-- Mary Barra, CEO of General Motors, October 2015
You've likely heard it before: Self-driving technology is going to redefine the automotive industry, and it's going to do so faster than anyone imagined. Truly autonomous vehicles are projected to begin traversing our roadways within the decade, and by 2035, they are expected to compose a quarter of every single automobile sold. Any company positioned to capture that shift faces a massive opportunity ahead.
But that's just the start of the story.
Although autonomy may begin by redefining the car, it will end with reimagining transportation at its very core. For society, the transition will be likely be revelatory, not unlike the advent of the automobile itself once was for modern civilization. The very concepts of car ownership, logistics, and mobility will be challenged entirely -- and for forward-thinking capitalists, that's exactly where the real opportunities lie.
As this series will explore, the ability to automate driving is, at its very core, a chance for today's businesses to fundamentally influence the future of transportation -- to carve out a pivotal role in how it will function, and to become perpetually ingrained in one of society's most expansive and relied-upon systems moving forward. It's an opportunity promising decades of prosperity for those that can capture it, but also one that has rightly sparked fears of eventual obsolescence for many entrenched in the current state of transportation.
In just a few short years, these revelations have catapulted self-driving technology onto the corporate radar and straight into public spotlight. What was once little more than a quiet niche of R&D has rapidly evolved into an explosive, full-blown race to autonomy -- one being heavily funded and hurtled forward by a myriad of powerful companies with much to gain, and for those dependent on today's transportation landscape, even more to lose. Leading the race are a band of outsiders -- those born of Silicon Valley blood that have elected to blaze the trail forward despite automotive norms calling for conservatism in the face of uncertainty; a dated mentality that has cost Big Auto before, but that is beginning to fade.
In these early days, major questions still loom over how aggressively self-driving technology should be introduced into society (there are competing philosophies), how autonomy will transform the transportation economy moving forward (business models are already being pursued), and how the industry should approach the mountain of regulatory and sociological hurdles that stand in its way (ironically, federal support is bourgeoning while the public remains skeptical). Nevertheless, outsiders like Tesla and Uber have carried on by pressing regulatory boundaries, innovating with breakneck haste, and taking brazen risks in pursuit of the future. Unencumbered by the same shareholder scrutiny that has long weighed down Detroit and its global counterparts, they have shaken awake an aging automotive industry -- and opened the floodgates for its competition to rush in.
Today, a dizzying array of incumbents and newcomers have entered the race. From traditional carmakers and technology giants to ride-hailing kingpins and start-ups fresh off their funding, each player is vying to bring a unique vision of autonomy to consumers -- or simply survive the changes to come. In their pursuit, the dynamic has quickly grown complex. Paths often seem to converge and overlap in an ever-evolving web of partnerships, acquisitions, and rivalries as everyone struggles to understand exactly how driverless technology will take hold in the years to come, and how best to position themselves for when it does -- a question that is just now beginning to show signs of an answer.
Despite the many hurdles that lie ahead, the fog surrounding autonomy is beginning to clear, and we are finally getting a glimpse at what the future of transportation may soon bring -- both for society, and for investors. In the last six months alone, we have seen significant technical breakthroughs cleared for public roads, a rapid convergence of Big Auto with Silicon Valley as the two seek to pair scale with innovation, and the long-awaited release of federal guidelines that will allow the industry to continue pressing forward. We have also witnessed the first death at the hands of self-driving technology; an inevitable reminder that the pace of innovation will be scrutinized when lives are at stake -- and that despite that scrutiny, nothing will slow this technology down.
The road ahead will be undoubtedly be long and winding for those racing forward, but make no mistake, the question is no longer if autonomous vehicles are coming -- only when, and how, they will get here. This series will attempt to answer those questions by starting from the beginning. To frame an answer, we must first identify the incredible opportunity at hand for investors -- and frankly, for humankind itself -- as self-driving technology proliferates through our roads, our societies, and our everyday lives.
We start with the simplest question of all: Why does this technology matter?
