No. [EDIT: headline here fixed to not include the words "death spiral"]
The article is a (lousy) summary of a report from Fitch. It has no new content, and its regurgitation of the report confuses most of the fundamentals of the energy and credit industries.
This is by itself a very useful kind of HN comment, but just so you know, it leaves me hungry for a lot more detail. In case having a waiting audience motives you to write more... well, you've got one.
I haven't access to the Fitch article, and I'm no specialist of the automotive market at large. I know even much less about oil. However, here are a couple of guesses about how things are likely to go wrong for car makers.
In a vertical market like cars, you've got many actors, from iron ore mining to the "going from A to B reliably" service, going through part makers (who actually make most of the car), car maker (brands), repairmen, dealers, etc. Very often in those markets, one actor controls a key level, protected by entry costs, secrets, regulations, exclusive customer relationship, whatever. By leveraging this stronghold, this actor extracts most of the margins, leaving just enough to other levels to let them survive. You want all other levels in your vertical market to be commoditised: Microsoft wants PC hardware commoditised, Über wants driving to be commoditised (through underpaid drivers first, unpaid robots ASAP), etc.
It seems that for cars, mastering the engine is the way to control the whole vertical market. Moreover, ever-more-stringent emission + fuel efficiency regulations keep it hard to make engines, despite technical progress. Electrical cars change that, because it's (comparatively) very easy to make an electrical engine.
Another asset held by carmaker is the brand and consumer relationship, and this one's probably doomed as well. Cars stay parked for 95%+ of their lives, the only reason you buy one (and it's your most expensive possession after your house) is because you want it to be reliably available whenever you want. Once cars drive themselves, it stops making economical sense to own one: for a fraction of the price, you'll rather subscribe to a fleet of autonomous cars which reliably deliver one on your front door 10 minutes after you summoned it with your smartphone. That not only means fewer cars driving a higher percentage of time: it makes obsolete the car-makers' genuine expertise in making individuals want to buy their models. I'd bet that selling hundreds of thousands of units to Kalanick is significantly tougher than making some hillbilly lust for a Canyonero.
It looks like mastering level-4 autonomy will be the new way to lock that vertical market, and current car-makers don't look better positioned than the Silicon Valley to secure that stronghold. Cue the famous last words by the then Palm CEO, saying about the iPhone “PC guys are not going to just figure this out. They’re not going to just walk in”. Yes, in radical changes, it typically is an incumbent who figures it out.
<Very often in those markets, one actor controls a key level, protected by..
Any writings on who these actors in different markets? clothing? retail? shipping? whatever?
<Once cars drive themselves, it stops making economical sense to own one
Driving is so much fun. Do you ever think they will have laws reducing the driver-cars? Like HOV but for NDV?
So.. when you get into a house you no longer need a landline 'cause of cellular phones. Does this mean when you get into a house you no longer need to own a car? Do you really think this will happen?
Another observation. reporting of deaths.
Now, whenever a passenger plane crashes, it becomes top of search news. "We Interrupt this broadcast" historical procedures. Same for bad rail accidents. Yet with automobile accidents, there are over 30k each year on our highways. Not "interrupt this broadcast" or top of search news. [some, but the weather chair reactions or extreme pileups]. It is even hard to find news about the death near your home highway at times.
But, anytime a driverless car is involved in an accident, especially a death, we can expect them to be top of search results and lead news story. It is new. It will be years before an accident with a driverless car becomes so routine it does not make news. Tons of news sites need fodder. A driverless accident is perfect food for clicks and genuine interest.
<deliver one on your front door 10 minutes after you summoned it with your smartphone
I thought about this. Okay, I will not trust anybody to be better than me when I drive in a snow storm. Several months I HAVE to go to work. I really doubt I will take a driverless car especially because I know how crazy other drivers are and I know the idiosyncrisies of the trek I take 530 times a year. Thus, I will have to own a car. It will make economic sense.
So is horse-riding, and some people still own personal horses. But most people don't, and those who do ride for fun, not for transportation. They take their car to go and ride their horse actually. Because horses are comparatively impractical.
When autonomous cars will be mainstream enough, there won't be any traffic jams in autonomous-only lanes (yes of course it will be a thing), contrary to those allowed to legacy cars. Also, fleet cars won't park, so the pressure to reclaim parking space in the cities will become enormous, and parking your personal car will become as hard as feeding your horses while shopping at Walmart. Human-driven cars will become as impractical compared to fleet cars as horses are compared to cars today.
> reporting of deaths
It's hard to predict which deaths remain newsworthy, and I don't feel like I can. However, I suspect that crashes between two autonomous cars will be very rare, compared to human driven vs. autonomous car crashes. And the primate-operated vehicle will be blamed, probably rightly. Musk considers he needs autonomous cars to be 10x safer than legacy ones, in order to overcome this effect, and expects to reach that level in a couple of years (he wrote that's when he'll remove the "beta" qualifier on his auto-pilot).
