I think we’re at the point where even someone mentioning the term ‘autonomous’ in the context of transportation instinctively induces physical convulsions, and in rare cases, actual vomiting in their audience. The reason for this is equally debilitating – any string of dependent and/or independent clauses that follow the word ‘autonomous’ are likely blasé predictions about the future in which the people spewing them like the plague give no actual insight into anything.

To me, the only thing interesting in a*******mous vehicles right now is who is actually going to make money off of them, how, and who’s best positioned to win. The pundits will interrupt this question as they burst forth into a monologue about how ‘ride sharing’ and ‘shared mobility’ and ‘intermodal transportation’ will pioneer the future and ‘no one will own a car’ and ‘everything will be within reach.’ Alright, well let’s just calm down.

Let’s look at who cares the most about autonomous vehicles (read: who stands the most to gain from them?) Consumers like you and me? Nope. At the aggregate level, maybe, but at the individual level, single businesses stand to gain far more financially than individual people, and as such will be willing to pay much more for it and be inclined to purchase it earlier. It’s businesses that produce physical stuff that needs transporting. And it’s not just the businesses doing the actual transporting – any business with a cost base that includes some type of transportation and shipping will be affected.

So if businesses involved in physical shipping are probably the ones who most stand to gain, at least at first, from autonomous vehicle tech, then who’s best positioned to capitalize on it? Let’s take a short stroll through the on-road trucking industry, a fairly old-school market with a lot of legacy ‘ways we’ve always done things’. Despite the stereotypic gruffness, the online load boards (where shippers match with truckers) and tracking technology of existing players is fairly advanced, making it slightly less vulnerable to new entrants.

However, enter Uber Freight, Convoy, and other well-funded startups with roots in tech, and for Uber, expertise in matching demand and supply better than anyone else. So if half of the equation is the robustness of software offerings dedicated to matching supply with demand, and the other half is actually creating autonomous trucks, then who would be able to do both?

At the moment, the only convincing answer is Uber Freight. Companies like Convoy are simply apps that are the ‘Uber for trucking’, while companies like Tesla and Nikola are focused on the hardware required for selling autonomous trucks more so than leveraging the trucks to drive additional new revenue streams.

In conclusion, a simple, non-cliche opinion about autonomous vehicles: mass adoption will start with trucks, and the firm best positioned to capitalize on both the evolving freight market and the hardware required to enable AVs is likely Uber Freight.

This article comes on the heels of Samsung’s disclosure of its acquisition of Harman International Industries, referenced here.

The automotive OEMs’ business model, at its core, revolves around simply selling physical cars to people every 7-10 years, and hasn’t changed (or needed to change) since the car was originally invented. Enter the smartphone in the late 2000s, and within a few years the most important features on every car shopper’s must-have list involved some type of smartphone connectivity, which was about the time when carmakers started getting nervous. If what people care most about in a car (besides the basic standard that it moves when told to) is no longer what the carmaker controls or owns the development of, then theoretically it should be fairly simple for an Apple or Google to produce their own smartphone-centered cars, or at least reduce Ford and GM to simple low-margin hardware suppliers.

So why hasn’t the sky fallen on the OEMs yet?  If the latest move by Samsung, another one of the big smartphone players, offers any indication, there’s hope for them yet. Even within the last year, there were rumors swirling of Apple developing a secretive Titan connected car project that was to spell doom for the mainstays, while Google’s autonomous teletubby cars garnered tons of media buzz as they spun around the streets of Palo Alto. Today, however, Google has decided to pursue a more modest partnership strategy with its autonomous driving software, project Titan has been shuttered indefinitely, and now Samsung is entering the fray with a more-muted strategy in line with that of its digital brothers.

If you’re a Mary Barra or a Carlos Ghosn, this is at least a temporary sigh of relief. It’s another example of a so-called ‘digital disruptor’ finding it harder than anticipated to adapt its software/service business model to a hardware-heavy industry, opting instead for a less-risky, less-predatory entrance. It also confirms at least in the short-run that the creation of the automobile itself remains securely in automakers’ hands, while the connectivity and software aspects of the car will remain a hodgepodge effort of Detroit-Silicon Valley partnerships, internal development, and a plethora of tier 1 suppliers and startups.

At this point in the connected car race, both carmakers and external players find themselves sitting across from the same hairy dilemma: how do we leverage these new connectivity capabilities between the car and its surrounding devices to bring value to drivers? So far, they’ve come up with mainly three unsatisfying answers: car-sharing services, telematics/informatics services, and V2X (vehicle-to-something) communication. As all parties involved have found, not even a combination of these business models yields the fruit they had expected yet.

Perhaps the real meaty value of the connected car lies in its unique role as the central device that physically connects us to our world, much in the same way that our smartphones are the focal points of our digital lives.

The Tesla and SolarCity merger is not just a smart business bundle of achieving one-time corporate synergies. It’s arguably the beginning of a future where regardless of how the energy is gathered or utilized, it can be shared.

This may seem obvious or like not a big deal, but when we start talking about the future of modular transportation where a group of “modules” (cars) together can power a train more efficiently and with less traffic, these cars need to be able to pool their energy repositories together to create one large pool for the train of cars to pull from.

Short side note: this is where fossil fuel vehicles hit a bigger roadblock than a herd of angry Greenpeace activists. Fossil fuels produce energy, but they have to be turned into electricity via combustion prior to being able to be shared. I can’t pour gas into my iPhone and expect it to work, ever again.

