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There are four waves of innovation sweeping through the automotive industry that will disrupt vehicles more in the next 10 years than they've changed in the last 100.

Each week, we explore connected cars, electrification, changing ownership models, and autonomous self-driving vehicles, as we seek to understand and prepare you for the future of transportation.

Jun 25, 2019

EP011 - Announcements, News, and AB 5

http://www.vehicle2.getspiffy.com

The Vehicle 2.0 Podcast is back for the summer! Episode 11 is a news-focused episode, recorded on June 25th, 2019. We start off with an exciting piece of Spiffy news, which kept us busy during a several-week-long break. From there, Scot rounds up an array of industry news and explores their impact on the Vehicle 2.0 realm, including:

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The four pillars of Vehicle 2.0 are electrification, connectivity, autonomy, and changing ownership models. In the Vehicle 2.0 Podcast, we will look at the future of the auto industry through guest expert interviews, deep dives into specific topics, news coverage, and hot takes with instant analysis on what the latest breaking news means for today and in time to come.

This episode was produced and sound engineered by Jackson Balling and hosted by Scot Wingo.

 

Transcript:

Scot: 

[00:56] Welcome to the Vehicle 2.0 Podcast! This is episode 11 and it's being recorded Tuesday, June 25th, 2019.

Scot:

[01:04] Welcome back vehicle 2.0 listeners. We had a little gap in episodes there and I apologize for that, but we are ready to get back on at least a biweekly schedule here with our little summer pre-summer break that we took. Um, we have a lot of exciting guests lined up in all of our favorite topics, so look forward to bringing you guys that soon. The main reason we took a gap was something that I want to start off with today. This is gonna be a news episode and we're going to kick it off with Spiffy's big news. So today we are actually announcing that we have raised over $10 million in funding led by Tribeca Ventures.

Scot:

[01:40] And then over the last year we've been stealthily opening fleet-oriented cities, so we're excited to announce that we're now in 11 markets. We have our first five markets, which were Raleigh, Charlotte, Atlanta, LA, and Dallas. And now we've added an additional six: New York City, Washington, DC, Seattle, Phoenix, Denver, and this week we opened Tampa. The last thing we're announcing today is our new service for fleets that we call "Fleet Management as a Service" (FMaaS). Working with fleets for the last couple of years, we realized they are looking for a comprehensive solution to all their challenges that integrates software services and a green orientation. So we'll be covering in fleeting. So services such as pre delivery inspections, re-conditioning and fueling, uh, and then through preventative maintenance, which is obviously wash and oil where we're known for, but adding a lot more capabilities there around tires and other PM activities. And then finally, the last cycle, last part of the lifecycle is d fleeting. So as these vehicles are leaving fleets, we can help there too. Uh, so reconditioning them, listening to them for auctions and defueling are some of the areas where we're helping fleets with. So excited to get that out there. That's been keeping us really busy here at Spiffy and we're glad to have that out in the news today.

Scot:

[02:59] With that, let's pivot away from spiffy and talk about the news in the industry. So as you know, the vehicle 2.0 framework has four components: connected car, changing ownership, electrification, and autonomy. So let's start with connected car, a lot of activities here. Since we last talked to you, Spiffy announced Ford had their announcement about connected car and they were in there with Amazon and Spiffy was included as well. So a lot going on in connected car, a Fiat Chrysler announced a new marketplace called you connect market that's part of their in vehicle marketplace platform.

Scot:

[03:39] Uh, and they talk about how customers can skip lines and save time by ordering food, beverages and reserve tables. They're launch partners are shell, Domino's, Park Whiz and Yelp. So it's gonna be interesting to see how, how some of these things are delivered. Should they be in the dashboards? Should they be in the OEMs APP or should they be separate apps with OEM connectivity? A lot activity, they're going on. A report came out in June, um, from the transparency market research firm, uh, about the connected car and they say that the connected car device market will surpass 20 billion by 2026. Uh, in there, uh, I definitely recommend that report. We're going to link to it in the show notes. A so in there it's pretty nursing. They talk about how by 2023, uh, OBD to dongles will essentially be, you know, uh, slowed down substantially as that's the kind of the point in time when they see the lines crossing where the automakers connected car capabilities will surpass kind of the what's called the retrofit devices that are out there changing ownership.

