The web economy will chopshop the car industry


A few news stories make it clear that the venerable automobile industry is going to wind up sliced, diced, and consumed by the new economics and technologies of the web, and in short order.

Ford has announced that it’s working with Amazon to integrate the Alexa virtual assistant service that runs on the Echo smart speaker and Fire TV devices, so that we can turn the on the lights in our homes with a voice command from the car, or start the car as we walk out the back door in the kitchen.

Ford is also integrating with Wink, the smart home hub company formerly an arm of Quirky purchased by Flextronics when Quirky filed for bankruptcy in 2015.
I get an odd pleasure thinking of an automobile as an extension of the smart home, like a thermostat or washing machine. But that’s one of the trends we are witnessing. And the relationship between Amazon and Ford — or any other permutation of the formula <Internet Giant> + <Automobile Manufacturer> — is deeply imbalanced because of the relative velocity of the two players. So we can imagine that the destabilizing impact of this relationship will shake the Automobile Manufacturer into its constituents, and anywhere that the Internet Giant is strong will be taken over by them.

In this case, imagine a few years down the line when a car is even more of a hardware commodity than it is now, and where you will select the ‘carware’ based on how well it integrates with your ‘homeware’. Say I am a big fan — and buyer of — Amazon’s smart home products, and not invested in Apple, Google and Microsoft alternatives. Amazon provides my critical UX, stores all my data, and the various devices integrate ‘seamlessly’ and complement each other well. So I may choose a Ford the way that people choose a Mac, Dell, or Microsoft tablet today, first choosing the OS and then the device.

Here’s a scenario that Ford provided to Geekwire as an example of the interaction through Alexa:

Owner: “Alexa, ask my Ford for my scheduled car start time.”

Alexa: “Here is the list of your current go times. You have a start time set for Monday at 7 a.m., with a cabin temperature set to 85 degrees Fahrenheit. Tuesday at 5:45 a.m., with a cabin temperature set to 75 degrees Fahrenheit.”

Owner: “Alexa, ask my Ford for my car’s driving range.”

Alexa: “You have an available range of 56 miles.”

In that scenario, Ford’s investment in proprietary on-board communications technology will turn out to be something like the Palm OS: a dead end in smart device operating systems. I will think of the Ford as another Alexa device, like my Fire TV Stick or Echo. I won’t care who manufactured the device. In fact, it could be branded Amazon, and built in Shenzhen by jobbers following an Amazon (or Apple, Microsoft, or Google) design.

However, the smart home-centric model isn’t the only model we are seeing at work. Consider the news from General Motors which is investing $500 million in Lyft, the Uber competitor. GM announced last year that it plans to deploy a ‘fleet’ of autonomous Chevy Volts by the end of this year, so it has seen the decline in car ownership accelerating in the future, and want’s to get ahead of it.

Millennials are much less car oriented than earlier generations, and the cost savings of car ‘sharing’ — or fractional availability, are huge: connect the dots, and you see imminent revolution in carland.

Cars spend 95% of their lives parked. Leaving aside the ecological and city planning aspects of that waste, the cost equation of fractional car availability — or sharing — will trend toward very low car ownership when all falls out. If GM wants to have a dominant role in the future economics of cars, they need to broaden their economic participation because there will be much fewer car purchases, and more miles on the meter per car.

They are hoping to become Lyft, or Uber, or the like, while operating as a car manufacturer in the meantime. Good luck. That’s the kind of self-renewing straddle that incumbents find so hard to accomplish. Will they be willing to accept Amazon-sized minuscule profits and plow profits back into disrupting their markets faster than others — like Amazon, Apple, Google, and Microsoft — will be doing?

It’s an easier bet to say that Uber — and maybe Lyft, although they are facing strong headwinds — might start building their own cars, and get out ahead of the auto companies, just like Amazon, Apple, Google, and Microsoft will. The brand value will come from those defining the most unique aspects of the product, and that won’t be automotive: it will be the user experience. You might choose a future Uber over a Lyft because it integrates better with your smart phone, not because of the seats or steering.