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Smart Brevity count: 1,682 words, a 6-minute read.
1 big thing: Transportation's looming overhaul
The transportation industry is teetering between tried-and-true business models of the past and an alluring, but uncertain, future, Axios managing editor Alison Snyder and I write.
The big picture: The modernization of cars, trucks, planes and public transit could be one of the greatest reorderings of civilization since the dawn of the horseless carriage. But progress in the $1.5 trillion transportation industry is getting snagged on technological, regulatory and social issues.
What's happening: A historic shift to cleaner, more economical, automated transportation is underway.
- More than 1,400 self-driving cars, trucks and other vehicles are being tested across the country, according to Transportation Secretary Elaine Chao.
- Electric cars are going mainstream, with 35 battery-powered models available in U.S. showrooms next year and 130 by 2026, according to IHS Markit.
- Cities are rolling out electric bus and rail systems to try to curb emissions as well as congestion pricing to reduce traffic.
- Fledgling microtransit systems — from on-demand shuttles to e-bikes and scooters — aim to fill the transportation gap in some cities.
- UPS just won permission to launch the first commercial drone delivery service and Uber, Boeing, Google and others are developing air taxis.
All of this change is roiling an industry that provides jobs to 13.3 million people in the U.S. and represents a 9% slice of the U.S. economy.
- The future, industry leaders predict, is a clean, highly-tuned, multi-modal transportation system that includes shared, connected vehicles running on electrons rather than gasoline and in which driving is optional.
But that vision is being challenged by unforeseen technical hurdles, crumbling infrastructure and a stalled-out federal government that has yet to create standards and regulations for the coming changes, leaving strapped states struggling to step in.
- Meanwhile, cars, trucks, planes and ships continue to pump carbon dioxide into the atmosphere, accounting for nearly 22% of global carbon emissions in 2018, per the IEA.
- President Trump has gone to battle with California over auto emissions laws, causing regulatory uncertainty for automakers during what is likely to be a long court battle.
- All the while, a culture of convenience is fueling a fast delivery system that is putting more vehicles on the road and more CO2 in the air.
- Companies have to solve the stubborn technical challenges associated with AVs and EVs, but also figure out how to make money from vehicles that consumers aren't interested in or don't trust.
- The world's largest automakers — once drivers of employment and the economy — are also weathering labor disputes and caught up in politics as trade wars persist and the global economy is reordered.
What to watch: The specter of disruption is triggering enormous R&D investment by automakers fearful of becoming the next Kodak, Blockbuster or Blackberry.
- Spending on AVs, by both traditional automakers and newcomers, is forecast to grow to a cumulative $85 billion through 2025 — on top of $225 billion spending for electric vehicles, according to Alix Partners.
- They're all chasing a multi-trillion-dollar global market that Boston Consulting Group says is worth $380 billion in profits.
- But there's no guarantee any of it will pay off.
"It's a gamble based on what you think will happen, but if you don't do anything, then for sure you're out of business," says Mike Ramsey, an analyst at Gartner.
2. GM labor deal could mean higher costs for all
A tentative 4-year labor contract with the United Auto Workers lets GM shutter underutilized factories as it wanted, but could also lock in higher labor costs across the domestic auto industry.
Why it matters: Detroit typically follows "pattern" bargaining — the economic terms struck at one company are generally matched by other UAW-represented automakers, setting a uniform standard of living for all unionized auto workers.
- But the terms laid out Thursday would do little to lower labor costs ahead of what automakers anticipate will be a disruptive and expensive decade of change, writes the Detroit News.
What's happening: Factory workers at GM will receive big bonuses and keep their lucrative health benefits under the proposed contract, which is subject to ratification by 49,000 striking workers, who will continue to walk the picket lines until the vote is completed a week from today.
- "I'm sure neither Ford nor Chrysler is going to be thrilled with the economics of this deal," GM's former director of labor relations, Arthur Schwartz, now a consultant, told the News.
- The record-setting $11,000 signing bonus GM is offering UAW members, along with the lack of changes to current health care benefits, will be costly to Ford, which has more hourly UAW workers than GM.
- Changes to pay for workers hired after 2007 and temporary workers that were hot-button issues during the GM contract talks could be expensive to FCA, which has a younger workforce.
Yes, but: The concept of pattern bargaining has weakened in recent years, and it will be up to negotiators on both sides of the table at Ford and FCA to hammer out their own deals in the coming weeks.
3. Shared lessons from Boeing and GM disasters
Deadly safety crises at Boeing this year and at GM in 2014 share the same, avoidable, root causes — lax government oversight and poor communication.
Driving the news: A multiagency task force this week concluded that "a breakdown in the nation's regulatory system and poor communication from Boeing compromised the safety of the 737 MAX jet before it crashed twice in five months and killed 346 people," the New York Times reports.
