The Future Of Transportation Has Tesla Written All Over It

Tesla Model 3

JUL 24 2017 BY EVANNEX 16

Tesla

Tesla Model X and Model S (Image: Tesla)

TESLA, THE BLUEPRINT OF THE FUTURE

Revolutionary change is coming to the auto industry, and no one can say at this point what the transport system of the future will look like. All kinds of theories are flying around – and most of them seem to include Tesla.

Many writers have discussed Tesla’s role in revitalizing the American manufacturing sector, but Tony Hughes, Managing Director at Moody’s Analytics, believes that Tesla may prove to be the savior of the auto industry for quite a different reason (as reported by TheStreet).

The rise of self-driving vehicles and ride-sharing could cause power to shift from automakers to services such as Uber or Lyft.

“Our bold prediction is that if ride-sharing companies become truly huge, they will seek to buy vehicle manufacturers and shift research and development efforts firmly in the direction of cost reduction and reliability,” writes Hughes.

This is in line with predictions in a recent report written by Tony Seba, which argues that manufacturing vehicles will become a low-margin commodity business, and the real value will be in providers of Transportation as a Service (TaaS), which will gravitate to electric vehicles because of their lower operating and maintenance costs.

*This article comes to us courtesy of EVANNEX (which also makes aftermarket Tesla accessories). Authored by Charles Morris.

Above: Prepare to have your mind blown as Tony Seba outlines his forecast for the future of energy and transportation (Youtube: Colorado Renewable Energy Society)

However, Hughes believes that the real threat to the automotive sector is not self-driving technology itself, but rather homogeneity.

“Vehicles will… become more homogeneous when ride-sharing is everywhere,” Hughes told TheStreet. “You imagine the taxi fleet: taxis are very homogeneous. If ride-sharing becomes 100% of all journeys – no privately owned vehicles – that trend would be very bad for car makers. It means that their product would become commoditized. As a general rule, businesses want to maintain that their product is special. If something becomes a commodity, it means they lose the ability to charge excessive prices.”

Without demand for niche vehicles and the brand loyalty that they inspire, Hughes suggests that automakers will need to combine with ride-sharing companies in order to survive.

Tesla

Tesla is already encouraging corporate and fleet sales.

So why does Tesla emerge as the hero of this story? Because Tesla’s master plan for ride-sharing still envisions individual car ownership. As proposed, the Tesla Network would not own all the vehicles, but rather provide a platform for car owners to put their vehicles into ride-sharing mode, and make money when they are not using them. “I am aware of Tesla’s foray,” say Hughes. “That is the blueprint for the future.”

It’s an interesting alternate future, but it depends on several major uncertainties. It’s uncertain that ride-sharing will ever account for 100% of all journeys, or anything like it – many people may still want to own their own vehicles. It’s far from certain that ride-sharing services will necessarily insist on undifferentiated, unbranded vehicles – just as people want to drink a Starbucks coffee, they may want to ride in a Mustang. And, looking at the other side of the equation, there’s no guarantee that Tesla won’t eventually decide to operate its own fleet of vehicles, if that turns out to be more efficient.

Tesla

Tesla Model S and Model X at the factory in Fremont, California

Someday, we may be getting around in flying cars, zipping around underground in tunnels…or staying in one place and staring at holographic screens. In the meantime, whatever possible future comes to pass – Hughes’s, Seba’s, Elon Musk’s or another one entirely – one thing is certain: Tesla is deeply involved in all the major trends that are remaking the transport sector, and it’s highly likely to be one of the winners.

*Editor’s Note: EVANNEX, which also sells aftermarket gear for Teslas, has kindly allowed us to share some of its content with our readers. Our thanks go out to EVANNEX, Check out the site here.

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16 Comments on "The Future Of Transportation Has Tesla Written All Over It"

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One can recognize an Evanex article from the headline alone.

Tony Seba predicts 14 cents/mile. At typical city traffic speeds of 12 mph and a 60% utilization factor that’s $7-8 for a 9am-4:30pm leasing day. That’s before Tesla takes their cut. Since you pay an extra $3-4 in tires and electricity (@ 10 cents/kWh) plus wear and tear, extra insurance, etc., there’s zero profit.

Seba’s 14 cents is probably too low. Most analysts are in the 20-30 cent range. But normal rates would be lower, offset by higher rush hour rates. Rush hour is really the only time it’ll make economic sense to add individually-owned cars to the pool.

