Google, Uber, and several major automakers are working to bring autonomous vehicles (i.e. self-driving cars) to the marketplace. In mid-October 2016, Tesla announced that three of its models will be fitted with all the hardware needed to be driverless. In September 2016, Uber cars were seen on the streets in self-driving mode. The technology is rapidly maturing, and we continue to see testing of cars with driverless capabilities in some cities. There has been speculation that autonomous vehicles are the next radical market transformation for the automotive industry, as cloud computing was for the software industry. The prediction is that we will move from an automotive product-based ownership model to a use-based service model – and this change will happen within the next ten years.
People consume transportation differently based on where they are in life and family responsibilities. For example, parents with young children need their car in a different way than an unmarried person with no children or an empty nester. Given this reality, there may be six different models of autonomous vehicle usage that can, and perhaps will, co-exist. Let’s explore them:
- True Ownership model – In this model a consumer buys a car in the traditional sense. They go to the dealership, test drive, pick options, pay for or finance the car and drive off the lot with it. In this case, however, the car drives itself into the consumer’s driveway. During, and at the end of the payment period, the consumer owns the car and remains responsible for all the maintenance, insurance, and upkeep for the car. The owner’s ego involvement associated with the brand, brand loyalty, and the look-and-feel of the car remains intact. Other than the fact that this car drives itself, this model represents the status quo.
- Traditional Lease model – Again, this model represents the status quo as an already existing business model. A consumer leases the car for a term of years and is otherwise responsible for all costs of ownership. The limited benefits are identical to the true ownership model.
- Exclusive License model – This model is the first step towards transitioning to a different way of consuming private transportation. In this model, the owner of the vehicle is someone different than the day-to-day user of the vehicle. However, the user has exclusive use of the car. The true owner may control where the vehicle is stored when it is not in use. In this scenario, the maintenance and upkeep of the car is handled by the true owner, not the user. The exclusive license could be for a specific car, or a specific timeframe for a specific car, or perhaps dedicated use of the term with the owner maintaining the flexibility of changing the car with notice to the user. The price to the user may be fixed over the term or calculated otherwise. This model may begin to lower the infrastructure consumption of real estate if the car is not stored in the user’s garage or parking deck at work. For example, the vehicle will feel like it belongs to the user and the user can keep items in the car (e.g. a car seat, or a charger for a mobile phone, etc.) but the user will benefit from no extra or unpredictable storage and maintenance expenses.
- Non-exclusive License model – This model is similar to the exclusive license, except over the term the user does not have full control over the vehicle to which they have access. The timeframe that the consumer will have use of a vehicle could fluctuate daily, monthly, yearly, or some longer term. A non-exclusive license could also be a shared license where a known and specified group of multiple users contract to use a vehicle or group of vehicles over a finite period of time. For example, this could be a useful model for an extended family. Resource consumption could be enhanced in this non-exclusive approach (whether a shared license or not) because one vehicle could be used multiple times throughout the day (thereby reducing idle time) by different, but known individuals.
- Service-based model (fleet-owned) – This model is similar to a cab or an Uber. In this model the user pays for access either by-the-ride or over some finite period of time (monthly or yearly). In this model the user has no control over the car. The car is owned by someone else, stored elsewhere, and maintained elsewhere. The user consumes transportation on an as-need basis. The vehicle is truly for-hire and the owner will attempt to maximize its usage across its lifetime. Concerns regarding storage, maintenance, and lifespan of the service are the owner’s, exclusively. Under this model, the Uber or cab driver may become a thing of the past, as companies in this space may choose to own their own fleets of cars and will move to replace the driver with an autonomous vehicle.
- Service-based model (individually-owned) – This model is a hybrid to models 1, 4 and 5 above. For the user, it is identical to the Service-based model (fleet-owned), but providers like Uber may ultimately decide to avoid the huge capital outlay involved in purchasing fleets of vehicles. Instead, their model would work essentially the same way the Uber model works now, with the cars used in their service owned by individual car-owners. Uber-like providers would still connect riders with cars, but the cars would be driverless. For the car owner, the car functions more like an investment. You purchase the car for the purpose of employing it as a driver-less, ride-sharing asset, and the time that Uber/Lyft drivers currently spend driving is completely freed up for other purposes. Your driverless car could drive you to your place of employment and, while you work all day at your job, your car would be out earning money for you. Or, you could put your car on the road to earn money while you stay home in your pajamas and play video games all day.
Any one of these models may have several permutations within them, and only time will tell how it all evolves. What we do know for sure is that autonomous vehicles are on their way and will shift the way many industries do business. As business models emerge, legal issues will quickly surface. We will continue to explore the landscape of autonomous vehicles from both a legal and business perspective. Stay tuned.