Scot:

[04:42] A lot of news this week. So, uh, here in 2019 we've enjoyed the IPO of both Lyft and Uber. And now there's just, yeah, there's a daily drumbeat of news coming out of those. Um, the, the one I wanted to talk about that's really interesting and a lot of people in industry are keeping their eye on is we have this larger gig economy. So not only do you have ride sharing like Uber and Lyft, uh, but all the food delivery, um, even like Amazon utilizes 10 99 drivers for delivering a bunch of its packages, uh, et cetera. So, so that, that Gig economy 10 99 is a really interesting part of the economy. Well, California has a law called in in the works called ab five. Uh, and this is actually passed kinda half of where it needs to go. And what it would do is it would dramatically tighten the rules around who can be treated as a 10 99 contractor versus a w two employee.

Scot:

[05:37] Uh, essentially when you read the rules, a Lyft, and Uber drivers would squarely be in the target here and they would move over from 10 99 contractors to w two. So this would subject them to all the normal employee rules, such as a 12 minutes, $12 an hour minimum wage, a daily and weekly over times, et cetera. Uh, what's this mean for Uber and Lyft? Well, one analyst, Ross Sandler at Barclays did a really kind of interesting back of the envelope here. So Uber has around 3.9 drivers globally. Half of those are our domestic and he estimates about six to 7% of those are effectively California trips. Lyft has 2 million drivers, all domestic. Um, so he believes they have about 15% of their businesses, California, so about double the exposure of Uber. Um, and then when you, when you kind of take the math, they're essentially, this would increase Uber's losses by 500 million, uh, annually.

Scot:

[06:33] Uh, 13% increase in Bern, uh, and then lifts 290 million or a 24% increase in Bern. So Wall Street's kind of keeping a very close eye on this and it's gonna be interesting to see how it plays out. Um, at the same time as these, since these guys have gone public there, they're working on their unit economics and trying to show investors that they're improving those. Uh, so for example, Lyft has been increasing. Uh, it's, uh, it's take rate, which means less pay for drivers. Uh, so for example, in the, uh, Xcel and black car segments, which are the larger vehicles and the limousine segment, um, they've decreased the pay out to drivers five to 6%. So there's definitely this showdown happening between the ride sharing companies and drivers, uh, and municipalities like California that we'll be keeping a really close island. Uh, another interesting, uh, segment of, uh, the changing ownership is subscriptions.

Scot:

[07:28] So these have had mixed results. So a lot of the OEMs came out with subscriptions. Um, Mercedes for example, this month announced they're actually expanding their program to add it to Atlanta. I believe that launched a national and now they're, they're adding more cities at the same time. Earlier this year, a Cadillac pulled back their offering. Well a new company threw their hat in the ring this month and that hurts. They launched my car, which is their subscription service. Uh, so if you go to hertz.com/hurts my car, uh, you can read all about it. They have two tiers to have $1,000 a month here and a $1,400 a month here. Uh, that's expensive. But when you read what's included is pretty interesting. So it includes insurance, all maintenance, uh, and there's really just kind of a month to month commitment and you get to swaps per month.

Scot:

[08:15] So the different tiers you have different classes of vehicles. So essentially tier one is kind of like that. Um, the, the one tier below kind of where you can walk up and get any fancy car. Um, and then the 1400 a month, uh, includes a lot of the hurts of select a vehicle choices. Um, this is targeted towards folks that, you know, um, have a lifestyle where, uh, you know, maybe most of the time they want to commute or tech car and then they want to go away for a weekend to the mountains and get an SUV or they want to go to the beach and get a convertible. So folks that are really kind of looking to swap out cars as part of their lifestyle and have everything taken care of them. So kind of that, that super convenience oriented consumer. Um, it's going to be, we'll keep an eye on the subscription programs and, and keep you posted on what's going on there.

Scot:

[09:02] Uh, let's move on to electrification. Uh, our next episode is going to be a heavy focus on electrification. So we want to save a bunch of time, uh, with you for that. Uh, but this week, uh, there was an announcement from BMW. So a BMW CEO essentially made a statement and said, by 2021, we will have doubled our sales and electrified vehicles compared to 2019. Uh, so they are heavily committed to electrification. Um, and by 2023, there'll be offering 25, uh, models there. Um, they announced they've sold 150,000 i3s in the US, which is the hatchback Evy. Uh, and then there are also investing in new plugin hybrid technology. Um, there's, there's a lot of interesting municipalities, uh, in Europe that are looking to have, um, you know, these, these areas that are called green zones where only I, uh, evs are allowed.

