Tesla’s best-laid plans will have a challenge in convergence

Tesla’s best-laid plans will have a challenge in convergence

Driverless cars and ridesharing are poised to bring about the next big tectonic movement that technology provides for the human experience. In much the same way that the mobile phone has transformed the way we live, autonomous vehicles and transportation sharing promise to change the way we move.

Tesla’s recent announcement of its Master Plan, Part Deux exemplifies the convergence of these technology trends. For Tesla, this is a natural evolution for the business that makes complete sense.

There are many hurdles to overcome, but as these technologies develop, local and federal regulations may be the largest. Tesla’s plan believes that proper testing will require approximately 6 billion miles (10 billion kilometers) in testing before worldwide regulatory approval will be achieved.

There is little doubt that cars will reach a level of self-driving competence at some point. However, what driverless, shared vehicles mean and how they become adapted into today’s infrastructure could create problems as governments wrestle with existing infrastructure and deeply entrenched financial interests.

Today’s trend

The PC evolution, the internet, the switch from cell phone to smartphone, tablets and laptops — these are a few of the examples of profound introductions of new technology to our society that have managed to cause evolutionary changes in our lives.

Now both driverless vehicles and ridesharing can be added to the list. Auto manufacturers are already experimenting with and making investments into these capabilities: GM recently invested $500 million in Lyft, with Toyota following suit in Uber and VW investing $300 million in Gett, a Tel Aviv-based ridehailing startup that operates in dozens of cities across Europe. The race is on.

Mary Meeker, in her recent state of the technology industry presentation, devoted a few slides to the intersection of ridesharing and autonomy.

The benefits of rideshare and driverless cars working together seem to far outweigh excuses to stay with the status quo.

“Google wants to leapfrog straight to fully self-driving cars, which could take a while, Tesla wants to iterate its way there despite the risks of semi-autonomy and traditional car makers are combining the approaches while making strategic investments in ride-sharing startups… UberPool has succeeded in de-stigmatizing car sharing, and could achieve mass adoption as the time saved offsets the slightly higher cost compared to public transportation… Fascinating questions to debate about how transportation will change as autonomy makes cars into mobile living rooms.”

The writing is on the wall

The benefits of rideshare and driverless cars working together seem to far outweigh excuses to stay with the status quo. With the high costs of owning a vehicle, reduced interest in driving and potential revenue opportunities by sending your car out to earn income via rideshare, the new model feels overwhelmingly compelling. As outlined by Meeker’s slide:

Car ownership will wane as its high costs and inefficiency give way to ride sharing.” As vehicles get into the market of being driverless-ready, rideshare companies provide an interesting option for owners of these vehicles.

Although we are not quite there yet, solving the technology challenges that will enable this new phase will eventually happen. The revenue opportunity is too great and will drive the innovation to commercialize as quickly as possible.

Right now, most of the talk and focus has been on gaining acceptance by government regulators, mostly to do with security and safety concerns. “U.S. regulators are embracing self-driving cars faster than tech in the past, poising the nation for gains from the auto industry shift.”

Knee-jerk reactions now could create large pileups down the road.

Still… there have been significant, and tragic, accidents that may slow the adoption of autonomous technologies. With the death of a Tesla driver using autopilot in Florida on May 7, 2016, government regulators may be forced to be more circumspect in their attitudes on how this technology progresses. To further add concern, another recently crashed Tesla on autopilot certainly won’t help government speed regulation.

Technology always evolves far faster than governments can keep up with. And as autonomous vehicles merge into the fast lane, understanding how they influence economies will be critical. Knee-jerk reactions now could create large pileups down the road.

The local government conundrum

Real-life examples of governments wrestling with ridesharing services are evident already. Take a look at Austin, where recent intervention by the city’s government prompted Lyft and Uber to pull out of what had been a successful area for them.

Some local governments have banded together to come up with solutions on how to best handle how rideshare companies integrate with their cities. From New York and Toronto to Athens and Barcelona, mayors are forging alliances to deal with the changing situation.

By combining ridesharing and driverless cars, companies are creating the potential for even more pressing issues for local governments on the horizon.

The driverless car and rideshare mashup won’t be easy

With increasing populations and aging infrastructure, the cost of road maintenance and public transportation infrastructure seems to increase every year. The typical strategy has been to offload those additional costs through taxes on things such as gas, parking, insurance payments, tolls or even pay-per-mileage recently introduced in Oregon.

Driverless cars and rideshare have the potential to significantly reduce cars on the road and negatively impact revenues needed to support local transportation infrastructure.

As owners of cars look to contract out their vehicles for usage in rideshare services to help support the cost of ownership, you’ll see fewer vehicles on the road. With EVs, hybrids and more fuel-efficient vehicles, fuel taxes are also at risk for decline.

The government is in total control of when and how these new technologies get introduced.

Increased carpooling will also impact a reduction in the use of public transportation. Reduced parking and toll revenue will combine with the aspects noted above, and will jeopardize the amount of money that’s collected and needed to support local infrastructure.