Of course, most Tesla owners need their cars during rush hour, so they’re left out in the cold.

Glad you’ve figured out the economics of this business model that doesn’t exist yet. You make some pretty unsubstantiated assumptions.

You assume only 12mph all day? Why wouldn’t my car go out to the airport and back or other such routes? Why would utilization only be 60% and not 90%? You have no idea what Tesla’s “cut” would be.

Also, rush “hour” is 2-3 hours morning and evening. My commute is only 30 minutes. I could still get 4 hrs worth of “rush hour” fares. Also no reason I can’t pick up 3 passengers to ride in my car on my way to work or back home.

Call Gullible but it makes total sense to me..I believe & agree with 99% + of what Tony Seba is saying in the video,in fact I backed it up several times to confirm what I was hearing and ,I Could not Agree More…

“…no reason I can’t pick up 3 passengers to ride in my car on my way to work or back home.”

You could do that now. It’s called “carpooling”. Why do so few people carpool? Because it takes more time and it’s inconvenient. Switching to self-driving cars isn’t going to change that, or at least it’s not going to change it much.

Darth – the analysts who model Robotaxis take data from existing taxi, Uber and road traffic sources. They do make assumptions. Seba is the most aggressive and some of his numbers don’t add up. 12 mph is urban rush hour speed. Suburban and urban non-rush hour speed is higher but utilization and pricing are lower. If you put your car into the fleet 24×7 your revenues will approach a dedicated robotaxi. But your expenses will be higher because you lack scale. Also, if your car is in the fleet all the time why would you use it to commute? It’s probably halfway across town when you need it. Just use the nearest robotaxi. And if you use other robotaxis, why own a car at all? I’m not saying it makes no sense to put your car into the fleet. I expect a continuum of dedicated robotaxis, owned cars that go into the fleet at rush hour and owned cars that never go into the fleet. But don’t buy the fantasy that your #2 expense will magically become a personal profit center. Competitive markets don’t work that way. There might be a temporary imbalance during which you’ll make good money, as… Read more »

The biggest problem with this is depreciation…While the maintenance is low, you still need tires, parts can still fail including suspension components…Then what happens in an accident if someone rear ends the Tesla hard? While it’ll be fixed, your car is no longer “accident free”, usually every accident brings down the resale value by at least thousands…You also have degradation, warranty issues and even random things like the DCFC charger lifetime limit…

No Such thing as a *Totally* Free Ride…. lol..

I ride share my car with my wife.

And that is because I have to, not because I like it.

Is that ‘Lucky Wife’, or Unlucky You?
:÷;)

I think the next time I read that the future of transportation is going to shift toward ride-sharing services and away from personal car ownership, I’m gonna throw up in my mouth a little.

People are not going to give up the convenience of owning their own car and having it available whenever then need it just because the car is self-driving. And really, what advantage is there to renting out your car to strangers when that just means it will wear out faster, and you’ll have to spend more on a new one that much sooner? Isn’t the idea that a car will “make money for you” or “pay for itself” just wishful thinking?

I think some people’s excitement about the future of cars has caused their brains to shut down! And a surprisingly high number of them, too.

The millennials as a whole are good with it.

Millenial men in urban areas are good with it.

That’s not much.

In a ride sharing economy of the future, not owning a self driving vehicle is the cost savings option…let the owners of self driving cars deal with the wear and tear.

Yes, just like how landlords “deal with the wear and tear”

That’s priced in to what you pay to consume ridesharing, plus some profit.

Ridesharing will make sense for occasional drivers. For people who drive every day, owning your own car will still be the economical choice.

Pushmi – Robotaxi is more convenient than owning in urban settings due to scarce parking. Instead of paying to park in a garage a block or two away and schlepping all your stuff through the rain, the robotaxi picks you up and drops you off at your building’s main entrance.

Of course an owned self-driving car can do the same thing. But you pay extra for equal convenience.

The idea of ridesharing companies buying manufacturers is laughable. Last I heard Tesla and some other manufacturers actually have some talented programmers.

If you can program a car to be frickin’ autonomous, writing a matching and routing algorithm is trivial.

At this point, you could probably have Tesla interns write their own Uber + routing/consolidation in a couple sprints.