AI changes the transportation industry. And it’s not all about self-driving Teslas.

8

October

2022

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When you think about Artificial Intelligence in the transportation industry, probably the first thing that comes to your mind are shiny, brand-new Teslas with their famous Autopilot feature. Tesla is indeed the highest capitalized motor vehicles company right now, but there is much more change in the transportation industry empowered by AI than only self-driving vehicles (TradingView, 2022).

Artificial Intelligence has found many applications for public transportation authorities. With the use of advanced models, mass transit agencies are able to design and develop optimal route networks that maximize ridership and minimize road congestion. On top of that, AI can accurately predict passenger flows throughout the day, allowing to roll out more vehicles on the road or tracks when needed, making them less crowded and offering more pleasurable experience (Abduljabbar et al., 2019).

One might think that it is easy to solve traffic issues simply by building more lanes. Unfortunately, this statement is very far away from the truth. Firstly, expanding physical infrastructure is extremely costly and in most cases just infeasible in dense urban areas. Secondly, road infrastructure is an example of a fascinating economic phenomenon known as induced demand. In simplest words, each added lane incentivizes additional drivers to go on the road. Thus, in the short term, traffic congestion might be improved, but in the longer term it always ends at least as bad as before (Lee, Klein and Camus, 1999).

This is where data and AI comes in, seen as the most efficient way to combat traffic congestion with the current state of technology. It turns out that infrastructure elements we take for granted are much more technologically advanced than one might think. Take traffic lights as an example. Data gathered from cameras and sensors at the intersections is fed to algorithms which can in turn improve timing plans for traffic lights (Abduljabbar et al., 2019). That improves the traffic flow and limits congestion – without adding any additional lanes.

Last but not least, AI serves as a backbone for Automatic Incident Detection (AID) systems. With the use of cameras and radars, these systems can detect unusual situations on the road in seconds, allowing qualified operators to spot incidents quickly and send emergency services if needed. Those systems are also supported by smartphones, which can detect incidents with accelerometers and acoustic data. Research shows that AID can reduce the fatality rate on the roads by 6%, meaning it actually helps to save human lives (White, et al., 1999).

Automatic Incident Detection – principle of operation

After all, AI is not only about self-driving vehicles. Insights from data are actively used in other aspects of transportation, allowing for more efficient public transport systems, reduced traffic and improved safety on the roads.

References

Abduljabbar, R., Dia, H., Liyanage, S. and Bagloee, S.A. (2019). Applications of Artificial Intelligence in Transport: An Overview. Sustainability, [online] 11(1), p.189. doi:10.3390/su11010189.

Lee, D.B., Klein, L.A. and Camus, G. (1999). Induced Traffic and Induced Demand. Transportation Research Record: Journal of the Transportation Research Board, 1659(1), pp.68–75. doi:10.3141/1659-09.

TradingView. (2022). Stock Screener — Search and Filter Stocks. [online] Available at:https://www.tradingview.com/screener/.

White, J., Thompson, C., Turner, H., Dougherty, B. and Schmidt, D.C. (2011). WreckWatch: Automatic Traffic Accident Detection and Notification with Smartphones. Mobile Networks and Applications, 16(3), pp.285–303. doi:10.1007/s11036-011-0304-8.

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The Implementation of IoT in the Automotive Industry

7

October

2022

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Despite the increase in popularity of the Internet of Things, its definition is still loose. Stoltzfus (2020) defines the Internet of Things, hereinafter referred to as IoT, as “a computing concept that describes the idea of everyday physical objects being connected to the Internet and being able to identify themselves to other devices and send and receive data”. The particularity of the IoT is that it allows almost any object to be connected to and transmit data to other devices. Here is a typical IoT example: based on the morning alarm set on your phone, your smart curtains could open automatically to help you wake up and your connected coffee machine could start brewing you a hot coffee by itself as soon as you get out of bed.

