Navigant Research Blog

Ford Takes the Exit Ramp from the Car Business

— May 1, 2018

In many respects, the company that Henry Ford built more than a century ago moved America from the cart to the car (this October will mark the 110th anniversary of the Model T). Today, Ford is undergoing another transformation as the transportation market continues to morph. During its 1Q 2018 financial results, Ford confirmed that its North American vehicle lineup will include only two cars from 2020, the iconic Mustang and the new Focus Active—and even the Focus is morphing into a crossover-style vehicle.

More than 90% of Ford sales in the next decade will be pickup trucks, utilities, and commercial vehicles. Despite the change in the shape of the average Ford vehicle, the company is committed to improving energy efficiency in addition to operational efficiency. In part, that means adding electrified propulsion options to just about every vehicle it builds—from the Mustang to the F-150 and every new SUV.

Until now, Ford has just taken token stabs at the battery EV (BEV) market with vehicles like the defunct Transit Connect Electric and slow-selling Focus Electric. Even its hybrid systems, which are second in sales only behind Toyota, are only available on three nameplates: the soon to be discontinued C-Max and the midsize Fusion and Lincoln MKZ sedans.

Changing with the Times

However, that’s all about to change. At the New York International Auto Show in March, Lincoln revealed a concept version of its upcoming Aviator SUV with a plug-in hybrid drivetrain. That vehicle is expected to share its hardware with the next generation of one of Ford’s best-selling vehicles, the Explorer. The upcoming Bronco, Escape, and other models will also be available as hybrids.

In addition, Ford is committing to BEVs with a new dedicated platform rather than just conversions like the current Focus. This will enable much improved packaging and performance and a better cost basis. Starting with a performance crossover BEV in 2020 to be built in the Mexican plant that currently builds the Fiesta, Ford plans to launch 15 more BEVs globally in 3 years. While six of the BEVs will be available in North America, many of rest will likely be optimized for the Asian market, where Ford has formed partnerships with Zotye in China and Mahindra Group in India. Some of them may even be cars.

These vehicles will likely represent the bulk of Ford’s business for many years to come. But Ford is also working to build its mobility service business into something that is commercially viable and profitable as soon as possible.

Surviving Today’s Crises

The first three generations of Fords to run their eponymous company, Henry, Edsel, and Henry II, surely wouldn’t recognize this new enterprise as the one they built up over more than 7 decades. But during their tenures, Ford also faced several existential crises and survived—albeit without quite the radical product changes today’s business is facing.

It seems that almost everyone running a car company today is cursed to “live in interesting times.” Today’s company leaders, including the founder’s great grandson Bill Ford and CEO Jim Hackett, will have their work cut out for them to rebuild Ford for a new generation and move travelers from the car to whatever comes next.

However, there is precedent for a company to make similarly shocking moves while transforming into more of a services company. IBM exited the PC business in 2004 that it helped to found to focus on supercomputers, software, and services. And that paid off: within a few years, the company was generating even higher revenue and profits.

 

The Need to Balance Ride-Hailing Costs and Benefits

— April 26, 2018

People who frequently use ride-hailing and carsharing services enjoy the flexibility and freedom that comes from operating or owning a car. Others complain about the perceived shift back to personal car use from public transit and increases in traffic congestion.

Perspectives from Texas

Case in point is the city of Austin, Texas, where Uber and Lyft have returned after a 2-year hiatus. According to Automotive News, not everyone in the city was happy to see the services return, with some residents miffed about the increasing congestion. Adding to the fray in Austin is General Motors, which recently brought in a fleet of all-electric Chevrolet Bolts via its Maven Gig rental program. The Bolts are offered to people without a car who want to work for the ride-hailing and delivery services, with drivers paying weekly rental fees. The Bolts provide the benefits of zero-emissions driving, but still add to the number of vehicles on city streets.

Austin was rated as one of the 26 best US cities to be an Uber driver based on analysis of earnings per trip. All of these cities will likely see more ride-hailing traffic in the coming years. According to Navigant Research’s Mobility as a Service report, the number of drivers working for ride-hailing services in North America will grow by 20% annually and surpass 5 million in 2026. The benefits and costs of these services to the cities where they operate will continue to generate debate.

