Autonomous Vehicles: The Rise of New Business Models

By: Alind Saxena, Executive VP and Business Head Transportation, North America, L&T Technology Services

The influence of technology has moved beyond the mobile handset evolution and now encapsulates larger and much wider aspects to the extent of driving cars on its own. Popularly known as autonomous cars and considered to be path breaking innovation that will radically transform the way we commute, the concept has literally taken the world by storm. The apprehensions related to driving and maneuvering over unknown roads or difficult terrains may be a think of the past. In effect, the technology transformation will eventually lead to a complete change of mindset required while driving cars.

The early days of the revolution:

While the complete autonomous cars ecosystem is still a distant reality, OEMs are proactively working towards embracing it even if in small steps. For instance, luxury cars that fall in the $140,000 price bucket now come fitted with windshields with touchscreen surfaces. Other new features introduced include systems that greet, advice as well as update passengers – all customized as per consumer preferences. Not only the infotainment aspects, but even the material used are having a makeover with carbon fiber reinforced plastic being the first choice. The components too would be replaced by nuts & bolts to data points & networks. All these are moving towards a reengineered car structure with traditional suppliers and value chain partners being replaced with new-age technology enablers.

Thus it is no more about a car manufacturer offering a vehicle to the end user and revenues being generated out of such a proposition. The new ecosystem will be all about data at the core of the game play with customized end user experience being the driving force. The manufacturer will have to give way to ecosystem partners and enablers to have a balanced and fair ‘hub-and-spoke’ value arrangement involving OEMs, technology enablers, telecom operators as among the key. The differentiating aspect will extend beyond the engineering marvel to technology USP. Technology acquisition opportunities will assume the key pursuit KRA of OEMs.

Cyber security, GPS-based mapping solutions, freight aggregation, driver safety, human-machine interaction enabling solutions and IoT analytics are the technologies to be in demand.

Redefining motor insurance:

Presently 90% of car accidents are due to human error. A complete autonomous car ecosystem backed by advanced safety features, is expected to drastically reduce the scope of accidents. Automatic emergency braking systems can reduce front-into-rear crashes by 50% whereas front collision alerts can lower rea-end accidents by 27%. Insurance service providers that continue to follow existing auto-insurance models will find themselves up against the wall for survival.

Usage-based insurance (UBI) will be the unsaid norm for auto-insurance providers with pay-as-you-drive (PAYD), pay-how-you-drive (PHYD), pay-as-you-go, and Distance-based Insurance and distance-based insurance also coming into limelight. The underwriting for these will be mainly derived using telematics and track odometer readings so as to determine the mileage and drive consumer behaviour. As per research reports. Within the next five years 20 percent of auto-insurers will offer UBI—taking the market for these products to $123 billion by 2022. New insurance plans will include driverless car insurance plans. Software malfunctions too will find place in insurance claims. Globally. Ecosystem players have already started work on these areas. An automotive major has already announced that it will offer a “single price for car, maintenance, and insurance.” Other companies are also following suit, transferring the responsibility of organizing insurance from the car owner to themselves.

The Way Ahead:

Car manufacturers can no longer turn a blind eye to the emergence of the autonomous car narrative. Towards this they will need to take into consideration that in future private car ownership in all likelihood will witness a drop. The future times will surely be exciting!