Ford has announced a partnership with Lyft, aimed at deploying self-driving Ford vehicles in a ride-hailing scheme. The partnership is in its infancy, and where and when these vehicles will be deployed has not been revealed.
IHS Markit perspective
- Significance: Ford has announced a partnership with Lyft, as a working partnership, rather than the automaker taking a stake in the ride-hailing company. No financial details have been disclosed.
- Implications: Ford will develop an app for deploying its self-driving vehicles through Lyft and the two will work together to explore the specific details of how such a fleet would be maintained, delivered, and accessed. The two companies also plan to share their expertise in big data, fleet management, and traffic flow within cities.
- Outlook: The partnership creates opportunities for both companies to explore revenue streams and business models related self-driving cars for mobility services, as well as the opportunity to refine the enabling technology. Deploying self-driving technologies for wide consumer use, ride-hailing or other services, is still a few years down the road, but understanding potential business opportunities beyond theoretical ones is necessary as well. This partnership may explore that issue more deeply.
Ford Motor Company has announced a new partnership with ride-hailing service Lyft, in a blog post by Sherif Marakby, Ford's vice-president of autonomous vehicles and electrification. Reuters reports that the two companies plan to see Ford self-driving vehicles on the ride-hailing service company's network in "large numbers" by 2021; however, Marakby's blog post does not include the timing of this. This date of 2021 has been cited in several media reports, though not confirmed and we believe it refers to a statement on the subject from former Ford CEO Mark Fields. When current Ford CEO Jim Hackett outlines the new strategy on 3 October, more details on the timing may be forthcoming. Initially, Ford will put human-driven vehicles on Lyft's network, and the company did not confirm when it plans to offer its first rides using self-driving cars. According to Reuters, Marakby said, "We're not building prototypes for the sake of building prototypes."
In the announcement of the partnership, Marakby writes, "As we at Ford continue making progress on developing self-driving technology ‒ through our self-driving vehicle and Argo AI's virtual driver system ‒ we are simultaneously building out the infrastructure and systems necessary to make it easy for people to use our service. Think of it this way: Someday, when you open the Lyft app during a period of high demand, Ford and Lyft software will need to be capable of quickly dispatching a self-driving vehicle so that you can get to your destination as quickly and as safely as possible."
Marakby goes on to describe the work that Lyft and Ford are planning, and what strengths Ford believes each will bring to the table. Ford sees strengths in this relationship from its experience with autonomous vehicle technology development and large-scale manufacturing. It also notes Lyft's existing and growing network of customers, its growing demand for rides, and its "strong knowledge of traffic flow within cities". Marakby also states that both companies have experience with fleet management and big data. "With our combined capabilities, we believe we can effectively share information to help make the best decisions for the future," Marakby writes.
The two partners will focus on three key areas for development of a future system. These include creating a Ford technology platform that can easily connect with a partner's platform (in this case, Lyft, but it could be others) to effectively dispatch a self-driving vehicle. The two will look at where to deploy the self-driving vehicle service, based on shared data and information. The third issue the partnership will work to evaluate and address is what kind of infrastructure will be necessary to service and maintain the fleet of self-driving vehicles, in such a way that they are available whenever a consumer needs one.
Addressing, to some degree, criticism from Wall Street and the media that Ford may be lagging relative to developing in this space, Marakby reiterated a point that Ford has previously made, saying, "Some view the opportunity with self-driving vehicles as a race to be first. But we are focusing our efforts on building a service based around actual people's needs and wants. We are placing a high priority on safety and dependability so customers will trust the experience that our self-driving technology will one day enable."
Outlook and implications
The partnership creates opportunities for both companies to explore revenue streams and business models related self-driving cars for mobility services, as well as the opportunity to refine the enabling technology. While the technical aspects are notable, the opportunity to explore the revenue-generation practicalities are the next issues the industry needs to address to move from the theoretical to the practical.