The Case for Autonomous Vehicles
In the time it's taken you to get to reach this sentence, assuming you read at the national average of 200 words per minute, fourteen people have lost their lives at the hand of automobiles. Last year, 38,000 lives were lost on U.S. roads alone -- that's the equivalent of a Boeing 737 falling out of the sky nearly every single weekday for the entire year. Globally, that number reaches about 1.3 million lives. Imagine the entire population of Dallas gone forever -- every single year. The automobile, no matter how revolutionary, is tragically flawed. But those flaws only begin with death.
There is a famous conjecture that begins,"Henry Ford freed common people from the limitations of their geography."If that's really true, then he also shackled them to a once-revolutionary system of transportation that's begun to show its age.
Every single day, 6 billion minutes of our lives are lost sitting in traffic. This is time not being spent contributing to our societies, stimulating our economies, or being with our families, and things are not getting better. The number of urban delays has doubled over the last 30 years, and globally, urbanization is rapidly on the rise. Today, around 54% of the world is urbanized. By 2050, according to the UN, that number will climb to 66%. As cities around the world experience continued population influx, many will eventually run out of room to expand and will begin growing upward to compensate (think New York City, or more recently, Hong Kong). These people will require access to additional transportation, many bringing vehicles with them into already congested cities. But without additional land to store and operate those vehicles, this will only lead to worsening congestion and worsening pollution. Today, the average Chinese citizen can spend roughly three years of their life searching for parking.
Stateside, the problem is inverted. Parking spaces litter urban America, with land devoted to automobiles consuming close to 50% of all cities (in places like Los Angeles, this number is closer to two-thirds). Many of these spots go completely unused, but are required by antiquated city ordinances to be maintained by local businesses, who must then pass on the costs to consumers and tenants, thus driving up the prices of groceries and rent in surrounding areas; in some cases, by well over $200 per month. This in turn drives people out of cities, thereby increasing their commute time and reducing the number of hours they can work, in a vicious cycle of waste and inefficiency. Parking mandates once intended to spur economic development for cities have instead stifled it, contributing to population declines, lower median incomes, and job loss -- all while propagating an influx of commuters and congestion that ironically winds up tarnishing the city anyway. In more severe cases, the costs that mandated parking and commuting impose on working-class individuals can prevent them from being able to access cities altogether, significantly limiting their potential to secure jobs that allow for socioeconomic advancement, and further perpetuating the economic divide.
The fact is that car ownership is difficult. Repairs and maintenance cost owners not just money, but also time and, for lack of a better term, their sanity. Then there are mandated insurance costs and, for many, financing fees (over 80% of new car owners elect to take them on). All in all, AAA estimates that the average cost of owning a personal car comes out to $8,558 per year -- and when you consider the fact that the average American household owns 2.2 cars, that's a lot to be paying for a rapidly depreciating asset that sits idle for over 95% of the time we own it. It's also worth considering that the average automobile tends to be overengineered -- most cars only travel at around a sixth of their top speed, on average -- and thus carries an unnecessarily bolstered price tag for the vast majority of users.
All the while, the blind, elderly, and disabled often find themselves unable to operate a conventional vehicle in the first place. For them, public transportation can be difficult to access, and hailing a ride can often prove too expensive. Forced to rely on others to move about their daily lives, members of these communities can easily grow to feel confined and robbed of their social freedoms. For many, it means no longer being able to interact with or contribute to their communities, despite being fully capable -- simply because of a lack of viable transportation.
And if all of that isn't enough, from an environmental standpoint, traffic helps contribute an additional 56 billion pounds of carbon dioxide to the environment every year. And that's on top of the 2.9 billion gallons of fuel lost sitting in it. Enough to fill the Superdome. Four times over.
Today's transportation system, like the automobile it was built around, is fundamentally broken. But modern civilization has become inexorably dependent upon it -- because despite its flaws, the reality is that it keeps the world running. From how we conduct global commerce to how we ensure our children get to school in the morning, our dependency on today's system has solidified the many problems above as bitter facts of life, long-accepted casualties of an otherwise indispensable component to modern society. For anything to change, a compelling breakthrough must first be made.
