Traffic congestion is a major problem in most metropolitan areas globally. Ever-rising number of vehicles exceed the road infrastructure capacities, prompting the need to look for possibilities of transportation beyond roads. Electric Vertical Take-Off and Landing (eVTOL) vehicles – more commonly known as air taxis, unmanned aerial vehicles (UAVs), or autonomous air vehicles (AAVs) – are considered as a genuine solution to the problem. While they are still in nascent stage of development, we look at the opportunities that may arise in the Urban Air Mobility (UAM) market.
Electric Vertical Take-Off and Landing, or eVTOLs, for a layman, can simply be defined as electric-powered vehicles that have vertical take-off or landing capabilities similar to a helicopter, minimizing the space required to become air-borne.
While the concept dates back to the early 2010s, development in the eVTOL space has gathered pace since 2016, when Uber released its Uber Elevate white paper envisaging its plans to present a working test prototype by 2020, and commercially launch an air taxi service in 2023.
State of eVTOL development
Uber’s announcement acted as a stimulus for eVTOL manufacturers to fast-track the development and testing of their aerial commuter vehicles. Several leading eVTOL manufacturers have conducted unmanned and manned testing of their prototypes in controlled air spaces across major cities across the world, with a view to ensure the operability and safety of these air taxis for commercial deployment.
In 2016, Germany-based Volocopter became the first manufacturer to get a permit to fly its eVTOL prototype in Germany. In 2017, the company conducted a successful public demonstration of its air taxi – making an unmanned flight near Jumeirah Beach Park in Dubai, with an aim to launch a commercial pilot air taxi program in Dubai in early 2020s. Since then, the company has completed similar tests in the USA in 2018 and Singapore in 2019.
Chinese company EHang has stolen a march on its competitors, becoming the first company to successfully commercialize passenger-grade autonomous aerial vehicles. As of December 2019, the company had delivered 38 two-seater passenger-grade air taxi (EHang 216) to private customers globally.
Uber has also entered in partnerships with several eVTOL manufacturers (mostly companies owned or backed by aircraft manufactures), engineering firms, real estate companies, and research organizations, over the past four years, including Joby Aviation, Aurora Flight Sciences (a Boeing subsidiary), Embraer, Bell, Pipistrel, Karem Aircraft, Jaunt Air Mobility, and Hyundai.
Other key manufacturers such as Lilium, Opener, Kitty Hawk, and Airbus have also conducted multiple flight tests globally since 2017.
Companies have also taken initiatives to develop other critical components of the air taxi business. Uber entered into a partnership with NASA in 2017 to develop unmanned air traffic and airspace management systems, which could help Uber smoothly drive its air taxi operations.
Companies are also partnering with real estate companies to develop dedicated infrastructure which could act as nodes for any air taxi network, as well as with power solutions providers to deploy vehicle charging solutions at these nodes.
Various analyst firms believe that eVTOLs present a high growth opportunity. Deloitte, for example, forecasts the eVTOL market to be valued at US$3.4 billion in 2025, and grow to US$17.7 billion by 2040 – a CAGR of 11.6%. German consulting firm Horvath & Partners estimates the number of air taxis could exceed 23,000 by year 2035.
Investors are banking on this growth potential, which is evident from the amount of investments flowing into eVTOL development companies.
In January 2020, US-based Joby Aviation raised US$590 million in Series C funding led by Toyota (which invested US$394 million), making it the most funded eVTOL start-up globally. Volocopter also raised U$55 million in September 2019 in series of funding led by China-based Geely group. Lilium, which is backed by Tencent, is also looking to raise more than U$400 million for its eVTOL business through venture capital.
…on opportunities in UAM Space
Uber’s air taxi vision has created opportunities for multiple stakeholders across the air taxi value chain. Several aircraft and automotive companies are participating to develop commercially practical and viable eVTOL vehicles, while real estate companies are delving into design infrastructure solutions for vehicle landing and take-off.
Innovators are teaming up to develop new-age solutions which would be able to manage air space and aerial traffic, while also ensuring the safety of the commuters (both in the air and on the land).
There will be opportunities for analytics companies – whether it is related to determining the service prices (pricing analytics) or creating innovating customer solutions (such as loyalty programs). Once eVTOLs are commercially deployed, after-market ancillary and repair solutions are also expected to gain demand.
Additionally, the social impact of these air taxis – which will help generate employment opportunities for both technical and non-technical personnel – cannot be underestimated.
…on Uber’s plans to commercialize air taxis
Uber’s plans to commercially launch an air taxi service by 2023 might perhaps be a bit too optimistic. However, given the state of the development of eVTOLs and the level of support it is generating from governments in its key target markets (including the USA, Australia, and Japan), the goal may be achievable – more likely by 2025.
However, the initial deployment, which is expected to comprise only 40-50 eVTOLs, is likely to be limited to the affluent section of the potential customers, due to limited access and high costs of such service.
Such services may be able to reach mass consumers only once the eVTOLs have a widespread deployment, which is unlikely to happen before 2030.
An extensive deployment and increased mileage (either in the form of distance covered or number of flights) is likely to help achieve operational efficiencies, eventually leading to lower pricing of air taxi services, making them more affordable for mass consumers. Uber plans to bring the pricing of its air taxi services at levels similar to that of its UberX service in the long run.
Whether Uber is able to achieve its target or not, the urban air mobility market shows significant potential and attracts considerable interest. Given the current level of development in eVTOL space and partnerships to build related infrastructure, there is a definite sense of optimism – the future of urban mobility is definitely “up, in the air”.
Blockchain, with its ability to offer significantly more transparent and decentralized way of conducting operations, has the potential to come to the forefront of technologies which are disrupting the way most industries work today. While the application of blockchain is still currently focused largely on cryptocurrencies, the technology is slowly finding its way to a range of industries, including the car rental and leasing industry.
Car rental and leasing sectors are growing worldwide, driven by rising technological advancements in transportation and increased need for ease of mobility. A shift in demand from car ownership to car sharing (not to be confused with ride-sharing services such as Uber or Lyft) is driving the growth in car rental and leasing industries.
The process of renting a car is highly centralized, where the car rental company being the main point of contact for the driver to rent cars. Car rental companies need to maintain a fleet of cars, as well as car stations and staff to efficiently run their operations, which makes up for bulk of their operating costs. Car rental companies cover these costs from (high) rental rates charged to their customers.
In the peer-to-peer (P2P) care rental (or car sharing) model, there is no need to maintain any infrastructure or staff required to perform the task of renting, a fact that reduces the overhead costs. Lower costs offered by P2P car rental have resulted in the model gaining prominence. P2P car sharing has significant potential, highlighted by recent investments in car sharing services such as Turo and Getaround. In July 2019, US-based Turo raised US$250 million from IAC, an internet media company, taking its overall valuation to US$1 billion. Getaround, a US-based car sharing company established in 2011, raised US$300 million funding from SoftBank in 2018.
However, the P2P car sharing model is inherently prone to fraud and other illicit activities, causing lack of user trust, which in turn acts as a barrier to scaling of rental business, despite the growing demand for car sharing.