If driverless cars and ridesharing are going to be the next big thing, local governments need to look for ways to secure, grow and sustain revenue for the future. This dilemma potentially creates a barrier to the widespread adoption that would change the way we live.

On one hand, you’ve got a technological and cultural shift about to happen, but from a tax point of view, governments will create a problem for themselves by supporting this change.

Despite doing what’s right for people and the environment, we don’t always see that playing out in economics. Uber isn’t accepted everywhere because it threatens local regulated, revenue-generating taxi services, even though it’s a great service for consumers. Meanwhile, people in communities where rideshare is restricted continue to pay higher prices to own vehicles. Until this problem is solved, you’ve got some local governments unwilling to move.

Weave into that driverless cars, and you have government’s seemingly working against themselves — if they aren’t careful, they’ll legislate themselves into a deficit.

The government is in total control of when and how these new technologies get introduced.

Maybe they’ll decide to de-couple the rideshare from the driverless car, where people could still own driverless cars, but not use them to subcontract for rideshare services. Then you’ve got to restrict rideshare companies from owning their own vehicles now or face the same problem. Big decisions fraught with peril become evident from many angles.

The overwhelming benefits will ultimately see driverless cars adopted everywhere. And those cities that restrict rideshare will be faced with even more questions by local residents critical of the decision that blocks communities from the inherent benefits.

Governments will have to come up with different ways to pay for the system they’ve built, but their revenue requirements won’t go away. Perhaps driverless busses will reduce the costs of transportation. Parking fees could be recovered by mileage tax, or charging drop-off and pick-up fees for rideshare trips. Maybe you’ll see chargeable driverless car “waiting areas” pop up. Or insurance cost-savings created by a decline in accidents could be offset by higher taxes underneath the noses of the consumers.

One thing is for sure, these revenues will have to be made up somewhere. The question is where? With these questions still open, and a whole bunch of change coming, governments will soon be in No Man’s Land.

Featured Image: chombosan/Shutterstock
Source: TechCrunch

With changes to price-matching, Amazon and Walmart usher a new era of retail

With changes to price-matching, Amazon and Walmart usher a new era of retail

Walmart and Amazon both recently changed their price matching policy, and the changes may be a harbinger of things to come in the retail world.

Walmart would match a competitor’s price if a shopper showed an ad for the same product, while Amazon’s shift is in regards to a price drop for a recently purchased item.

If the price of a product dropped within 7 days…the customer would receive the difference. The assumption is that third party applications that track refunds have made an impact on how Amazon adjusts its pricing algorithm and has resulted in lowering margins retroactively.

As a former retailer who has matched pricing from Amazon, I was able to see Amazon dropping at cost or even below cost at times and offer some of the lowest prices around.

As a former competitor to Amazon, I saw long ago the need to “get out of their way”…but that’s another story.

While this policy made it hard on competitors to compete, lower prices helped Amazon build a loyal customer base and grow its business.

The change in the refund policy addresses this “hole” third party applications exposed, enabling Amazon to continue their pricing fluidity without retroactive harm.

In fact, Amazon has managed to build their business into one of the most searched upon properties on the web, rivaling even Google in that regard. Amazon’s growth in search has been well documented — pegging them at taking 44% of all direct searches for products, over search engines at 34% and all other retailers at 21%.

With the billions spent on ads on properties like Google, Facebook et al., Amazon’s “control” in this space equates to billions in savings on advertising and a massive competitive advantage.

amazon boxes

The shift in the Walmart’s refund policy is also interesting. Walmart feels they no longer need to price match competitors, which signals that they feel they have a strong enough brand to support the elimination of the perceived “lowest price guarantee policy”.

Over the years, Walmart has also managed to establish itself as a retailer with a powerful physical and online presence. With continued  investments in logistics, which help support lower prices, they are in a unique position to compete with Amazon and have done a superb job transitioning from a traditional retailer in the face of technology changes this past decade.

But shifting their refund policies in the face of competitors who maintain their “lowest price guarantee” goes against what consumers have come to expect from retailers for decades.

The only conclusion we can make from this change is both Amazon and Walmart must feel comfortable enough with their brands to the point where they feel they won’t easily lose customers.

The Threshold Shift

In the evolution of the retail industry, this change signals a shift in what both retailers believe to be the threshold for consumer abandonment.

Amazon and Walmart feel that their competitors have been weakened to the point where they are no longer a credible threat — and their customer base is loyal to a point where both retailers have established themselves in the marketplace as THE places to shop.

For Walmart and Amazon, it is now time to begin increasing margins in a calculated way. And the adjustments in their refund policies are a small first step in that direction.

With Amazon’s ancillary services like Prime, Echo and efficient logistics, they’ve got great complementary components that competitors can’t match. And Walmart’s physical presence, size, matching logistics and continued innovation they are the only real rival to Amazon.

Any slight price “increases” will likely outweigh the benefits of shopping elsewhere.

With the already strong perception of great prices, selection and service, consumers know they can get what they want, at a good price efficiently. Why should they take a chance on any other brand?

In the grand scheme of things, it appears we have just reached the point of a new evolution in retail.

Featured Image: Radu Bercan/Shutterstock
Source: TechCrunch