Scot:

[10:04] Um, so BMW is working on technology where the vehicle would detect that as entered one of these green zones. And, uh, essentially it'd be a plug in hybrid. It would only run the Evie as when it was in that part of the city. So a lot of really interesting things going on in the world. We're going to do a really big deep dive in the next episode. So that leaves autonomous vehicles where, uh, there's tons and tons of news. Um, so one of the first ones is kind of in the rumor category. So the, the information which is a, a publication focused on tech, um, it, it is reporting that they have heard. Uber is close to buying a company called Mighty Ai. A mighty AI is a Seattle based startup that helps autonomous vehicle developers trained their computer vision algorithms to identify objects better. Um, so you're seeing what I would call consolidation here, where, um, there's a lot of startups that do mapping and uh, you know, here on the show we've had folks that do the takeover driving type technology, et cetera.

Scot:

[11:06] Um, you're going to see, uh, the big guys, uh, Uber Waymo, apple, um, Jim's cruise division, uh, and then forward or kind of the five big a v providers. I think you're going to see them kind of start to grab some of these companies and make that technology proprietary in that genre. One of the biggest investors in this category is Softbank through their vision fund. Um, and they had a really interesting interview, um, where, uh, the managing partner that focuses on autonomy, Michael Ronen, uh, said that he doesn't think this is a really a winners take all, but it's kind of a quote unquote big boy's game. And by that he means the smaller independent companies are going to struggle because you know, the investments to play in this space are getting well north of 500 million to $1 billion would, which is certainly something that not many startups can stomach within, uh, within GMS Cruise Division.

Scot:

[12:04] Kind of some mixed news. In the last month, uh, on the negative side, they had this big demo, um, with uh, uh, one of their partners Honda where the CEO got into one of the prototype cruise vehicles. Um, and then about 20 minutes in, it was supposed to take this like little 30 minute ride around, I believe Las Vegas. Uh, and suddenly the car just kind of, uh, you know, freaked out. The software stopped. Uh, and then the, the backup driver had to take over and they couldn't really get the system restarted. And essentially they had to send a, another vehicle out there to pick them up the CEO and finish the demonstration. Having done many live demos in my life. This is a Murphy's law, always loves to jump in at the most inopportune time on these things. So, um, that was an example of, you know, probably what should have been a very gated experience kind of crashing.

Scot:

[12:54] Um, and obviously you wouldn't be, want to be in a car on the highway when that happened. Um, to that point, um, the, the CEO of GM Mary Barra, uh, talk, uh, to Axios, uh, I think in reaction to this and essentially said, um, that they have a very aggressive timeline to launch a self driving taxi. Uh, but they're not going to deploy the technology until it's safer than a human driver. So, um, they're, they're trying to start in San Francisco, uh, this year. But most folks realize that's probably not going to happen. Uh, another thing that we're starting to see is the OEMs are kind of partnering up with, with various folks if they don't have their own internal initiative. Um, so, uh, we also saw this month, uh, Renault in Nissan signed deals with Waymo where they're essentially going to be using the way mode technology as their Avy partner.

Scot:

[13:46] Uh, and then, uh, one of the, the, the remaining independents out there is called Aurora. That's a bunch of folks from Tesla and Google that got together. Um, that company is backed by sequoia has a, you know, it's kind of well over Unicorn status, so it's got like a $3 billion evaluation. Um, they signed a deal with Hyundai, Kia, and Fiat Chrysler. So you're starting to see the OEMs kind of line up with, with different folks and figure out who their partner is going to be so forward. Um, then, uh, they have their own initiative, uh, called Argo. Um, and they have locked up with Volkswagens. So Volkswagen kind of through their, their hand in with Ford. Um, they didn't really announce how much of the expenses would be shared. Um, but it is viewed that there, you know, the Volkswagen will probably invest in the Argo AI startup that is owning the, the Ford autonomy, um, and that a deal is imminent and should be announced as early as July. So appreciate you listening in this week.

Scot:

[14:55] So that's the quick news coming in from the future of vehicles with vehicle 2.0 next week, we are going to have a guest and do a deep dive into electrification and hope your summer's going well and safe driving!