Howes: Race to autonomous future far from starting line
GM Cruise LLC CEO Dan Ammann has seen the autonomous future and he likes to say it boils down to this: “We’re in a race to the starting line.”
Meaning the days of electric driverless vehicles plying public streets, sharing the road with unwashed masses steering 20th-century metal powered by gasoline, are not coming as quickly as the hype suggests.
The reality check is here. Managing expectations down and educating the public are the newest new things for major players in the space because getting the technology right and making it safe are more important than being first.
At last week's CES electronics show in Las Vegas, a new coalition of automakers and non-profit organizations announced formation of the Partnership for Automated Vehicle Education: "Its members believe that in order to fully realize the benefits of driverless technology," according to its website, "policymakers and the public need factual information about the present and future state of technology and its potential benefits."
As automakers and tech companies partner and position themselves to compete in the Auto 2.0 space of mobility, autonomy and electrification, they’re also coming to terms with just how challenging the road ahead is — and how economic conditions not so far ahead could affect the journey.
In a note in advance of the opening this week of the North American International Auto Show, Morgan Stanley predicts investors will “place greater emphasis on Auto 1.0/Macro vs. Auto 2.0 in 2019.” That’s because automakers’ ability to generate revenue and profit in a plateauing car and truck market is critical to their ability to invest in expensive technology.
And investing in a still-evolving future can be fraught. Ideas don't materialize, and others flop. Engineering concepts fail validation and miss regulatory hurdles. Accidents or spotty safety records undermine public confidence and raise skepticism. Oversimplified media accounts informed only by short, controlled demonstrations make the vision seem much closer to realization than it actually is.
“We consistently tend to overestimate the technology for the short term and underestimate what the technology and its disruption can do in the long term,” said Asutosh Padhi, senior partner and global co-leader for the advanced industries and automotive & assembly practices for McKinsey & Co. “Autonomous vehicle technology is no exception.”
Tech companies accustomed to operating in an agile, risk-taking culture virtually free of government regulation are learning just how regulated the American auto business is, how precise the engineering must be, that building cars and trucks is a low-margin business that ain’t easy.
Automakers accustomed to engineering process and long cycle times are wrestling with their old economy history and the burdens slowing their competitive metabolism. That's a key reason the likes of General Motors Co. and Ford Motor Co. are planning to winnow their salaried ranks even as they move to hire new kinds of talent.
The auto industry tends to move in sequential steps, each requiring validation that will inevitably require some form of regulation. Silicon Valley is the opposite: it prizes innovation, speed, getting the product out into users' hands quickly to see how it's received and then make adjustments on the fly.
The arrival of Auto 2.0 in any meaningful way is a process measured in years, Pradhi said, perhaps even a decade or more. Autonomous "robo-taxis" operating in carefully defined, or "geo-fenced," areas could be realized in as little as three or four years. A fully autonomous taxi could be at least a decade away — and then only operating in specific areas.
"We will be in a progressive journey over the next 10 years or so," he said. "And like any journey, the first steps will begin modestly."
And then accelerate, quickly. Disruption is minimal, but signs are growing: demands for cash are forcing automakers like GM and Ford to drop money-losing models and redeploy the capital into higher-margin products; restructuring efforts are skewing to finding talent for next-generation projects; more competitors from new disciplines are crowding the space.
Semiconductor makers drive data computation and the cost of data goes down. Rivals like Tesla Inc. push traditional automakers to adopt over-the-air software updates. Automakers integrate advanced technology into rolling hardware that can pass muster with regulators because that's what they do.
Massive change is coming because if the technology exists it can't be stopped. But it's not here just yet.
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.