TRANSPORTATION AND LOGISTICS BRIEFING: GM nearly ready to monetize self-driving cars - Cloud software providers' automotive opportunity - Alibaba takes control of Cainiao logistics affiliate
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GM IN STRONG POSITION TO MONETIZE AUTONOMOUS CARS: Companies like Tesla and Waymo have received the lion's share of attention in the race to develop fully autonomous cars, but legacy automaker GM is in a particularly strong position to mass produce and effectively monetize autonomous vehicles in the near term, according to a new Deutsche Bank analyst note, cited by CNBC.
The note predicts that GM will have fully autonomous vehicles that don't require a human driver ready for commercial launch in quarters, not years. The note said GM executives point to recent tests conducted with self-driving cars in complex urban environments like San Francisco as proof that they are nearing commercial launch. GM also recently unveiled its first commercial design for an autonomous car, dubbed the Cruise Generation 3.
Deutsche's note also predicted that GM will leverage its autonomous vehicles to take a sizeable chunk of the mobility services market. Once the Generation 3 is fully ready for commercial launch and production, GM plans to use it for commercial fleets that can provide mobility services, including ride-hailing. Deutsche said that the introduction of autonomous vehicles will lead to an explosion in the market for these services.
- Up to 60% of American households in cities could find it more convenient (and cheaper) to use autonomous mobility services than owning a vehicle, according to Rod Lache, the note's author. Urban households make up the majority of the US population, according to the US Census Bureau.
- That will drive significant growth in these services, which will account for 10% of all vehicle miles driven in the US by 2030, up from 2% in 2025, Lache predicted.
- Lache predicts GM could grab as much as 17.5% of the US market for autonomous mobility services. GM itself has forecast that the global market for autonomous mobility services could be worth up to $7 trillion.
GM still has several barriers to overcome to launch autonomous mobility services:
- Putting self-driving cars on the road. The Generation 3 already features all of the hardware necessary for a self-driving car, according to GM. However, its software still needs further testing and development before it can handle any scenario on the road and fully replace a human driver.
- The regulatory environment for self-driving cars in the US remains unclear. The Senate is set to take up legislation passed by the House that would turn the Department of Transportation's recently released self-driving car guidelines into legally enforceable regulations. However, the guidelines are littered with vague language, and, with no clear legal precedent for how regulators will enforce them, could lead to further confusion for automakers.
- Lastly, once GM puts autonomous cars on the road, it will face steep competition. Other automakers, including Ford and Daimler , are also exploring this opportunity. Those companies are also spending heavily to accelerate their own autonomous ride-hailing services, and competition among these players will be intense.
CLOUD SOFTWARE COMPANIES' AUTOMOTIVE OPPORTUNITY: Major enterprise software analytics vendors such as Hortonworks, Cloudera, MapR, and Teradata have a huge opportunity in the connected, electric vehicle (EV) market, according to a new report from financial services firm Cowen & Co.The report argues that adoption of electric vehicles will be faster than the market currently expects. The report argues that demand for EVs will hit the initial inflection next year in the "hockey stick" demand curve, reaching 3% in 2020 and climbing to 7.5% in 2025. The report said that many other industry experts believe adoption will be slower, reaching 2.5% in 2020, and only hitting 5% in 2025.
These cars will produce massive data sets that'll need to be analyzed at multiple stages by different analytics tools - creating an opportunity for enterprise software vendors. EVs are increasingly outfitted with dozens of sensors and embedded connectivity that produces a vast amount of data. These vehicles will push the annual amount of data produced by connected cars to 1.5 million petabytes (about 1.5 trillion Gigabytes), according to Gartner. This data can be sorted by tools like Hortonworks' data flow platform that uses filtering and prioritization tools to choose the most critical data sets to be analyzed in the cloud. From there, the stored data needs to go through batch processing to analyze and identify vehicle usage patterns. That can be performed in the cloud by Hadoop platforms, such as those provided by the vendors mentioned above.
Taking advantage of this opportunity will require an ongoing effort by these software vendors to tailor their tools for the increasingly complex needs of automakers . Automakers are in the early stages of a transformational shift from connected EVs to semi-autonomous and fully-autonomous vehicles. As this evolution takes place, automakers will increasingly rely on analytics services that can efficiently process new types of vehicle data in greater volumes and at higher speed. However, that will require these enterprise software vendors to expand their capabilities to process new types of data - data from cars' pressure sensors and driver assist cameras, for example. That will be a major deviation from the enterprise data, like customer transactions and engagement metrics, which these companies typically analyze.
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ALIBABA TAKES OVER LOGISTICS AFFILIATE CAINIAO: Alibaba is investing $800 million to raise its stake in its logistics affiliate, Cainiao Network, and take a 51% majority ownership of the company, The Wall Street Journal reports .
Alibaba also said that it will invest more than $15 billion over the next five years to grow Cainiao into a global logistics network. Cainiao provides a software platform that coordinates the delivery of orders placed on Alibaba's marketplaces among the e-commerce giant's various logistics partners in China. The platform allows those merchants to track their orders on the way to their customers, and leverages machine learning algorithms to help speed up deliveries. Cainiao also provides warehousing space for merchants to store goods.
The deal will have two primary benefits for Alibaba:
- Taking majority ownership of Cainiao should put a recent SEC inquiry into Alibaba's financial reporting practices to bed. Alibaba did not previously include Cainiao's financial results in its own earnings reports. That practice had been criticized as an attempt to make Alibaba's results look more favorable, as Cainiao lost $153 million in its fiscal 2017, and $46 million in fiscal 2016. Alibaba disclosed in May 2016 that the SEC had launched an inquiry into its reporting practices as a result. Now that Alibaba has taken majority ownership, it will include Cainiao's performance in future financial reporting.
- The move will also help Alibaba as its expansion beyond China's borders picks up steam. The e-commerce behemoth has been ramping up its efforts in Southeast Asia, and recently invested $1 billion in Lazada, the largest e-commerce player in the region. The WSJ noted that taking control of Cainiao will give Alibaba greater access to logistics data that can be aggregated together with customer data to glean new customer insights. That can help Alibaba quickly get up to speed on consumer shopping habits as it expands into new markets.
In other news...
- The Coalition for Future Mobility, an alliance of automakers, tech companies, and other proponents of self-driving cars, launched an advertising campaign to persuade the Senate to pass new legislation that would boost production of the vehicles, according to Reuters . The bill, a version of which has already been passed in the House of Representatives, would ease safety regulations and bar states from outlawing autonomous vehicles. The bill could stall in the Senate because the chamber is divided over whether to make the bill's regulations and mandates apply to commercial semi-trucks in addition to cars.
- London-based food delivery startup Deliveroo raised $385 million in Series F funding, bringing its valuation to over $2 billion. The funding round was led by T. Rowe Price and Fidelity, which joined existing investors that include Index Ventures, General Catalyst, and Accel Partners. The company is using the additional capital to open more delivery-only kitchens to help its partner restaurants fulfill larger order volumes, grow its technology team to optimize its delivery routing algorithms, and to expand into new markets. These moves could help the company expand what are currently very thin margins for its services.
- The US Federal Aviation Administration (FAA) guidelines for drones supersede cities and local government's drone laws, a recent decision by a federal judge in Massachusetts confirmed. The judge discarded a local town law that barred drones from flying within its airspace at altitudes below 400 feet without the operator first obtaining permission from the owners of any property the drone will fly over. The ruling gives clarity to drone operators, which previously were unable to operate the aircraft in many areas because of confusion over whether it was legal to do so.