Change at the Hands of Autonomy
The problem is that such a breakthrough would have to occur within the confines of today's deeply rooted transportation network, at least initially. The infrastructure our world relies on isn't going anywhere anytime soon, and any attempts at overhauling it would prove nearly impossible to gain traction. Furthermore, for that breakthrough to work, it would have to be readily adoptable by society, i.e., viable enough to scale within a reasonable amount of time to the vast majority of individuals and businesses that rely upon our roads every day. Needless to say, these restrictions have long inhibited a viable solution to the problems today's automobiles and their drivers cause.
But if such a solution were to exist, even as a promising theory, it would be completely irresponsible for society and its regulatory authorities to withhold their full support in bringing it to fruition as quickly as would be feasibly possible. It would be equally as ignorant for businesses in a position to capitalize on that solution to withhold their resources from pursuing it in force, because the opportunity to profit from such a life-changing shift in transportation would be as tremendous as its very impact on society -- but only for those companies with enough foresight to ingrain themselves into the solution before it takes hold, and shape the future of transportation in the process.
This is where we find ourselves today.
After decades of worsening transportation issues, and despite many hurdles, a viable breakthrough has begun taking hold in the form of autonomous vehicles. Self-driving cars have the capacity to eradicate the problems tarnishing today's transportation system, all while preserving the parts of its infrastructure that society still depends upon. The technology is already far past theory, has garnered burgeoning regulatory support, and is being pursued by an exhaustive list of companies with an intensity that virtually guarantees it is the path forward for transportation -- a path upon which no company wants to be left behind.
In fact, with automakers and technology firms either barreling over one another or frantically forming new partnerships to become relevant to the future of transportation, the race to autonomous vehicles is advancing faster than anyone thought possible. At the start of the decade, the concept was hardly more than a theoretical conversation -- experts posited that many people alive today wouldn't see commercially available self-driving cars within their lifetimes. Yet just a few years later, small-scale trials testing self-driving taxis have already begun in Singapore and, more recently, in the US.
Although we conclude this series by exploring the rapidly evolving timeline to the widespread adoption of autonomous vehicles, the broad consensus is now that self-driving technology will begin proliferating by the end of this decade, despite the significant regulatory and sociological hurdles that lie ahead. The future of transportation may still be up for debate to some -- but with each new press release issued, partnership announced, and breakthrough made, the path forward is becoming increasingly clear.
For investors, that means we can begin forecasting the technology's path to adoption, as well as analyzing the radical new business models it will soon enable. We can study the effect those models will have on the forward-thinking companies laying the groundwork for this shift today -- and the danger they pose to those lethargic few who will undoubtedly be caught off guard. And we can use these learnings to shape our investment thesis and give us the context we need to analyze new opportunities moving forward. Yet to do so effectively, we must first understand one thing: We are entering the dawn of the autonomous vehicle, and its impact -- both on society and investors alike -- will be revelatory.
The Dawn of Autonomous Vehicles
Imagine a world in which our highways functioned as networked grids that could communicate with the cars and trucks that traversed them, coordinating their various destinations and movements in tandem to determine each vehicle's optimal lane position and top speeds, thus minimizing drive time, reducing congestion, and preventing collisions for everyone on the road -- ultimately eliminating the concept of traffic entirely. A world in which your autonomous cab could detect mid-ride that you're experiencing an abnormal heart rate and have fallen unresponsive, then promptly redirect you to the nearest hospital, after communicating to surrounding cars that it needs priority on the road due to a medical emergency. A world where deaths on the road become as rare as plane crashes in the sky.
The Opportunity for Society
"Vehicle autonomy could have as big an impact on society as the Ford mass assembly line had over 100 years ago."
-- Mark Fields, CEO of Ford
Make no mistake, these are not fringe cases. They're but a taste of what autonomous technology will give way to over the next two decades. In the more immediate future, imagine asking your car to pick up your dry cleaning and dinner before it meets you right outside your office doors at the end of the day to take you home -- the same place it dropped you off that morning before taking your kids to school. Imagine your commute becoming one the most productive hours of your morning, allowing you to finish work earlier in the day -- or one of the most relaxing, allowing you to unwind with a book or movie on the way home. Imagine never stressing over parking, paying for auto insurance, or fixing a flat tire again, because without drivers in the equation, ride-hailing will have become an affordable, rapid, and efficient replacement for full-time car ownership, even for those outside the city.
