Uber's deal to purchase 24,000 Volvos for a driverless fleet signals a shift in the auto industry.
Uber's agreement with Volvo to purchase 24,000 new SUVs over the next four years for an autonomous vehicle fleet should be good news for car companies. After all, the move will add around $1.4 billion to Volvo's bottom line.
Since each new car dealer in the US on average sold about $56 million worth of vehicles in 2015, the Uber-Volvo deal would be the equivalent of the annual sales of about 25 dealerships. While this is a fraction of the just over 500,000 cars Volvo sold worldwide in 2015, the Uber transaction does not involve overhead such as dealer incentives and support and could be a model for large-scale vehicle sales in the future.
Waymo struck a similar but much smaller deal with Fiat Chrysler America (FCA) to buy 1,000 Pacifica minivans to test its autonomous technology on the streets of Phoenix. The Alphabet self-driving vehicle division is already making the Pacificas available to the public—eventually without a human behind the wheel—as part of a robo-taxi testing program. So it's likely Waymo will order more minivans to expand its fleet.
Waymo Chrysler Pacifica Hybrid minivan
In both cases, Uber and Waymo add their own sensors and software to enable the vehicles to be self-driving. But according to Bloomberg, the Uber deal could help lower the cost and speed up delivery of Volvo's "own fully autonomous cars planned from 2021" since "Volvo engineers have been working closely with Uber to develop a base vehicle with core driverless technology that the ride-hailing company can then augment."
Self-driving technology has already made for strange bedfellows, with multiple automakers signing deals with Uber and Lyft—GM is working with both. But while selling 24,000 vehicles in one fell swoop and working on self-driving technology with ride-sharing companies and tech giants like Google may be attractive to automakers, car makers could also be facilitating their own demise.
Planning for Peak in Car Ownership
A recent study by IHS Markit predicts that by 2040 sales of vehicles to private owners will fall nearly 20 percent annually in the US, Europe, China, and India. But the vehicle miles traveled per year in those areas will go up 65 percent to 11 billion miles per year in the same time period.
IHS Markit added that this is due to ride-sharing services' expected purchase of more than 10 million vehicles in the US, Europe, China, and India over the next two decades as the companies move away from human drivers. This contracts with 300,000 vehicles ride-sharing services are expected to purchase in 2017.
The Uber-Volvo deal signals a huge shift in the auto industry from individual car buying by consumers to large fleet purchasing by ride-sharing services like Uber and Lyft, IHS Markit said. In the future, self-driving cars will be about "doing more with fewer resources," Jeremy Carlson, an automotive analyst for IHS Markit, told The Detroit News, "which from a tech perspective means we're able to optimize and efficiently use our resources a lot better."
This also means that car companies could increasingly become suppliers for ride-sharing services, and move from being consumer brands to a commodity product. And car companies as we know them could cease to exist.