We take for granted all the things that we simply plug into the wall. This is how the future of transportation needs to work from the standpoint of universality of the energy being used, but we need to go a step further. Being able to charge your iPhone and iPad from your computer’s energy source is fantastically useful, but it doesn’t make the USE of that energy any more efficient – if anything it makes it less because my iPhone dies every fourth email whereas my computer can handle a few hundred before dying.

With transportation, though, there are real benefits from being able to allocate energy correctly, and only if the energy can be easily allocated in different ways can these tangible benefits materialize.

For example, say there are two 18-wheel trucks, one directly behind the other, driving on an interstate for several hundred miles. Both are carrying their own payloads, and both are using their own engine power to move their respective payloads across the country. However, the guy driving behind the first truck is expending much less energy than his friend in front because he doesn’t have to deal with as much headwind hitting the front of his truck. This is a fairly common occurrence among truckers, and it’s called drafting. The problem with drafting, is that someone is always having to take the brunt of the wind, while the others simply coast behind.

But what if there were a way in a line of interstate trucks for the trailing trucks to push energy from their engines forward to the trucks bearing the brunt of the headwind? Then you’d have the energy where it’s needed most and where the other trucks can simply coast along. It’s a similar thought process as a train on train tracks. Each car does not individually have its own power supply, but rather is attached to the power in the front.

Granted, trucks on a highway are not going to connect directly to reach other necessarily, but the value of having the front truck bear the brunt of the headwinds while everyone that’s trailing pushes some of their own energy forward makes everyone more efficient and channels energy directly to where it’s needed.
That same hallmark of directing energy where it’s most needed is apparent in the Tesla/SolarCity deal. The solar system stores the energy in the battery packs, which then can be used where it’s most needed. Whether that’s charging the person’s car to go somewhere or heating their home or profiting from selling the energy in excess back to the grid, the person’s energy ecosystem is allocating energy where it’s most needed and where it’s most efficient.

In developing a common energy platform where energy can be targeted to where it’s most needed and most efficient, the Tesla/SolarCity deal is way more than just good old fashioned corporate synergies.

Last week, the New York Times’ John Markoff explored the new investment by Toyota in intelligent car research through partnerships with Stanford and MIT lab researchers. See the full story here.

My first blog post ever was written about how Toyota firmly believed in the driver having the final say in a car’s decisionmaking, a stark divergence from the autonomous crowd that started with Google and now Apple and has bandwaggoned even the most performance-leaning carmakers.

Toyota is thinking much differently, and as the world’s largest automaker, people should be taking notice when the frontrunner goes against the grain of the rest of the industry on such a pivotal area of the business. Toyota has a history of making bold decisions that end up confounding industry experts and other companies. The most prevalent being the Toyota Prius legacy that launched the hybrid drivetrain revolution by bringing eco-friendly cars within reach of the middle class. More recently, Toyota has rebuffed Apple and Google’s intrusion into the car by heavily investing in their own user interface and infotainment centers rather than concede defeat. And the next frontier they will do battle is in the autonomous car age.

Over the past week or two, everyone from GM to Volvo has announced the imminent introduction of Apple’s CarPlay and Android Auto in most new models, hailing them as the next great steps in automotive tech innovation. This reliance on such powerful, non-automotive companies for such a consumer-visible feature and differentiating factor is a fairly new concept to OEMs, who in the past have relied on ventures with automotive suppliers like Delphi and QNX to build special tech platforms for each distinct brand. 

That seems to be changing now that CarPlay and Android Auto will look and act virtually identically in every car, regardless of if it’s a Ferrari or a Honda. While this is great if you’re a driver (since you won’t have to learn a new platform every time you get into a different brand of car), it’s a dangerous precedent for automakers to set. Consumers today are buying cars more due to the unique tech features and less due to the car’s performance metrics. Rupert Stadler, CEO of Audi, recently stated that technology features will be more important to average consumers than horsepower by 2020. 

So what happens when the features that consumers most care about when buying a car are features that the car company themselves did not create or have any control over? Well, certainly nothing good for the margins of the OEMs as the supplier power of Google and Apple continues to grow. We’re at an intersection between what the car has been for a hundred years, and what it’s going to be in the next twenty years. For automakers to be successful against Apple and Google, they’re going to have to beat them at their own game. 

What is Google and Apple’s game? To create a platform by which every device in your life seamlessly interacts, thereby achieving a sort of tech ecosystem. So how do you beat them at this game if you’re a carmaker? By making the car, as Stadler also noted, the most powerful and important device in the consumer’s tech ecosystem. To me, the new age of the Internet of Things should be more aptly named the Food Chain of Things. Apple and Google have created a new battlefield for companies from a variety of industries to try to position their products higher up the Food Chain of Things than the next guy’s product, thereby making it less likely that the consumer views your product as superfluous and unnecessary compared to other devices. 

There are obvious, true advantages to automobiles over smartphones and iPads, mainly in their ability to physically transport people rather than just show Instagram pictures of where they could be. In this new era of Food Chain of Things, cars need to be more affordable like other devices we buy, and they need to seamlessly incorporate the virtual world while at the same time seamlessly incorporating the physical one. 

What might this look like in reality? New payment options and ownership flexibility, better traffic management and safety, and better incorporation of smartphone features are just the beginning. To solidify the car’s sustainable place in the digital age, carmakers are going to have to do battle with pretty much every consumer-facing industry that wants a bite of the Food Chain of Things, and nowhere is this more apparent than with Google and Apple. It’s an uphill battle, but luckily it’s a brave new world for everyone, not just carmakers.