The issue can be aided by the emergence of blockchain, which is acting as the market disruptor. The use of a distributed ledger for car rental and leasing is likely to revolutionize the industry, especially P2P car sharing.
Blockchain to enable peer-to-peer car rental gain further prominence
There is a shift in paradigm from car ownership to car sharing, via car rental or leasing. The fact that vehicles are under-utilized and parked (and inactive) most of the time, while the vehicle owners incur ongoing fixed costs such insurance, tax, maintenance, and parking, is further driving this shift.
Emergence of use of blockchain in car rental offers a safe (from frauds) and reliable car-sharing platform, a fact that is likely to further promote P2P car sharing. Inherent unalterable properties of the blockchain offer a secure platform for both car owners (to list their cars) and the customers.
The concept of blockchain in car rental industry works similarly to any other blockchain transaction. Service providers (or car owners) and end clients registered on the blockchain can sign digital smart contracts which execute contract terms based on pre-agreed rules in place, similar to a regular rental model.
The smart contract also contains the necessary information, such as details of the renter (driving license proof, insurance, and credit card details) and data such as car registration number, rate, mileage, length of rental, and credentials of the car owner. All financial transactions (rental payment) can be done either through a card, or using associated cryptocurrencies and tokens purchased to get registered on the blockchain.
The process is fully decentralized and digital without any intermediary required which is the key advantage of car rentals being executed over blockchain. Transparency of transactions made over a distributed ledger also adds to the credibility, thus lowering the risk of any fraudulent activity to a great extent.
Lower fee offered due to elimination of intermediaries is another major advantage of using the blockchain technology in car rental industry. For example, HireGo, a UK-based blockchain-based car rental start-up, claims to offer transaction fee up to 35% lower compared with traditional car rental charges under the existing B2C model. Moreover, use of smart contracts has made the system direct and reliable, as information on the contract is unalterable.
Blockchain technology is designed to encourage a sharing economy platform so that businesses such as P2P car rentals and leasing can become integrated and cost-effective, through collaboration among participants in a common, transparent, and “trustless” (or distributed trust) environment, which are the primary attributes of blockchain.
Blockchain in car leasing to improve visibility
When it comes to leasing, blockchain has even more potential. Tracking a car right from the OEM, transfer of ownership, tracking of repairs, mileage, fuel, and maintenance over a single distributed ledger can help bring visibility across the leasing journey. This in turn can help customers avert mileage fraud, while also eliminating any disputes at the end of the lease term.
With all necessary and unnecessary repairs being visible to all parties involved, calculation of charges and violation penalties is likely to become much easier.
The use of a distributed ledger also eliminates the need of undertaking time-consuming paperwork at each node (or stakeholder) of the leasing value chain, thereby improving the overall efficiency of the process, while also cutting costs, making it much more cost-effective to lease a vehicle.
Similarly to its function in car rentals, a distributed ledger also eliminates high costs charged by car leasing companies, resulting in increased popularity P2P leasing of vehicles through smart contracts. Blockchain can also be used as an open maintenance log, as well as for the provision of other value added services such as insurance and toll payments.
Transparency across the lease to help minimize customer disputes
The benefits of blockchain are most prominent at the end of the lease term, when a customer returns a leased vehicle. The use of an open distributed ledger eliminates any disputes that may occur between the service provider and end client, with regards to end-of-lease charges. Transparency across the lease lifecycle, including open logs of vehicle usage, mileage, fuel, maintenance, tire changes, and insurance, make it easier to calculate any end-of-lease charges, based on the pre-defined terms of the smart contract. These charges can also be automatically paid in the form of cryptocurrencies or tokens, as per the provisions in the smart contract.
Blockchain entries can also help leasing companies estimate the approximate value of the vehicle at the end of the lease term, making it easier to decide whether to remarket (re-lease) or dispose of the vehicle, as well as reducing the overall time and resources required in the remarketing process.
Newer blockchain-based platforms expected to drive growth
The global automotive blockchain market is likely to witness growth of 31.1% CAGR between 2020 and 2030, with Asia witnessing the fastest growth. Majority of this growth is attributed to proliferation of car rental and leasing in countries such as India and China, where people are seeking easier means of mobility and are making cautious effort of reducing traffic in metro cities.
Several companies in the region started investing in building platforms using blockchain. In 2017, Mumbai-based Drivezy, an Indian car sharing company, successfully developed a car rental and leasing platform using blockchain, in which users can rent cars and make payments using cryptocurrencies and tokens. In 2018, the company raised US$20 million in a Series B funding through an initial coin offering (ICO). Such investment is encouraging further start-ups looking to utilize blockchain for car rental and leasing.
Darenta ICO, a Russian car rental start-up, developed a platform for existing car owners to rent out their cars using a digital solution that employs geolocation, smart contracts, and other blockchain technology. Launched in 2018, the company has already expanded its presence in 20 countries, and plans to enter the USA and Canada, followed by other European and Asian markets (including China) by 2020.
Several major companies have also invested in developing other technology platforms using blockchain technology, which could have applications in the rental and leasing businesses. In 2017, Ernst and Young, for example, launched a blockchain-based platform called “Tesseract” to support an integrated and autonomous mobility. Through this platform companies and individuals can share cars, while payment and insurance are handled through blockchain. In 2017, Renault also launched a prototype blockchain platform to track information about a car’s maintenance history, including repair shops and dealerships at one place, through a digital maintenance log prototype.
Lack of acceptance of cryptocurrencies likely to pose challenges
While blockchain has plenty of benefits, broad scale deployment of the technology faces certain challenges as well – one of the most crucial ones being recognition of cryptocurrencies in key emerging markets in Asia, including India and China. Most blockchain-based solutions are looking at ICO to generate funds, issuing their own cryptocurrencies (mostly based on Ethereum tokens), which also act as a mode of transactions and payments for the service. Lack of regulation of cryptocurrencies is currently limiting the adoption of blockchain technology in the rental and leasing space.
Also, for the blockchain technology broad scale implementation, there is a need for high performance computers (or supercomputers) along with highly skilled workforce to handle the blockchain. Such challenges can cause delay in widespread adoption of blockchain technology for car rentals and leasing system at a larger scale.
Currently, blockchain is considered synonymous to cryptocurrencies such as bitcoin, which is still very unstable and is commonly seen as an investment rather than a mode of transaction. Such a perception is likely to continue to prevail in the short term. Once the paradigm shifts from cryptocurrencies being looked at as a mere investment tool, to being considered as a mode of transaction or a trustless platform, which utilizes inherent properties of blockchain, the overall acceptance of blockchain is also expected to increase. This shift is also likely to bring more stability in cryptocurrency prices, which in turn is also expected to generate a more positive regulatory outlook in favor of cryptocurrency and blockchain technology.
Once blockchain gains prominence, we are likely to witness a lot more start-ups promoting peer-to-peer car sharing (rental or leasing), driving a change in the way people look at their cars. Idle vehicles will increasingly be considered as assets which can generate a source of additional income via car sharing model, resulting in better overall utilization of cars.