This technology can be implemented in virtually any sector, and the automotive sector is no exception to this. Over the past years, the IoT has allowed cars to become part of a network of interconnected vehicles that communicate with each other and with the external world. Mobile apps such as the My BMW app already allow drivers to remotely check the status of their vehicle, pre-climatise their vehicle in advance based on their calendar, and even locate their vehicle when unsure about its parking location (BMW, n.d.). In addition to the great technological progress that has been made in the past decades in the car industry, the IoT still has much more exciting features to offer to this sector.

As for every technology, the IoT also comes with a set of concerns that should be taken seriously since they are directly related to drivers’ safety. Equipping cars with technology that connects them to the IoT means that they become subject to the same dangers as other connected devices (Kirk, 2015). Similar to computers or mobile phones, cars now become hackable, but with consequences that are far more dangerous. An autonomous car could for example be controlled by a hacker that could voluntarily make it collide with other vehicles. Additionally, equipping cars with more technology also means creating more sources of distraction for drivers, which is a major concern as well.

References:

BMW. (n.d.). Connect your life with the My BMW App. Retrieved 07/10/2022 from https://www.bmw.com/en/automotive-life/connected-life-with-the-my-bmw-app.html

Kirk, R. (2015). Cars of the future: the Internet of Things in the automotive industry. Network Security, 2015(9), 16-18. https://doi.org/https://doi.org/10.1016/S1353-4858(15)30081-7

Stoltzfus, J. (2020). Internet of Things (IoT). Retrieved 07/10/2022 from https://www.techopedia.com/definition/28247/internet-of-things-iot

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Information Asymmetry in the Second-hand Car Market

4

October

2021

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Something you might find at a second-hand car dealership

Information asymmetry is an important topic in any market. It presents itself in situations where the selling party knows something important about the product, which the buyer does not know. In the case of second-hand car dealerships, this phenomenon, known as the principal-agent problem, arises when dealers offer cars of lower quality (lemons) at similar prices to cars of higher quality (peaches) (Kim, 1985). This makes it much harder for buyers to distinguish between good and bad quality cars. In practice, this pricing method allows dealers to sell low quality cars to naïve buyers for the same price as higher quality cars. Dealers benefit from these transactions, as they sells cars for higher prices than their true value.

However, buyers suffer from the consequences of their buy. They regarded the car as functional and believed it fit their requirements at the point of sale. Unfortunately for the buyer, the car they bought will likely have problems which went unnoticed at sale but become apparent after some driving time. When buyers in the market find out that some cars are lemons, but they cannot distinguish them from peaches, they will stop buying cars until they can distinguish between them. Nevertheless, instead of distinguishing between lemons and peaches through prices, it is more beneficial for the dealers if they do not distinguish (if they do distinguish, selling lemons becomes really hard). Since nobody wants to buy the dealers’ cars anymore dealers keep lowering the prices, still not distinguishing between lemons and peaches. Eventually, the prices become so low that the dealers cannot come around from the revenue from car sales and the market will collapse.

This market for lemons has to be controlled in some way to prevent dealers to be able to benefit from selling low quality cars at too high prices and causing the market to collapse. One way to solve the problem is to implement a market-wide, government-ordered warranty for each sold car. This will force dealers to distinguish between lemons and peaches, because they would have to pay for the repair costs of the bad quality cars they sold, if they were to break, so they give lemons either a shorter warranty, or a lower repair limit. This solution has two possible, likely positive consequences for buyers in the market. Either dealers will distinguish between lemons and peaches, allowing buyers to choose a car that fits their requirements fairly and more easily. Or dealers will stop selling lemons and only sell peaches which means buyers will only be offered good quality cars. Either way the market survives and does not collapse on itself.

Kim, J.-C. (1985). The Market for “Lemons” Reconsidered: A Model of the Used Car Market with Asymmetric Information. The American Economic Review, 75(4), 836–843. http://www.jstor.org/stable/1821360

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Help! My car can read my mind!

