CaaS — The future (or lack there of?) of the Auto industry?!

Recently we’ve seen news of companies such as Uber and Google teaming up with players from the auto industry to lobby for legislation to regulate the usage of autonomous vehicles. At first look this makes sense, but does it?

Let’s see…

Uber might be a big consumer of autonomous cars, as this technology would allow it to operate cars which are more “efficient” as they don’t require breaks or compensation. Google has been researching autonomous cars for years and has demonstrated their safety. If they follow their pattern with Android, they might license their technology to the big car manufacturers instead of going directly into the car business. And the auto industry as a whole stands to sell a whole lot of new, autonomous, cars.

All of that seems to indicate that it will be a good deal for everyone involved. Seems, however, is the key word in that sentence.

Consider the market in which the auto industry operates today. They have millions of customers, to which they have direct access and in which they try to inspire brand loyalty through services, design and quality. (Some may question this for some automakers, but I believe it is a valid general statement.)

How would that change if Companies in the business of providing cars as a service, on demand, could provide access to comfortable and stylish cars when you need it, as you need it? A lot of people wouldn’t by cars anymore. That is a natural evolution to the combination of autonomous cars and smartphones.

If that is the case, down the road, I can see a future in which, instead of having millions of customers, the auto industry ends up with a few dozen. These would be the Car as a Service (CaaS) companies such as Uber. Now, that does not sound like a good scenario for automakers.

These CaaS companies could decide, for the sake of efficiency, to standardize on a single or a couple of car brands, to the detriment of millions of sales of other manufacturers. While this might seem like a boom to the chosen companies, it would end up making them directly dependent on the CaaS companies since loosing one of them as a customer could lead to the loss of the sale of tens of thousands of cars a year.

Now lets consider another side of this equation. The automakers already have an established services network which spans dozens of countries. They produce the cars and with a licensing deal with Google they might be able to start mass producing these new vehicles in a couple of years. All they seem to be missing to go to market directly and bypass the likes of Uber is what? An app?

Any automaker that is worried of going through the Nokia scenario should be looking into tackling the CaaS challenge directly and not just waiting around for other companies to take their customers away.