Yesterday, news broke that Google and Ford will work together to build self-driving cars with the purpose of creating a new ride-sharing business. Neither company has confirmed nor denied the report, but a formal announcement outlining details of the collaboration is expected at the 2016 Consumer Electronics Show. Until we find out more, here's some analysis based on what we know so far.
This shouldn't be that surprising
It's certainly a massive development and could have huge implications, but Google that it would rather partner with established manufacturers than build its own cars. Making cars is extremely complicated; working with a traditional carmaker, especially one based in the U.S. with facilities, supply chains, and partnerships already in place, will relieve Google of many potential headaches and could save the company billions of dollars in overhead costs.
"A lot of people out there do a really good job making cars," Chris Urmson, Google's director of self-driving car research, once told me. "They've been doing it for 100 and something years. They're very good at it. They've got a lot of experience. Yeah, it's not obvious to me that Google making cars is the right answer."
This approach—offloading the hardware responsibilities and licensing out its software—is also similar to how Google handles its phone and tablet businesses. Cars are much more complex than those gadgets, however, so there will likely be more collaboration during product development.
Also worth mentioning is that Alan Mulally, Ford's former CEO, now sits on Google's Board of Directors. And John Krafcik, Hyundai's former CEO who spent 14 years before that at Ford in product development, heads up the tech company's self-driving car division, which was recently spun off into as part of Google's Alphabet reorganization. So yeah, the company teaming up with a legacy carmaker, in particular Ford, makes a lot of sense.
Ford is a perfect first partner
While Google has become essentially synonymous with autonomous cars, traditional carmakers haven't exactly been slouches when it comes to autonomous-vehicle research. Ford has been involved in DARPA's autonomous-vehicle challenge for a decade, and an autonomous Ford Fusion recently became the first vehicle to at MCity, a University of Michigan proving ground for autonomous vehicles. The company opened its first Silicon Valley office in 2012, and last year it opened up an . Next year, the company to begin testing its autonomous Fusions on public roads in California.
According to the initial report , the deal isn't exclusive to just Ford, but being the first partner puts the company at the forefront of a nascent and potentially enormous market. This is where Ford likes to be with new technologies. The company was aggressive with implementing in-car connectivity and developing its Sync and MyFord Touch infotainment systems. It has also put a high priority on bringing semiautonomous safety systems to the masses. All together, Ford has the hardware, experience, and the necessary mentality to work closely with Google.
There's still a lot to figure out
According to Yahoo's sources, this new ride-sharing collaboration will be a separate venture from Ford's main business. This is believed to at least partially be a way to insulate the core of the company from any legal issues, but it's also a good indicator of just how many questions are left open when it comes to fully autonomous cars in terms of liability, insurance, and even capabilities.
For example, Google has found in its testing that accounting for human drivers is the biggest challenge when trying to make vehicles semi- or fully autonomous. So Google wants to . Only problem is, Google's self-driving cars have also recently come under for driving too cautiously and causing accidents. For a fully autonomous (i.e., "Level 4") ride-sharing venture, these issues need to be resolved. They likely will be with time, but it's still a concern.
Then there are California's new proposed laws that require an autonomous vehicle
to have a steering wheel and a licensed human driver in the car in case of an emergency. Google says this could significantly delay its research. If other states follow California's lead, that could further complicate matters and be a pretty big speed bump for autonomous-vehicle adoption.
Ford knows it needs multiple "mobility solutions" in the future
Yes, it's terrible corporate speak, but it's true. In addition to its own autonomous research, Ford, like most carmakers, has been exploring business alternatives outside the traditional route of selling cars to consumers. This is in response to trends that include the resurgence of city living, the dominance of Uber, the popularity of ride sharing, and a declining interest in traditional vehicle ownership. Last year at CES, Ford a slate of global testing programs that included ride-sharing schemes, on-demand transportation services, and remotely controlled vehicles (drone cars, essentially). The company has even gone so far as to start calling itself a mobility company.
Despite what people might think, carmakers are savvy to the changes happening around them. They know that transportation as we have known it is about to drastically change. In the future, car companies will need to be able to provide products and services based on the needs of consumers, which will vary widely. A person living in rural Ohio might still need the freedom of a human-controlled car equipped with semiautonomous capabilities, but in a city or more urban area, fully autonomous fleets might be more efficient and sensible for the majority of travel and commuting.
Earlier this year I discussed these new challenges and what it means for Ford with Erica Klampfl, Ford's global mobility solutions manager, and Alan Hall, Ford's technology, research, and innovation communications manager.
This is what Klampfl had to say: "We know this is happening. There are certain areas where car-sharing will continue to increase. There are opportunities to increase sales in emerging markets, but in areas where car sales could potentially decline, we still want to make sure we make the product of choice. Maybe people aren't owning them, but fleet sales are going to increase, and those are our customers. Right now fleet sales are 30 percent of our base, so those are our customers today and that customer base is going to continue to grow. And we want to make sure our products are positioned to take that piece."
To which Hall followed up: "It's a long-term play. Manufacturing cars has been a great business for 111 years, but manufacturing cars, and Bill Ford has said this, is not necessarily going to be our entire business for the next 100 years. That was the way we delivered mobility solutions for the first 100 years—what are the mobility solutions going to be for the next 100 years? It's easily going to be a mix."