Regardless of the underlying developmental hurdles to resolve relative to the mechanics and technical solutions for self-driving, routing and service delivery relative to ride-hailing, and the functionality of the apps consumers interact with, this relationship has notable potential for exploration of the specifics around the revenue streams: who owns the vehicles and who gets money when. There are seemingly endless possibilities in this, and the right solution for any given company, geographical area, or set of technologies may be quite different from that for another company; but in order to refine and evolve, a start needs to be made. The partnership with Lyft has the potential to be as significant for Ford as Maven is for General Motors (GM).
Given that the answers to these issues are not resolved, the blog post, entitled 'How Ford and Lyft Are Teaming Up to Take Self-Driving Cars Mainstream', asks more questions than it answers and does not really explain how Ford and Lyft will take the option mainstream. Instead, it provides a framework of what to expect and lays out the target. The statement confirmed that Ford will deploy its own self-driving vehicles through Lyft's app and passenger network, and that Ford is developing an app that can work with the ride-hailing service's app to provide seamless performance to the consumer. The relationship addresses one path for Ford's self-driving cars to enter the market and gives Ford a built-in network of riders and Lyft an added supply of vehicles.
Former Ford CEO Mark Fields had promised autonomous vehicle deployment in 2020, initially in the ride-sharing space. New CEO Jim Hackett is due to outline his forward strategy to investors in mid-October. At that point, we may see further refinement as to the timing when Ford expects this partnership to bear fruit ‒ and, more specifically, the revenue involved. The timing may or may not shift with the new management, but there is consistency in Ford's overall messages and goals.
Lyft is already working with GM, Waymo self-driving vehicle tech start-up Drive.ai and others, but from the beginning it had said that its partnerships were not going to be exclusive. The series of partnerships indicates that Lyft's long-term role will remain connecting drivers with mobility services. It would appear that any intention to manage its own fleet or maintain its own vehicles is only one of the several levers Lyft will use in the primary service of connecting drivers with rides. By working through a variety of partnerships and making investment in its own potential self-driving platform technology, the ride-hailing company is preparing for access to a variety of essential business models and pathways. Whatever the road to profitability, Lyft will be positioned to participate on most.
For Ford, this partnership might be an effort to ultimately explore providing mobility through a new lens: looking for profitability through vehicle miles travelled. The partnership announcement is light on details, such as who would own the actual fleet and be responsible for maintenance, as these are issues the partners plan to explore. However, it is possible for Ford to use this partnership to rethink the business of selling cars and instead sell access to cars. In such a scenario, Ford could work with Lyft to build an audience for their specific products within the ride-hailing community. Once done, regardless of the mechanics of which company puts maintenance on its expense sheets, there are options for exploring the possibility of generating revenue from vehicles based on miles travelled ‒ instead of selling the cars to Lyft and focusing efforts on revenue from that sale, Ford may use this partnership to evaluate the many potential options for capturing revenue from the vehicles' operation. It seems that the partnership could help Ford contrast opportunities it would have if it simply sold the vehicles to Lyft, though a more simple supply partnership would isolate Ford from accessing the revenues generated from the service and would be a path more likely to lead to the vehicle being relegated to a bland commodity. Exploring alternative business models and being as prepared as possible to take advantage of whichever proves dominant, at this stage of the game, is every bit as critical as developing the critical technology.
The partnership announcement says little about how, when, or where the vehicles will be deployed. Ford has been developing its self-driving fleet with the Fusion, so we may see the first deployment under the partnership using the Fusion. Additionally, while the Lyft partnership opens up the options for Ford's future business models, this is also simply be a different path from that of several other automakers. GM's Maven and its own partnership with Lyft have the potential for that company to access a VMT business model, while Volkswagen's Moia could do the same. Daimler's CASE (connected, autonomous, shared, electric) model is also going to explore all elements of the business case.
The path forward of Ford's partnership with Lyft open doors and create options for Ford, but largely these are not options that many players are working to resolve. Success for any of these players will depend on execution, which will also depend on coming up with the right set of assumptions. Ford has already indicated that it is not concerned with getting to the market first, but arriving with the right product. This partnership provides another pathway for meeting that objective.
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