Are Millennials Killing the Personal Vehicle, Too?

There have been several studies on the impact of ride-hailing, including analysis by the Institute of Transportation Studies at the University of California, Davis. According to a recent report, ride-hailing customers report using public buses, light rail, and bicycles less, but actually walked and took trains more. While traffic may be increasing, parking is getting easier as people are parking at destinations less, and many cities are seeing declining rates in car ownership. According to UC Davis data, 9% of millennials who use ride-hailing services disposed of one vehicle in their household, and others have delayed car ownership. As the frequency of using ride-hailing services increases, the likelihood of giving up a car rises, while vehicle miles traveled in personally owned vehicles declines.

Sharing Services Continue to Gain Popularity

Between 2010 and 2015, several of the largest US cities saw declines in vehicle ownership among millennials, including Seattle, Detroit, Washington, DC, New York, and San Francisco. The decreases in vehicle ownership are likely to continue as ride-hailing and carsharing services rise in the coming years.

There are positive repercussions for urban land use with the reduction of vehicle ownership and personally owned vehicle trips. Eliminating parking spots in the urban core frees up spaces for greening cities and other uses that are more aesthetically pleasing than parking. Reduced vehicle ownership will make more spots available in residential areas for those drivers who retain their cars.

Economic Benefits

Ride-hailing services also are good for the economy as customers can freely travel to areas with limited parking, stay out later, and indulge in drinking alcohol knowing that a safe, reliable ride is available in minutes. A recent study from the University of Pennsylvania found a correlation between the presence of Uber and reductions in drunk driving, a safety benefit for all. Another benefit is less costly transportation access for an aging population and people with disabilities. Uber recently announced the UberHealth service, which enables caregivers to book appointments for patients.

Ride-hailing should not be left unchecked to create more traffic problems and reduce use of public transit. That said, the benefits of ride-hailing services for customers and local economies are real.

 

Technology Misuse Endangering Automated Driving

— April 24, 2018

If we’ve learned anything from the era of reality television and user-generated online video, it’s that a surprising number of people will risk great harm by misusing themselves or technology to get some online attention. Whether it’s blowing up a microwave, eating laundry detergent pods, or misusing driver assist features on a car, too many are willing to abandon common sense in search of the dopamine hit that comes with seeing the number of views ratchet higher. I shake my head in bewilderment when I hear of someone swallowing a detergent pod, but at least they are not putting others in harm’s way.

Vehicle Travel Should Be Serious

More concerning is seeing videos of people using today’s vehicle partial automation systems, like Tesla AutoPilot, beyond the scope of its capabilities or trying to figure out how to trick it into functioning as a more highly automated system. I have no issues with hardware hacking of stationary devices, or vehicle systems not related to driving. Repurposing hardware you have purchased to provide added functionality can be fun, educational, and allows you to extract more value from it.

But modifying or tricking a vehicle’s guidance system puts innocent bystanders at risk, with potentially disastrous consequences. People who override driver assistance systems or pay little attention to the vehicle’s operation could negatively affect the adoption of automated vehicles.

Consumers Shouldn’t Overestimate Vehicle Autopilot

Tesla AutoPilot and similar systems from General Motors, Volvo, Mercedes-Benz, Nissan, and others are not automated driving systems. Except for GM’s SuperCruise, none of these systems are reliably able to hold a vehicle in lane to the degree of hands-off functionality. All of the driving systems, including GM’s, require the driver to remain engaged with eyes on the road and ready to take over.

Overconfident Users Are Misusing Existing Automated Capabilities

While Tesla CEO Elon Musk often talks about software updates that will give AutoPilot full self-driving capability, that day has not arrived and may never be here with the current generation of hardware. Despite the well-known flaws and limitations of AutoPilot, Tesla owners continue to ignore warnings from the system and the company, using the system in ways or in places where it should be disabled. One owner that has posted dozens of videos to YouTube recently tried to demonstrate that stuffing oranges between the steering wheel rim and spokes could fool the system into thinking the driver’s hands were on the wheel. Had this been done on a closed track, it might have been an interesting stunt. On a public road, with other vehicles around, this was downright reckless.