ICOs are likely to remain the most common mechanism to generate funds. While the technology has several potential uses, which are expected to disrupt the car rental and leasing market in the near future, the state of blockchain acceptance currently remains highly speculative, primarily due to its close association with cryptocurrencies.
In the past few years, food tech (online food delivery) industry in India has seen substantial growth in terms of daily order volumes (DOVs), revenue, and funding. While the business is growing for all players, they are still posting losses. A closer look into their financials and business models reveals that the current operating margins are very thin, and much of the recent rapid growth has been on the back of heavy discounting offered by players to attract customers. At present, the growth strategy is loud and clear: to acquire new customers, enter new markets, and expand current market share at any cost. This has raised a question whether such a model is sustainable in the long run or is it another tech bubble just waiting to burst?
Less than five years ago, the way Indians consumed food was completely different. Eating out was predominantly occasion-driven, while ordering food was limited to calling local restaurants or ordering a pizza from Dominos or Pizza Hut through their own websites. Online food ordering through apps was not at all a part of consumers’ culinary vocabulary.
However, this has been transforming over the past few years. There is a growing trend among Indians to order their food online via food aggregation apps. Today, Indian consumers, especially in metro and larger cities, are ordering food online more often than before. As a result of this, food tech has become one of the fastest growing internet sectors in India with an astonishing triple-digit growth rate in gross merchandize value (GMV) and DOVs in 2017 and 2018.
Huge potential waiting to materialize
After an initial hype among entrepreneurs and investors in 2015, the food tech industry saw a slump and market consolidation in 2016 and 2017. Yet in 2018, India’s food tech industry rekindled investors’ appetite for the sector with huge spending spree. Driven primarily by rising disposable income, rapidly growing internet and smart-phone penetration, urbanization, and a young and working-class consumer base, India’s food tech industry stood at around US$700 million in 2017 and is expected to reach US$4 billion by 2020. In 2018, DOVs went up to 1.7 million orders from 0.2 million in 2016. The current market consists of four key players. Leaders Swiggy and Zomato currently hold a combined market share of ~70%.
The market still in its infancy
While order volumes have gone up significantly in the last 12-18 months, the industry is still in its infancy considering its outreach and adoption rates across the nation. At present, online food ordering is available in just over 200 cities across India and contributes to merely around 5% of the total food delivery business.
Further, India’s US$1.7 billion food tech market is pretty small compared to US$10.5 billion in the USA and US$36 billion in neighboring China. Out of the 90 meals consumed each month, Indians eat out or get their food delivered less than five times a month as compared to around 40-50 meals in countries such as Singapore, China, and the USA. In a nutshell, food aggregators have just begun to scratch the surface in India and there is a long road ahead for the industry to develop and grow further.
Growth driven by deep discounts
While the recent growth numbers draw a compelling picture of the industry, it should be noted that much of the current growth is driven primarily by deep discounts that are offered by the players to attract customers onto their platforms. With the recent funding boom, all players are deep-pocketed. In a fierce battle for market share, companies are spending heavily on advertising, low-cost and complimentary deliveries, and discounts as their primary growth strategy. Given the huge potential of the internet economy, even investors are willing to throw in money and keep the incentives going. However, recent history in India as well as similar experiences from other internet companies globally reveal that while this can be a good strategy to attract customers and penetrate markets, it is unlikely to be sustainable.
The recent growth is not entirely organic. A significant part of it is inorganic, pushed by discounts and offers, as players focus more towards acquiring new customers, increasing their order frequency, and entering new geographies.
– Satish Meena, Senior Analyst, Forrester
Again, customer loyalty is very hard to come by in the food tech industry. With India being a price-sensitive market, consumers will often flock to the platform that offers the best deal. Just like in India’s cab aggregation industry, it will be interesting to see how the food aggregators find their revenue and DOVs impacted once these offers will start to disappear.
Penetration beyond tier-II cities
Till 2018, orders were highly concentrated among top ten cities of India. These markets accounted for around three-fourths of the total business for all players. In order to move away from these gradually saturating markets, and to scale up their outreach across India, food tech players are pushing to capture the untapped potential in tier-III cities and smaller towns with first-mover advantage. While they consider these markets to be lucrative with improving demand appetite, rising spending power, and profitability, these cities are very different from metros in terms of size and customer preferences. E-commerce adoption rates as well as user base in these cities are relatively small, and therefore it will be challenging for food aggregators to create demand here, as consumers are not acquainted to online food ordering.
On the demand side, it will be difficult for aggregators to generate order volumes from smaller cities in India. Considering that Indians are very price sensitive, once these offers are gone, the drop-out rates will be much higher in these markets as compared to metros. – Satish Meena, Senior Analyst, Forrester
Back in 2016, Zomato tested the potential in smaller cities and had to shut down its business in four cities including Lucknow, Coimbatore, and Indore due to poor demand. Similarly, Grofers, an online grocery delivery platform expanded into several tier-II and tier-III cities. But they also had to suspend operations in nine cities, citing the same reason. While the advent of Jio (an Indian mobile network operator) and its cheap internet data packages are proving to be a boon for e-commerce players, the question still remains how food aggregators will be able to create a sustainable demand in cities where population prefers to cook its food every day.
In addition, unorganized players dominate food delivery in these markets. It will be tough for aggregators to compete with them, especially in terms of pricing, since the local players operate with very low overhead costs without the need to worry too much about hygiene, safety, and other quality standards.
Weaker financials and unit economics
With the ongoing discounts and offers, the cost of customer acquisition is very high at present. A closer look at the financials of Zomato and Swiggy reveals that their monthly cash burn has increased five times within 2018, as they resort to aggressive discounting to grow further across the country. At present, all players are posting losses. This is very common even in the global food tech industry where most players are still operating with losses. For example, China’s Meituan-Dianping and ele.me are still far from reaching the break-even point, even after 10 years in the business. The story is the same even in developed markets such as USA and the UK. The aggressive cash burn model requires food aggregators to keep raising funds at regular intervals in order to further scale up and grow. This is a major concern raised by many industry experts.
Look at China! The top two players have still not managed to turn profitable even with far superior market penetration and order volume rates as compared to India. – Former Executive, Swiggy
Another major challenge faced by all the players are the inefficiencies in their operations, a fact that has a direct impact on their unit economics and thereby profitability. Although food delivery logistics is slowly getting better, it still constitutes a major chunk of the overall cost. Players are in a dire need to leverage innovative technologies and processes to streamline their logistics operations and make the most out of their logistics infrastructure and assets.
In order to improve their unit economics and operational margins, everyone is trying to streamline their logistics operations and to make the most out of their current infrastructure and assets. – Vaibhav Arora, Former Associate General Manager,
Playing by the same playbook?
For the Indian market, food tech industry’s current growth story may seem to be a flashback from the ride-hailing industry, which really took off in the early days. On the back of heavy discounts and attractive offers, it looked like a win-win situation for all. In recent years, when cab aggregators slowly started to move away from discounts, at the same time increased fares for customers on one hand, while reducing incentives for drivers on the other, they started to witness challenges on both demand and supply sides of their business.
