DENVER -- The future of automotive transportation can be summed up by one acronym: ACES.
Autonomy, connectivity, electrification and sharing technologies will shape the future vehicle fleet—and ultimately, the fuel retail business—but the question is when.
At the recent Fuels Institute Annual Meeting, presenters and more than 100 attendees representing the convenience-store, automotive and fueling industries gathered in Denver to discuss the potential of these technologies while also attempting to gauge when exactly they will hit. Beyond regulatory and economic factors, one element will shorten—or lengthen—the timeline: the consumer.
“If you’re asking consumers to adopt shared mobility, you’re asking them to overturn more than 100 years of habit,” said John Eichberger, executive director of the Fuels Institute, Alexandria, Va. He has adopted a more pragmatic—or as some would say, “curmudgeonly”—attitude toward the pace of adoption. He predicted that the ACES technologies and consumer readiness will intersect at some point in the next 20 to 25 years.
Read on for five insights on an ACES-centric transportation future. ...
When it comes to the future of mobility, there are two common viewpoints on its development, according to research by Deloitte, New York. One is held by industry insiders, who think technology will evolve incrementally; the other “disruptor” view believes we are currently at a tipping point, and that the new age of fully autonomous vehicles is only five to 10 years away.
The question, however, is how fast will consumers accept the change? In its Global Automotive Consumer Study, a survey of 22,000 consumers in 17 countries, Deloitte found a clear difference in receptiveness to automated vehicles. For example, consumers in China and India were much more open to different levels of automation than those in the more developed markets of the United States, South Korea, Japan and Germany. This could be because traffic fatalities are much higher in those less-developed countries, and consumers see automation’s potential to make transportation safer.
In fact, safety is a big selling point of autonomous technology in general. The top four autonomous features that all consumers said they were most interested in all involved safety. The least popular features: service enablers, or tools that assisted with tasks such as finding a parking spot or paying a fee.
Imagine a world where cars do not need to follow the three-second rule of driving—the rule of thumb that a driver should stay at least three seconds behind a vehicle in front of him or her to maintain a safe stopping space.
Instead, what if vehicles were automated and would only need one-third of a second of space to stop? This would be the world of connected transportation, where cars speak to each other and to the infrastructure. In this case, not only would travel be more efficient, but it would be easier and greatly expanded—more vehicles could fit on a road, according to a Cisco Systems analysis.
Some vehicles already are broaching these capabilities. Tesla’s Model S, for example, offers 4G connectivity. Not only is it a nice selling point, but the feature allows the vehicle to provide continuous feedback to Tesla on its performance, so that the electric-vehicle manufacturer can make tweaks to improve the customer experience.
It’s the forefront of machine learning, where a vehicle can learn as it drives.
Projections on when the vehicle fleet will become electrified range from very aggressive to very conservative. For example, Tony Seba, a lecturer on entrepreneurship, disruption and clean energy at Stanford University in California, predicts that all new vehicles sold will be electric by 2025 because of their cost savings. Some oil majors, meanwhile, have more modest expectations.
Proponents of an aggressive scenario would point to the plummeting cost of batteries, which are the biggest price component of an EV. According to Business Insider, battery costs have fallen 90% in the past six years. Between 2021 and 2024, batteries will reach a price point that places EVs around the same cost of a conventional gasoline-powered car, according to the Rocky Mountain Institute (RMI), a Boulder, Colo.-based nonprofit that focuses on clean energy.
Even now, EVs have lower ownership costs. According to the institute’s estimates, driving an EV costs about 3.6 cents per mile, vs. 9 cents per mile for a gas-powered car, assuming gasoline at $2 per gallon. Gasoline would have to cost 80 cents per gallon to be competitive.
The conservative estimate would argue that consumers do not have awareness of ownership costs, especially on a per-mile basis. But will the growing familiarity with ride-hailing services, which typically price rides on a per-mile basis, change that mindset?
In Deloitte’s Global Automotive Consumer Study, 23% of U.S. consumers said they used a ride-hailing service such as Uber or Lyft at least weekly, and this share is expected to grow at a highly accelerated pace. Of those who use a ride-hailing service, 52% said they question whether they needed to own a vehicle in the future. This includes 64% of millennials and Generation Z.
There are real implications for the vehicle market. After seven straight years of growth, vehicle sales have been softening in early 2017. Car sales were down nearly 500,000 units over the past five years, and off 300,000 units from 2016 to 2017, according to Ward’s Automotive. Truck sales have countered some of the sales erosion—they rose by nearly 1 million units in the past five years, and were up 150,000 units from 2016 to 2017, thanks to low gasoline prices.
Consumers’ openness to ride-hailing services, however, could be what transforms a cyclical vehicle sales decline into a structural one.
The future model
An ACES transportation market would be transformative to the current fueling and vehicle retail models.
For example, some might assume that automated vehicles would naturally be electric, but this is not necessarily a given. While there may be synergies, other alternative fuels such as liquefied natural gas could have application in a scenario where automated vehicles are owned as fleets and refueled at a central hub.
In this scenario, what need would an automated vehicle have to stop at a gas station? Even assuming an automated vehicle was gasoline-powered, its passenger would likely not want to be involved in the fueling process.
In an ACES world, would it make more sense for carmakers to offer the service of automated vehicles on a usage-fee basis? For example, a consumer would get all the travel they desired for a monthly subscription fee of $500.
As attendees of the Fuels Institute meeting learned, the timeline for these transformative changes is up for debate; their inevitability, however, is not.