Sep 20, 2019

Axios Navigate

Joann Muller

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  • Expert Voices contributor Ian Sweeney sees opportunities in a new data-driven era for auto insurance.
  • Smart Brevity count: 1,301 words, ~ 5 minutes.
1 big thing: The AV cash grab

Illustration: Sarah Grillo/Axios

Billions of dollars are flowing into autonomous vehicle development from all corners of the auto and tech industries, with no clear path to success for anyone.

Why it matters: Self-driving technology is not a first-mover, winner-take-all contest. Technology advancements matter, but companies will need to carve out a profitable business model that capitalizes on their strengths — and stop investing in races they can't win.

The big picture: Spending on AVs, by traditional automakers and newcomers alike, is forecast to grow to a cumulative $85 billion through 2025 — on top of $225 billion in spending for electric vehicles, according to AlixPartners.

  • They're all chasing a multitrillion-dollar global mobility market that Boston Consulting Group says puts $380 billion in profits up for grabs.

One way it could shake out profitably for all — at least in AV ride-hailing — is outlined in a new paper by researchers at the Clayton Christensen Institute. Per the paper...

  • The odds of success heavily favor the incumbents, Uber and Lyft, which could be a platform for others to deploy AV fleets, though the authors didn't consider who would bear the costs of owning or managing those vehicles.
  • Well-resourced competitors like Waymo, Cruise and Argo AI could mount a challenge with their own robotaxi services, but that will be enormously expensive and unlikely to succeed.
  • Instead, those companies would be smart to focus their efforts on monetizing what is likely to be the scarcest technology in AVs: the operating system. In essence, Waymo and Cruise should become the AV equivalent of Microsoft.
  • Startups targeting simpler AV applications — like Voyage offering rides in retirement communities and May Mobility filling gaps in public transit — should abandon dreams of moving upmarket and just master their niches.

Yes, but: No one is ready to yield what could be the most lucrative aspect of the AV ecosystem: the customer relationship (and the data that comes with it).

  • "That’s like calling the game in the first 5 minutes," says Argo CEO Bryan Salesky in an interview.
  • "Having a personal mobility experience with a tailored, purpose-built vehicle with the experience you want to have — the right temperature, the right music — that doesn’t exist yet."
  • "To say that people won’t switch from those who were first (in ride-hailing) to those who offer a better experience is crazy to me."

What we're watching: A more likely scenario, in these early days of autonomy, is that companies will carve out footholds on a city-by-city basis, says Brian Collie, head of Boston Consulting Group's automotive and mobility practice.

  • For example, Cruise is targeting San Francisco, Waymo is in the Phoenix area, and Argo is testing in Miami and Washington, D.C., among others.

The bottom line: For the next decade or so, there's room for multiple players — with different winners and different business models in each city — but long-term, expect consolidation.

2. Rivian's waiting list just got longer

Amazon's last-mile delivery van, designed and engineered by Rivian. Photo courtesy of Amazon

Rivian hasn't even begun producing vehicles at a mothballed Illinois factory that once belonged to Mitsubishi — but already it has a long list of customers.

What's new: Amazon announced yesterday that it has ordered 100,000 custom-built electric delivery vans, the first 10,000 of which will be delivered by 2022 and the remainder by 2030, perhaps sooner.

Why it matters: It's the latest vote of confidence for the red-hot, electric vehicle maker that has raised close to $1.9 billion from deep-pocketed investors (including $700 million from Amazon).

  • Rivian plans to sell a line of electric pickups and SUVs under its own brand, along with the underlying technology for use in other vehicles.

Yes, but: Like its EV rival Tesla, the unproven Michigan company will have to master the difficult challenge of mass manufacturing.

  • Production of Rivian's R1T pickup and R1S SUV will begin in Normal, Illinois, in late 2020, followed by Amazon's electric vans in 2021, a Rivian spokeperson said.

Details: The electric vans are exclusive to Amazon and designed to meet the online retailer's specifications for last-mile delivery.

