Technology has transformed many traditional businesses already, and the transport sector is facing its moment now, a latest research report says.
The global transportation sector is a behemoth with $6.8 trillion annual output and a 1.2 billion vehicle, generating $2.1 trillion in annual light vehicle sales and another $4 trillion plus in supplies and ancillary services, according to consulting firms Roland Berger and Navigant Consulting.
“We believe that the sector is highly inefficient with 95 per cent of cars parked at any one point, cars costing up to $8.5k/year to own and operate and generating 23 per cent of C02 emissions. The rising financial, social and environmental costs of transportation are unsustainable and demand a fundamental rethink of mobility. We see change catalysed by disruptive technologies and business models, rapidly evolving consumer preferences, and regulatory pressures,” Bank of America Merrill Lynch’s report Thematic Investing: Overdrive – Global Future Mobility, says.
The report predicts the convergent and mutually reinforcing trends of electrification, autonomous driving, the Internet of Cars (IoC) and the sharing economy will drive a fundamental shift from today’s car-centric travel to a platform-centric model whereby transport becomes a utility.
“Future Mobility – including an integrated, on-demand electric fleet of autonomous taxis – can generate $3.8 trillion of total positive impact in the next 10 year and lead to a “world of zeros”, including a 59 per cent decline in vehicle demand, 87 per cent fewer accidents, 54 per cent fewer parking spots, and 85 per cent lower emissions,” the report says.
Dubai takes a giant leap
Dubai has already taken a lead towards transforming into the smartest city in the world. Last year His Highness Sheikh Mohammad bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, launched a strategy for smart self-driving transport.
“By 2030, 25 per cent of all transportation trips in Dubai will be smart and driverless. The strategy is projected to generate economic revenues and savings of up to Dh22 billion a year,” Sheikh Mohammad said at the launch.
When implemented, the strategy will reduce transportation costs by 44 per cent, or Dh900 million, saving Dh1.5 billion through reduction of environmental pollution, and Dh18 billion through raising efficiency of the transport sector by 20 per cent.
“Dubai definitely is one of the most advanced cities in the world and I think there are chances that the first self-driving car is running here,” says Mudassir Sheikha, co-founder and CEO of Careem.
He says Careem is actively involved in the efforts to introduce the driverless pod with Road Transport Authority in Dubai.
“The collaboration between RTA and international players – we are also the part of these efforts – will achieve the target of 25 per cent of all journeys by driverless transport,” he says stressing “it is going to be sooner in Dubai than most of us think.”
Vilhelm Hedberg, co-founder and CEO of ekar, Middle East’s first pay-as-you-go hourly car rental, says there are symbiotic relationships between self-driving technology and the car-sharing network.
“The RTA is very focused on implementing all kinds of mobility verticals and self-driving cars will sooner or later make their way to Dubai. This is what we have learned from all the symposiums and car-share expos that we have visited around the world, this is very much the future of self-drive transportation,” he says.
“Ekar simply looking to add to the technology by incorporating self-driving vehicles in the fleet. The concept would work by plugging in the advanced service into our existing network and serving our clients accordingly,” Hedberg says.
Ride-hailing attracts $32b
According to Navigant Consulting, global car-sharing services revenue reached $1 billion in 2013 and expected grow to $6.2 billion by 2020, with over 12 million members worldwide.
Automotive-focused start-ups have enjoyed a massive rise in investment. Mobility services, particularly ride-hailing, has been on the most active areas of venture investment in recent years.
“There was $9 billion of investments into the area in the first half of 2016 alone. Investments in ride-hailing has totalled around $32 billion since 2011. There were $6 billion raised in the third quarter of 2016 alone,” Merrill Lynch’s report says.
Acquisitions have been heating up, with major OEMs such as GM, Ford, Daimler, BMW and Volvo each purchasing or investing in auto and auto technology companies since 2011.
“While 2016 brought record sales and profitability to the sector, automakers are also at risk of suffering from the success trap. They are each aiming to avert the Kodak/Nokia moment, to catch the crucial inflection point towards the next phase of autos,” the report says.
“We do believe the traditional ownership model is being disrupted… We’re going to see more change in the next five to 10 years than we’ve seen in the last 50,” Mary Barra, CEO of GM said in a Wall Street Journal interview in 2015.
Uber began testing self-driving cars in Pittsburgh last year and soon expanded to Arizona, after its self-driving cars were banned from San Francisco’s streets in December by the California Department of Motor Vehicles.
The focus on self-driving cars was intended to demonstrate Uber’s progress with the nascent technology, and it began picking up customers in Tempe last month after Arizona Governor Doug Ducey, a proponent of self-driving cars, took the inaugural ride.
“Uber is uniquely positioned with a combination of network, hardware and software to lead innovation in self-driving,” the spokesperson of Uber says.
“One of the strongest self-driving engineering groups in the world, the practical experience that comes from running ride-sharing and delivery services in hundreds of cities, world-class manufacturing partners like Volvo and Daimler, and the intelligence that comes from doing 1.2 billion miles on the road every month,” the spokesperson says.
Another self-driving car giant Waymo, a Google project that officially became a company this December, recently gathering data on operating its vehicles in snow in South Lake Tahoe.
Waymo on March 27 tweeted: Making snow angels in Tahoe, “we’re testing our self-driving Pacificas in cold weather and collecting snow data to train our software.”
Waymo and Uber are not alone in the autonomous car market – there are 27 companies testing vehicles around the world. More