Strategies such as surge pricing, hike in fares, cutting-down driver salaries and incentives, etc., have impacted their businesses and resulted in unhappy customers and driver partners, unreliability in services, and a tussle with local associations. Cab aggregators in India have still not found the right balance to continue to grow without leaking money.
Many industry experts believe that food aggregators will also face the same set of challenges in the coming years, as players will start moving away from discounts along with hike in delivery charges and restaurant commission in order to improve their operating margins. This is already becoming evident as delivery partners from Swiggy in Chennai went on a strike for wage-related demands in December 2018, while UberEats faced a similar situation in April 2019 in Ahmedabad.
You can connect the dots with cab aggregation business and foresee similar challenges coming up for the food tech sector. In the long run, they will start charging higher delivery fees from customers and higher commissions from partner restaurants. – Vaibhav Arora, Former Associate General Manager,
In recent years, food aggregators in India have definitely created a market for themselves by inculcating consumers with online food ordering concept. There is no doubt that the Indian food tech market is still developing and has a huge potential. But it is also a difficult one to crack. As seen in the past few years, many start-ups folded up early on. Similarly to India’s cab aggregators and e-tailers, food tech companies have started to believe that discounts are the way to a customer’s heart and eventually increasing their market shares.
None of the major players within the Indian internet sector is profitable yet. Even for Indian food tech players, profitability looks elusive, at least in the short to medium term. They will require massive funding injected regularly to finance their aggressive growth strategies. Uber in its recent initial public offering (IPO) prospectus made a bold statement admitting that if may never be profitable. This is one of the deepest concerns across the industry, and many industry experts are not sure whether sustainable growth can be achieved with the present business models.
In India, it looks like a certainty that both Swiggy and Zomato will be still posting losses for at least the next two to three years. – Former Executive, Swiggy
There are many areas which are not streamlined enough, and therefore a significant amount of money is lost there. In order to grow, players will have to address the fundamental issues around unit economics and operational efficiencies. Companies will have to find multiple ways to improve their operational efficiencies such as looking at alternative revenue streams, monetizing their fleets, building other businesses, etc. Therefore, Swiggy has ventured into hyperlocal business by starting deliveries of groceries and medicines to further optimize its current delivery fleet. Similarly, Zomato has started Hyperpure, a service wherein they deliver food products to restaurant partners in order to grow further.
On the one hand, the above mentioned strategies seem to be logical for food aggregators and the way forward to scale up their businesses. On the other hand, this approach also raises concerns whether they are trying to juggle too many balls with just one pair of hands. Are players diversifying too early and rapidly, considering that they have not yet mastered the trade of online food delivery? Will these diversifications shift their focus away from the core business? Do they have the bandwidth as well as the expertise to manage these new businesses?
Furthermore, it will be also difficult for players to continue their current growth momentum beyond 2019, since they have penetrated all metros as well as tier-I and tier-II cities in India. Growing in smaller cities with low e-commerce penetration will be a daunting task, especially without the discounts. All these challenges are likely to cause the industry growth to slow down. To continue the growth momentum, food aggregators will also have to customize their strategies for smaller towns in India. Since availability of cuisines and quality of food is the biggest pain-point in these markets, players will have to compete by offering more choices with higher quality standards. Variety and quality of food will be one of the key differentiators for them to succeed in these markets.
In order to succeed in the long run, players will have to leverage the vast consumption pattern data at their disposal, and convert them into insights. By harnessing technologies, they can smartly identify the demand-supply gaps in each market, and address them by launching relevant products and services. For example, aggregators can assess and identify particular cuisines, dishes, order time-slots, etc. that are trending in each market, based on which they can either collaborate with restaurants and push them to expand their offerings and outreach to meet the increasing demand, or themselves start to move up the value chain by setting up own cloud kitchens (delivery-only kitchens) to fill such gaps, and thus further improve their profitability.
Additionally, players will have to further innovate their offerings. For instance, since migrant workers and students are the prime target, introducing subscription based meals in this segment could allow players to gain customer loyalty as well as earn steady stream of revenue. Similarly in the B2B (business-to-business) space, they can forge partnerships with small and medium enterprises (e.g. Indian Railways) to supply meals to their employees and customers. This is another market segment with huge latent demand where variety and quality of food is the need of the hour.
While these are early days to comment on the long-term growth potential of the industry, we can expect the market and current players evolve over the next few years. Considering that no one in the Indian aggregation space is profitable yet, and the fact that the path followed by food aggregators closely resembles to the one followed by cab aggregators in India, who have found it to be bumpy, unless players can build a solid business model with a clear path to profitability, for now, the rapid rise of food tech sector looks like another tech buzz that will eventually slowly down over the years to come.
The current landscape in the Gulf countries is believed to show solid scope for sharing economy platforms’ growth. On the other hand, the region still lacks consumer engagement as well as updated and adequate regulations, which may cause these platforms to stumble and fall on their way to growth.
The concept of sharing economy has been spreading with great velocity worldwide with the advent of new technologies and connectedness. It emerged as a recognized concept around 2008-2010 with the arrival of successful players such as Uber and Airbnb offering P2P platforms that allowed financially strapped consumers to earn extra income. Global sharing economy was valued at US$15 billion in 2014 and is expected to reach US$335 billion by 2025.
GCC’s good foundations and latent potential
In 2016 alone, PwC estimated that consumers in the Gulf Cooperation Council (GCC) spent US$10.7 billion within five sectors of the sharing economy platforms – household services, accommodation, business services, transportation, and financial services.
The spending in sharing economy was of course lower than spending on similar services acquired through traditional avenues – for instance, in 2016, hotel revenues were expected to hit US$24.9 billion in the GCC, a considerably higher sum than accommodation revenues in the sharing economy that totaled to US$1.29 billion in that same year. This indicates latent potential, and with part of the traditional service revenue possibly taken over by sharing economy, the scope for growth is very promising, underpinned by favorable characteristics of the GCC countries.
Young and technologically-participative population
Sharing economy platforms do not hire employees directly but work with self-employed service providers instead. The essence of these platforms is to enable people – mainly young, dynamic, and technologically-participative – to use them as a way to exchange goods or services for money.
The appeal of the GCC for sharing economy platforms is exactly that – the diversity and demographic profile of the region’s population allows sharing economy platforms to reach a large pool of young, tech-savvy consumers and service providers. In 2018, 60% of the GCC population was under the age of 30 – considered key demographic to interact and use sharing economy services on both the demand and supply side.
Large immigrant pool willing to engage
Another market growth driver that is somewhat unique to the region is the large percentage of non-nationals living and working in the GCC. Between 2016 and 2017, 51% of the Gulf region total population were non-citizens, who, according to a 2016 PwC survey, were active users of the sharing economy services, largely due to relatively low incomes and limited (if any) access to other ways of improving their financial standing. The region’s large volume of immigrants has always been a steady trait that is very unlikely to change in the future. Due to this, high numbers of expatriates participating in the sharing economy platforms on a daily basis is likely to ensure a long-term steady growth of these platforms in the region.
