Sport utility vehicles justify their workhorse reputation in a survey conducted by iseecars.com.
No one has a fully accurate prediction. Politics, regulations, and public input remain wild cards. What’s certain is the technology is moving faster than expected, while widespread application could take more time than planned.
The technology itself could yield new consequences, good and bad. And no form of transportation has completely disappeared because of a more advanced option. Even for-profit horse and carriage services still charm and ferry tourists in historic districts.
When Virginia operator Dan Goff considers driverless cars, he’s being strictly practical: “As much as it pains my wallet to say this, or believe this, I think the changes in vehicles, autonomous technology and fossil fuel free technology will render the local for-hire transportation operator obsolete,” says Goff, general manager and co-owner of A. Goff Transportation in Charlottesville, Va. “As a human being I love it, as a livery provider I’m concerned about it, and as a company owner I’m planning for it.”
Indeed, a complete driverless network could supplant all forms of private and public transportation, including rental cars, taxicabs, limos, and private vehicles. Goff points out the networked technology would require fewer vehicles used more often, freeing up space now taken up by buildings, garages, parking decks, parking lots, auto maintenance facilities, and extra traffic lanes.
“If you drew a line back to horse-pulled wagons, you always had someone holding the reins or the wheel,” Goff says. “That will end as we change from human to computer directed activity. Local operators have no place in the future. We cannot finance large fleets of 10,000 autonomous cars constantly driving in circles.”
In a driverless network, mobile technology would prove more reliable than humans. It doesn’t get mad in traffic and flip the bird. “This is beneficial for the human race, massively terrible for our industry,” Goff says. “I remember people telling me five years ago, it would happen 40 years from now. Earlier this year, it would be 15 years before passengers get into driverless vehicles. Instead, it’s next month. These things happen much faster.”
“A lot of what’s happening is going according to that plan,” says Kanter, founder and CEO of Proforged.com and a technology futurist. He cites automakers planning vehicles without steering wheels or brakes within five years. “Who will those be sold to and in what volume, and where will they get deployed? The people most willing to run those vehicles will be operators instead of individuals. The cost savings of having autonomous vehicles will be greater for someone who pays people to drive instead of someone who drives themselves.”
Semi- and autonomous vehicles will involve fewer accidents, cost less to own and repair, and require less insurance liability, he says. Like Goff, Kanter predicts a now fragmented market gradually consolidating, with fewer small chauffeured operations and a small number of large-scale operations. Those clients preferring driverless luxury service will likely go with an on-demand name-brand operator, he says.
“The economies of scale for operating fleets will be advantageous to larger companies, deploying resources from one coast to one coast,” Kanter says. “Rental car companies shuffle around fleets to meet demands. I think the market for transportation will go up, but ownership go down. It’s hard to predict how the technology plays out, but maybe there will be new chauffeured needs no one can see today.”
Operators of luxury autonomous vehicle networks stand to save on overhead costs, such as labor, down time, maintenance, and vehicle purchases, Kanter says. “You are limited by the number of vehicles you have deployed as opposed to number of drivers.”
Goff predicts ever-present, ever-ready vehicles, a “stream of bubbles on the road,” ready to respond to an app tap or just sense someone walking out of a building needing a ride. Wait times will be 30 seconds or less. “Quite possibly, some people will choose lux models, and some may prefer private ownership. But that will be a sliver of the population. The cars of tomorrow will be the sidewalks of today.”
Role Of OEMs
With major OEM automakers entering the driverless R&D sector, they likely will move even more into the fleet side of the business, says Nick Kokas, vice president of global operations for Brentwood’s Distinguished Executive Transportation in Macomb, Mich.
“From a labor cost perspective, initially not much will change,” Kokas says. “There will still be a need for a person in the car other than the passenger. However, instead of a driving role, it will be more of a mobility assistant role. Now this is where the conversation gets controversial. Eventually, we will become fleet management facilities contracted out to manage and maintain fleets of fully autonomous vehicles.
And I’m not talking about contracting with Uber. It will be contracts to manage the fleets of the manufacturers like Ford, GM, BMW and Mercedes to just name a few.”
Kokas foresees the OEMs as the eventual competitors to chauffeured transportation, not Uber. “In fact during Ford’s announcement of releasing their first car without a steering wheel or pedals in five years, Mark Fields, CEO of Ford, said you can see the name of Ford Motor Company evolving to Ford Mobility Company,” he says. “This was a significant statement which validated their intent of moving into our sector which is mobility logistics. It will become a world of subscription based mobility. Today, I’m going to work so I open the Ford app and a Ford shows up to take me to work. But at night I want to go to a fancy dinner so I open the Mercedes app and a Mercedes shows up to whisk us away in high-end luxury.”
The real question before operators is what do you do between now and then, which could be 10 years or longer, Goff says. “We are in a ‘horse-and-buggy’ business at a time the car is being invented. Those [driverless] cars will be rolling 24 hours. If that’s the end, what happens next? And for how long? That’s the real question.”
For A. Goff Transportation, the near-term future means a strategy of boosting its high touch personal service. “Where I see a lot of effort today is focused on trying to crush prices down to get value proposition up to compete with Uber and Lyft, which are companies not making money nor ever will. They are investment companies. I’m in a profit making business. Reducing price to get close but never close enough is a strategy that will not serve me well in the time remaining.”
