Howes: A glimpse of GM’s future – Amazon junk in trunk
Two days after General Motors Co. announced a partnership with Amazon.com Inc. to deliver the online retailer’s packages to more than seven million GM vehicles, CEO Mary Barra fielded a question from a prominent Wall Street analyst.
“You have 100 million cars on the road, more or less,” said Adam Jonas of Morgan Stanley & Co. “Amazon is going to spend about $60 billion this year on shipping and fulfillment, and you can really help them solve a major pain point for them in their customers and logistics.
“First, is this not just the tip of the iceberg in the ways that GM can work with Amazon on logistics and customer experience? I mean, this can be a lot more than just Amazon putting their junk in GM’s trunk, right, Mary?”
The consummate diplomat parried the “junk in the trunk” riff before delivering her money quote: “There’s much more opportunity with Amazon and others,” Barra said, according to a transcript of the first-quarter earnings call. “It definitely provides an opportunity for General Motors to generate revenue and profitability, and it’s a more efficient way for Amazon to get, as you call it, that last mile.”
That’s precisely the point. It’s also an arguably under-appreciated advantage controlled by global automakers struggling to prove their value to investors negotiating Auto 2.0. They produce the metal that integrates the technology, the transportation and the paying customer in one neat package.
“Turning on a car,” as Jonas as his team write in a new report, could be “worth big bucks.” It would empower automakers to collect revenue on everything from package delivery and software updates to route planning and insurance analytics to reduce costs.
This is not your father’s General Motors.
“We believe that investors do not fully grasp the potential for auto companies to monetize their position as ‘landlords’ of mobile real estate and the primary owners of vehicle and passenger data,” Morgan Stanley says. “The end state of the connected car business model is that car companies are highly incentivized to keep as many cars switched ‘on’ as possible.”
Which means that’s probably exactly what they’ll keep trying to do. The ability to grow their top line — especially if the march to mobility, autonomy and ride-sharing starts cutting into sales — will depend on it.
Meantime, efforts like GM’s deal with Amazon are bids to build an investment thesis, to demonstrate that Old Economy automakers understand the need to innovate in the transportation space with New Economy partners.
But here’s the rub: the company that you paid (indirectly, anyway, through your dealer) to provide you with wheels is getting into position to make money off your vehicle. Not at the point of sale, but for as long as you own the vehicle and for as long as it generates data.
Modern and next-gen vehicles are essentially steel and rubber carriers of micro-chip driven information gathering. And the people who built the car, or deployed the processing power running your adaptive cruise control or semi-autonomous system, will be the ones who own that information — not you.
Sound familiar? Of course. Sounds like an idea straight out of Silicon Valley ... which it pretty much is. Through your car, someone will know what you order at Starbucks and where you buy your gas, what satellite radio channels you prefer and what roads you drive, where you spend the weekends and where you spend the night.
In theory, anyway. Beneath all the hype for techy mobility and self-driving technology is a welter of ethical dilemmas with privacy and ownership at the center, followed by commercial relationships turned upside down. Instead of paying for a service, Morgan Stanley speculates, would-be customers will be expected to ask not to be charged.
Still, there’s optimism here for traditional automakers that was less obvious just a few years ago. Silicon Valley fan-folks have long awarded advantage in Auto 2.0 to the techies, and there’s no doubt the innovation and speed of players like Amazon is a metabolic shot 100-year-old companies could use.
No question. But the leading global automakers have a few tricks, too, starting with a deep understanding of integrating advanced technology into a vehicle and developing it under a fairly strict safety rubric. A crashing car does a lot more damage than a crashing mobile phone.
There’s more opportunity for automakers in the brave new world. The challenge is identifying it before someone else does.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.