(Slowly) growing women’s economic inclusion
Another appealing aspect of the GCC market is that all six countries have been changing (alas, slowly) their attitude towards women’s economic inclusion, fueled by shifting cultural norms that traditionally imposed limitations on women’s ability to work and earn.
This change is likely to allow them to participate more actively in the workforce, and a ride-hailing app company could be a good option to provide transportation to and from work to female workers, since in some GCC countries they are not allowed to drive by themselves, while in others they customarily do not often do it. With women representing around 40% of the GCC population, higher financial independence places them in the group of potential consumers of sharing economy goods and services for their transportation as well as household services needs.
Eagerly-consumed fast connectivity
Regardless of the gender participation mix at both supply and demand side, the sharing economy players are certainly set to benefit from fast adoption of technology by local consumers in the GCC. In 2017, 64% of the population owned a smartphone and, by 2018, 77% of the GCC population were mobile network subscribers. Such rates seem to give strong foundation for sharing economy platforms to grow.
Moreover, the GCC highly tech-savvy youth seeks new technologies and faster mobile connections. In response, the Gulf countries aim to become global leaders of 5G deployment (all markets planning to launch 5G by 2020), a major contributing driver to the sharing economies growth in the region. High-speed mobile connections plus a growing pool of eager-tech young adults willing to engage in P2P platforms are likely to become a major driver for their growth.
Nonetheless, despite these favorable foundations, there may be roadblocks representing a threat for the success of sharing economy platforms in the Gulf region.
Large immigrant pool refrained from joining the platforms
One of the key obstacles is the cultural-legal environment prevalent in the region. While the region has long been characterized by large share of immigrants in local populations, their way of working is controlled by Kafala, an outdated sponsorship system carried out by the GCC. This system allows immigrants to work in the region only for their sponsor, who is legally responsible for them during the time of his or her stay.
Kafala system does not allow for self-employment, nor does it allow for second employment beyond the job given by the sponsor. Since sharing economy companies interact mainly with freelance service providers, there is a large portion of expatriates working in the GCC who will find it difficult to be able to freely join the platforms as service providers.
Lack of a dedicated government entity to oversee sharing economy services in the Gulf countries may cause consumers to be wary of using these platforms, ultimately hindering market growth.
According to a 2016 survey conducted by PwC, GCC users put considerable emphasis on trust and transparency when dealing with online providers, two factors that can influence their purchasing decisions.
In sharing economy, users need to be able to trust platforms’ screening process for providers before they deal with them. As a result, if the states do not establish bodies and laws governing sharing economy services, the platforms could witness weak demand from both consumers and services suppliers who are cautious about protecting themselves.
Limited awareness and lack of need
Lack of consumer awareness and simply lack of need for the sharing economy services is also an issue for the market growth since not all GCC nationals seem to be aware about the existence of the sharing economy platforms.
According to the same PwC survey, an average of 21-35% of respondents were not familiar with the sharing economy concept. This could be attributed to the fact that many households in GCC countries have traditionally enjoyed high income levels, a fact that resulted in no need for shared services and allowed them to afford services of expatriate workers hired directly and for long term (e.g. employing a household driver or cleaner, rather than using external providers as needed).
Consequently, local consumers may not see the need to use an online platform dampening the success of sharing economy platforms. This might change, as households’ incomes growth stagnates and sharing economy could help stretch that income.
The GCC countries could be a promising landscape for sharing economy platforms to dock successfully. The region offers growing population, continues to be characterized by a solid base of young, tech-savvy users, as well as females and non-citizens available to participate in the sharing economy market.
However, despite the current growth, these platforms could nosedive unless local authorities deal with regulatory deficiencies. A dedicated supervisory entity is required to allow local authorities to regulate sharing economy companies, which will also provide support to consumers through consumer protection and better screening processes of services providers. Local customers clearly manifest their need for such a protection, and the lack of it is likely to dampen the demand and thus market growth.
The update of labor policies such as the Kafala system is also required for sharing economy platforms to witness a continuous growth. This growth can only happen through allowing a good share of the readily-available pool of expatriates to work under a more flexible scheme these platforms require. This is something for GCC states to consider, as there region is increasingly facing the requirement for economic diversification and stimulation of its sluggish economies. Creating labor policies that allow people to work for sharing economy platforms legally (at least as a secondary employment, as it is increasingly allowed in Dubai) is likely to create employment opportunities across the region, spurring consumer spending and generating tax revenues.
While there also are other obstacles in the GCC sharing economy market, it is the lack of appropriate regulation and supervision of the industry, as well as the current form of the Kafala system that are the two key challenges to the market’s accelerated growth. Considering the nature of these challenges, it seems that the potential of this market is unlikely to be realized without active facilitation by the local governments. However, it is uncertain to what extent the governments will try to understand the potential economic benefits of fully embracing sharing economy, and change the deeply-rooted, long-standing, archaic labor laws.
With plans to expand globally, Ola Cabs, India’s leading ride-sharing service provider, marked its entry into the international market by announcing in January 2018 the launch of its services in the Australian territory. While the exact date of the service launch in Australia is not yet decided, as it is subject to regulatory approvals, the service provider has already started the ground work by inviting private hire vehicles to join them. The company is starting to collaborate with private hire vehicle owners in Sydney, Melbourne, and Perth, the three cities where Ola cabs will initially be available for rides, to be ready to roll out once the commercial operations commence.
Presently, the market for ride-sharing service providers in Australia includes players such as Uber, Taxify, and GoCatch, among others. With Uber, which has emerged as the leading player in Australia, already present in the market, Ola needs to have its strategy, policies, and priorities set just right to smoothly launch and successfully run its operations. However, the presence of Uber has worked, to some extent, in favor of Ola, as it paved the way for ride-sharing services in the country resulting in regulatory policies being already in place. This makes the market entry a bit easier for Ola as the company will not need to deal with several challenges that the early market entrants in such novelty markets as ride-sharing typically have to tackle.
However, competing against its largest rival, Uber, is not the only concern for Ola. To be successful in the Australian market, Ola also has to focus on smaller and newer competitors, and set its operational and pricing policies keeping in mind their strategies in the market. Taxify, an Estonia-based company that launched its operations in Australia in December 2017, is expected to closely compete with Ola, especially with its ride services being operational only in Sydney and Melbourne, two of the locations where Ola is launching its services as well. With two ride-sharing service providers launching its operations in similar locations within a span of few months, a price war between the two is expected to happen. Currently, Taxify offers rides to its commuters without any surge pricing, making the ride cheaper than Uber. If Ola plans a similar pricing structure, among other strategies to drive the business, the competition between the two operators will, most likely, heat up very soon.
With two ride-sharing service providers launching its operations in similar locations within a span of few months, a price war between the two is expected to happen.
