Greetings from gridlocked New York, where I'm covering the annual New York Auto Show. Please share this newsletter and tell your friends they can subscribe here. If you have tips or feedback, just reply to this email.
Today Expert Voices contributor Raphael Gindrat examines the revenue potential from selling miles, not cars.
1 big thing: NY transit crisis is an opening for AVs
New York City is facing a transportation crisis that is triggering new political consensus on old ideas like congestion fees and is helping to move the needle — ever so slightly — toward self-driving cars as part of the solution.
Why it matters: New York's past reluctance to embrace AV testing, for both practical and regulatory reasons, means the city has missed out on the tech buzz and new jobs that the robotaxi boom has brought to smaller cities like San Francisco, Phoenix and Pittsburgh.
- Amid the crisis, a new AV pilot program in Brooklyn could signal a possible shift in attitude.
What's happening: Optimus Ride, a Boston-based self-driving startup, plans to deploy an autonomous shuttle service this spring in the Brooklyn Navy Yard, once the epicenter of American shipbuilding and now home to an urban industrial park.
- The electric shuttles, with a top speed of 25 miles per hour, will run in closed loops within the 300-acre campus.
- Because the roads are private, the shuttles don't have to comply with a state law — unique to New York — that requires one hand on the wheel at all times.
- AV companies have complained that the law — as well as a costly requirement for a state trooper escort — is a deterrent to AV testing in the state.
- Politics have also been a factor. GM Cruise effectively abandoned plans to test AVs in Manhattan in 2018 amid skirmishes between NYC's mayor and the governor.
The big picture: New York is in the midst of twin transportation nightmares — a transit crisis that grew slowly due to years of neglect and a traffic crisis that landed suddenly with the arrival of ride-hailing apps like Uber and Lyft.
Where it stands: A recent budget deal includes up to $25 billion to help fix the city's crumbling subway system via a new congestion fee on vehicles entering Manhattan's busiest streets, plus new taxes on high-end real estate and online purchases.
No one expects AVs to be jostling with taxis in Times Square any time soon, as driving in Midtown is just too chaotic.
- But AVs could be useful in so-called "transit deserts" far from bus or subway lines, says transportation consultant Sam Schwartz, a former New York City Traffic Commissioner and author of a new book, "No One At The Wheel."
What to watch: At the Brooklyn Navy Yard, a startup called Carmera is developing real-time, high-definition maps that will act like "virtual railroad tracks" for self-driving vehicles on the campus.
"The Navy Yard is a microcosm of what any city comes up against. We're nearly 1 mile from any subway stops. That's a problem for a Navy Yard tasked with creating jobs."— Ro Gupta, co-founder and CEO, Carmera
The bottom line: If Optimus Ride's pilot program is successful in the Navy Yard, city leaders could be more welcoming of AVs in other neighborhoods where mobility is a challenge.
2. Highlights from New York
Luxury cars tend to be the stars of New York's annual auto extravaganza and this year's show includes noteworthy debuts from Lincoln, Cadillac and Genesis.
What we're seeing:
- The Lincoln Corsair is a premium compact crossover utility rounding out the resurgent lineup at Ford's luxury division, which includes Navigator, Nautilus and Aviator. It lets you use your phone as a key and comes with a huge list of driver-assistance features.
- Crossovers are hot, but Cadillac is trying to make the case that premium sedans still matter. It has two models going on sale soon: the CT5, debuting in New York, and a smaller CT4 coming later.
Genesis revealed its pint-sized Mint concept electric vehicle at an event at Hudson Yards ahead of the traditional press preview and it attracted a lot of attention, which is helpful for the struggling Hyundai-owned luxury brand.
- The Mint is a vision for "a premium city car as an accessory for the modern, urban lifestyle."
- There's no word on whether it will actually come to market.
3. Automakers could profit from selling miles, not cars
If AVs eventually dominate the car industry, automakers could start charging for miles travelled instead of vehicles sold — potentially a much bigger revenue opportunity, Bestmile CEO Raphael Gindrat writes for Axios Expert Voices.
The big picture: Automakers and tech companies are investing in AV technology because it offers, among many things, a new revenue stream if people shift from owning vehicles to buying access to transportation.
Background: Currently automakers take in around $512 billion a year selling about 17 million vehicles at an average price of $30,000 each.
- Meanwhile, ride-hailing costs about $2.50 per mile, including driver labor, according to estimates from Ford and GM.
How it works: There are some 260 million cars on U.S. roads, traveling an average 3.9 trillion miles per year.
- At 60 cents per mile (AAA's estimate of vehicle operating costs in the U.S.), this represents a $2.37 trillion revenue opportunity today, if all miles were converted to AV services.
- If automakers indeed shift their business model to operate autonomous mobility services, there's room to earn a tidy profit and still charge far less than ride-sharing companies.
The bottom line: The Center for Automotive Research found that "OEMs and venture capitalists expect innovative mobility services will start yielding double-digit profit margins, much higher than the 4% to 9% automakers' core business currently generates" — up to 20%.
Gindrat is co-founder and CEO of Bestmile, which has developed a fleet management platform.
4. Driving the conversation
Hauling: How the rise in self-driving trucks will transform the trucking industry (CNBC video)
- Why it matters: Automated trucks from companies like TuSimple and Embark could arrive before self-driving cars because their mission — mostly straight highway driving — is easier to achieve.
BYD: The World’s Biggest Electric Vehicle Company Looks Nothing Like Tesla (Matthew Campbell and Ying Tian — Bloomberg Businessweek)
- My thought bubble: I remember visiting BYD in 2004 as it was just transitioning from batteries to cars. It took three tries for the door to shut properly on the car displayed in the lobby of its Shenzhen headquarters. This company doesn't stand a chance, I thought.
"Moral crumple zones": When new technology goes badly wrong, humans carry the can (John Naughton — The Guardian)
- Details: A paper by Madeleine Clare Elish, an anthropologist at the Data & Society Research Institute in New York, finds we have a subliminal tendency to assign more credibility to supposedly “smart” machines than to humans.
5. In the East, another auto show
China's electric vehicle ambitions were in the spotlight at this week's preview for the Shanghai auto show, which managed to steal some of New York's thunder.
Why it matters: The Chinese market is the largest and most important to the world's automakers, who are pouring huge investments into EVs in response to government policies.
- GM unveiled Buick’s first all-electric model for China, the four-door Velite 6.
The big picture: Chinese purchases of pure-electric and hybrid sedans and SUVs soared 60% last year to 1.3 million — half the global total. And there's some concern that China's overall auto sales are falling.
Yes, but: Auto shows are no place for worries. It's all about the future, including concepts like Audi's AI:ME, the German luxury maker's autonomous city car of the future, and VW's whimsically named ID ROOMZZ, which includes seats that swivel to create a lounge-like atmosphere.