From Benedict Evans, August 22:
There are now several dozen companies trying to make the technology
for autonomous cars, across OEMs, their traditional suppliers, existing
major tech companies and startups. Clearly, not all of these will
succeed, but enough of them have a chance that one wonders what and
where the winner-take-all effects could be, and what kinds of leverage
there might be. Are there network effects that would allow the top one
or two companies to squeeze the rest out, as happened in smartphone or
PC operating systems? Or might there be room for five or ten companies
to compete indefinitely? And for what layers in the stack does victory
give power in other layers?
These kinds of question matter
because they point to the balance of power in the car industry of the
future. A world in which car manufacturers can buy commodity ‘autonomy
in a box’ from any of half a dozen companies (or make it themselves),
much as they buy ABS today, is very different from one in which Waymo
and perhaps Uber are the only real options, and can set the business
model of their choice, as Google did with Android. Microsoft and Intel
found choke points in the PC world, and Google did in smartphones - what
might those points be in autonomy?
To begin with, it seems pretty
clear that the hardware and sensors for autonomy - and, probably, for
electric - will be commodities. There is plenty of science and
engineering in these (and a lot more work to do), just as there is in,
say, LCD screens, but there is no reason why you have to use one rather
than another just because everyone else is. There are strong
manufacturing scale effects, but no network effect. So, LIDAR, for
example, will go from a ‘spinning KFC bucket’ that costs $50k to a small
solid-state widget at a few hundred dollars or less, and there will be
winners within that segment, but there’s no network effect, while
winning LIDAR doesn’t give leverage at other layers of the stack (unless
you get a monopoly), anymore than than making the best image sensors
(and selling them to Apple) helps Sony’s smartphone business. In the
same way, it’s likely that batteries (and motors and battery/motor
control) will be as much of a commodity as RAM is today - again, scale,
lots of science and perhaps some winners within each category, but no
broader leverage.
On the other hand, there probably won’t be
direct parallels to the third party software developer ecosystems that
we see in PCs or smartphones. Windows squashed the Mac and then iOS and
Android squashed Windows Phone because of the virtuous circle of
developer adoption above anything else, but you won’t buy a car (if you
own a car at all, of course) based on how many apps you can run on it.
They’ll all run Uber and Lyft and Didi, and have Netflix embedded in the
screens, but any other apps will happen on your phone (or watch, or
glasses).
Rather, the place to look is not within the cars
directly but still further up the stack - in the autonomous software
that enables a car to move down a road without hitting anything, in the
city-wide optimisation and routing that mean we might automate all cars
as a system, not just each individual car, and in the on-demand fleets
of 'robo-taxis' that will ride on all of this. The network effects in
on-demand are self-evident, but will will get much more complex with
autonomy (which will cut the cost of an on-demand ride by three quarters
or more). On-demand robo-taxi fleets will dynamically pre-position
their cars, and both these and quite possibly all other cars will
co-ordinate their routes in real time for maximum efficiency, perhaps
across fleets, to avoid, for example, all cars picking the same route at
the same time. This in turn could be combined not just with surge
pricing but with all sorts of differential road pricing - you might pay
more to get to your destination faster in busy times, or pick an arrival
time by price.
From a technological point of view, these three
layers (driving, routing & optimisation, and on-demand) are largely
independent - you could install the Lyft app in a GM autonomous car and
let the pre-installed Waymo autonomy module drive people around,
hypothetically. Clearly, some people hope there will be leverage across
layers, or perhaps bundling - Tesla says that it plans to forbid people
from using its autonomous cars with any on-demand service other than its
own. This doesn't work the other way - Uber won't insist you use only
its own autonomous systems. But though Microsoft cross-leveraged Office
and Windows, both of these won in their own markets with their own
network effects: a small OEM insisting you use its small robo-taxi
service would be like Apple insisting you buy AppleWorks instead of
Microsoft Office in 1995. I suspect that a more neutral approach might
prevail. This would especially be the case if we have cross-city
co-ordination of all vehicles, or even vehicle-to-vehicle communication
at junctions - you would need some sort of common layer (though my bias
is always towards decentralised systems).
All this is pretty speculative, though, like trying to predict what
traffic jams would look like from 1900. The one area where we can talk
about what the key network effects might look like is in autonomy
itself. This is about hardware, and sensors, and software, but mostly
it's about data, and there are two sorts of data that matter for
autonomy - maps and driving data. First, ‘maps.’....
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