In the Australian market, the ride-sharing services segment is still in its infancy stage of development and with only one player (in this case, Uber) currently dominating the scene, it makes sense for Ola to launch its operations here now, offering a new option for consumers to choose from. Entry of Ola, along with new players such as Taxify, may indicate a transitioning phase in the Australian ride-sharing market as the entry of new players has the potential to end Uber’s monopoly. Currently, with very little known about the operating dynamics, not much can be commented about the success of Ola in the Australian market. However, the unsaturated state of the local market clearly indicates that Ola has a good chance to thrive in Australia, as long as they get the pricing right and set their eyes on the long-term business growth rather than short-term gain through higher prices.
The concept of sharing economy has become a global phenomenon and after capturing several markets across Northern America, Europe, and Asia, it is now finding its way in Africa. The pre-existing sharing culture in several African countries makes this business concept gain good momentum across the continent. In addition to global companies, such as Uber and Airbnb, which have witnessed exponential growth in their limited years of business in this region, there are a host of home-grown players that are offering niche and country-specific services in this space. At the same time, sharing economy business does face a great deal of challenges in Africa’s complex markets. Safety concerns as well as limited availability and use of technology are two of the largest roadblocks for a thriving sharing economy business model. Although companies seem to find their way around these issues on their corporate drawing boards, the challenges are more intense and impactful in reality. Therefore, while the concept of sharing economy is likely to boom in the continent, it remains to be seen which companies manage to best adapt to local dynamics and thrive, and which players will fail in navigating the complexity of the regional markets.
Sharing economy businesses have been growing at an accelerating rate globally with leaders such as Airbnb and Uber taking over their traditional hospitality and travel competitors and becoming the largest players in the tourism and passenger transport sectors, respectively. After gaining huge market in several mature economies, the asset-light collaborative economic model is now making its presence felt in Africa. With vast youth population and a growing middle class, several markets in the African continent offer a huge growth potential for companies operating the sharing economy model. In 2016, Airbnb alone witnessed a 95% rise in the number of house listings in the continent, which increased from about 39,500 in 2015 to 77,000 in 2016. Moreover, the number of users of its online platform reached 765,000 in 2016, witnessing a 143% y-o-y rise, and is expected to further expand to reach 1.5 million registered users by the end of 2017. Similarly, Uber, which entered Africa in 2013 through Johannesburg, has expanded into 15 cities across eight African countries in a span of just four years and has over 60,000 partnering drivers across the continent.
This remarkable growth is underpinned by a burgeoning middle class that is looking for (and increasingly can afford) convenient and reasonable solutions. Moreover, the sharing economy concept helps Africans bridge service gaps created by inadequate resources and infrastructure present in the continent. For instance, with increasing number of tourists and a limited number of high-end and mid-tier hotels or resorts, companies such as Airbnb are in a perfect position to fill such a demand-supply gap without much investment. In addition, sharing economy companies also help ease the unemployment and underemployment issues faced across several countries in Africa. The sharing economy model helps channelize a work stream for people who are unemployed or work in the informal sector, and provide them with a formalized platform where they can sell and market their services. Sharing economy is largely dominated by workers aged 18-34, which is also the age group largely affected by unemployment in Africa.
However, the key reason for the sharing economy model to have eased so well into the African lifestyle is the pre-existence of a sharing culture, which has been prevalent informally here for many years. Unlike in many developed regions, the concept of sharing economy is not new to Africa and the main task for global players entering this market was to formalize it through tech-based platforms. Therefore, despite being one of the least developed regions globally, Africa comes as a good fit to the sharing economy model. As per a survey conducted by AC Neilson in 2014, 68% of respondents in the Middle East and Africa region are willing to share their personal property for payment, while 71% are likely to rent products from others. These numbers are much higher in Africa than in Europe and North America, wherein only 54% and 52%, respectively, are willing to share their possessions for pay and even fewer (44% and 43%, respectively) are interested in renting others’ products.
While global companies are at a strong position to capitalize on this opportunity, there are a host of local players across the African subcontinent that are also looking for a share in the pie. Although these companies have come up across Africa, they are somewhat clustered in the more developed regions of South Africa, Kenya, Nigeria, and Uganda.
Being one of the most developed economies in the subcontinent, South Africa has openly embraced the global sharing economy phenomenon and has been the entry point into the continent for several leading international players such as Uber, Airbnb, and Fon. Uber has received great acceptance in South Africa with the first 12-month growth rates in Cape Town and Johannesburg superseding the growth experienced in other cities globally, such as San Francisco, London, or Paris (during their first year of operations). Uber provided 1 million rides in 2014, which was its first year of operation in South Africa, rising to 2 million rides by the first half of 2015. The company has also created more than 2,000 jobs in the country where unemployment levels are as high as 30%. Likewise, Airbnb boasts of similar growth in the country. In 2016, about 394,000 guests used Airbnb listings for their stay in South Africa, in comparison to 38,000 guests in 2014. During that year, Airbnb’s users generated US$186 million (ZAR2.4 billion) worth of economic activity in the country, of which about US$148 million (ZAR1.9 billion) was attributed to Cape Town, Johannesburg, and Durban. Fon, an unused bandwidth sharing company, also enjoyed success in the South African market and more than doubled its community hotspots from 21,000 (at the time of its launch in 2014) to 52,000 community-generated hotspots in 2015. Taxify is another global player in the ride sharing space. Launched in 2015, Taxify is an Estonian company offering similar services as Uber. The company has managed to acquire 10% of South Africa’s ride sharing market by offering 15% lower fares compared with Uber, while providing a higher driver payout (Uber takes a 20-25% cut from drivers while Taxify takes a 15% cut).
These international players are challenged by several local companies, which, despite being much smaller in size, are competing on both price as well as local expertise. In the ride sharing market, there are several smaller domestic players, such as Zebra Cabs, Find a Lift, and Jozibear. Similarly, in the accommodation sharing market, acting as a direct competitor to Airbnb is South Africa’s local, Afristay (formerly known as Accommodation Direct). The company has applied a country-specific approach and has succeeded in providing more varied and cheaper options as compared with Airbnb in South Africa. Having a single country focus, Afristay has close to 20,000 listings across 2,000 locations in South Africa. Airbnb on the other hand has 35,000 listings in the country.
Another emerging space of sharing economy concept adoption in South Africa has been seen in the medical sector, wherein players, such as Medici and Hello Doctor, are connecting patients with medical practitioners. Hello Doctor currently services around 400,000 patients in South Africa. Medici, which launched in May 2017 has partnered with the Hello Doctor and aims at connecting rural and less developed regions to remote access medical advice and consultations.