- Boeing did not adequately explain to federal regulators how a crucial new automated software system worked, the report found.
- The Federal Aviation Administration delegated responsibility for certifying much about the plane's safety to Boeing's own employees, a practice now under scrutiny by Congress, the Times notes.
Flashback: In 2014, GM was gripped by its own safety crisis in which faulty ignition switches were tied to at least 124 vehicle deaths and led to the recall of 30 million GM cars worldwide.
- An internal investigation concluded that reporting breakdowns and cultural barriers inside GM were to blame.
- A congressional report also criticized the National Highway Traffic Safety Administration for ignoring warning signs that could have resulted in a safety recall years earlier.
- NHTSA officials blamed GM for not conveying critical information about an engineering change they made to the switches.
What's happening: Lawmakers can't seem to pass self-driving car legislation and the U.S. Department of Transportation has adopted a hands-off approach to autonomous vehicle development, for fear of stifling innovation.
The bottom line: The AV industry is self-regulated and without clear safety standards for self-driving cars, we're at risk of repeating the same mistakes again.
4. Didi's big move into driverless tech
Didi Chuxing, China's colossal ride-sharing company, is rolling out a self-driving pick up service on Chinese streets in the next few weeks — a gamble that could give the company an important edge in the global market, ZoZo Go CEO Michael Dunne writes for Axios Expert Voices.
Why it matters: The first company to put large numbers of self-driving cars on the road stands to gain two important advantages: reduced operating costs and real-world driving data for its algorithms, which will improve its autonomous driving systems.
Between the lines: While China has abundant labor, Didi has made an aggressive push into self-driving cars because of concerns around competition and safety.
- In wealthier city markets like Beijing and Guangzhou, labor is no longer cheap — but to win those markets, Didi must offer the lowest prices compared to Beijing-based Shouqi Chauffeur and Geely-backed CaoCao Zhuanche. Removing drivers is seen as the most direct path to lower costs.
- Didi faced heavy scrutiny after two female passengers were killed by drivers in 2018. The company has 33 million drivers and cannot screen and monitor all of them effectively.
What to watch: Didi plans to push out its self-driving services to other countries rapidly, starting in 2021.
Michael Dunne is the CEO of ZoZo Go, an investment advisory firm focusing on Asia and mobility, and the author of "American Wheels, Chinese Roads."
5. Driving the conversation
Short Circuit: Harley-Davidson halts electric motorcycle production (Rajesh Kumar Singh and Rachit Vats — Reuters)
- Why it matters: The company's decision to suspend production of its new $29,799 LiveWire because of an undisclosed glitch is a major blow to its effort to reverse declining U.S. sales by attracting younger, more environmentally conscious riders.
Economic boost: South Korea speeds up plans for autonomous, electric and flying Cars (Kyunghee Park — Bloomberg)
- Details: President Moon Jae-in says the country will invest $50 billion in the future of transportation in hopes of reviving a sagging economy. The announcement comes a month after Hyundai and Aptiv agreed to co-develop robotaxis by 2022.
Supercharging EVs: Electric vehicles see both gains and growing pains (Ben Geman — Axios)
- Details: Volvo introduced its first all-electric SUV, the XC40 Recharge, and Ford announced two EV charging initiatives in preparation for the debut of its first long-range electric SUV next month.
- Yes, but: The transition to electric vehicles faces headwinds, too, with several companies struggling to survive or yanking the plug on their EV efforts.
6. What I'm driving
My latest ride is the 2020 Lincoln Aviator, the luxury brand's first midsize three-row SUV.
The big picture: Lincoln is making an impressive comeback, with a fresh lineup of new models that emphasize what it calls "effortless luxury."
- It's not trying to match European carmakers on performance. Instead, it's successfully carving out its own niche as a stress-free oasis.
- One example: The 30-way power adjustable heated and cooled front seats come with a relaxing massage feature for your back, hips and thighs.
Details: You can get the Aviator with a smooth 400-horsepower twin-turbo V-6 or opt for the Grand Touring model, a plug-in hybrid.
- I drove both, but preferred the gasoline version over the plug-in hybrid, which felt sluggish dragging around an additional 800 pounds.
- Convenient new technology lets you use your phone as a key to unlock or start the vehicle without a traditional key.
- An adaptive suspension uses a forward-facing camera to spot potholes or speed bumps, adjusting the ride as necessary.
- Lincoln's CoPilot 360 driver-assistance feature comes standard with lane-keeping, blindspot monitoring, forward collision warning, automatic emergency braking and automatic high beams.
- If you upgrade to CoPilot 360 Plus you get adaptive cruise control with stop-and-go traffic jam assist, lane-centering technology and an automatic parking feature, among other technologies.
The bottom line: The Aviator, which ranges from $51,100 to $87,800, is a great ride for the well-to-do family.