KEY POINTS

  • New technologies are disrupting the business models of legacy automakers, dampening consumer demand for purchasing vehicles. Tech-mediated models of transportation — like ride-hailing, for instance — are presenting would-be car owners with alternatives to purchasing vehicles. In fact, a study by ride-hailing giant Lyft found that in 2017, almost 250,000 of its passengers sold their own vehicle or abandoned the idea of replacing their current car due to the availability of ride-hailing services.
  • Artificial intelligence (AI) is one technology automakers can use to adapt to this changing landscape, as it offers opportunities to both decrease production costs and create new revenue streams.
    • Reducing production costs: By 2025, AI is expected to provide $173 billion in cost savings across the entire automotive OEM supply chain, ranging from procurement to research and development, according to McKinsey. The biggest impact will be in manufacturing, where AI is expected to provide $61 billion in cost savings.
    • New revenue streams: Self-driving technology will be the biggest opportunity AI creates in the transportation space: It will present a $556 billion opportunity by 2026, growing at a 39% CAGR from $54 billion in 2019, per Allied Market Research. AI will present other opportunities as well, like predictive maintenance and route optimization.
  • Despite its benefits, there are major barriers to developing and integrating AI technology: cost, talent, and trust.
    • Cost: More than half (53%) of global business and IT leaders cited the high costs associated with AI technology as a major deterrent to adoption, according to a survey conducted by MIT Technology Review.
    • Talent: A survey of 50 C-level executives found that only 14% felt confident that they had the human capital necessary to implement AI projects, per Constellation Research.
    • Trust: Trust in AI was ranked as the top barrier driving employee resistance to implementing AI solutions, per Constellation Research.
  • A number of transportation firms are already successfully leveraging AI, proving it possible to overcome the barriers to using AI in the space.
    • Autonomous driving: Waymo launched the nation's first commercial autonomous ride-hailing service in December 2018. The firm has completed more than 10 billion miles of public road tests, strengthening the capabilities of its technology with each test by continuously feeding its self-driving algorithm higher quantities of valuable data.
    • Manufacturing: Volkswagen expects to see a total of €350 [...]