Owing to a burgeoning middle class as well as an increasing access to education and the Internet, Kenya is a strong market for the digital sharing economy. Airbnb witnessed significant growth in Kenya, increasing its listings in the country from 1,400 in 2015 to 4,000 in 2016. The number of guests choosing to stay in an Airbnb accommodation have also expanded three-fold during the same period. Uber has received a similar response in the country, completing 1 million rides in its first 15 months of operations (beginning 2016), and having 1,000 drivers registered with them in the beginning of 2016. However, a local Kenyan company, Little Cabs, which is owned and operated by the country’s leading telecommunication players, Safaricom in partnership with Craft Silicon, a local software firm, is a stiff competition to Uber. The company, which began operations in July 2016, managed to acquire 2,500 drivers and 90,000 active accounts by the end of the year, owing to more attractive pricing and driver-payout in comparison to Uber. Moreover, it offers several services, which have not been introduced by Uber in Kenya yet. Having the backing of the leading mobile network operator, Little Cabs is attracting customers by offering them discounted mobile recharge along with trips, free Wi-Fi for passengers, and the option to process payments using M-Pesa – Safaricom’s mobile money service, which has two-third share in mobile market in the country. However, despite a smaller fleet size and less attractive services, Uber continues to be the market leader in Kenya for now, with a revenue share of about 30% (in comparison to Little Cabs, which has a revenue share of about 10%) primarily due its global brand value and first mover advantage.
Another newcomer to the sharing economy market in the country is Lynk, which aims at connecting service providers across about 60 categories to customers in Kenya. These include services such as plumbing, beauty works, tuition, or party planning. Having started operations in 2015, the company identified and recruited about 400 workers across 60+ service categories, who provided 800+ services to paying customers within its first year of operation.
All of that being said, the sharing economy concept has not had that easy of a ride in the continent and has faced one too many challenges on its way up. The main issue challenging the success of this concept has been the limited use of smartphones, which are inherent to this business model. While the use of smartphones in today’s time is taken for granted in most economies across the globe, this is not the case in Africa. In many cases, these service providers (especially drivers) are using smartphones for the very first time in their lives. Although the youth population is expanding in the continent, elevating the demand and use of smartphones, the numbers still remain extremely low – both at the consumers’ as well as service providers’ end. In 2015, only 24% of Africans used Internet on their mobiles and e-commerce penetration was mere 2%. This makes it imminent for companies looking to excel in the sharing economy space to provide training and workshops to help service providers adapt to and embrace the smartphone technology. Companies aiming to build a stronger position in the market over their existing competitors should also look at providing cost effective and easily accessible financing for the purchase of smartphones for service providers interested in registering in their sharing apps. In the African scenario, such a move would incentivize service providers to join the company’s sharing platform, potentially choosing it over other competitors present in the market, while the company would be able to expand its supply-end of the business by growing the registered service providers’ base.
The other issue that is key to operating in Africa is safety. Since the entire concept of sharing economy is based on trust, ensuring safety becomes a very important aspect in this line of work. Considering the high number of cases of theft and vandalism as well as weak regulatory system, African customers’ trust in service providers in their region is naturally lower than the western market customers’ trust in their local service providers. This impedes the service use growth and forms one of the largest barriers for sharing economy to reach its full potential in the continent.
In the transportation segment of the sharing economy market, the issue of safety is increasingly addressed by several players. To ensure safety of passengers, drivers undergo a rigorous background check that includes a multi-level verification. Companies also undertake innovative approaches to ensure only verified drivers work under the company logo in attempt to improve safety. In one such case, Uber introduced a ‘selfie protection’ feature, in Kenya, wherein a driver is required to take a selfie in the Uber app once in a while, before accepting a ride request from a customer. In case the photo does not match the one registered with the account, the account is blocked. In a market such as Africa, while safety precautions are a necessity, if marketed correctly, they can also be a differentiating and marketing factor. Along with general information and ratings, companies can also show driver’s verification details and training credentials on their app before a consumer selects a ride. In case of other services, they can also include details of the certifications undertaken by the service provider.
In addition to this, the limited use of plastic money – which is the main form of payment in sharing economy-based businesses globally – is another speedbump in the operation of such a business model in Africa. While several ridesharing companies are tackling this issue by introducing cash payments, it remains a limiting factor for companies whose services nature leaves a limited scope for introducing cash payments option, e.g. Airbnb.
Regulatory barriers and outburst of traditional competitors is another challenge, however these issues are common for players across markets globally, though in various intensity. We have talked about it in more detail in our article in October 2016, Sharing Economy Needs Regulator Support. Companies such as Uber have had to face several regulatory roadblocks, the latest of that being a July 2017 lawsuit ruling recognizing Uber drivers as employees (instead of the company-preferred ‘driver partners’) as per South Africa’s labor laws. While the company does have plans to work around this ruling as it currently only applies to the seven drivers who filed the lawsuit, such issues have the potential to disrupt the companies’ smooth operations in the country. There have also been severe protests from traditional taxi companies and Uber has faced several safety-related problems with Uber drivers being attacked and cars being burnt in Kenya, as well as cases of smashed windscreens at railway stations in South Africa. To counter this, the company has posted security guards outside railway stations in Johannesburg for the security of the drivers.
While the concept of sharing economy seems to fit perfectly in the African lives, it does require the companies to follow a very localized approach accounting for specific regional dynamics in order to blend with the countries’ local fabric. While this gives an advantage to the local companies that better understand customer needs, it becomes difficult for them to match the scale of global leaders who have hefty marketing budgets.
Although sharing economy has largely captured the travel and passenger transport, with medical, education, and several other vocational services also seeing new businesses entering with sharing economy model, it is the crowd financing segment that might see the next boom in Africa. African region houses several dynamically emerging economies, with huge hunger for capital, and digital crowd funding platforms can help SMEs connect with potential investors, and help African start-ups with seed capital. In addition to basic investment, these platforms can also offer mentoring opportunities to small start-ups. While there already are a couple of companies, such as VC4Africa, that are operating in this space, crowd financing as a sharing economy business still has great potential to be tapped in Africa, especially beyond the Tier 1 cities of Johannesburg and Cape Town, where ideas are in abundance but there is lack investment and support.
Originally published on EMIA on 21st December 2017.
An Uber self-driving car was reported getting into an accident in Arizona last month. But as the saying goes “any publicity is good publicity”, this also holds true for autonomous vehicles. The news sparked a discussion and shed some light on potential challenges the technology may face before it becomes available for commercial use. At the same time, it spread awareness about the level of safety testing being done to improve the technology before it is rolled out to the public. We are taking a look at what’s potentially in store for users waiting to see streets flooded with driverless vehicles.
Autonomous self-driving vehicles have been the talk of the industry for some time now, with some of the initial attempts to create a modern autonomous car dating back to 1980s. However, major advancements have only been made during the last decade, coinciding with advancements in the supporting technologies, such as advanced sensors, real-time mapping, and cognitive intelligence, which are perhaps the most crucial to the success of any autonomous vehicle.
Early advancements in the segment were led by technology companies which focused on developing software to automate/assist driving of cars. Some prime examples include nuTonomy, which has recently partnered with Grab (a ride-hailing startup rival to Uber) to test its self-driving cars in Singapore, Cruise Automation (acquired by GM in 2016), and Argo AI, which has recently received a US$1 billion investment from Ford. These companies use primarily regular cars/vans that are retrofitted with sensors, as well as high-definition mapping and software systems.
