Amazon places a bet with Aurora, Airbnb wants to be a transportation company - SAI Newsletter #6
Although China is still celebrating Chinese New Year, lots going on in the U.S.
Thank you to those who pinged me about my grammatical mistakes in last week's newsletter. I will try to do a better job of catching them before I press send in the future.
I am currently in Detroit and will be in SF by this weekend. It's great learning more and more about what's happening in each of these locations. One of the big wins for Detroit was Waymo announcing that they tapped Detroit to help them retrofit their Jaguars and Pacificas to transform them into their autonomous vehicles.
GM this week also started laying off people as part of their restructure and unfortunately someone in my family was affected. An ex-GMer and my good friend Mike Diaz wrote a terrific note of encouragement that he posted on LinkedIn addressed to those who got laid off this week. His advice could be used any number of tough situations so I encourage you all to have a read.
For you new readers, my name is Tu Le and I am the founder and managing director of Sino Auto Insights. This weekly newsletter is a collection of articles I feel best reflect the happenings of the week or important trends that have effects on the automotive and mobility sectors here and in the U.S. I also provide a point of view that I hope educates and sparks debate about how I look at the issues. We will mostly divide our articles into these buckets: AI, Mobility/Ridesharing/Ride-hailing/Bikesharing, OEMs, EVStartups, Investments, and Other. If you know of anyone who would like to sign up for this newsletter please have them visit: www.sinoautoinsights.com. Thanks for reading.
The Sino Auto Insights team
This is the type of risk other automakers need to make. I applaud the VW management team in recognizing that there was opportunity in crisis but if automakers are going to lead Version 2 of the transportation sector, they’ll need to keep taking chances that in the past were deemed and calculated to be too risky. The key is not waiting until a crisis drives this risk-taking, it needs to become part of their DNA.
I think it’s far too early for the VW management team to pat themselves on the back for making this decision to FULLY embrace the EV. Although the article states that the old guard has been mostly pushed aside, can change happen, the type that really transforms companies, if most of the replacement managers are bred from or have been mentored by the ‘old’ guard? Not to mention that none of them have ANY real tech experience?
Mary Barra also recognizes that in order to be a player in the future, GM needs to cut the dead weight and take chances on opportunities they see for themselves in the future. That’s a major reason for the massive layoffs that happened in Detroit at the Warren Tech Center and the Ren Cen in Detroit.
Bets have been placed. GM opened with an $8B investment in EVs, Daimler raised to a whopping $42B but it wasn’t until 2 months ago that VW re-raised Daimler with an $80B over the top ‘all in’ bet. Those that follow poker know that moves like this are a tell to the other players that their hand is rather weak and that they’re trying to buy the pot. Comparing at absolute investment amounts might not be that useful as VW sells many more vehicles than Daimler and GM did not have to get past a diesel-gate type scandal. No one can see around corners but VW and GM are large enough and in enough countries that they could make their bets on the future come to life.
Although Aurora came on the scene later than Waymo, Cruise, Argo, and other AI startups, it didn’t take long for them to make a $530M impact. That’s how much was raised for their Series B funding from Sequoia Capital, T. Rowe Price, and Amazon.
The bench strength of the management team is about as good as any in the biz and a lot of people are long Aurora believing they could make a big impact and with this Amazon tie-up, it looks like they’re trying to do just that.
The investment by Amazon is where this gets interesting since up till now, most AI startups have focused on collecting data so that their autonomous taxis are ‘safe enough’ at level 4-5 autonomous. Amazon didn’t make this investment so they could sit on the sidelines and just watch their money grow so the conventional wisdom is that they’ll use the tech developed by Aurora to deliver products autonomously to people under their Prime subscription.
Commercializing and monetizing the delivery of goods will likely happen much faster than getting Level 5 cars on the road en masse so this could be the first of many cross-pollinating business opportunities for the AI companies.
The Trump Administration signed an executive order this week to help ignite the development of AI in the United States. There was very little detail about how they would actually accomplish this nor any amount of funding specified to pay for policies & programs that will fall under this executive order.