Among the changes Goff has made is requiring chauffeurs to get to pick-up destinations one hour ahead. “The customer willing to compensate us for transportation is one not standing on a corner looking at a phone wondering where we are,” Goff says. “They will never have to wonder. They have no concerns about us being prepared with a chauffeur, cold water and a newspaper for them. Our business will last some period of time. We will not sit in an ever smaller hole for the rapid pick-up business. We’re in the high-touch business.”
For limo operators, service must exceed price as the determining factor in finding customers, Goff says. “The old school wants someone to know them, take care of them, know where they are going. They are not confident in driverless cars. That model has the longest legs. Many of the 8,000 plus limo companies will disappear in the next six to 10 years. The ones to disappear are the ones who use price as prime value they deliver.”
And he adds one caveat: Driven buses have a longer shelf life. The issues of controlling the bus grid and providing access will keep it fragmented and thereby preserve group transportation as we know it. Even if buses become technologically autonomous, they will still need “conductors,” and fleet managers. “In 10 years, we won’t be giving many individual rides, but we will be giving group rides in some way.”
Kanter sees opportunities in non-urban cores. Operators who want to stay in the limousine business should invest in operations and companies in suburbs, outer exurbs, and/or semi-rural regions and cities.
“If I owned a limo company today, there are two things I would consider: Selling the business, or two, I would be focusing on more rural and suburban market areas,” Kanter says. “The driverless cars will be operated by big fleets like Google, GM, or Uber, or someone we have not heard of, and they will go to high density areas first.”
Customers in areas 20 miles out from urban areas would still need chauffeured services, Kanter said. In the Washington, D.C. region for example, that would mean serving Prince George, Manassas or Warrenton, with continued runs to Dulles International, instead of serving Alexandria, Arlington or Bethesda, with runs to Reagan National.
What About Uber?
Kanter cautions Uber may not ultimately win the battle, despite its hot short term growth and high valuations. Operators should exercise good business judgement on whether to partner with Uber.
“By refusing to participate in something like Uber, I don’t think it makes an impact on Uber’s business, but maybe on the operator’s business,” Kanter says. “I see no reason if you have vehicles and drivers with excess capacity, and you can drive for Uber with a positive contribution margin, I don’t see a reason not to participate in it in the short term. Why not take a portion of profits now? You’re not going to stop the company altogether. Momentum is too strong at this point.”
Kanter compares transportation network companies (TNCs) to Amazon.com. “You can protest and not participate, but the sale will go to someone else. It’s not giving up, but making a market decision and setting aside feelings and taking part of the profit. I understand some businesspeople will want to make more of a principle than a profit decision. But from a strictly profit and business strategy standpoint, the right decision is to take percentage of profits while they’re there to take.”
Kokas, whose company is one of Uber’s top chauffeured partners in Michigan, says Brentwood’s reservation business has increased in the two to three years since on-demand transportation emerged. “On-demand became a marketing angle to customers who didn’t know we existed. They want a consistent level of service and book the old fashioned way even if it is more of a hassle.”
He advises that if operators lack the resources or infrastructure for a white label on-demand app, then they are better off partnering with a chauffeured app company or TNC. “These are all great avenues to increase the usage ratio of vehicles in place.
“Less than 5% of our business is on-demand. Those customers are looking for more consistent levels of service. Among those who find us through the app via Uber, on-demand customers became pre-reserved customers.”
Whether operators plan to stay in for the long haul or get out within 10 years, they need to bone up on the latest technology, constantly, Kanter recommends. Just like everyone upgrades their smartphones and mobile devices frequently, the same goes for software, apps, GPS, affiliate networks, and all the tech components of a limousine operation.
“Where that happens in your business is making small investments in new technology,” Kanter says. “Software that was $10,000 or $100,000 is now something you can get for $25 or $100 per month with no sign up fees or long-term contracts.” Technology to optimize drivers schedules, plan health care, or streamline payroll is worth trying, he says. “See how it works and keep an open mind on how technology can benefit your business.”
The Five Levels Of Driver Autonomy
The National Highway Transportation Safety Administration defines vehicle automation as having five levels:
No-Automation (Level 0): The driver is in complete and sole control of the primary vehicle controls – brake, steering, throttle, and motive power – at all times.
Function-Specific Automation (Level 1): Automation at this level involves one or more specific control functions. Examples include electronic stability control or pre-charged brakes, where the vehicle automatically assists with braking to enable the driver to regain control of the vehicle or stop faster than possible by acting alone.
Combined Function Automation (Level 2): This level involves automation of at least two primary control functions designed to work in unison to relieve the driver of control of those functions. An example of combined functions enabling a Level 2 system is adaptive cruise control combined with lane centering.
Limited Self-Driving Automation (Level 3): Vehicles enable the driver to cede full control of all safety-critical functions under certain traffic or environmental conditions, and to rely heavily on the vehicle to monitor for changes in those conditions requiring transition back to driver control. The driver is expected to be available for occasional control, but with enough transition time. The Google car is an example of limited self-driving automation.
Full Self-Driving Automation (Level 4): The vehicle is designed to perform all safety-critical driving functions and monitor roadway conditions for an entire trip. Such a design anticipates the driver will provide destination or navigation input, but is not expected to be available for control at any time during the trip. This includes both occupied and unoccupied vehicles.
Source: NHTSA press release
Sport utility vehicles justify their workhorse reputation in a survey conducted by iseecars.com.
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