One Big Problem With Driverless Cars: Figuring Out How They Make Money

Driverless tech startup Zoox (named in the FT’s reporting) demonstrates its ability to drive Lombard in SF. Is that enough?
Photo: Zoox
The Morning ShiftAll your daily car news in one convenient place. Isn't your time more important?

As it turns out, making cars drive themselves may have been the easy part. The hard part is yet to come. Read up on that, the Ford vs Tesla truck fight, and something strange with Volkswagen and China and more in The Morning Shift for Tuesday, Nov. 26, 2019.

1st Gear: Pesky “Profit” May Be Standing In The Way Of Driverless Tech

Over the past few days, the Financial Times has detailed in two reports how the autonomous vehicle businesses of Silicon Valley are beginning to reckon with a new issue: being functioning businesses.

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I understand this must be a new and troubling development for any Silicon Valley startup, but here, it sounds like a profound wakeup call. From the FT’s “Autonomy, in search of customers” report:

Increasingly, industry insiders recognise that commercialising their technologies may be more difficult than anticipated — due to questions around “government approval, public trust, brand marketing, the ability to manufacture at scale and the technical knowhow to manage a fleet that competes with the likes of Uber and Lyft on timely pick-ups”, Patrick McGee reports in his weekend Big Read.

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Indeed, it’s in that deeper report “Driverless car groups look past the engineering challenge,” that we get some good details on how driverless tech had really thought all it had to do was get the tech working first, as if it were Facebook:

Scott Corwin, head of Deloitte’s future of mobility team, says the industry has over the past decade spent untold sums perfecting self-driving systems like there is a “race to win the Willy Wonka golden ticket”. But it is becoming clear that getting the technology right is only a first step.

“There’s no way you could do a national rollout, in any sense, for this technology. The cost of capital would be bananas,” says Gartner analyst Mike Ramsey. “They have other challenges that are huge and unresolved: the business case, the government regulations. That will slow things down.”

The rollout of autonomous cars will still happen over the next decade but with “limited market launches in pretty controlled environments, where variables are pretty knowable,” Mr Corwin says.

Local laws and political cultures are likely to lead to a host of different operators in US cities, while there are unique regulatory challenges in major markets such as China, Japan and Europe. 

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I begin to fear that as these companies realize that this stuff is not only hard, but also not particularly cool, that we’ll start seeing investment drop off, and we may remember this whole AV thing as a craze more than anything else.

2nd Gear: Ford V. Cybertruck War Set To Become Even More Dumb

Elon Musk, ever the upstart, took to his safe space, Twitter, to get into it with Ford. He showed a Tesla Cybertruck prototype pulling a F-150 up a hill in a tug-of-war. But Ford, thin-skinned as it is, did not respond by doing the right thing that a gigantic mega-corporation should (buying all of Tesla in a hostile takeover and shutting it down out of spite) and instead called the vid unfair.

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Ford wants a rematch, as the Detroit News spotted:

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This is, of course, dumb, and it’s only going to get dumber.

Twitter science has already logged on:

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Asking for a Cybertruck to test? Ford should be flexing by reverse-engineering a Cybertruck of its own, or dropping unheard-of cash to poach all of Tesla’s engineering talent. This is a little weak for me, and I expect things to get even more finicky as the days and months drag on.

3rd Gear: Something Is Going On With VW In Western China

Every time any western company does any sort of development or promotion in China, western media is quick to jump on it somehow supporting an oppressive government. Sometimes this feels a little overblown, like people yelling at Ken Block, sometimes it feels rather apt.

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The latter appears to be the case for a new report by the German institution the Süddeutsche Zeitung, detailing how Volkswagen’s plant in western China, where the federal government is oppressing the Muslim Uighur population, makes no business sense. As such, something else has to be going on. And indeed, it is, via the SZ through Google Translate:

No city in the world is as far from the sea as Urumqi, capital of the Xinjiang Autonomous Region, deep in northwestern China. No matter in which direction you turn - there are always a few thousand kilometers to a coast. A location for a factory could hardly be more unfavorable; And yet Volkswagen has built a factory in the middle of this structurally weak wasteland, a steel and glass colossus whose façade shines silvery in the sun. In front of the factory gate blow the German and - a little higher - the Chinese flag, everywhere there are guards around, the landscape is barren. A Barracks of the Armed People’s Police is nearby.

Volkswagen has been building the mid-range Santana car in Xinjiang since 2013, with an SUV being rolled off the production line next year. It is probably the most useless and by far the most political production that the Group has from Wolfsburg. An industrial memorial to the pact, on which the Germans apparently got involved with China. The deal a few years ago, it is said in the industry, read: Volkswagen operates in Urumqi an economically unprofitable work - and in return may open a number of new manufacturing facilities on China’s east coast.

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Basically, the Chinese government wouldn’t let VW build two profitable factories in the east without building one unprofitable one in the west. VW claims it had no clue about what the Chinese government has been up to over there, and the question remains if VW will side with what’s right (and politically sensible outside of China) or with what makes it money (and is politically sensible inside the halls of China’s government).

4th Gear: Audi Cuts 9,500 Jobs, Will Replace Them With 2,000 E-Mobility Roles

This is not the biggest layoff in the automotive world, but it’s a telling one. Audi is in the midst of an austerity plan, and it’s claiming that we have e-mobility to thank for it, as the SZ reports:

At Audi falls in the course of the austerity program in Germany every sixth place away. By 2025, 9500 of the total of about 61,000 jobs in this country to be reduced, as Audi announced on Tuesday after several months of negotiations with the works council.

In return, up to 2000 specialists for e-mobility and other future-oriented fields will be hired, so that around 7500 jobs will be lost. The job cuts should be made socially acceptable, it was about about employee turnover and early retirement programs. Operational layoffs should be avoided. The employment guarantee for the remaining Audi employees in the Ingolstadt and Neckarsulm plants will be extended from 2025 to 2029.

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I expect to hear more companies try to tidy up their messes (Audi still reeling from Dieselgate, for example) using eco-tech as a bit of a cover-up.

5th Gear: FCA-PSA Marriage Gets Official Soon

They just have to sign the paperwork. And they’re not worried about that bizarre legal fight with General Motors.

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Via Reuters:

Fiat Chrysler and PSA Group told their employees they would sign a binding merger agreement in coming weeks.

FCA Chairman John Elkann last week said he was not worried by a U.S. racketeering lawsuit by General Motors against FCA and that he was confident of reaching a binding merger deal with Peugeot owner PSA by the end of this year. FCA faces potentially billions of dollars in liabilities arising from the 95-page lawsuit, which claims FCA used bribes to top UAW officials to obtain a competitive advantage over GM in terms of labor costs.

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Congratulations to the happy couple.

Reverse: Some Good Cars In That One

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Neutral: Which AV Company Will Be The First To Make Good Money On The Tech Alone?

Will slow-and-steady Waymo be the first to make money selling driverless tech? Will nobody?

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About the author

Raphael Orlove

Raphael Orlove is features editor for Jalopnik.