The future of transport
Self-driving cars, vacuum-tube trains and flying taxis were until recently consigned to the realm of science fiction, but technology is now remarkably close to bringing these concepts to life, writes Callum Glennen in the BVCA Journal
Until quite recently, the fundamentals of the transportation industry remained surprisingly stagnant. Cars, trains, boats and planes have become more efficient, reliable and cheaper in the last 50 years, but systems and networks have remained relatively unchanged. However, technology has now caught up and the sector is evolving quickly. Driverless cars are approaching a standard that could allow them to be a regular presence on public roads, and transportation apps are providing the information needed to make public transport systems more efficient. The way people get from place to place has the potential to look very different in the next few years from how it does today.
The current transport revolution can be traced back to the development of car-sharing culture. Around the year 2000 a myriad of services emerged that allowed people to either access or lease cars left in convenient locations. All of these services capitalised on the idea that cars are an expensive asset that is largely unused. For some, renting a car only when you need it may be cheaper than owning one, and car owners should take the opportunity to generate a return on an asset that is often sitting idle. From here, the next round of innovation came in the form of ride-sharing companies like Uber and Lyft who took the concept another step forward; now drivers can share their car while they use it.
What these trends have led to is a rethinking of how transport assets can and should be used. Now, new start-ups and established players are working to develop transport systems that are far more efficient and effective.
Hitching a ride
Mass public transport systems like trains, trams and busses are not going to disappear, but are currently changing in significant ways. Timo Möller, Head of the McKinsey Center for Future Mobility, said high-density transport systems will continue to play a major role in urban transportation given their effectiveness and limited environmental impact. “The future system will depend a lot on the city’s characteristics such as density and income level,” he explained. Moreover, the current system will play a decisive role — one example: a city with an existing extensive rail network will use that in the future, too. What might change is that the train operation will be automated and more reliable. “We can also observe some general, more disruptive trends in cities worldwide,” Möller continued. “Many are moving into multi-modal, seamlessly integrated transport systems, offering ‘mobility as a service’ and incorporating new means of transport such as electric scooters and shared bikes.”
Möller also said these public transport systems will respond to actual customer demand. “Not fixed routes, but flexible routing based on changing demand patterns will be the answer, and therefore better utilisation and also better service quality.”
One company currently implementing this is Citymapper. The company known for its transport navigation app has turned its focus on using data to develop more efficient services. In 2017 the company experimented with smartbus services that reacted to customer demand, and in February 2018 launched a private hire service that operates within a network of designated stops. “It’s a bit like a bus because it has stops, it’s a bit like a cab because you book it and it has guaranteed seats, and it’s a bit like a metro because it has a network of roads,” said Citymapper president and head of business Omid Ashtari in an interview with The Guardian at the launch of the service. A similar approach has been taken by ViaVan, an on-demand ridesharing app that launched in London in April, which requires customers to walk to a nearby ‘virtual bus-stop’ where they meet their ride. ViaVan is a joint venture between Via, which has been operating in New York since 2013, and Mercedes-Benz Vans.
The other major development in the transportation industry is the self-driving car. Tesla, Google, Uber and many established auto manufacturers are currently working on getting an autonomous vehicle on the road. Uber’s ‘Autopilot’ feature can already perform tasks like driving down a freeway with minimal driver input, changing lanes and self-park, while Google’s Waymo team is focussing on getting an entirely automated fleet of taxis out soon. In 2016 General Motors purchased Cruise Automation and has claimed that it will manufacture an autonomous car without pedals or a steering wheel by 2019. While there have been many successful trials, the industry is now navigating a number of legal and ethical questions. Regulators across the globe have been taking differing approaches to trials, and a fatal accident involving an Uber self-driving car and a pedestrian in America in March 2018 has raised doubts as to their current safety.
While regulation is a concern for the feasibility of self-driving cars, Founding Partner at Hoxton Ventures Hussein Kanji said the number one issue for those working in the space is technology. “I think technology pulls regulation, versus regulation driving technology. We don’t really know what’s possible yet, and we don’t know how stable you can make these cars.”
In 2014 the Society of Automotive Engineers (SAE) developed a way of categorising how automated a self-driving car actually is. The ranks are between 0 and 5, with 0 being fully driver controlled and 5 being fully automated. Level 3 is the next step carmakers are targeting: a fully autonomous cars operating in a mapped setting with a human operator on standby to respond in unexpected situations. Kanji said opinion varies significantly as to when full autonomy will be reached, if at all, but believes the technology will eventually be available publicly. “My gut is that we’re going to have these self-driving cars on the roads, my gut is that it will be probably be a bit longer than two years, but it will be less than 10 years.”
To the skies
Based on current trends, Möller said the transformation of the global auto industry is only picking up speed. “Sales will nearly double by 2030, increasing from the current level of US$3.4 trillion to reach US$6.6 trillion. This jump represents annual growth of 4 to 5%. And while new offerings such as mobility services, self-driving cars, or electric drive systems account for less than 1% of total revenue today, their share in 2030 will be nearly a quarter. At the same time, traditional sources of earnings, such as vehicle sales (40% of revenue) or service and repairs (19%), will remain important.”
For venture capital in Europe, Kanji said investing in mobility is quite difficult. Building a single self-driving car is extremely expensive, making developing the fleet necessary to make an impact in the market a costly proposition. “Unfortunately, I think the two pioneers are Waymo and to some degree GM with Cruise, and I think this is going to be one where Waymo has a pretty good chance of building a semi-monopoly type business. Because if you’re the first mover, you get the fleet up on the road, you get the user experience really good, it should become an increasing returns-to-scale business.”
There are other developments on the horizon though. Hyperloop projects involve train-like carriages that travel through vacuum-sealed tubes at speeds not possible otherwise, but the technology is still in its early stages. Kanji said another potential is flying cars. Based in Munich, Lilium conducted the first test flight of its two-seat electric air taxi last year and has received over US$100 million in funding. Kanji said that it’s not clear whether the project will be successful, but of the handful of companies currently competing, Lilium is regarded as a leader. While a flying taxi might sound preposterous, the same could easily have been said of a self-driving car 30 years ago. The transportation industry has greater heights to scale yet.
