Future of Mobility, Part V: Race to the Top

As of June 15, 2017, there were more than 30 different tech companies and OEMs that have Autonomous Vehicle Testing Permits from the state of California — and they’re all rushing to be the first to offer a commercially viable vehicle.

Some of these companies are very familiar to an average customer and have strong brand recognition and loyalty, like Google’s Waymo, Tesla Motors, and BMW. Others, like Zoox, Inc., Pony.AI, and CarOne LLC, are operating in stealth and therefore have fewer mentions in the press for now. This can be good if people at the company want to work on advancing the technology without getting distracted, and make a splash when the technology is ready. But, this also means that if the company is late to the game in deploying a self-driving car, then it may miss out on capturing any significant market share. Establishing and leveraging brand loyalty is an important part of the car-buying process; after all, the first step in the auto finance value chain is finding and connecting with customers who need to borrow money to make their purchase, according to a report from Deloitte Consulting.

“Both indirect relationships and the ability to leverage customer loyalty to particular carmakers are unique sources of strength for captives, and they will continue to be important foundations of competitive advantage in the market…” the study said.

As part of a larger discussion on what’s taking place within mobility and auto finance (view Part IPart IIPart III and Part IV here), co-author of the study, Cameron Krueger, spoke with Mobility Finance about where luxury auto brands fit in with autonomous vehicles, how brands will use data, and how captives should prepare.

“In the world of autonomous fleets, you have to ask the questions of ‘Where does brand matter in that?’ and it matters in consumer preference,” Krueger said, adding that when it comes to getting consumers to pay more for a service, luxury brands have an advantage.

“Will I pay more to ride in a Google car or a Ford, [versus] a Lexus? In some cases, it’s ‘absolutely,’ but in others, it won’t be,” he said.

As households shift from owning multiple cars to owning only one — or even a fraction of one — the market will become increasingly competitive, and the biggest risk OEMs face is a completely new player in the market that can mass produce an autonomous vehicle inexpensively, Krueger said. That will make brand loyalty all the more important, because if the new player does not have a strong and trusted presence already it will be harder to capture the market, while recognized brands can enter later and capitalize on their long-term customer relationships.

But capturing the market isn’t only about scooping up the most customers for the captive — it’s also about capitalizing on the data, Krueger said. With fewer vehicles likely to be on the road and owned by a household, every individual vehicle will need to be more profitable to make up for the lack of volume. That’s why each car is going to have a larger ecosystem surrounding it in the future, Krueger said, equating a car to Google’s AdWords universe (since its birth in 2000, the AdWords “universe” has expanded well beyond Google.com to also include additional search engines, shopping sites, and more than a million websites, videos, and apps).

“As we capture preferences around mobility and around what’s going on while the vehicles moves, like where it goes, and stops to shop, and what the consumer is doing inside — you create a repository worth monetizing,” he added.

The captives, banks, rideshares, and fleet managers all have their place in the market, but they are all looking for differentiators in how they can stand out, Krueger said. Captives should become more focused on commercial lending, as fleets of AVs become standard; they should also explore new ways to use data for their underwriting practices, he said. While the standards for underwriting won’t change, the use of artificial intelligence and innovative data, like social media presence, will impact the traditional lending cycle, he said.

“People need to have a strategic plan to move in that direction sooner rather than later,” Krueger said, adding, “The moment the first AV hits the market an avalanche of others will follow.”


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