RE-ACT — A model for the evolution of the ‘Car of the Future’

The one sector that has always fascinated me is the ‘Car of the Future’. Many years ago I worked with my colleagues (Who shared the passion) to patent an idea on the subject. Over the last few years the Automotive market has gone through an unprecedented change. Most of the automotive giants were in deep slumber to the extent of complacency, charging a premium for incremental improvements in the feature lists. They had no reason to be worried as after Ford’s IPO in 1956, no Auto company had listed at the US stock exchange for about 5 decades until Tesla in 2010. Given that the car manufacturing was a game of Scale, and decades of research under the belt, it was difficult to imagine a car company changing the game.

With NIO, Tesla, Rivian, and Byton knocking at their doors, while Google, Uber working on Autonomous technologies, the ground seems to be shifting beneath the feet of the industry giants. In this article, I am trying to share my perspective on how the disruption will look like and who will be the winners.

The evolution of the ‘Car of the future’ however will be on a continuum along five dimensions — ‘RE-ACT’ — Ride Sharing, Electrified, Autonomous, Connected, and Traffic Management.

1. Ride Sharing: Increasing traffic, changing life style, and Uber effect has made ride sharing a cool thing to do. With rapid urbanization, this will advance with more and more people relying on another form of transport to travel from one point to the other. This increase in volume will lead to ‘Economies of Scale’ bringing more riders to the platforms.
2. Electrification: While a few years ago it was unthinkable to have a transportation system that could run without gasoline, Tesla and now NIO have proved the viability of the model. While, it can be argued that it will take many years for battery technology to be perfect and to completely replace conventional cars, the question is less of ‘If’ and more of ‘When’. No wonder other car manufacturers are jumping to join the bandwagon.
3. Autonomous: Development of self driving vehicles that will navigate the complex territory on their own. The autonomous driving level is graded on a scale of 0 to 5 by SAE (Society of Automation. L0-Dumb car; L1-Lane assistance, Radar based cruise control; L2-Steering and handling acceleration, Nudge the car to left or right, Self park feature, Driver always ready to intervene; L3-Can drive along a pre punched path, Limited fail safe, Human driver to instantaneously take over; L4-Drive almost on its own except on busy highway merger, In tricky situations abort the drive by parking; L5-Complete Autonomy -No steering wheel. We currently stand at a level of L2 -L2.5. While Tesla X is capable of L3, regulations do not permit that as of today. Tesla will have to wait for a few more years before it can push the SW update. NIO on the other hand has promised an L4 Car (NIO EVE) by 2020.
4. Connected : As more car manufacturers adopt autonomous technology, the need for cars to connect with environment will increase. The below infographic from Qorvo captures the idea of connectivity (V2X). Connected Cars will support V2P — Vehicle to Pedestrian (Sensing the Pedestrian, Sending or Receiving signals), V2H — Vehicle to Home (Cars will interact with smart homes to unlock the door as you arrive etc.), V2N — Vehicle to network (Connecting Vehicle to the cellular infrastructure and the cloud), V2V — Vehicle to Vehicle (Sending signals to the car around ), V2I — Vehicle to Infrastructure (Ability to communicate with traffic lights — Covered in next part) among the most prominent features.

5. Traffic Management : We will never reach a point of Autonomy level 5 until vehicles can also communicate with the traffic lights captured above as V2I. This is when transportation will become more of a lifestyle experience where people will be completely dependent on self driving vehicles to be transported from one place to the other.

So as the Automotive landscape changes, let us evaluate which companies are better placed to capture the value.

1. Smart Vehicle Chip Manufacturers — NXP, Nvidia, Intel, And Qualcomm — The car of the future will require intense computational power.
2. Electric vehicle companies — Tesla, NIO, Byton (Yet to prove), and Rivian
3. Ride Sharing players — Uber, Lyft, Didi
4. Autonomous driving technology manufacturers — Waymo (Google), NIO, Uber, Nvidia, Cruise Automation, drive.ai, Aurora. These will be the real winners. As more and more data will be generated by smart vehicles, these companies will have huge advantage over other players in the sector.

We see the Vehicle value chain changing a lot in the future with few companies having a clear advantage over the others. However in the end the real winners will be the consumers who will finally be able to breath in an environment that is cleaner, safer, and connected.

Thank you for taking the time to read this piece. Would love to hear your thoughts about this space or article and learn more.