Because that's exactly what many of the leading players in this race -- a monumental list of companies ranging from well-established giants collectively valued in the trillions to talent-packed start-ups fresh off funding -- have in mind for autonomous vehicles in the near term. For the past several years, members of the press have cyclically proclaimed that this technology is coming faster than anyone expected, as if constantly blindsided by the pace of progress. But their dramatics are warranted. As Jetsonian as it may sound, the reality is that the timeline is indeed speeding up, and it won't be much longer before today's autonomous technology advances far enough to allow for the earliest of those scenarios to begin taking hold. If regulatory support follows in line, it's no longer a stretch to expect to enjoy many of them within five years.
Five meager years.
Already, vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) technology allows cars to communicate their position, speed, and trajectory to neighboring vehicles, traffic signals, and emergency services to help prevent and respond to accidents. These systems are particularly conducive to self-driving technology because they allow for vehicles to compose a fluid map of their surroundings without having to actually see the road using sometimes-erratic cameras or sensor-based technology, and they are already being pursued by major automakers like General Motors (NYSE:GM) and Audi for rollout in select 2017 models. As automakers continue to implement and expand these vehicular communication systems, those interconnected networks will dramatically increase the viability of autonomous vehicles by bypassing several key technological constraints, thus bolstering their overall rate of adoption and the impact they will be able to make on society in the near term.
The prospects for eliminating congestion appear to be just as promising. Studies conducted by MIT researchers in Singapore (historically one of the most congested cities in the world) have estimated that the city's 780,000 privately owned cars could theoretically be replaced by just 200,000 driverless taxis -- a nearly 70% reduction in vehicles -- all while minimizing the average time between booking a ride and being picked up to around three minutes for the entire population of 5.4 million residents during regular hours. Even during rush hour, they concluded that adding just 100,000 more autonomous taxis would keep wait times below 15 minutes for all of Singapore, and all with far less congestion. Simulations from the Organisation for Economic Co-operation and Development have come to similar conclusions, projecting that with certain infrastructural developments, the introduction of an autonomous fleet of taxis to Lisbon, Portugal, could remove up to 90% of cars from the city without sacrificing any mobility for its residents. The research, though preliminary, strongly suggests that the efficiencies to be gained from autonomous fleets could significantly reduce overall rates of congestion as those services grow in popularity.
Those efficiencies would also have a direct environmental impact. Researchers from the Lawrence Berkeley National Laboratory have estimated that by 2030, an electric fleet of autonomous taxis could reduce greenhouse gas emissions by as much as 94% from what U.S. light-duty vehicles currently produce. That's before factoring in any other environmental benefits the technology would introduce. Because driverless cars can simply drop their passengers off and drive away, the technology will significantly reduce the need for land to be dedicated to parking in metropolitan areas, freeing it for far more efficient purposes. After dropping off passengers, personal vehicles could navigate themselves either back home or to garages located unobtrusively outside the city center, where they would then wait to be summoned. Furthermore, since an empty car does not need to open its doors after parking, garages dedicated to storing autonomous vehicles could be designed far more efficiently, allowing for spaces up to 62% smaller than the current standard, and thus the storage of significantly more vehicles per square foot. And because vehicles could easily communicate with nearby garages to determine availability, there would be no congestion from cars looking for parking.
The impact that this simple auxiliary benefit of autonomy would have on cities and their surrounding inhabitants cannot be overstated. With less need for urban parking, existing garages and mandated street parking could be replaced or even repurposed into residential housing, new businesses, and community parks. An influx of housing, particularly in supply constrained areas like San Francisco or New York City, could provide tremendous relief to low-income households struggling to secure affordable living conditions. Moreover, because property owners would no longer have to pass along the costs of mandated parking to their tenants, overall rents would fall as well, allowing tenants to reinvest those savings into their communities and the economy. Cities would also become more accessible to commuters, as the reduced congestion and substantial efficiencies brought about by autonomous taxi fleets would provide affordable and flexible alternatives to many of today's inefficient public transportation systems (imagine a subscription model for driverless taxis, where each ride costs the same as bus fare), allowing for those without either the time or money to currently access and work in major hubs the chance to do so. For the disabled and the elderly, that same affordability and flexibility offers a chance to regain control over life.