28

September

2021

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When thinking about futuristic developments in the automotive industry, people usually think of autonomous cars operating with machine learning systems amongst others. Thinking a step further, one could also envision flying vehicles. But what if I told you that we are not that far away from cars reading our minds. The thought of that can be rather scary. Mindreading cars remind society of Sci-Fi movies and make such technologies appear as invasive tools to invade humans privacy.

Let’s take a step back and look at this phenomenon in detail, starting with the technology that even enables this advancement. You may have heard of brain-computer-interfaces (BCIs) before. Most people believe this technology to be very futuristic and immediately think of chips being inserted into our brains. However, this is not the case. BCIs solely measure brain activity, extract certain information from that and then further convert that information into outputs. The outputs enable the BCI to replace, restore, enhance, supplement, or improve human functions. The current state of the technology has not reached implants yet but rather works with wearables. In more detail, the wearable contains an electrode that measures neuronal activities, which does not sound too ‘Sci-Fi’ at all. Experts in the field describe the unfamiliarity and false marketing of the BCI technology as the greatest obstacle for the industry. The devices are not reading our minds or invading our privacy at all. Instead, they solely measure what we are focussing on through our brain waves.

Coming to the initial topic of cars reading our minds, we can now better understand the underlying process behind it. Mercedes Benz has introduced the Mercedes Vision AVTR last year during a conference in Las Vegas. The self-driving car does not have a steering wheel and reminds of a spaceship rather than an average car. AVTR stands for ‘Advanced Vehicle Transformation’ but also relates to the movie AVATAR since the vehicle is a collaboration between Mercedes Benz and Disney. If you have watched the movie, you are probably familiar with the Avatars connecting with nature through their nerve ends. During the recent IAA Mobility 2021, Mercedes showed how the vehicle will be controlled by mind control and minor touch. The BCI is found in a wearable that can be calibrated to the driver taking around 30-40 seconds. Further, the driver can calibrate their body to the car by placing their palm on a control pad, recognizing the driver through their heart rate. Mercedes explained that proper focus is needed to use the BCI, so the car will not just drive a certain way after a short thought. Further, Mercedes explained that the wearable is only necessary due to the current state of the technology. In the future, however, the BCI may be part of the car’s headrest or something similar. Further, researchers are currently working on chips the size of a sand grain that can be surgically inserted into our skull making a wearable redundant.

BCIs are not only emerging technologies in the automotive sector, but also in healthcare and many other industries. This promising technology might enable paralyzed people to draw or type amongst others. Research is also investigating the use of BCIs in the military sector.

Personally, I believe BCIs to be a promising technology. It has the potential to facilitate multiple aspects of life and offer opportunities to people that are currently disabled to do certain things. Certainly, we are still far from seeing BCIs in our daily lives, however, I believe we will get there in the future. Would you get a BCI implant if the technology reaches that state? Let me know in the comments!

Sources:

Daimler. (2021, September 6). Mercedes-Benz VISION AVTR: operating the user interface with the power of thought – Daimler Global Media Site. MarsMediaSite. https://media.daimler.com/marsMediaSite/en/instance/ko/Mercedes-Benz-VISION-AVTR-operating-the-user-interface-with-the-power-of-thought.xhtml?oid=51228086In-text citation

Krames, E., Peckham, H. P., & Rezai, A. R. (2018). Neuromodulation: Comprehensive Textbook of Principles, Technologies, and Therapies (2nd ed.). Academic Press.

Neurable. (2021, August 9). From Brain Chips To Wearables: The State Of BCI Technology Today. https://neurable.com/blog/from-brain-chips-to-wearables

Norris, M. (2020, August 27). Brain-Computer Interfaces Are Coming. Will We Be Ready?RAND. https://www.rand.org/blog/articles/2020/08/brain-computer-interfaces-are-coming-will-we-be-ready.html

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The Impact of Personalization and Versioning on the Car Industry and Electric Vehicles

25

September

2021

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Four of the many different BMW 3-series models in 2020

In the early 2000’s something happened which would forever change the car industry. The first Toyota Yaris was released. This car seamed harmless at first, but it did not last long before car manufacturers worldwide experienced the shock that the Yaris brought to the market. This car on its own was not very special, however, the Yaris model as a whole offered the customers, for the first time, the opportunity to fully customize their new car from factory (Lander & Liker, 2007). This inspired a new way of thinking in the car industry which is why you can now order your new car in (almost) every color of the rainbow. Car manufacturers realized they had to capitalize on the customers’ need for diverse product options.

