What Does The GM & Lyft Partnership Mean For The Future of Automakers

February 25, 2016  |  By Michael O'Shea  |       

gm-lyft-partnership
Plenty of surprises come out of CES each year, and 2016 was no different. While there were a number of interesting developments that came out, one of the most influential for the automotive industry was the announcement that GM and Lyft are partnering up.

The giant OEM and the young upstart ridesharing company didn't seem like they would ever get together, but their joining forces is a smart move. In fact, as the relationship matures, this partnership will cause a major change in the automotive industry, transforming the landscape in several key aspects. The future of automakers will fundamentally shift as GM and Lyft join an increasing trend toward mobility solutions, not just building and marketing vehicles.

Mass Market Penetration

This new partnership between GM and Lyft will be a key component of the push toward mass market penetration for on-demand autonomous cars. Similar to how taxis and other ride services work, people will be able to use a device to hail or schedule one, and be taken to their destination of choice. As these services become more common through some of the larger OEMs, reservations people have will begin to recede.

While it will take some time for mass market penetration to occur (at least 2030 or so), certain strategic benefits of the technology will win over many supporters with these features:

  • Greater Security: Riders aren't interacting with a driver, reducing the risk of assaults, etc.

  • Efficiency: Autonomous cars don't need breaks like humans, increasing availability for consumers.

  • Time: With improved nav technology on-demand autonomous cars will be able to choose optimal pathways, cutting down on the length of commutes.

New Partnerships

While the partnership between GM and Lyft took many in the automotive industry by surprise, there are some who can see the benefits. Still, other OEMs will be watching the development of the partnership closely, weighing if they too should take the plunge with a similar arrangement.

As GM and Lyft demonstrate the benefits of OEMs and mobility services joining forces, this will create a large shift in the auto industry. Car companies will team up with the likes of Uber to compete against GM's expanded portfolio of services. As is the case in any industry, this will create an escalation as the different players try to outdo each other.

Developers who recognize the unique opportunities as they are emerging can reap huge benefits. Instead of viewing the auto industry in the traditional sense, they need to focus more on mobility solutions and not just how companies make and market cars.

Not Industry-Wide

Despite the GM and Lyft partnership creating a big shift among OEMs, it won't affect the entire auto industry. Bigger OEMs will be the ones that are better equipped to take advantage of partnerships with ride services, thanks to economies of scale.

In other words, don't expect too many of the smaller car brands to get in on the action. Logically, this means the market will become a little tougher for the little guys, who might then find it necessary to form relationships with larger OEMs. An alternative would be that several smaller OEMs join together and pool resources, similar to how Renault and Nissan have partnered up.

There's constant talk about these sorts of partnerships growing, but as fleets of on-demand autonomous cars break into mainstream usage, those types of developments could become a reality.

Fighting Against the Trend

As on-demand autonomous ride services begin entering the market, there will be pushback from consumers. As is the case with all adoption cycles, there will come a point where the services reach critical mass and start to enter showrooms.

Instead of fighting against the trend of mixing together car ownership with technology and vehicle sharing, OEMs that embrace it will have an immediate advantage in the marketplace. By necessity, OEMs will need to work closely with the tech industry to develop diverse solutions, helping their services stand out in the market. This is already in the works, not only with the GM and Lyft partnership, but also with Ford Credit Link and others.

Not everyone will need or want to use autonomous on-demand vehicle services the same way. By recognizing this, companies can take advantage of that fact and carve out different niches for themselves, such as:

  • Car Owners: Many people will still want to own a car for various reasons. They might occasionally need to use a ride service, like when their vehicle is in the shop, they need to go to the airport, they've been out drinking, etc.

  • College Students: While much of what they do is on or near the campus, college students sometimes need a vehicle. They also tend to be tech-savvy, so the service would need to be tailored accordingly. Already, services such as Silvercar have started to recognize this unique need.

  • Elderly: Instead of taking on the risks and stress of driving, the elderly will start to realize there are distinct benefits to this piece of emerging technology. They will need vehicles that address their concerns and technological aptitudes, otherwise adoption rates will be low.

A Large Hurdle

Several factors could slow down the rate of adoption for on-demand autonomous cars, but one of the biggest hurdles will be perfecting self-driving tech. Quite a few OEMs and tech companies are working on improving vehicle positioning and navigation, as well as sensors to detect other vehicles, people and animals. This has some hurdles to climb, slowing down the progression of these services and their potential effects on the auto industry.

While a number of approaches are being tested, the fact is the technology hasn't quite reached the point of being practical for a wide variety of situations. It will be best for limited scenarios at first, making the autonomous ride services a niche before it can reach consumers.

Dense urban areas will be the single biggest hurdle for these services, which is where many people who might want to use them are located. Quite a few residents of big cities find vehicle ownership to be inconvenient, expensive and unnecessary due to other public transit options. Unfortunately, the crowded nature of urban areas makes it difficult for the technology to operate reliably, as has been demonstrated with Tesla's AutoPilot feature.

Instead, autonomous ride services will likely be applied to narrow use cases in the beginning, such as college campuses, airport shuttles, etc. With nav and vehicle positioning technology in its interim stages, these services will be able to drive on the highway or highly controlled environments (corporate campuses, retirement communities) long before tackling busy city streets.

Horses and Driving

Elon Musk has famously said that in the future, non-autonomous cars won't be annihilated. Instead, they'll be like how horses are now: still around, but not used by everyone. Certain people will still want to feel the joy and challenge of driving a vehicle, but it will be considered more of a luxury than a necessity.

The OEMs that don't get into the on-demand autonomous ride service economy will cater to this unique group of drivers. Already, Porsche and Lamborghini have said they won't use autonomous technology in their cars. While those brands might adjust their strategy later, others will likely continue to cater to this niche in a market that’s like never to go away.

Thanks to the presence of these consumers and their influence, the adoption of services such as the product of the GM and Lyft partnership will be slowed, at least somewhat.

How do you think the new GM and Lyft partnership will affect the auto industry?

Topics: Automotive Trends

Michael O'Shea

Michael O’Shea is the Founder and CEO of Abalta Technologies. He is responsible for all aspects of executive management of Abalta and a direct participant in many client engagements, particularly in management advisory projects.

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