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Home » Features » When Automation Predictions Come To Be: Transportation as a Service

When Automation Predictions Come To Be: Transportation as a Service

By: Bob Reselman on June 29, 2017 1 Comment

Back in December of 2016 I wrote an article for DevOps.com titled, “What Do We Do When Everything is Automated?” in which I made a prediction:

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Also, think about this: As Uber and Lyft mature in the business landscape and self-driving cars become commonplace, the ride-share companies will replace human-driven vehicles with self-driving vehicles. Then, Uber or Lyft will start to offer a pricing model that is a flat fee for 24/7 service with unlimited mileage.”

Pretty brazen prediction, huh? Well not really. I thought and still do think that such a situation is inevitable. You just have to think things through to arrive at the conclusion I made above. However, my thinking was that, until yesterday, this sort of inevitability is about five years out. Then this news flash come in from Bloomberg: “Apple Is Working With Hertz to Manage Its Self-Driving Car Fleet”

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This caught my eye. Hertz stock went up 14 percent that day. Upon further inspection, I learned that Apple is leasing a small fleet of cars from Hertz to test self-driving vehicles. Turns out the Alphabet Inc., a.k.a., Google, has a similar deal with Avis Budget Group Inc., a competitor to Hertz in the car rental space. Now granted, I thought that Uber or Lyft would extend the scope of their activity by working directly with automobile manufacturers making self-driving vehicles. That the service provider might be a current automobile rental company was a bit unanticipated. But, as I explored further, it gets interesting.

I turns out that Hertz previously was owned by Ford Motor Company, which sold the company to a private equity group in 2005 for $15 billion, a tidy sum. Hertz acquired Dollar Thrifty in 2012. Avis Budget Group, a competitor to Hertz, owns Zipcar as well as the New Zealand rental company, Apex Car Rental and Maggiore Group, the fourth largest car rental company in Italy. There’s a lot going on in the auto rental space.

As I reflect upon events, things become clearer. It makes sense that those non-automotive companies working to create driverless vehicles are attracted to car rental companies. Car rental companies are not in the automobile business. They are in the transportation service business. Few people go to Hertz to rent a Chevy. They go to rent a way to get around. If a customer shows up at the Hertz counter only to find out that there is no Chevy to be had, most people will take the Nissan alternative. They don’t care about the car. They care about the service the car provides.

Now imagine this: Let’s say you are a vehicle manufacturer, new to the marketplace. You finally figure out how to make a driverless vehicle that satisfies the needs of consumers under most driving conditions. Given current trends, when it comes time to make a profit from your investment, are you going to open showrooms with the hope of selling your new automotive brand to consumers? Or, are you going to buy an existing company that has a proven record success and infrastructure for providing transportation services on demand to the masses? In other words, what’s easier to imagine, Apple setting up showrooms throughout the world to sell autonomous vehicles to consumers accustomed to buying Ford, Toyota, Nissan or Tesla? Or, rather, Apple going directly into the autonomous transportation-on-demand business by buying Hertz? Or maybe Hertz will just buy driverless cars from Apple. (Hertz buying from Apple is hard to imagine; Apple is a company that likes to think big. Selling cars to Hertz is thinking small.)

My take? Well, two things: First, as autonomous vehicle technology matures, transportation as a service is going to grow on the landscape. Vehicle manufacturers need to survive. They will adapt. How the actual selling of vehicles fits into it all is still working itself out. I think we’re going to see a lot of vehicles being made to provider of service, not as a property to own. Second, maybe it’s time to buy some stock in Hertz, maybe Avis too, for that matter.

What do you think?

— Bob Reselman

Filed Under: Features Tagged With: Apple, automation, Avis, driverless cars, google, hertz, predictions, transportation as a service

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