As driverless cars move closer to reality from science fiction, there's a new competition: the race to a business case.
Self-driving cars are often heralded as the future of the century-old automotive industry, with the potential to change fundamentally the way companies make money. Meantime, hefty support from investors has spurred a years-long contest between automakers, startups and Silicon Valley tech companies to deploy the first commercial fleet of driverless cars — and begin to reap the financial rewards.
But it's still unclear what those commercial services might look like. Leaders like General Motors Co.'s GM Cruise LLC and Alphabet Inc.'s Waymo LLC appear focused on ride-hailing services, looking to mirror the success of Uber and Lyft without the added cost of human drivers. Others, like Ford Motor Co., are more concentrated on delivery and e-commerce.
The end result, however, likely won't be so black-and-white.
"No one has necessarily concluded there is a right way to do this," said Sam Abuelsamid, an automotive tech analyst for Navigant Research. "Right now the best pathway is to focus on deploying in urban centers and having multiple-use cases for the vehicle."
Ford is providing an example of this approach. It's partnering with the likes of Domino's Pizza, Walmart and delivery-app Postmates in an attempt to spread bets before launching a driverless vehicle service in 2021.
"Our work with companies like Postmates and Walmart is helping us figure out which segments autonomous vehicles really work for," said Sherif Marakby, CEO of Ford Autonomous Vehicles LLC, the Blue Oval's driverless car development arm. "We're thinking about a strategy that makes sure we're reaching full utilization of the vehicles."
Even GM's Cruise, focused on deploying a ride-hailing service, has started working with food-delivery app Doordash, while its Detroit-based parent company partners on in-car delivery with Amazon.com Inc.
Think of it like plant utilization, said Alexandre Marian, a managing director in the automotive and industrial practice at AlixPartners LLP. Plant-capacity utilization is an important indicator of financial health for automakers, with unprofitable and under-used plants squeezing already narrow profit margins.
Developing these driverless fleets already is pinching margins and the core business. The pressure, for example, is motivating GM to address its plant utilization as part of a restructuring designed to slash costs and redirect capital toward expensive autonomy, mobility and electrification efforts.
Ford is also executing a restructuring as it pivots to what it sees as the next iteration of the automotive industry. Executive Chairman Bill Ford has said he sees driverless vehicle services as a path to fatter profit margins and a "less capital-intensive"business model, if done right.
"If you can increase utilization of the vehicles, that will be the true driver of profitability," Marian said. "The company's profit on a driverless fleet will depend on an effective asset-utilization model."
Automakers historically are not known for ceding control. In an industry where companies already closely supervise the core business model — the buying and selling of vehicles through franchised dealers — it's possible the companies will want a similar level of control over future autonomy businesses.
But a newer phenomenon has underpinned most of the progress traditional automakers have made in developing self-driving cars: partnerships. GM's perceived leap to the head of the pack can be traced to its 2016 acquisition of the former self-driving startup Cruise Automation. Waymo has been using Fiat Chrysler Automobiles NV's Pacifica minivans in its fleets since 2016. And Ford in 2016 acquired a majority stake in artificial intelligence startup Argo AI.
"One of the key elements (in deploying a business model) is going to be building partnerships," Marian said. "The (manufacturer) used to be at the center of everything, but now they have to be realistic about what their core capabilities are and what they need in this field to be a key player."
Established players in ride-hailing or delivery could offer a leg up to companies as they try to build trust with consumers. The auto industry tempered autonomous vehicle optimism last year after a fatal accident involving one of Uber's self-driving test vehicles struck and killed a pedestrian, raising questions about the safety of the technology.
Vehicle search-engine Autolist recently found that 22% of the 1,650 car shoppers they surveyed don't trust any company to bring a self-driving vehicle to market in 2019. That's down from 27% when Autolist conducted the same survey last year, asking car buyers which company they trust to put driverless cars on the road.
GM, still working toward launching its robo-taxi service this year despite a long quiet period, saw the biggest gain in trust to 15% from 9% in 2018. Tesla Inc. was the most trusted, with 24% of consumers choosing the Silicon Valley electric-car maker.
"There are likely to be cases where we still have some human-driven vehicles," Abuelsamid said. "We could see hybrid fleets of autonomous and human-operated vehicles so companies can provide full service at all times and when customers need it."