2019

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How Autonomous Driving will Change the Market

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Car manufacturers are not the true driving force behind the trend toward automated and autonomous driving. Rather, it is the mobility service providers, fleet operators, cities and delivery services that are far more interested in this technology.
Torsten Gollewski, January 10, 2019
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Torsten Gollewski Head of Advanced Engineering and Design at ZF, Managing Director of Zukunft Ventures GmbH.
How does an industry know that it is in the middle of a disruptive change? One of the key identifying characteristics of such change is that technological innovations are no longer being driven by the usual market leaders, but by new players. Another obvious characteristic of disruptive change is that not only products and technologies are rapidly changing, but also the customer structures and business models – in other words all the usual business coordinates.

A classic example that everyone is familiar with is the smart phone. It was introduced on the market more than ten years ago, but not by Nokia, the one-time industry driver for mobile phones. In fact, it was Apple that leveraged its expertise in software and re-invented the mobile phone as an internet-capable application platform now known as the smart phone.
We in the automotive industry are currently experiencing just such a disruptive change. It is being driven by two technology trends: The first is electromobility. The all-electric drive considerably reduces the complexity of the vehicle drive system and has opened up the market to new suppliers. We have been seeing this for several years in China where new automobile manufacturers are exclusively producing electric cars in relevant quantities. At the same time, the importance of the battery-charging infrastructure necessary for electromobility requires a strong understanding of networked mobility. The second and most important current technology trend is autonomous driving. Though it evolved, in part, from the advanced driver assistance systems (ADAS) developed by automobile manufacturers, it is expected to lead to new kinds of vehicles and business models. These will have less and less to do with the traditional business of manufacturers over time. This, in turn, will have feedback effects on technological requirements.

New cars – different requirements

New cars – different requirements

One striking example that will soon be seen out on the roads is a self-driving car called a people and cargo mover, which will be used both for passenger transport as well as package delivery services. To develop and produce such people and cargo movers, many ask whether such work doesn’t necessitate the competencies and unique selling propositions of current automobile manufacturers, specifically peak values in driving dynamics and engine performance. The answer is no, such peak values are not necessary for vehicles operated at a maximum 70 km/h. What about industrialization know-how in mass production? No, it is not absolutely necessary when it comes to small-batch production. A decisive factor in the use of such fully automated and self-driving vehicles is the integration of data, both routing data from the delivery services as well as application-supported data from the mobility supplier and its customers. The latter will also be critical for a further important autonomous vehicle segment, namely ride hailing, offered by companies like Uber, which provides for the specific booking of and payment for individual rides.

The true drivers behind autonomous driving are mobility concepts such as “Mobility-as-a-Service” or “Transport-as-a-Service”(MaaS and TaaS). These concepts, in turn, are being driven by cities and city planners – players and customer segments that the automobile industry has not really paid attention to until recently. A well-regarded study by Berylls has estimated what impact the use of robotaxis would have on the city of Munich. Results indicated that a fleet of 18,000 self-driving taxis could replace around 200,000 privately-owned cars. The reason is that such robotaxis are permanently on the road, ready to offer passenger transport at any time, unlike passenger cars in today’s private transport. Privately-owned cars are used only about five percent of the time during a given day, the rest of the time they simply take up parking spaces. Consequently, if private transport in Munich were more heavily based on the use of robotaxis, then around 2.9 million square meters of parking space would be available for a different use.

The future market of shared mobility using self-driving shuttles

The future market of shared mobility using self-driving shuttles

This is the kind of potential that is associated with autonomous driving. And for this reason, market segments are now already noticeably shifting or expanding. For example, market analyses based on estimates from Goldman Sachs, Roland Berger and McKinsey, among others, are forecasting, in the autonomous driving market, a potential of roughly $12 to $18 billion for the passenger car segment for 2030 – including hardware, software, services and possible upgrades – and even up to $36 billion for the commercial vehicle segment. Annually. The market for people and cargo movers however tops these figures. In this segment, analysts are forecasting a potential of between $20 to $50 billion annually, whereby the cargo mover will easily make up the larger share. And ride hailing is expected to exceed by double the passenger car market with a potential of $18 to $35 billion, provided that the right legislation is passed soon, for instance to allow cars without drivers to drive on public roads.

Automated driving functions in the traditional passenger car segment are “add-ons” based on today’s advanced driver assistance functions used by customers and car buyers. They also result in a better safety rating, the EuroNCAP, to name an example. In contrast, autonomous driving for people and cargo movers as well as vehicles for ride hailing is a pre-requisite for realizing entirely new forms of mobility for other customer segments. That is why other automobile-related requirements can be “narrowed down.” This will noticeably impact the design and the technological basis of the vehicle – and also the costs. These vehicles no longer fit into our previous vehicle category assumptions of compact, mid-size or luxury passenger cars. This is especially clear with the people and cargo movers for which “purpose-built vehicles (PBV) will be used. They not only look different and have a modified technological base, their supply chain will also shift in the manufacturing process. Because vehicle technology is becoming less complex, system suppliers like ZF can provide the complete mobile chassis platform, including electric drive, brakes and steering, sensors and control software as well as – in the case of passenger transport – integrated safety. For vehicle bodies, specialized suppliers can be used, depending on whether the vehicle will be used for passenger transport or deliveries.