Versioning has been a hot topic across many different industries for the last two decades. Manufacturers try to capitalize on customers’ different WTP’s by creating different versions of their products to sell at different prices. Every person differs in their taste and needs for cars. Some want (and can afford) a top-of-the-line 4-door limousine, like a BMW M8, while others are contempt with a small but sufficient city car, like a Toyota Yaris. To differentiate between different types of customers, car manufacturers create different versions of their car suiting their unique requirements. BMW for example produces cars suiting different needs divided into series (from 1- to 8-series) to roughly divide their customer base. Within these series they version their products by offering cars with different utility types (family, sport, luxury) (BMW, 2021). This type of versioning allows manufacturers like BMW to get the most out of each of their customers’ WTP.

Recently, electric vehicles (EV’s) have been making a very successful entrance into the market for cars. With the release of the Model 3, Tesla was able to sell over 95,000 units in 2019 and almost 86,000 in 2020 showing that customers are interested in buying EV’s (carsalesbase.com, 2021). Tesla’s success caused other manufacturers to fast track the development of their EV’s as to defend their position in the market. However, where tesla offers relatively little versions and personalization options to customers, established manufacturers like VW, Audi, BMW and more have already announced and even released electric versions of their combustion engine counterparts (IAA, 2021). Because incumbents offer more versions they are able to capture the attention of a broader audience and, eventually, through incumbents’ economies of scale Tesla is likely to lose sales.

I expect EV’s to slowly take over the market in the following decades. Newer generations of people are more aware of the severity of the climate situation and are more willing to do their part in changing it. I believe that through the smart introduction of EV’s into the market by incumbents and the ever increasing environmental awareness of consumers EV’s will be the future of the car industry and that personalization and versioning will help increase growth of the popularity of EV’s tremendously.

References:

BMW (2021) via https://www.bmw.nl/nl/index.html

Carsalesbase.com (2021). ‘Tesla Model 3 Europe Auto Sales Figures’. via https://carsalesbase.com/europe-tesla-model-3/

IAA (2021) via https://exhibitors.iaa.de/ausstellerportal/2021/produkte-aussteller/

E. Lander & J. K. Liker (2007). ‘The Toyota Production System and art: making highly customized and creative products the Toyota way’, International Journal of Production Research, 45(16), pp. 3681-3698

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0 to 60 mph in 1.9 seconds: The Tesla Roadster.

8

October

2020

The pinnacle of electrification of cars.
As the successor to the first production car of Tesla, which was the 2008 Roadster, the development of the new Tesla Roadster was announced by Tesla CEO Elon Musk in November 2017.

TeslaRoadster2

The fully electric vehicle is said to be released after the release of the renewed Model S, currently Tesla’s most famous model car. Tesla promises a 0-60 of 1.9 seconds with a top speed over 250 mph (400 km/h). The Roadster would be capable of such incredible performance figures due to its staggering 10,000 Nm of torque and all-wheel drive system. This would make the Tesla Roadster the fastest car in the world.

The Roadster would break all records for acceleration and performance compared to traditional super cars with combustion engines. With an expected range of 1,000 km, the range for electric vehicles would be greatly outperformed. Currently, this record is also held by Tesla, with the Tesla Model Y which has a range of 508 km. This is the most interesting point to me. Although the Tesla Roadster might look like an electric toy for rich people, in reality, I think the Tesla Roadster will achieve 2 things that are very important in our search for a sustainable future.

