Recently both Alphabet and Apple have signed partnerships with vehicle hire companies as part of their respective autonomous vehicle programmes.
Waymo, the Alphabet subsidiary (formerly Google's self-driving car project) set up to develop self-driving cars, has joined forces with international car rental company Avis, which leads the market for renting to the business sector in the United States. Under the agreement, Avis is managing the fleet of autonomous cars deployed by Waymo in the city of Phoenix, Arizona. Waymo set up a pilot project in April, offering volunteers the opportunity to take one of their vehicles to the destination of their choice. In return, they are asked to give the company their feedback.

waymo - chrysler partnership

The vehicles deployed by Waymo are also the fruit of a partnership forged in May with US-based Fiat Chrysler Automobile. They are basically Chrysler’s Pacifica hybrid minivans, which Waymo buys from Chrysler. Avis has been given the role of housing and maintaining them, using its existing infrastructure. The agreement is non-exclusive, is scheduled to run for a number of years, and does not provide for any capital stakes to be taken. Meanwhile Apple has signed a contract with Hertz, the number two car rental company in the United States in terms of revenue, vehicles and geographical locations. The agreement will enable Apple to rent out its hybrid SUV Lexus RX450h in order to test its self-driving software. Half a dozen vehicles are already riding around the San Francisco area using the software.

Combining software and hardware 

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Some might find it surprising that two state-of-the-art technology companies would team up with representatives of a sector which has not seen much change for quite a while. The reason is basically that Alphabet and Apple are both more interested in developing technology, essentially the software, than in the day-to-day management of fleets of autonomous cars, a field in which neither company has any experience whatsoever. “With members of the public using our growing fleet of self-driving cars, our vehicles need standard maintenance and cleaning so they’re ready for our riders at any time of the day or night,” explained Waymo Chief Executive Officer John Krafcik, pointing out: “With thousands of locations around the world, the Avis Budget Group can help us bring our technology to more people, in more places.” Apple, which was originally planning to build its own vehicle, finally decided to focus its efforts on artificial intelligence software, as CEO Tim Cook explained in an interview with US media company Bloomberg in June: “We’re focusing on autonomous systems… We sort of see it as the mother of all AI projects. It’s probably one of the most difficult AI projects to work on... It’s a core technology that we view as very important.” 

In addition to their expertise in managing a large vehicle fleet, car rental firms also bring to the partnership their clientele, their financial assets and their infrastructure, which should provide the new tech giants with the means to fulfil their aims in this field. Avis has no less than 11,000 outlets worldwide, on which Waymo can now rely to maintain the vehicles that are the key to its future expansion plans.

Not having to build the servicing infrastructure yourself, nor recruit people to work there, is a great advantage in this highly competitive market. John Krafcik estimates that his autonomous shared vehicles will do on average six times as many road miles as privately-owned cars: maintenance will therefore be a crucial aspect of the venture. Also worth mentioning is that in 2013 Avis acquired Zipcar, a startup also specialising in car rental, but based on a more flexible, innovative business model that has proved highly successful with a younger clientele. The million Zipcar users – among them a large number of tech fans – together with the more traditional Avis customers, enable Waymo to reach out to a large audience. Also important is the fact that Avis and Hertz do not only rent cars to individual users; they also rent fleets of vehicles to companies. They are therefore in a position to convert their entire business fleet to autonomous mode, a real drawcard for players working to promote self-drive technology.

In short, though rental companies may lack the innovation capabilities that characterise their Silicon Valley counterparts, they have all the material resources for deploying the technology on a large scale.

On their side, Avis, Hertz and similar firms have everything to gain from setting up this kind of partnership. The arrival in the sector of new innovative players such as Zipcar and Getaround, combined with the boom in on-demand mobility, exemplified by the success of companies such as Lyft and Uber, have seriously hammered their business. During the past year Hertz shares have lost 75% of their stock market value. Traditional car rental firms now have an opportunity to get back into the race and carve out a place for themselves in this new sector, which promises to transform the automobile market for the long term.

Autonomous, electric, shared taxis on the way?

The entire automobile landscape is now in the middle of a major reshuffle. Given that there is no player in the game at the moment that holds all the cards it requires to take a clear lead in this business, we are currently seeing the formation of alliances, in which some players contribute their software expertise, others their carmaking know-how, and yet others provide their ability to manage large vehicle fleets. Waymo has also teamed up with Honda and Lyft. Lyft has done a deal with General Motors – which has its own departments working on autonomous vehicles and car-sharing – and with Nutonomy, a startup specialising in software design for self-driving cars. Getaround, a peer-to-peer car sharing and local car rental intermediary, is working with Toyota, which in turn has its own department working on autonomous vehicles. From the range of alliances, we can see several possible models emerging. 

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Tomorrow’s road vehicles will be electric, self-driving and shared

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The first option would be to convert to self-driving mode all the vehicles belonging to car rental companies, which would continue operating more or less as they do today but more flexibly, with their customers using apps to order a car, plus other convenient functionality. This approach, which would be fairly easy to implement, is however not the most profitable, as it does not enable asset optimisation. If everyone rents his/her own self-driving car for his/her own use, this will not bring huge gains in terms of traffic reduction, lowering pollution and freeing up more urban space. In order to maximise the benefits of such hired vehicles, we would need to prevent individual people from occupying a car capable of taking four or five and also end the practice of stationary cars waiting for their owners in apartment building car parks.

A second, more complex option would be to transform all vehicles operating in towns and cities into a vast ecosystem of electric, self-driving, shared taxis, managed and maintained by car rental companies, which anyone could order via an app, and which would circulate in the area non-stop. L’Atelier has been arguing the benefits of this kind of ecosystem for a long time. This approach would enable society to draw on all the core benefits of self-driving car technology. If this vision of the future is to be turned into reality, the public sector will also need to get involved alongside the private sector players. The New York and Los Angeles authorities both recently announced that they were working on creating this sort of ecosystem, which is surely a step in the right direction.

By Guillaume Renouard