That is the model that ZF is pursuing as part of its joint venture with the company e.GO Mobile AG. As a conservative estimate, we are foreseeing a global volume of one million vehicles by 2025, which could also be exceeded if, for example, new intermodal transport models catch on in big cities. Such models are also referred to as a modal split, which means switching between different mobility solutions. For example, switching from a passenger car to an e.GO Mover could occur along the appropriate hubs on access roads, the same could happen on rails, where the e.GO Mover could travel part of its route on rail – and, accordingly, save range and time.

The main thing is to get from A to B, regardless of whether passenger or freight

The main thing is to get from A to B, regardless of whether passenger or freight

What is the difference between having a self-driving vehicle bring a passenger or cargo from A to B? If you look at the task purely from a driving point of view, there are many commonalities. That’s also why there is so much potential in the people and cargo mover business. After all, the logistics industry also needs new solutions based on autonomous driving in order to meet the transport growth forecasts, especially in light of the declining number of qualified drivers. Another conceivable option is self-driving trucks on a hub-to-hub highway. Starting from distribution centers located close to town, the further transport of goods into the city could also be automated and all-electric. This, in turn, would open up the possibility of night-time deliveries in the city center. At some point, this kind of service will become indispensable in supplying goods to cities that have populations in the millions. Also, the trend toward increasingly urgent last mile deliveries, which was documented in the 2016 Future Study commissioned by ZF and has since persisted, requires new transport concepts. This is no longer just pie in the sky. In 2018 a cooperative partnership was launched between the U.S. supermarket chain Kroger and the start-up and PBV manufacturer Nuro. Kroger, still the largest supermarket chain and the third largest retailer in the U.S., offers customers near a Kroger supermarket in Scottsdale, Arizona, same-day grocery deliveries using the autonomous cargo mover from Nuro. For Kroger, this is an experimental model for expanding its online business, which, if successful, will spread quickly to other markets in the U.S.

Autonomous ride hailing requires computing power

Autonomous ride hailing requires computing power

Even when it comes to ride hailing, the forecasts and the market potential are impressive. Analysts at Goldman Sachs expect a market of $285 billion for 2030. This potential can be profitably leveraged for suppliers especially if self-driving vehicles are used that do not generate any operating costs. For this reason, ride hailing supplier Uber is investing massively in autonomous driving. For example, it recently entered into a cooperative partnership with automaker Toyota valued at $500 million. Another young but financially powerful company that is preparing to become a market leader in the field of autonomous driving is Waymo. This spin-off from the former Google self-driving car project can already demonstrate an impressive number of test kilometers. The fleet uses the Waymo core expertise for seamlessly connecting sensor technology (radar, LIDAR, camera) as well as software and AI algorithms – and does so without producing its own automobiles. For its vehicles currently still considered as the test fleet, the company from Silicon Valley is relying on cooperation with Jaguar and Fiat Chrysler. There is no doubt that Waymo will play a leading role in the emerging market for AI-controlled robotaxis.

For such new mobility suppliers, the self-driving shuttle is primarily a data platform. This is where the sensor information is analyzed and calculated into trajectories. Additionally, the data from the mobility or delivery customer must be included for Mobility-as-a-Service and Transport-as-a-Service applications. In the vehicle, this requires enormous computing power that the electronics in conventional vehicles are currently not able to generate. Moreover, the data platform must generally be open in order to integrate the routing software of the customers. ZF has an attractive solution to offer this emerging market, namely the ZF ProAI, a powerful central computer that integrates the automobile control functions, the AI software for autonomous driving and the user’s MaaS or TaaS-related data. In brief, it is a supercomputer with automotive grade that is also freely scalable and generally open to any technology.

Summary

Summary

The mobility of the future will be considerably more comfortable, more individual, sustainable and, above all, more efficient than urban mobility in the early 21st century. New mobility concepts such as autonomous ride hailing will meet the majority of mobility needs particularly in cities – they are the biggest drivers when it comes to the development of autonomous driving. The “modal split,” or switching between different mobility solutions, will presumably usher in the new era of urban mobility. In some areas, the mobility of the future will rapidly change. With a strategic focus on "Next Generation Mobility", we not only record previous forms of private transport and the transport of passengers and goods, but also the new forms of mobility. Also for “new mobility customers” in the process of gaining a foothold in the industry, ZF is attractive due to its comprehensive range of expertise that covers automated driving, electric mobility, integrated safety, Vehicle Motion Control and digital competence. Those who identify future trends early on, anticipate solutions and seize opportunities to leverage the disruptive change in the automobile industry to their advantage will be particularly successful.

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