When combined, the changes brought about by autonomous vehicles will not only drive down costs of living, increase socioeconomic mobility, and reinvigorate withering commuter cities back into economic hubs of life, they will improve the quality of life for virtually all members of society. Many skeptics may misguidedly dismiss these scenarios as fantastical or impractical, but there's more to this utopian story than feel-good social advancement. The annual impact the above scenarios would have on society translates directly into an economic gain of $1.3 trillion for the United States alone, according to Morgan Stanley. Put another way, the combination of accident avoidance, congestion relief, reduced fuel use, and productivity gains brought about by autonomous vehicles could save America over 7% of its current GDP, per year.
Some may argue that these gains, while impressive, would be confined to developing markets, with emerging markets unable to afford the technology in the near term, or the infrastructure required for a widespread rollout. However, this ignores several key characteristics unique to those economies that today makes them prime candidates for autonomous vehicles. Although innovations like electricity or the computer once took decades to reach emerging markets, the past several years have given way to a rapid commoditization and subsequent adoption of traditionally expensive, but highly efficient, technologies that solve a unique problem for those places. This is perhaps best evidenced by the blazing pace of low-end smartphone penetration in markets like Africa, and the resulting innovation those devices have given way to. Today, the smartphone has enabled a sprawling mobile payments economy that now enables young African entrepreneurs to build businesses with global reach, despite the country's severe lack of banking infrastructure.
Because emerging markets tend to exhibit greater population density, levels of congestion that put America's worst cities to shame, and traffic death rates that border on criminal -- the road fatality rate in India is nearly 150 times worse than in the UK -- the need for autonomous vehicles far outweighs that of more developed economies. Pairing that need with regulatory environments that tend to be far more favorable to homegrown innovation, particularly in places like China, suggests that autonomous technology will enjoy a fast-tracked adoption in these markets -- at least when compared to developed economies in which the needs are not as severe, regulatory approval is meticulously sluggish, and existing infrastructural presents a viable alternative (revisiting our Africa example, a lack of telecom infrastructure allowed the company to skip landlines for smartphones altogether). These unique circumstances are precisely why the first-ever commercial test of autonomous taxis took place in Singapore -- and not America.
All of this is to say that -- between the life-altering changes autonomous vehicles would bring to their constituents, and the tremendous economic gains that would likely result -- regulators and municipalities around the world are compelled to see this technology become a reality . And they are not alone.
When Henry Ford launched the first assembly line over a century ago, he revolutionized the concept of labor by effectively creating the modern workday. He also built himself a multibillion-dollar empire. For automakers, technology firms, entrepreneurs -- and perhaps more important, their investors -- the revolutionary impact autonomous vehicles will have on society translates directly into an economic opportunity on par with what the automobile itself once was for visionaries like Mr. Ford.
Over a century later, Ford's legacy still stands -- and his company's newest president and CEO is again singing the praises of a technology that promises to change the world. We started this section with a quote of those praises -- it's only fitting to end it with what are likely Mark Fields' true ambitions:
"If you add up the OEMs around the world ... and the revenue, it's about 2.3 trillion dollars a year. We get about 6% of that. If you expand that to transportation services ... that's about a $5.4 trillion business a year.
We get none of that, and neither does the rest of our industry."
The Opportunities for Investors
The race to autonomy is an opportunity to define the very future of transportation -- to become vital to its ecosystem moving forward, growing in lockstep with the technology as it proliferates across the world -- not unlike Apple (NASDAQ:AAPL) once did with the iPhone, before becoming the most valuable company in history. Just as the smartphone gave rise to booming new industries and countless business innovations, so too will driverless cars.
For investors, that's what should be most exciting.
This is no longer simply a conversation about automakers, their suppliers, or the technology firms developing this technology -- it's much bigger than that. As the transportation landscape begins evolving around autonomous technology, so too will the innumerable business models layered upon it. The companies able to influence that transformation early on, and become essential to the transportation ecosystem moving forward, will flourish in the long run. But the untapped opportunities will stem from what their efforts enable.
