service-based providers see value there, or will they look for new, less capital-intensive opportunities?  

• What happens when you increasingly sell to businesses, rather than consumers? Most of today’s extended automotive industry is built to serve individuals and their personally owned cars. But as shared usage grows and car ownership declines, more and more of the mobility ecosystem will be geared towards commercial customers, like fleet operators and mobility management companies. That means dealing with large, sophisticated organizations, some of which may be large enough to demand concessions from carmakers, insurers, lenders, and others.

• How will value be created and captured? In other words, what are the emerging opportunities in the future of mobility? I’ve argued that value will increasingly be created by maximizing customers’ “return on mobility.” That means not just getting them from point A to B, but perhaps suggesting instead that they go to C with a quick stop at D. Delivering on that value proposition will take trusted mobility advisors, data aggregators, fleet operators, and OS providers, to name a few, all working seamlessly in a complex ecosystem.

It’s an exciting time. We’re on the cusp of a transportation revolution that could upend the car-centric model we’ve known for the last century. And it can be easy to get swept up in the breathless pace of new technological achievements. But for all the Sturm und Drang, business leaders still need to confront the same fundamental strategic questions: What role do I aspire to? How will I separate myself from the competition? What capabilities will I need?