Automakers face fight to stand out in driverless era

Ian Thibodeau
The Detroit News

Self-driving vehicles won't generate much buzz on Wall Street — or much of a profit — if automakers and technology companies don't find ways to make their products unique and financially viable after they launch, experts say.

General Motors Co., Alphabet Inc.'s Waymo, Ford Motor Co. and others have spent the past several years and billions of dollars developing the autonomous-driving technology expected to shape the future of the automotive industry.

But that technology is losing its competitive edge, because in a few years a number of companies will all have access to similar self-driving software, according to industry experts. That means the front-runners — Waymo, GM and Ford — are pushing to differentiate themselves as they prepare to debut their expensive self-driving vehicles over the next few years.

The companies could miss out on billions if they fail to make their offerings stand out. Ford alone expects to spend $4 billion just developing the first iteration of autonomous vehicles it intends to launch in 2021. The automaker spent $196 million on mobility in the third quarter of 2019; GM spent $200 million last quarter.

But there's a potential payoff: Morgan Stanley and consulting firm Frost and Sullivan estimate the market for autonomous cars for ride hailing and delivery will be worth $332 billion yearly by 2026.

A Chrysler Pacifica hybrid outfitted with Waymo's suite of sensors and radar is shown at the North American International Auto Show in Detroit.

Analysts and experts said automakers and technology companies will all be jockeying for a piece of that cash pile — and the best operating system will win out. It won't be enough just to have a car that drives itself. 

"Despite the incredible challenge of creating this, the virtual driver itself might become a commoditized technology," said Mike Ramsey, senior director at Gartner Inc., a research and advisory firm based in Connecticut. "Down the road, you can definitely create an argument that says it doesn't really matter who owns the driver. What really matters is who has the technology that allows companies to execute it."

Waymo is expected to launch the first-ever commercial driverless ride-hailing vehicle service within the next two months, multiple media reports have said. 

The service will run with maybe 100 vehicles in suburbs around Phoenix. Waymo did not respond to a request for comment about its plans for a self-driving business, but the technology company has said it would charge individual riders as well as businesses that want to shuttle people to their stores to shop.

The Silicon Valley company has partnered with Fiat Chrysler Automobiles to build thousands of Chrysler Pacifica Hybrid minivans as its self-driving platform. Waymo outfits the minivans with "vision" hardware, and works out its software by testing the mules in dozens of cities around the U.S. Phoenix is Waymo's home base, where many of its pilot programs start.

The technology company has kept its business plans close. Experts have speculated Waymo won't limit its vehicles to only running ride-hailing services — it's an accepted fact that the vehicles will have to be used to transport both people and goods to be profitable.

GM is expected to be the second company to start commercial service with self-driving vehicles and is approaching a self-imposed 2019 launch deadline. CEO Mary Barra and other company officials have said the automaker plans to move people and goods with the self-driving cars.

The first iteration of GM's service is expected to take the form of a ride-hailing service using fully electric Cruise AV vehicles in San Francisco, the headquarters of GM Cruise, the company GM acquired to build out its robotic vehicle software. GM and Cruise have not officially announced details of the plan or an official launch date.

And then there's Ford. The automaker has been bashed by investors, analysts and media who perceive the Dearborn company as trailing GM and Waymo on development of self-driving technology. Ford plans to deploy its vehicles in 2021. The automaker last week pulled the curtain back on its work in Miami, the first large-scale test city for the automaker.

Ford is holding its 2021 launch despite quickening timelines from its two largest competitors in the space. Sherif Marakby, CEO of Ford Autonomous Vehicles LLC, Ford President of Mobility Marcy Klevorn and Ford CEO Jim Hackett all told The News in separate interviews that the automaker's simultaneous development of a go-to-market plan with the autonomous technology should give Ford an advantage.

The automaker spent most of 2018 in Miami working with local and national businesses to figure out best practices to transport food, dry cleaning and other goods around downtown Miami and its suburbs. Ford will begin this year running the same tests in Washington, D.C., and will add other test cities through 2019 and 2020, at which time they'll also begin giving rides to the public in test vehicles.

Ford already has started to change and fine-tune parts of its business model in Miami based on feedback from business partners and consumers. That's helping prepare to launch its business model at-scale with little need for changes come 2021, the Ford executives and analysts said.

"What we’re doing now about learning these businesses, human interactions, working in complicated environments, those are differentiators, they’re not commodities," said Klevorn. "When those pieces of the self-driving system that everybody else is so focused on commoditizes, we’ll be ahead because we’ll have done all this other work."

The theory in the Glass House is that Ford's autonomous vehicle rollout won't have the same growing pains as companies that maybe aren't as focused on developing holistic systems ahead of launching. That remains to be seen. Ramsey and Sam Abuelsamid, analyst with Navigant Research, said Ford's competitors must have the same thought process in terms of a business model.

But, for now, Ford is the only company that's given some clarity on what its full autonomous vehicle business will look like and how it will operate when it launches.

"It should be investors that are looking at this need to look at the whole picture," Abuelsamid said. "Look at the holistic approach Ford is taking."

That could mean the company — which is taking its lumps now from investors who say Ford is moving too slowly — pulls ahead when it's ready to launch.

"You can't go to a market with the technology unevolved," Hackett told The News. "If you have a highly evolved technology and you under-imagine the market, you'll be putting a jet engine on a bicycle. That dance is the hardest part for everybody."

Twitter: @Ian_Thibodeau