General Motors and Lyft are teaming up to bring you something special: time away from your kids.
Surveying consumers in 2014 about why they might get an autonomous or semi-autonomous car, the Boston Consulting Group found that about 10 percent of respondents cited the possibility of not having to drop their children off at school themselves.
Having something like Siri ferry your progeny around may sound attractive if not exactly life-changing. But the implications for both the automotive and energy industries are potentially game changing over the longer term.
GM's $500 million investment in Lyft is a mixture of blue-sky thinking and co-opting an existing trend that otherwise might threaten its core business of churning out cars.
The immediate impact will be to let Lyft drivers rent GM models. This is smart on the carmaker's part. Not only will it give Lyft drivers and passengers exposure to GM's vehicles -- which may lead to future sales -- it will also provide a chance to learn which features work, or don't, in the vehicle-on-demand experience. This is far better than the alternative of simply sitting by as services such as Lyft erode the rationale for owning a vehicle in dense urban areas. Not a bad use of about 2 percent of GM's cash.
The more futuristic aspect of the partnership concerns this:
The joint development of a network of on-demand autonomous vehicles will leverage GM’s deep knowledge of autonomous technology and Lyft’s capabilities in providing a broad choice of ride-sharing services.
On-demand autonomous vehicles, or robo-taxis, would represent a fundamental shift in how city-dwellers interact with the car and energy industries.
Many movies, not to mention the odd Bruce Springsteen track, convey the idea that a car represents freedom. Ever the killjoy, an economist would tell you instead that it represents sinking a significant chunk of capital into a rapidly-depreciating asset you will barely use and which will suck up time and money to insure, maintain, and find parking for. In other words, your heart might say buy that Camaro, but your head should be telling you there has to be another, more cost-effective way.
It may be a leap to assume that autonomous vehicles will become commonplace in urban areas within the foreseeable future. But with the likes of Google, Apple, Mercedes, and GM working on it, it is clearly not just science fiction. And cities have much to gain from such a scenario in terms of easing congestion and pollution, as well as freeing up valuable downtown real estate for uses other than parking idled cars.
For a carmaker like GM, this might seem like a nightmare. After all, if city-dwellers can make most of their journeys in a shared vehicle, then they'll likely stay away from the dealer's lot. In a study presented a year ago, academics from the University of Utah and the University of Texas at Austin modeled the impact of an autonomous vehicle sharing scheme in Austin. The results showed that each shared robo-vehicle replaced about nine conventional ones.
Yet the same study found that actual miles traveled by those vehicles rose by 8 percent, in part because they have to get to passengers to pick them up. This suggests that the negative impact on vehicle sales may be less than you think. After all, vehicles get replaced when they wear out. If you've ever ridden in a New York City taxi after it has been running a couple of years, then you know how quickly that can happen.
An accelerated replacement cycle should offset the impact of lower individual ownership, says Xavier Mosquet, a senior partner in BCG's automotive practice. Moreover, if hybrid or all-electric models such as GM's Chevrolet Volt or forthcoming Bolt were to feature prominently in autonomous fleets, then that higher usage would help achieve better economies of scale for critical components such as batteries, reducing their unit cost.
So even if realizing such a future still faces big obstacles, it makes sense for GM, as well as several of its rivals, to participate in both ride-sharing and autonomous vehicle development.
There is no guarantee that these giants, focused for decades on simply pushing as much metal out as possible, can succeed in becoming manufacturing and service hybrids. Yet their engineering, financial and political muscle will count for a lot. Tesla Motors, whose stock slumped as much as 8.8 percent Monday after it reported it had just scrapped its reduced sales guidance for 2015, may be delighted that its efforts in vehicle autonomy are becoming more mainstream, but also should be worried about mounting competition.
One industry for which the Lyft-GM agreement is an unalloyed threat is oil. Highly dense cities account for only about 10 to 15 percent of vehicles on the road in the U.S. and perhaps more in the less wide-open spaces of Europe, says BCG's Mosquet. Even so, if autonomous, shared vehicles take off in such cities, then that will have important implications for gasoline demand.
First, gridlock should largely disappear in those cities, reducing the number of gallons burned while sitting in jams.
Second, vehicles ought to be better suited to their actual use. Cars ferrying passengers in a city could be smaller and, given the higher safety record implicit in this scenario -- robo-cars simply can't happen unless their safety is guaranteed -- possibly lighter. Rather than buying a Chevy Tahoe to cater to those few days of the year that you actually go to Tahoe, you might instead use smaller robo-taxis to get around San Francisco and then rent a bigger vehicle for your winter weekends at the slopes. This would tend to reduce average vehicle weight and raise fuel efficiency.
Finally, such cities would be testbeds for new vehicle features, including hybrid and electric drivetrains to combat pollution, that might then be transferred to the many millions of regular vehicles still plying the highways and rural and suburban routes.
None of these trends would do much to support growth in gasoline demand, which was actually one of the few bright spots in last year's otherwise dreadful oil market.
Saudi Arabia's petroleum minister is on record as worrying about sudden changes that could doom oil demand in the coming decades. His country's latest spat with Iran provides yet another reason for consumers to hope that his fears prove at least somewhat prescient; it would be nice to fret less about Mideast supply. Ultimately, if the blue-sky thinking of the Lyft-GM partnership works out, it should be good for the kids.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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