> when I drive in a snow storm.
Tesla's radars see perfectly well in the worse snowstorms, you don't. The car has reflexes orders of magnitude faster than yours, a direct connection to ABS sensors, etc. As of today, Tesla cars monitor their human drivers in every driving conditions, compares it to what the autopilot would have done, and whenever a discrepancy occurs, it sends a report over GSM to Tesla's engineering teams. That's how they improve their autopilot. As soon as you drive one you're teaching every car to drive better than you in pathological conditions :-)
It also does 2 other things as we've seen with other automation. The maintenance schedule can be forecast with higher accuracy (humans really make this difficult). Second, it lowers the insurance premiums as a result of higher predictability (humans REALLY screw this one up). As a comparison to existing solutions there's no room for competition if your company can't cross the moat.
> for a fraction of the price, you'll rather subscribe to a fleet of autonomous cars which reliably deliver one on your front door 10 minutes after you summoned it with your smartphone
Interesting, I'd picked a different idea as the market shape ("AirBNB for self-driving cars").
Yours probably works better for a well-capitalised firm. Especially since it encourages lockin through mere inertia.
There's no reason the manufacturers can't take this approach themselves. With a self-driving fleet, they can bypass their dealer channels and undercut everyone else, especially Uber, and Lyft (less Tesla).
In short, it's the GE model for aircraft engine. Selling engine hours, not engines. You can charge a premium over the actual financial costs because it's simple.
Plus most buyers prefer a fixed, regular payment over paying-per-use, even if doing so is financially irrational. Loss aversion and whatnot.
AirBnB works great when you exceptionally need accommodation, far from your normal environment. Most people would hate to need booking an AirBnB every night of the year, in order not to sleep under a bridge.
I think people can regularly move around in impersonal vehicles (as shown by public transportations), but they'd hate depending daily on borrowing a car that's clearly someone else's. They'd probably also have a problem leasing their own car when there's a slight risk that they might need it. So really, the dynamics that makes AirBnB possible doesn't seem to translate well to daily transportation.
> There's no reason the manufacturers can't take this approach themselves.
I'd turn it the other way: it's likely that the fleet operators will also build and repair the vehicles. But I wouldn't bet that legacy car manufacturers will be the ones cornering that market.
Very unluckily for them, electric power and autonomous driving look like they'll become mainstream simultaneously. As explained above, I believe the former will breach their historical moat, and nothing indicates that they'll be the first to rock at the latter, as well as the new kind of consumer relationship that comes with fleet operating for consumers (most of them already operate corporate fleets).
Anyway, unless you're a shareholder, it doesn't matter much whether the behemoth of tomorrow is called Ford, Tesla or Über. Many of the individual engineers will be the same either way, hired by the winner. I don't believe in Apple winning this: they're good at making you lust for ownership of tangible goods, but offering collective services in impersonal vehicles doesn't feel like it's in their DNA. As for Google's moonshots, I can't remember any of them being successful. Moreover, they'll probably be beaten at their usual strategy of accumulating more data than others and parsing it better: Tesla's already accumulating millions of analysable miles with their actual fleet of actual cars doing actual travels, while Google toys around SF with replicas of Noddy's car. And Musk's been hinting at interest for building a company-owned fleet (although he would be a fool to say it out loud: Tesla's all about making electric cars sexy to own).
Über is also very well positioned for smart data accumulation. And IIRC, Kalanick has always been open about his plan of cornering the autonomous cars fleet market before autonomous cars exist, and hiring drivers as a temporary stop-gap (which he also openly treats like shit).
> Plus most buyers prefer a fixed, regular payment over paying-per-use
They currently pay a mix of the two (they pay for gas and maintenance per mile). With electricity being cheaper than oil, it's possible for fleet operators to offer an even better per-month / per-mile ratio. And I agree with you that they'll probably do just that. Unless of course, a monopoly is secured so fast that there's no point in making fleet customers happier than those of cellphone or cable operators.
> Most people would hate to need booking an AirBnB every night of the year, in order not to sleep under a bridge.
Some people use Uber or Lyft occasionally. Some use them every day. In both cases the mechanics of use and billing are identical.
> I'd turn it the other way: it's likely that the fleet operators will also build and repair the vehicles.
Hertz, Avis et al are not seen as competitors to GM or Toyota, because the car-hours market is relatively dominated by owner-operators.
I don't see anyone talking about those companies manufacturing their own cars. Probably because manufacturing a modern car is a hard business to get started in. Tesla did, after years and many millions of dollars.
Maybe Tesla will go the fleet model. But nothing stops Chevy from doing the same. Nothing stops every single manufacturer from doing the same. There is no network-effect moat here.
They aren't: you have to go and fetch the car at their shop, which is very impractical compared to having your car parked on your driveway.
The most radical change with autonomous cars isn't that they drive themselves with passengers in it: it's that they'll drive themselves empty in order to pick up passenger wherever they want, whenever they want. That's what makes not owning a car practical.