The 2 reasons:
1. Just like with their Model S, the Tesla Roadster will make electric vehicles more appealing. Before the introduction of the Model S, electric vehicles were mostly low performance cars with boring designs. The segment was mainly intended for early adopters: drivers with a strong interest in sustainability and wanting to compromise on performance and design, in return for a more eco-friendly footprint with regards to their driving. After the Model S took the market by storm, the image of electric vehicles was completely changed. No longer where electric cars associated with compromising performance and boring designs. Instead, Tesla made electric vehicles a reasonable choice in the executive segment. The Tesla Roadster is capable of doing the same. Outperforming “classic” super cars, the Roadster will increase the appeal of electric driving world wide.

Elon happy

2. The tesla Roadster will push electric vehicle technology further with record breaking acceleration, top speed and most importantly: range. Currently, electric vehicles are known for their acceleration. The electric drive train makes it possible for the cars to have full access to their potential power from the moment you hit the pedal. However, their topspeed and range are often limited, due to the battery size. Batteries are heavy and therefore companies have to find a balance between the required performance (speed, acceleration, range) and how heavy they want the car to be. After all, the heavier the car, the more the weight is influencing the desired performance. I think the Tesla Roadster will push other car manufacturers to further develop the electrification of cars. This will result in more widely available models with increased performance at a more consume friendly price.

0to100realquick2

Do you have some savings laying around and has this blog article made you interested in the Tesla Roadster?
Prices are still to be announced for the European market, but the base model is expected to cost 200,000 dollar in the US, but the first 1,000 production cars (announced as the Founder series) will be priced at 250,000 dollar in the US. Future customers can pre-order the Roadster with a base reservation of 43.000 euro and a founders-serie reservation of 215,000 euro (for the Netherlands). For more information, check out Tesla’s  website:  https://www.tesla.com/nl_NL/roadster?redirect=no

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Ford, Mercedes and Toyota: the Nokias of tomorrow?

13

September

2016

5/5 (1) Reading Tech-Blogs nowadays, it seems like the days of traditional car manufacturers are numbered. Not only are they seen as producers of old, inefficient and not very innovative products, an image that has worsened thanks to Volkswagen’s self-made emissions scandal which has tainted the whole industry. VW, Ford and others also face a generation of consumers that increasingly sees owning a car as unnecessary, a development brought on by Uber and Lyft. And as if that was not enough, new competitors – be it an upstart like Tesla or technology behemoths like Google or Apple – are striving to wrestle market share from traditional players and revolutionize the car market with new technology – be it electric engines or driverless vehicles. But how bad is the situation really? Does the traditional car industry really run the risk of being disrupted as other industries have been before with all the catastrophic consequences this entails? Are BMW, Mercedes and Audi about to become the Nokias of the automobile industry?
To answer this question, it is useful to consider the Theory of Newly Vulnerable Markets (NVMs), developed by Eric Clemons and his colleagues. To fulfill the criteria for an industry that is ripe for disruptive innovation three conditions have to be met: it must be newly easy to enter, attractive to attack and difficult to defend. So let us examine whether these criteria are fulfilled in the automobile industry.

Newly Easy to Enter

Despite some recent technological developments, it seems that the automobile industry is still not easy to enter. Manufacturing and selling a car still requires investing huge amounts of both physical and human capital, a feat that is hard to achieve by start-ups, as they are notoriously under-funded (or so they say). It is no surprise then that the recent (aspiring) newcomers have deep pockets. A quick research on CrunchBase yields the result that Tesla raised approximately $2.37 billion over the course of the last 12 years. To some extent this was made possible solely by the support and connections of its founder Elon Musk. It is hard to see how any other start-up (that aims to actually manufacture goods) could raise that much money. And the efforts of Google and Apple in the car industry are made possible by these companies’ immense war chests, accumulated with profits from their core business. So if you are not Google or Apple and are not called Elon Musk, you will not be able to raise the huge capital outlays, necessary to bring a car to market and compete with the industry giants. Of course this does not change the fact that entry (whether it was easy or not) has already occurred. Furthermore, Uber’s popularity has the potential to undermine the traditional car manufacturers business models in the long-run.