Autonomous vehicles will not only require a host of new ventures to support their proliferation moving forward, they will eventually enable a vast array of entirely new business models aimed at addressing the vast societal and industrial needs not yet met by the existing state of transportation -- many of which we have yet to even discover.
Perfecting and proliferating the technology itself will require continued investments in everything from the automotive space to big data analysis, cloud services, and artificial intelligence. Driverless trucks will enable nearly every industry to reimagine logistics entirely. Driverless cars will enable media companies to develop completely new entertainment experiences around the car, allow local retailers to rethink home delivery, or inspire drivers to rethink car ownership altogether. Driverless roads will require technology and engineering firms to work in conjunction with municipalities to develop new transportation infrastructure. Interconnecting that infrastructure to vehicles would require telecommunications companies to facilitate those networks. Eventually, cities will begin evolving and rebuilding around these new models -- the list of opportunities goes on.
But those are just the obvious applications: solutions to today's glaring needs, not tomorrow's. Technology companies, particularly start-ups, are notorious for using new advancements to identify society's yet-undiscovered wants and executing rapidly on a solution -- often uprooting stagnant industries by successfully doing so. Larger players like Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), a heavyweight in this race, have become behemoths for a reason. For these players, the field is massive, with thousands of opportunities to attack the status quo using autonomous technology.
For the entrenched, that should be both cause for worry and an inspiration to think far ahead, as their investors certainly should be. While the automotive industry is far from stagnant, having learned during the financial crisis the consequences of letting innovation lag, its more traditional players are among those most dependent on the current state of transportation. Despite a renewed commitment to innovation, these companies face having to entirely rethink century-old business models to prepare for the changes at hand, or risk facing a slow spiral into irrelevancy.
We are already starting to see early signs of change. The growing popularity of ride-hailing and ride-sharing services (the latter allows different passengers traveling in the same direction to share rides for a reduced fare) with younger demographics is indicative of a larger trend: shying away from car ownership in favor of more convenient and flexible alternatives. Already, 24% of 18-to-29-year-old Americans say they use services like Uber and Lyft multiple times per month. Perhaps more surprisingly, when expanded to all adults under the age of 45, those numbers drop by only a few percent.
The already impressive trajectory of these services hints at the tremendous impact autonomous technology will have when introduced into the equation -- making hailed rides more affordable, more convenient, and rapidly accessible almost anywhere with a population. Uber, the current ride-sharing leader, is already testing a "subscription" program in which it offers customers $1 shared rides within designated metropolitan areas for an up-front fee of just $30 per month. Lyft is also running similar tests. And while these may just be a pilot programs, research from the investment firm ARK suggests that self-driving taxis could eventually cost passengers as little as 35 cents per mile -- roughly half the cost of operating a personal car, and a mere 10 percent of what traditional taxis charge on average. That's before factoring in the flexibility of door-to-door service and avoiding parking fees. All of this suggests that autonomous taxis will very likely mushroom into an economy of their own, and begin challenging the fundamental idea of car ownership.
The popularity of Uber and its competitors serves as just one example of America's subtle but indicative shift away from driving. The number of registered vehicles in the country has remained flat over the past decade, stalling out after nearly a century of consistent growth. A recent study published by the University of Michigan's Transportation Research Institute has shown that only 60% of 18-year-olds held a driver's license in 2014, compared to over 80% in 1983. The trend is similar for those in their 20s, and even extends to those in their 30s and 40s, although by lessening degrees.
Improved public transportation systems have certainly contributed to this -- but so have the rise of same-day delivery of necessities from the likes of Amazon and Instacart, the advent of highly flexible car-sharing networks like Zipcar, which allow their users to instantly rent cars conveniently scattered throughout major cities and return them whenever and wherever closest they deem convenient, and countless other innovations causing people and businesses to rethink transportation.
Autonomous technology will not only embolden these innovations, but significantly expand what they're capable of offering. The entrenched, and their investors, would be wise to recognize that as a severe threat -- and as a tremendous opportunity. Because the competition certainly does, and they have investors too.