However, software alone is not capable enough to offer self-driving driving functionalities, therefore, automotive OEMs are taking the front seat when it comes to driving advancements in autonomous vehicles segment. New cars/vans, which are tuned to work seamlessly with this software, are likely to adapt better with the algorithms and meet stringent performance and safety standards required before they can be rolled out commercially. California-based Navigant Research believes that with its investment in Argo AI, Ford has taken a lead among such automotive OEMs in the race to produce an autonomous, self-driving vehicles.
Advanced levels of autonomy still to be achieved
In a nutshell, there are five levels of autonomous cars. Levels 1 through to 3 require human intervention in some form or other. The most basic level comprises only driver assistance systems, such as steering or acceleration control. Most common form of currently prevalent autonomy is Level 2, which involves the driver being disengaged from physically operating the vehicle for some time, using automation such as cruise control and lane-centering. Tesla’s current Autopilot system can be categorized as Level 2.
Level 3 involves the car completely undertaking the safety-critical functions, under certain traffic or environmental conditions, while requiring a driver to intervene if necessary.
Most OEMs developing autonomous cars target launching their vehicles in the next three to five years. Tesla is probably the closest, with its Model 3 car with Autopilot 3 system expected to be unveiled in 2018 (however, this depends on whether the regulations are in place by then). Nissan, Toyota, Google, and Volvo plan to achieve this by 2020, while BMW and Ford have set a deadline for 2021. Most of these companies are working on achieving cars with Level 3 autonomy, with a driver sitting behind the steering wheel to take over from the car’s programming as and when required.
Level 4 and Level 5 vehicles are deemed as fully autonomous which means they do not require a driver and all driving functions are undertaken by the car. The only difference is that while Level 4 vehicles are limited to most common roads and general traffic conditions, Level 5 vehicles are able to offer performance equivalent to a human driving in every scenario – including extreme environments such as off-roads.
Some OEMs, Ford in particular, are against the practice of using a human as a back-up, based on the understanding that a person sitting idle behind the wheel often loses the situational awareness which is required when he needs to take over from the car’s programming. Ford is planning to skip achieving Level 3 autonomy and target development of Level 4 autonomous vehicles instead.
Google is currently the only company focusing on developing a Level 5 autonomous car (or a robot car). The company already showcased a prototype that has no steering wheel or manual controls – a prototype that in true sense can be the first autonomous car. Tesla also plans to work on achieving the highest level of autonomy and plans to fit its cars with all hardware necessary for a fully-autonomous vehicle.
High costs continue to be challenging
While the plans are in place, one massive roadblock that persists in the development of these cars of future are costs. There are multiple sensors used in these cars, including SONAR and LIDAR. The ongoing research has helped to reduce the costs of sensors – Google’s Waymo has managed to reduce the costs of LIDAR sensors by 90%, from about $75,000 (in 2009) to about $7,000 (in 2016) – but they are still very expensive. The fact that a driverless car requires about four of these sensors, makes the cars largely unaffordable for consumers, and that puts off any discussion of feasibility of commercial production at this stage.
The first three months of 2017 have been particularly eventful, with several prototypes launched or tested. This activity is expected to increase further as companies try to meet their ambitious plans to roll out self-driving cars by 2020.
Initial adoption is likely to come from companies investing in commercial fleet, particularly those focusing on on-demand taxi or fleet, similar to what Uber or Lyft offer. Series of investments by large bus manufacturing companies, such as Scania, Iveco, and Yutong, also indicate how this technology will be the flavor of the future in public transport.
It is too soon to comment how and when exactly these autonomous vehicles can be expected to impact the way people choose to travel and how they may redefine the societies’ mobility. It is likely to depend on how the regulatory environment evolves to allow driverless cars in active traffic. Current regulatory environment for driverless cars is still at a nascent stage and allows only for testing of these cars in an isolated environment. Some states in the USA, particularly California, Arizona, and Pennsylvania, have opened up to testing of these cars in general public. However, recent accidents and cases of autonomous cars breaking traffic rules have put pressure on authorities to reconsider their stance until the cars become more advanced and tested to handle the nuances of public traffic. We might need to wait another decade or two before driverless cars are a reality in many markets. As things stand, endless efforts continue to go behind the curtain, as companies strive to win the race to develop highly autonomous and safe vehicles.
Sharing economy works on a business model where individuals have the ability to borrow or rent goods or services owned by someone else. The concept has been widely accepted in a short span of time and companies such as Uber and Airbnb have become well known among consumers. The sharing economy sector has witnessed tremendous growth with aggregate valuation of the companies operating in this market reaching US$ 140 billion in 2015. The industry has already started causing a shift in the employment sector and is said to have far-reaching implications which are likely to disrupt the traditional rental business model, particularly for companies in hotel and transportation sectors. The growth potential of sharing economy has become of considerable interest to policy makers around the globe as well, and the industry has recently come under scrutiny of various governments and regulators, and is likely to face regulatory barriers affecting its potential to scale up.
The concept of sharing economy, also known as peer-to-peer economy, facilitates a direct contact between consumers and service providers and is centered around the use of privately owned, unused inventory. Technology is key to the growth of this type of economy, which has already witnessed the emergence of several sharing platforms enabling consumers to share products and services such as cars and houses.
Companies such as Uber and Airbnb have become the talk of the town, due to their tremendous growth achieved thanks to a simple business model: providing consumers the ability to monetize idle inventory and rent an asset, instead of purchasing it. Sharing economy also meets consumers’ desire for social interaction, lower costs, and technology-based access to goods and services. However, the sudden and overwhelming rise in its popularity has shaken the governments’ ability to appropriately and sufficiently regulate this economy. Weak legal frameworks hampering consumer’s safety and tax collection have led to debates around the benefits of sharing economy.
Implementation of the traditional regulatory frameworks in the sharing economy sector is likely to upend the peer-to-peer business model. Inclusion and implementation of monetary employee benefits, tax obligations, and safety regulations in the sharing economy can be expected to lead to an increase in the cost of services offered by these companies, thereby defeating the purpose of the existence of sharing economy. Thus, instead of imposing regulations originally developed and meant for traditional rental sector, there arises a vital need to develop a new policy framework best suited to the peer-to-peer business model.
Instead of completely imposing bans on these services and eliminating the opportunity to make use of idle inventory, governments should work alongside these companies and create regulations tailored to their regions to encourage safe business conduct. For instance, Airbnb signed an agreement with the City of Amsterdam to promote responsible home sharing in 2015. The agreement includes a set of rules for the hosts to be followed before activating their listing, and also stipulates the collection and remittance of tourist tax by Airbnb on behalf of the hosts. In addition, the agreement also includes a partnership with Airbnb to collect content from the company’s database to shutdown illegal hotels. These efforts are expected to ensure the hosts receive clear information on renting their homes and promote consumer safety.
Sharing economy has the potential to make a tremendous impact on the traditional rental sector and is likely to create opportunities across various different economic activities. However, from a legal perspective, it cannot be ignored that the model lacks a strong regulatory support, which over time will continue to put pressure on this newly emerged sector. The peer-to-peer model will be required to address these imperatives in the near future in order to scale to new heights.