A Blog by Jonathan Low

 

Jun 30, 2017

How Waymo's Partnership With Avis Makes Strategic Sense


It's not just the technology that's changing. Perhaps as importantly, the models for how cars are built, financed, owned, leased, rented, maintained and serviced have yet to be determined.

Every legacy transportation related enterprise is experimenting with different approaches and making bets on how this future might be optimized. They are rethinking not just their skills, but their purpose. And in that process of exploration may reside not just the seeds of survival, but prosperity. JL

Jamie Condliffe reports in MIT Technology Review:

Alphabet’s autonomous-driving division doesn’t care for auto maintenance, while rental firms are keen to find purpose as the model of car ownership changes. Avis owns the on-demand car rental service Zipcar, which was seen as a disruptive force. That might work well for Waymo by providing the kind of network to hire out its autonomous vehicles. Existing rental firms might find their fleet management skills can be sold as a service firms building autonomous-car networks.
The car rental giant Avis has signed a contract with Alphabet’s driverless-car division, Waymo, to service its first big fleet of autonomous vehicles.
As Bloomberg reports, it’s the first real autonomous-car partnership to focus on the rather less thrilling business of managing the vehicles themselves—oil changes, tire pressure checks, and all. But it’s also an interesting indication of how the automotive industry is having to reconfigure itself in order to accommodate the future of car ownership.
The motivation is straightforward as far as Waymo is concerned. The company recently announced that it plans to roll out a fleet of autonomous Chrysler Pacifica Hybrid minivans and Lexus RX450h SUVs in Phoenix, Arizona, which would provide hundreds of families with on-demand access to self-driving cars for everything from commutes to grocery shopping. But Waymo isn’t in the business of maintaining a fleet of cars—it just wants to build vehicles that can drive by themselves.
Avis ought be able do that job respectably, because it’s an old hand at managing large fleets of vehicles. So it will look after all of Waymo’s maintenance for the Phoenix fleet, save for the autonomy hardware such as computers and sensors. It’s not clear how much the deal is worth to the car rental firm.
Avis also owns the on-demand car rental service Zipcar, which it acquired because Zipcar was seen as a disruptive force at a time when autonomous cars still looked a little further off. That might work well for Waymo, though, by providing the right kind of network to hire out its autonomous vehicles in the future. Indeed, in Bloomberg’s report of the deal, it explains that Waymo CEO John Krafcik saw Zipcar as a large part of the attraction to partnering with Avis. But realistically it’s not clear how useful that will be: remember that Waymo is partnering with Lyft, too, which also has plenty of savvy with on-demand cars.
Meanwhile, Avis will be concerned about the future of the rental industry as car use looks set to change. As driverless vehicles become more mainstream, there’s expected to be a big shift away from car ownership and toward shared, on-demand vehicles. Boston Consulting Group reckons that by 2030 as many as 25 percent of miles driven in America could be spent in shared self-driving electric cars.
While communal cars may now be provided by incumbent rental firms, in the future they may be provided directly from automakers or, more likely, by ride-hailers like Uber and Lyft. Indeed, Uber’s business model is essentially built on the premise of disrupting car ownership. (Avis’s Zipcar, on the other hand, has struggled recently, having to shed staff and overhaul its service.)
Until now, all of Uber’s cars have been maintained by their self-employed drivers. But if nobody owns the cars that drive us all around, who’s going to service them? That question becomes even more important when you consider that whoever does own fleets of autonomous cars will want them in near-constant use, in order to maximize revenue from riders. That will demand more regular maintenance.
If nothing else, then, existing rental firms might find that their fleet management skills can be sold as a service to the firms that are building out autonomous-car networks. With the Avis-Waymo deal, we’ll find out if it works.

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