I’m at DellEMC World this week and one of the interesting talks was from Michael Dell in a break out talking about the coming autonomous car market and the potential it has for wiping out most of the existing car companies.
The car market is in a world of hurt; they are doing OK today but with the arrival of autonomous cars they have a serious problem. There are companies like Uber and Lyft that want to provide autonomous cars as a service, potentially dropping car sales by as much as 95 percent, with the last 5 percent being low margin sails to Lyft and Uber. They have Google and Apple who want to suck the value and the margins out of cars, leaving the OEMs with the dregs with plug in technology. They have Tesla who has already turned its cars into four-wheeled computers that run on electricity. Finally, car companies, convinced that technology was stable and a cost center, offshored much of their own internal technology skills to places like India so they now lack the resources to create a true alternative to Tesla, Lyft, or Uber.
Uber early on came up with the idea that its future would be based on being able to get to a critical mass of self-driving cars before a competitor did. This is because whoever gets to scale first with a “car as a service” model will likely wipe all others out of the market due to significantly lower costs and prices. Only Ford has stood up and fully seen this problem, and it is trying to build its own version of Uber. However, by the time Ford gets to market, Uber will be near dominant (if Uber’s CEO doesn’t accidently kill the company).
Now we add to this the fact that Tesla basically has a computer on wheels and has already begun to deploy self-driving technology (Tesla calls it Autopilot), making it likely for Tesla to have more cars capable of self-driving first.
This means that both Uber and Ford (along with the other car companies) are in a race for their lives to close the technology gap with Tesla and make sure the competitive advantage by either isn’t, in and of itself, a death sentence. By the way, I bring up Ford because it was the first to truly see this risk and begin to create a “cars as a service” model for itself—it just emulated Tesla on services with a Lincoln service at home model. But Uber just got shot for stealing Google’s self-driving technology, setting it back significantly and, as I noted above, the car companies got rid of much of the technical skill they now need to close this technology gap because they’ve been outsourcing to places like India.
Pivotal Cloud Foundry
Apparently when it comes to needing to build a technology competence nearly from scratch, the joint project created by GE and EMC called Pivotal Technologies to do the same thing suddenly is in very high demand. This is because it can be used to create a very advanced and targeted internal software development platform.
Apparently this is allowing the car companies to quickly close the software development gap and create a competitive solution so that the car companies can compete for this future market because, once drivers stop being drivers, and car ownership shifts from people to large companies, whoever isn’t in this game will likely go under because the car market is going to be a ton smaller. One car in a service could take the place of ten or so cars that are currently sitting unused parked in driveways, at curbs, or in garages.
Uber’s Achilles Heel
Uber actually has a second big problem. Uber doesn’t make or own cars. That’s not a problem now but it sure will be if this is a race to critical mass in terms of cars on the road. The car companies already build cars and have financial institutions set up to fund them. Uber lives off drivers who buy their own cars and then share revenue with those drivers; but if you lose the drivers, which is the plan, you lose the cars and the income. Now, Uber could still get people to buy cars and then put them in an Uber pool, but that would be potentially far harder to make happen since the cars will be more expensive and the income from them far lower. So the car companies, thank to Pivotal, have a shot. Plus, car companies are bigger than Tesla even though Tesla is currently far ahead.
This reminds me, ironically, about the PC industry. At the start, Apple jumped out with a solution and caught IBM sleeping. However, IBM was able to get Microsoft to provide technology that got it back in the game. This same technology helped launch Dell and now DellEMC is using a somewhat similar method through Pivotal to help the car do the same thing. We’ll see in a few years if a model created for the technology market works for cars. Given future cars will be rolling computers, it should.
President and Principal Analyst, Enderle Group
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