We can now at least confirm that the U.S. government recognizes the importance of AI to the future of the U.S. economy. Although little on detail, this is a VERY big initial step for the U.S. and their ability to maintain leadership in the space. Will keep an eye on this and update as we learn more about the specifics.
For those of us following the sector, this headline doesn’t surprise us but this article just puts numbers around how much ahead China is when compared to the U.S.
Difficult to look at absolute numbers since China sells many more cars than the U.S. so it would’ve been nice for the author to normalize these numbers so we could compare apples to apples, but you get the idea.
It’s no surprise that Tesla leads the way in the number of charging stations they have set up in the U.S. since they are the current de facto EV manufacturer as well.
Chinese EVStartups have to be studying this as well though. Until there is a standard agreed upon in China and/or globally, the EVStartups that are able to strategically invest in charging stations for their vehicles will definitely have an advantage they can market and tout during the sales pitch.
These companies all need to walk a tightrope though since too much investment in charging stations takes away capital for other areas of R&D. Too little and it could constrain sales of their bread and butter.
If EVStartups are looking at this strategically and not just a dollars and cents standpoint, then providing numerous, conveniently located charging stations is part of the overall ‘user experience’ for the brand. We know that a terrific user experience creates a halo effect for the brand which can be turned into sales. The opposite is true for a bad user experience though. This is likely a bridge to batteries that provide a much longer range so depending on moore's law and how optimistic these companies are about when that will develop and be priced competitively, it may make more sense to invest in just enough, whatever 'enough' means.
As we debate the when’s, who’s, where’s and how’s, it is easy to gloss over what should be one of the main goals of rolling out autonomous vehicles, which is making transportation affordable for everyone to utilize.
Robo-taxis will be a big piece of the revenue puzzle in the future for many OEMs and tech companies since these services will likely be the future of the sector. Unless these companies are truly able to reduce capital costs, robo-taxis will still be too expensive, like Uber and Lyft now, for most of the U.S. population.
This study looks at how the poor, due to their inability to afford robo-taxis, will disproportionately be at more risk in a car accident because they will likely be driving in older vehicles that do not have the latest safety features.
Until Uber, Lyft and any other future mobility company are able to convince total strangers to share rides in order to reduce the overall number of cars on the road theoretically reducing traffic congestion, they will still be contributing to the traffic & pollution problem. Since traffic jams affect everyone, including those folks that use public transportation or their own vehicles to get around, should these companies be required to provide or at least subsidize in some way transportation that couldn’t otherwise afford their services?
As scooters become more ubiquitous across American cities and injury studies and reports pile up about their dangers, a couple of observations can be made.
First, and I haven’t gotten into the details of the types of injuries but there has to be an opportunity for helmet companies here. Right now, about ~4% of e-scooter users wear helmets. If there are helmet requirements placed on the e-scooter economy, would that effectively end the e-scooter craze?
Second, all those startups that are developing an e-bicycle should feel pretty good that if they go to market with a safe, durable (near bulletproof) alternative to the e-scooter, work with municipalities to get the service rules, policies and etiquette down they could take over this ‘last mile’ challenge from the likes of Lime and Bird.
The e-scooter startups probably have a pretty good idea of what are the main causes of accidents and are working on prototypes that help either avoid or prevent those types of accidents from happening.
Unless there is absolute certainty that e-scooters can be a safe form of transportation for users and bystanders, there will be an opportunity for e-bicycles to come in and provide an alternative that can go farther and likely be much safer.
Airbnb knows where a lot of people are staying. If viewing through that lens, it would make a ton of sense to also help these people get around. Immediately, I can think of two or three transportation providers they can partner with that would help them quickly become a player, a player that has leverage over their partners.
Look forward to the initiatives they’ll undoubtedly roll out in the next 12-18 months.
Sino Auto Insights is a Beijing, China-based market research and advisory firm that specializes in assisting companies analyze, strategize, and develop products and services that will shape the future of mobility and transportation. Members of our team have experience working in Detroit, Silicon Valley as well as here in China across multiple sectors and functions as entrepreneurs as well as working at larger companies like Apple, Google, Amazon, GM and FCA, and many others.