When GM’s self-driving arm, Cruise, is deciding which cities to begin testing driverless cars, CEO Kyle Vogt and his team look at a number of factors. Among them is whether there is a big market for Uber, Lyft and other ride-share players.
Cruise, which has a pilot up and running in downtown San Francisco and hopes to launch one in New York City in 2018, has long touted the technological benefits of operating in complex environments. Put simply, the autonomous cars will be able to more quickly learn how to navigate difficult driving situations better than humans can.
And it turns out that cities also provide a significant business opportunity.
“It also happens to be the case we can have the biggest impact, by impacting the biggest number of people, in the most complex environments.” GM president Dan Ammann told analysts during a recent presentation. “That’s where the people are, and it’s also where the business opportunity is.”
Like Uber and Lyft in the early days, Cruise is going after major markets first. But the barrier to entry for Cruise is high. For one, navigating city streets for self-driving cars is difficult, and requires considerable regulatory oversight.
But when the company crosses those barriers and launches a truly driverless service in either San Francisco or New York City it will have a notable leg up on any competitors attempting to launch in those cities.
It then becomes easier for Cruise to expand outside of that city into surrounding suburbs and less-complex outer boroughs.
Technologically, the idea is if Cruise cars can drive themselves in downtown San Francisco and New York City, they can also handle less-complex suburban environments like Mountain View — where many of Cruise competitors are testing their cars — fairly easily.
In addition to the technological benefits of launching in a market first — the software will continue to develop and advance making it harder for later entrants to catch up — it also gives Cruise time to work on the efficiency of its network.
That efficiency will then allow Cruise to maximize the utilization of its supply. As Ammann mentioned in the same presentation, the company is also thinking about using its supply to deliver goods during parts of the day where there is typically low demand for ride-share services. Having an efficient network in a high volume market will be a crucial part of that.
“Utilization in the early days will likely be relatively low.” he said.
“As part of driving this utilization equation to help get the cost per mile down, we see opportunity to think about other modes beyond moving people around.” he continued. “We recognize the explosion in e-commerce and in the last-mile delivery opportunity so we see multi-modal uses as a key lever of getting utilization rates up and total cost down per mile down.”
With the new year around the corner, we’re nearing many of the deadlines that several companies have set for the launch of driverless cars in certain geofenced locations. But what we’ll be looking out for over the course of 2018 are signals as to how these companies plan to commercialize their services.