Autonomous Vehicles: An Irresistible Business Model for High Tech

Amazon, Apple, Google/Alphabet, Baidu, FaceBook, Microsoft. Why are these tech companies companies so interested in creating autonomous vehicles? There are reports of more than 40 companies trying to break into this space.

Dan Ives, analyst at Wedbush, said that “the EV party is just beginning, buckle your seat belts.”

Allied Market Research estimates that the global autonomous vehicle (AV) market will increase from $54B in 2019 to $557B by 2026. [Although $54B seems like an awfully big estimate for 2019 when fully autonomous vehicles weren’t available yet.] In any event, the market is poised for rapid growth — if the problems with technology or regulations don’t force autonomous driving technology to put on the brakes.

Chris Gerdes, co-director of the Center for Automotive Research at Stanford University, answered the rhetorical question “why are tech companies pushing into autonomous driving? Because they can, and because they have to. There are business models that people aren’t aware of.”

Raj Rajkumar, professor at CMU, told Bloomberg that “each of these companies, including Facebook, want to be a part of or even control and dominate, every part of citizens’ lives. From their business point of view, if you don’t, somebody else can and probably will, and eventually your current domain of influence fades away.”

Vijay Govindarajan and Anup Srivastava, professors at Dartmouth and the University of Calgary, commented in Harvard Business Review that “Google Search, Airbnb, Yelp, Uber, LinkedIn, and Facebook share one common feature: They have scalable virtual models that can be magnified exponentially with few additions to their asset bases. This is unlike a company like, say, Ford or Target that would require land, factories, distribution centers, or warehouses to expand. Put another way, tech companies can expand their revenues and income statements with little addition to their balance sheets.”

And some smaller companies are teaming up to compete and get in on part of the action that autonomous vehicles offer.

A report from Patent Forecast found, as reported by Overdrive Online, said that “patent activity in autonomous vehicles is insanely hot right now and has been over the past three years… Partnerships are becoming a vital part of the industry. Whether it be between OEMs and autonomous driving platforms, companies are beginning to realize that an autonomous vehicle is too large for any one company to tackle alone. Instead, more companies have created strategic portfolios to complement their niche.”