  • Although they share the same battery, powertrain and electrical network as Rivian's trucks, the body, interior and suspension were co-developed with Amazon.
3. Automakers could use vehicle data to compete with insurers

Illustration: Aïda Amer/Axios

Tesla recently announced it will offer its own insurance policies, which may signal a larger shift in the industry, Ian Sweeney writes for Axios Expert Voices.

Why it matters: The volume of vehicle behavioral data that connected vehicles will generate could be leveraged by automakers to edge into the insurance market, while enabling them to proactively protect drivers by recommending safer routes.

The big picture: Real-time data is already becoming a new currency for insurers, impacting the way the $558 billion industry works.

  • But this change also creates opportunities for startups and automakers to get into the insurance space.
  • Insurance tech companies raised $3 billion in investment in the first half of 2019, money that will likely advance in-house OEM insurance.

How it works: Fundamentally, insurance extrapolates historical data to create risk models for the future.

  • Real-time data collection can accelerate the building of those risk models for emerging mobility technology, like AVs and electric scooters.

Between the lines: Tesla's move reinforces the idea that OEMs could begin providing their own insurance.

  • Yes, but: This could prove a challenge for companies long dedicated to building cars.

What we're watching: In addition to offering insurance, this influx of data could be leveraged by suppliers in new ways. 

  • Eventually, navigation guidance could recommend a route where accidents are less likely to occur during rush hour.
  • Leveraging traffic, weather, and other data could protect fleets, equipment and especially people, which would reduce risk and lower insurance costs.

Sweeney is the GM of mobility at Trov, an insurance technology company.

4. Driving the conversation

Trade war: The case for higher U.S. auto tariffs (John McElroy — WardsAuto)

  • Why it matters: With the strike against GM entering its 5th day, McElroy examines the social costs of America's trade policies.
  • Key quote: "Thanks to low tariffs, the U.S. has some of the lowest prices for new cars anywhere in the world. But while consumers and retailers have benefited greatly from that, we’ve seen large swaths of the industrial heartland hollowed out, and the pain has been horrific."

Short cuts: Your navigation app is making traffic unmanageable (Jane Macfarlane — IEEE Spectrum)

  • Why it matters: The problem is that traffic management apps like Waze and Google Maps are not working with existing urban infrastructure to move the most traffic in the most efficient way, writes McFarlane, who is director of the Smart Cities Research Center at UC Berkeley.

Ouch: The side effects of the transportation revolution (Erica Pandey — Axios)

  • The big picture: Cities built for personal cars are unprepared to manage the new modes of transportation like scooters that are rapidly gaining popularity.
  • Erica knows: She fractured her elbow this week when her Bird scooter collided with a car.
5. What I'm driving

Audi Q3. Photo courtesy of Audi

This week I'm driving the 2019 Audi Q3, a great-looking compact SUV aimed at young, affluent buyers.

The big picture: For many people, it's the entry point to the Audi brand and it competes with models like the Mercedes GLA, BMW X1, Lexus NX and Infiniti QX30.

Details: Starting at $35,695, the all-wheel-drive Q3 comes with a turbocharged 228-hp, 2.0-liter 4-cylinder engine and an 8-speed automatic transmission.

  • The interior is posh and well-designed, with the infotainment screen and climate controls angled toward the driver for better accessibility.
  • It's 4 inches longer than its predecessor, but the rear seats still seemed cramped.
  • The driver can select one of 5 suspension settings to suit their handling tastes. "Dynamic" was a little stiff for me; I opted for "comfort" most of the time.
  • As with many new cars, it comes with a start-stop system for better fuel economy, which averages 19 mpg in the city and 27 mpg on the highway.

Standard safety features include Audi's pre-sense technology which warns the driver of a potential crash and prepares the cabin for impact by automatically closing the windows and sunroof and tightening the seat belts.

  • Advanced safety features include forward collision warning and automatic emergency braking.
  • Other driver-assist features such as blind spot warning, lane departure warning and rear cross-traffic warning are available as part of the "prestige package," which bumped the price on my test model to $44,745.

My thought bubble: The Q3 is a solid contender, and arguably the best-looking SUV in the segment, especially in the youthful turbo blue on my test model.

Joann Muller