One thing that’s been puzzling me recently is where the automakers will stand in this self-driving, ride-hailing world. If we’re transitioning over to the world where end-consumers don’t buy cars anymore, won’t the revenue of automakers be slashed overnight?

Not at all.

Automakers could see their revenues soar as a result of a self-driving, ride-hailed vehicle future.

Let’s walk through all the changes in the revenue models automakers may encounter in the future (and also describe whether they’ll increase or decrease revenue for automakers):

1. Fleet sales will replace individual vehicle sales (decreasing revenue)

This is the most obvious change in the revenue model for automakers. Companies like Ford will be selling their vehicles as fleets (such as in bundles of 50 at a time) to companies like Uber (or whoever manages ride-hailed vehicles) rather than selling their cars one at a time to end consumers. Obviously this change will generate fewer vehicle sales for automakers as it’s more efficient for people to hail a car rather than purchasing one (e.g. for a group of 300 people, 50 ride-hailed cars could collectively service them on a monthly basis; in today’s world a group of 300 people may collectively purchase 100 cars).

2. Vehicle turnover will increase, driving more vehicle sales (increasing revenue)

As a result of how easy it will be to operate and hail a car, we can expect the usage of vehicles to increase significantly. In turn, this will lead to more vehicle wear-and-tear and higher vehicle turnover. Fleet managers will need to purchase vehicles more often — increasing the revenue for automakers and essentially canceling the impact of decreased revenue as a result of fewer vehicles being collectively sold.

3. Premium driving services will be introduced (increasing revenue)

Tackling boredom has always been a problem automakers have had for their drivers. But given the attention needed for two hands on the wheel, this was only an issue that automakers could focus on to some extent (they basically said “let’s put in a radio and bluetooth and call it a day”). But in a future where little human intervention is needed, what will occupants do during their “drive”? Companies like Mercedes-Benz are already thinking ahead with innovations like their F 015 concept car: set with services like the ability to participate in conference calls while on the go. Automakers may implement these “premium” features into their cars for occupants to use for an extra fee or a subscription.

Premium services like conference calling in the Mercedes-Benz F 015 concept car could be a near-term reality

 

Given the safety and simplicity that the future of driving will offer, automakers will also have the opportunity to appeal and satisfy two large audiences who typically don’t operate their own vehicles: seniors (aged ~65+) and children (younger than the permitted driving age). Automakers will be able to customize and implement special “premium” features in their vehicles for these new audiences.

Take child occupants for example, parents/caretakers may pay a premium for the ability to access a child safety camera while a child is in a self-driving vehicle.

4. Automakers may become full-on mobility companies (increasing revenue)

This prediction is a bit of a stretch (but then again, not many people thought much of self-driving cars 20 years ago!), but automakers may introduce completely new product lines where they attempt to solve other mobility needs for consumers rather than just manufacturing cars. In September 2016, Ford debuted a Segway-esque vehicle called the Carr-E which people can stand on as it autonomously moves to a short distance. Or people can put a package on top of the device and have the Carr-E follow them as they walk.

The twist with the Carr-E is that Ford has no plans of putting the concept into full-scale production. But it demonstrates that automakers haven’t ruled out the idea of being “more than a car company” in the near future as their revenue models and products drastically change.