The Race to Autonomy: A Winding Path Forward
The concept of transportation has already begun to evolve, and autonomous vehicles will ensure there is no going back. The smartest of the aforementioned players have committed to speeding that evolution along, hoping to root themselves in the future of transportation by propelling autonomy forward. Those more cautious are simply positioning themselves to remain relevant as the technology takes hold. The most ignorant are dismissing the race altogether, and ultimately risk failing to adapt to the inevitable changes at hand. But while the race to autonomy may now seem like a clash between old thinking and new, as time draws on, those distinctions will begin to blur.
The incumbents of today's transportation system, and the very attackers attempting to uproot it, both bring unique skills to the table -- and neither has the full package. Technology companies cannot simply catch up to manufacturing expertise older automakers have honed over decades of producing vehicles (Tesla (NASDAQ:TSLA) is nearly 15 years old and still struggled to deliver 50,000 vehicles in 2015; GM delivered 9.8 million). Nor can automakers simply replicate the complex networks designed by ride-hailing companies to seamlessly connect passengers with a driver along optimized routes, or the innovation that underlies similar initiatives.
The simple fact is that the most revolutionary benefits to be gained from autonomous technology -- and the profits to be had from bringing them into fruition -- won't be realized until completely self-driving vehicles can safely traverse our roads; a monumental task requiring cooperation from players on all sides of this race. Already, a dizzying number of partnerships have been launched, such as Volvo producing base vehicles for Uber's autonomous fleet, and acquisitions made, such as GM acquiring Cruise Automation, a self-driving car start-up, for over a $1 billion to help build out its autonomous capabilities. All signs suggest that only more will come.
The nature of these partnerships will also evolve over time, only growing more nuanced and challenging as the race advances. While automakers can initially bank on producing an influx of autonomous vehicles for individual consumers, ride-hailing services, and various other industries, many of those same businesses ironically aim to reduce the need for personal car ownership in the first place. Morgan Stanley estimates that by 2030, a mere 13 years from now, over 25% of all miles traveled across the world would stem from ride-hailing services -- and that may be a conservative estimate. If they're right, and if those miles are indeed traveled using far fewer taxis than required today (as MIT's Singapore study suggests), automakers and their suppliers would find themselves facing diminishing demand, and would risk losing the growth gained by helping their competition rise to ascendance.
This threat is already forcing the automotive space to consider alternative business models around autonomous technology, and innovate on a level the industry hasn't seen in decades. General Motors has invested a small stake directly in Lyft to hedge its bets moving forward, and even reportedly solicited a bid to buy the ride-hailing company altogether. Verizon (NYSE:VZ) spent $2.4 billion acquiring Fleetmatics, a company that tracks fleets of trucks, and Sensity, a company that puts sensors in street lamps to monitor traffic, to bolster their expanding role in connected infrastructure. Auto suppliers Delphi (NYSE:DLPH) and Mobileye (NASDAQOTH:MBBYF) are teaming up to develop off-the-shelf kits that would enable customers to retrofit their existing vehicles with autonomous capabilities for as little as $1,000. Ford (NYSE:F) is teaming up with major cities to reduce congestion using crowd-sourced shuttle services and, ironically, shared bicycles -- likely using the data they collect to build their own mobility networks to compete with the likes of Uber networks, which they predict will deliver 20% margins over time. Tesla wants its owners to be able to profit from their cars by converting them into autonomous taxis when at work or on vacation, "just by tapping a button... [thereby] dramatically lower[ing] the true cost of ownership to the point where almost anyone could own a Tesla," according to CEO Elon Musk.
And as exciting as that all may be, it's only the start of where this technology will take us.
In the end, the race to autonomy is a competition for who will shape the landscape of transportation moving forward, and become a fundamental pillar of its existence by doing so. It's that competition, and the incredible societal benefits to be gained as a result, that virtually guarantees the rapid evolution and inevitable adoption of this technology in the coming years. The pace of progress has quickened, and it will continue to quicken, despite the substantial technical, regulatory, and sociological hurdles ahead.
But one thing should no longer be a surprise -- autonomy is coming, and it will change everything.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Armun Asgari owns shares of Apple and Tesla Motors. The Motley Fool owns shares of and recommends Alphabet (A and C shares), Apple, Ford, and Tesla Motors. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool recommends General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.