Transport as a service – a disturbing boom

What’s in common between the oil industry, the automotive sector and the digital world? For many decades the oil industry and the automotive sector have remained in a win-win partnership. Both lived and flourished in a petroleum + internal combustion engines symbiosis. Cars and trucks have been a de facto natural outlet for the oil industry. Waves of innovations, aimed at reducing oil consumption per kilometer, were compensated by the worldwide growth of car sales and car users.

Then came the Internet, changing our daily lives, especially through the web 2.0 revolution. At first glance, there was no clear impact of the IT world to the energy and the automotive sectors, ! But step by step a series of new services (car sharing, flexible car rental, and autonomous driving) developped in every conurbation. As a new generation of digital natives entered the mass market of global consumers, the value of cars started to be challenged by new objects such as a « simple » smartphone that runs on electricity. And to be noticed: smartphone run thanks to lithium batteries.

For a few hundreds of Euros and less than 120 grams (compared to € 15,000 and often 1200+ kg for a basic car!!) mobility services are getting every time more affordable, flexible and reliable. As a consequence, the habit of car ownership is being seriously challenged, especially in large urban areas. As people get more options for their daily commuting, they can better perceive the total cost of ownership (including insurance, maintenance, parking fees and other hidden expenses).

Futurist Tony Seba, an economist at Stanford University, predicted the solar industry boom when most observers remained skeptical. In Oslo, Norway, he recently explained the power of the combination of 4 key disrupting technologies. Here they are : energy storage, electric vehicles, autonomous driving and solar energy. According to Pr. Seba, ICE reach the limits of thermodynamics laws. Economic realities are leading the way to a complete new horizon for mobility. An electric car is 10 times cheaper to fill in than an ICE equivalent car. Constant improvements are being made in order to make the complete supply chain more cost efficient.

Tony Seba

The perspective of getting one’s own energy from solar panels should lead to virtually zero marginal costs, as Jeremy Rifkin described in his last book on zero marginal cost. In the meantime, oil extraction is getting more and more expensive as oil manufacturers keep on drilling deeper or extracting more non-conventional petroleum and face higher pressure from environmentalists and legal constraints. In terms of mechanics, the ICE is way more complex and less reliable on the long run than the robust and way less complex EV.

Tony Seba pretends that the Silicon Valley innovators are about to make not only fossil fuel industries obsolete. They might as well make the nuclear and the big centralized electric utilities somehow useless. The USA and China are strongly investing in battery manufacturing and other alternative storage technologies. Meanwhile, as the global EV and hybrid market develop, the unit cost drops thanks to economies of scale.

In terms of cost (a killer in disruption and market transition), Tony Seba predicts that by 2020 (nearly tomorrow!) the buying price of EVs will be as cheap as for ICE vehicles. Therefore, taking into account almost free energy refills and way cheaper maintenance costs, sticking to oil-based cars will make no sense. Therefore, no one should be surprised by the great strategic turn of the major automotive players. Toyota, Renault-Nissan and Volkswagen are already leading the way, while chinese and corean counterparts are also getting ready. Not so long ago, most german automobile brands would simply laugh at the perspective of mass-market EVs. They would find any possible excuse for blaming the « no future » of any kind of alternative technologies. As Gandhi once stated: « first they ignore you then they laugh at you then they fight you then you win ».

But keep this in mind: what we are witnessing nowadays isn’t a simple replacement in terms of product offer. Beyond a pure technical change or improvement (and only time will tell whether this will drive actual human progress) what we’re about to see is a cultural change – in other words a different approach for urban mobility. OK then, what about today? As always, we tend to only believe in what we can see. Resistance to change is deeply rooted inside us.

According to Seba, major IT players such as Google, Apple and their subcontractors (Foxconn for Apple) are already bidding on the future of « computers on 4 wheels ». Billions of USD are being invested every year. Wind of change is blowing right now…

Laurent

 

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