> There is no network-effect moat here.
There might not be a natural monopoly, but there is a pretty big critical mass: to reliably serve cars fast enough at predictable prices, a fleet must be pretty large. And whenever you go from city A to city B, you need the operator to be present in both cities.
You're right that everyone's allowed to compete on this new market, including Chevy. Just as Blackberry and Nokia and Microsoft were allowed to compete in the post-iPhone smartphone market. But have they got a critical advantage to help them succeed? They've got plenty of legacy that will be more of an hindrance: dealership networks (that's another thing Tesla is fighting tooth and nail not to get entrapped with), many engineers and engineers-turned-executive who can't let go of a dead culture (ICE, driving as a dangerous-but-exhilarating activity, cars marketed as phallic substitutes), syndicated workers on their assembly chains...
Twice in my career I've seen incumbents lose their market, because it took them too long to embrace inevitable change: Unix workstations killed by Linux on beefed-up PC in the early 00's, and cell phone makers deprecated by iPhone and Android in the late 00's. I'd be surprised if GM and Ford proved smarter and more adaptable that HP or Sun in the good old days, or Nokia and RIM a decade later.
When the paradigm shifts, you're better off with a clean slate than with a legacy.
> They aren't: you have to go and fetch the car at their shop, which is very impractical compared to having your car parked on your driveway.
Precisely. Some people will still want to own their car, even if it's autonomous. I imagine that over time folk will become accustomed to living more like New Yorkers -- renting car time -- but it might not be a big bang.
> And whenever you go from city A to city B, you need the operator to be present in both cities.
Or you have a service acting as middleman. Like AirBNB, or Amazon, or Google.
> Unix workstations killed by Linux on beefed-up PC in the early 00's
This process has already played out in the car market. It's what Ford did to the dozens of small manufacturers who existed previously. Unix vendors had high margins that couldn't be sustained as mass-market technology caught up. Sheer manufacturing power (and let's not forget Windows here) did them in.
New car manufacturers are not entering a market of Unices. They are entering a market of Intels.
> cell phone makers deprecated by iPhone and Android in the late 00's
This one is due to genuine product improvement, in my view. The iPhone was actually usable, it wasn't just random options stuffed any old where the engineers found a gap in the menus.
But again, cars are a rather more sophisticated product. They already compete on design. There might be some more competition on usability.
> I'd be surprised if GM and Ford proved smarter and more adaptable
It occurs to me that I ought to have disclosed that I work for Pivotal, in which Ford recently invested a lot of money. It didn't occur to me because I don't work with any Ford teams myself, though some colleagues in the company do.
What I can see is that neither Ford, nor GM, are just sitting around waiting to be replaced. The lessons of the technology industry are now widely diffused. Applying them uncritically means assuming incumbents will rest on their laurels, because that's what happened in tech.
Except everyone else has gotten to observe what happened in tech. Incumbents understand the perils of laurel-resting.
> When the paradigm shifts, you're better off with a clean slate than with a legacy.
iOS is based on a technology that is nearly 50 years old. Android is based on a technology that's 25, inspired by the technology that is nearly 50.
I don't have enough time to write a thorough post, but the most obvious flaw in their logic is that utilities and auto-makers are unlikely to be disrupted completely by switching from fossil-fuel technologies to renewable+battery technologies. Since the switch will take an estimated 20 years, they have plenty of time to invest in renewables.
A few things (like shale oil drilling investments) might be impacted in a "death spiral" way, but I don't believe that is anywhere near the 25% they claim by invoking everything that touches oil.
Also, bonds have a finite lifetime and are often for equipment with depreciation. Even if 25% of bonds today were for oil infrastructure, many would be re-paid before the disruption had significant financial implications.
TLDR: the headline is egregious clickbait of a regurgitated article.
Just to chime in, I too value when community members can provide more detailed arguments on things. There's a lot of very interesting topics on here that are simply WAY outside my domain of knowledge. The modern world is complex, and while I have opinions on a lot of topics I'm barely qualified to, there's a very real limit on how much we can even have any kind of view about.
I enjoy the comments on places like HN, because it provides a good accompaniment to Wikipedia: where Wikipedia is a summary of the topic, as it stands, comments on HN are a summary of the discussion about the topic, as it stands. (Well, when we get at least two different perspectives contributing and discussing, which is why we should be careful with groupthink and downvoting dissenting views.)
I agree that the article was very click baity, but I am curious about how energy utilities will be affected by cheap batteries. These are some of the most entrenched and connected industries, so disruption, if it happens, won't be easy or fast.
What you say is true but, one thing they usually cannot do is affect whether not individuals put solar panels on their roofs and batteries in their garages. When the price of these two components become cheap enough for consumers to comfortably go 'off the grid' utilities will have little recourse.
The article is a (lousy) summary of a report from Fitch. It has no new content, and its regurgitation of the report confuses most of the fundamentals of the energy and credit industries.