Attractive to Attack

While the car industry is still not easy to enter, it would be an attractive target industry for an attack on the incumbents. Despite falling overall profit margins (due to intense competition), there clearly exists a product profitability gradient, inviting opportunistic pickoff of the more profitable segments. Although exact profit margins for specific models are hard to come by (most car manufacturers only publish total company profitability), it is a well-known fact that premium cars enjoy higher profits margins than low-end models. Therefore, “cherry picking” the high-end customers first, is possible. Tesla has successfully implemented such a strategy by first introducing its high-end Model S (base price: $66.000) before penetrating the mass market with its new Model 3 (base price: $35.000) that is due to hit the streets in 2017.
There is another factor that makes the car manufacturing sector attractive for attack. With recent technological advancements, the driverless car seems an achievable goal within the next two decades. This will bring a tremendous shift in the way we move, as car manufacturers will become “mobility company[ies]”, according to Ford’s CEO Mark Fields. Whoever comes to dominate this market will surely reap immense profits. This is the reason why technology giants such as Google and Apple have become interested in automobile manufacturing.

Difficult to Defend

This leads us to the last condition for NVMs: the difficulty of defending the car industry. Here the picture looks ambiguous. While traditional car companies (especially German ones) are still dominated by engineers and their often inflexible and narrow way of thinking. This could become a burden when competing against companies with a more agile and creative mindset and therefore a higher capacity to innovate.
However, there are a few silver linings that give hope that not all is lost for traditional car makers. First, some of them own hugely popular brands. In some cases, these have been built over the run of almost a century. Other forms of intangible capital that give incumbents a defensive advantage, are the complex supplier networks that also are the result of years of cooperation between companies in the car manufacturing supply chain and the specialized knowledge, accumulated in the employees of big manufacturers. Finally, the incumbents have realized the need to innovate and have started to develop new business models (e.g. Moovel by Daimler) or investing heavily in R&D of future technologies like electric vehicles and driverless cars (e.g. the decision of many German car makers to dramatically increase their electric vehicle fleet).

Conclusion

So back to the initial question: are Ford, Mercedes and Toyota (or other manufacturers) the next Nokias? In my opinion they are not. While it is true that incumbents of the automobile industry face unprecedented challenges, they also have decades of experience in their industry. Tesla’s recent difficulties in scaling up production and in dealing with the first driverless fatal crash have shown that the regulatory environment and the economics of the car industry as well as its engineering challenges are harder to navigate than the classical technology market from which the new challengers originate. Even Apple seems to have run in difficulties in developing its driverless car, firing dozens of employees working on “Project Titan”. Combining their unique industry knowledge with an openness to innovation both in technology and business model, will enable today’s car manufacturers to take on Google, Apple, Tesla and Uber.
Don’t expect a mass extinction of big car brands just yet!

 

Sources:

Clemons, E. K., Gu, B., and Lang, K. R. Newly vulnerable markets in an age of pure information
products: an analysis of online music and news. Journal of Management Information Systems, 19, 3,
(winter 2002-2003), 17-41.

https://www.crunchbase.com/organization/tesla-motors#/entity

http://www.thecarconnection.com/overview/tesla_model-s_2016

http://uk.businessinsider.com/ford-ceo-mark-fields-interview-2016-3?r=US&IR=T

http://t3n.de/news/bmw-elektroautos-744882/  (Source in German)

http://www.nytimes.com/2016/09/10/technology/apple-is-said-to-be-rethinking-strategy-on-self-driving-cars.html?_r=1&utm_source=affiliate&utm_medium=ls&utm_campaign=hL3Qp0zRBOc&utm_content=355861&utm_term=1&siteID=hL3Qp0zRBOc-cyn_bCjerUifNi5Eavmxrg

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