An Apple engineer recently died when his Tesla was on AutoPilot mode and ran into a highway barrier in California. While the system clearly failed to hold the vehicle in the lane, this driver had previously complained about the car exhibiting the same bad behavior to Tesla service. Since the accident, several other Tesla owners have replicated the situation while recording video with a hand-held phone, risking further injuries.

A pedestrian was killed by an Uber autonomous test vehicle in another instance of a driver not paying attention as instructed and pushing the technology beyond its limits. Automakers need to continue clarifying the vast differences between the driver assist technologies of today and the driver not needed technologies of tomorrow.

Holding out Hope for Progress

A number of studies have already shown that a majority of people don’t trust automated driving systems. Automation has the potential to provide enormous societal benefits by saving lives and damage to property. However, if the actions of those looking for views erode public trust in the technology even as it improves, those benefits may remain off in the horizon.

 

California Ports Look to Strategies for Reducing Port Emissions

— April 19, 2018

At the end of 2017, the Ports of Los Angeles and Long Beach (LA-LB) jointly announced aggressive emissions reduction goals in the Clean Air Action Plan (CAAP) Update. The intent of the CAAP is to provide stakeholders with high level guidance to drive down port emissions. Mayors of both cities have declared their desires to eliminate emissions from cargo-handling equipment by 2030, and share a zero-emissions goal for on-road drayage trucks by 2035.

LA-LB’s focus on emissions reductions from port and other non-road transport aligns with broader California plans. In 2017, the California Air Resources Board (CARB) passed resolutions to develop air quality regulations to achieve 100% zero emissions vehicle (ZEV) compliance for cargo-handling equipment by 2030. Additionally, the South Coast Air Quality Management District and CARB will work to develop concepts for an Indirect Source Rule to control pollution from large freight facilities, including ports, and any alternatives to achieve emissions reductions.

LA-LB are committed to supporting a host of regional and state regulations to reduce port emissions, including ZEV standards for on-road trucks; engine standards for locomotives and vessels; emission controls from non-regulated vessels; fleet turnover requirements for harbor crafts and cargo-handling equipment; and idling restrictions for cargo-handling equipment.

However, future regulations will have few teeth. Signed in April 2017, the State of California Senate Bill 1, while it supports developing a funding mechanism for transportation infrastructure, prohibits the development of new regulations that would create requirements for the replacement of trucks before 800,000 miles or 18 years from the engine model year. Unable to require changes, LA-LB will have to advocate for significant voluntary incentive and grant programs to entice fleets to opt in.

Balancing Immediate Results with Long-Term Strategies

LA-LB want to reduce their port emissions as much as possible, as quickly as possible. However, finding strategies to immediately bring port emissions reductions before certain technologies are available will prove challenging. ZEV and near-ZEV trucks are not yet broadly commercially available, though demonstration projects are underway. According to CAAP, the only near-ZEV engines available are fueled by natural gas, while near-ZEV diesel will come to market sometime after 2020. The ports have suggested an update to the Clean Truck Program to limit drayage vehicle registrations to newer engine years beginning mid-year 2018, as well as establishing a rate trucks must pay for entry to the port, with exemptions for near-ZEV and ZEV trucks.

LA-LB can still move toward the electrification of off-road vehicles while waiting for heavy-truck electrification technology to become commercially viable. The electrification of cargo-handling equipment provides another path toward reducing port emissions. Port of LA has several cargo-handling electrification projects, including demonstration projects of plug-in yard tractors and the electrification of 10 rubber tire gantry cranes. A full list of cargo-handling electrification projects and implementation can be found on the Port of LA’s Zero Emission Technologies page.

Will Improvements Pull in or Drive Away Business?

LA-LB’s adoption of the CAAP Update signals the market that there is an increasing demand for cleaner vehicles operating within the ports. This plan could hasten the development of commercially viable ZEV vehicles for ports, helping spur the market beyond Los Angeles and Long Beach. While the CAAP Update is an ambitious plan for emissions reduction in the region, it comes with a possible $14 billion price tag, with the assumption that businesses and taxpayers will foot the bill. LA-LB hope the quality and emissions improvements will make them more desirable than their competitors, but the potential for increased costs and fees may drive cargo shippers to other, less expensive ports.

 

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