Ford’s blueprint to turn self-driving tech into profits

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With Waymo declaring it will launch a ride-hailing service with self-driving vehicles next month and General Motors indicating it will follow sometime in 2019, it is perhaps not surprising that some industry experts believe Ford Motor Co. trails the competition.

But Ford is punching back. Just because the company doesn’t have plans to launch a commercial business with autonomous vehicles until 2021 does not necessarily mean the company is behind, argues Sherif Marakby, CEO of Ford Autonomous Vehicles, the subsidiary the company started to handle businesses underpinned by self-driving technology.

“If we wanted to launch 100 vehicles and call it a launch next year, we could do that,” Marakby said Wednesday. “I don’t think that’s what we want to do when we get to the complexity of getting to profitability. We think it requires considering the entire value chain, and understanding customers, to call it a launch. We’re talking launch at scale.”

For Ford, that amounts to launching thousands of self-driving vehicles and quickly turning profits. In outlining a comprehensive blueprint of its market strategy during an event at its Miami test hub Wednesday, Marakby and other Ford executives focused on the business and operations under its program as much as the automated-driving technology.

“We are laser-focused on utilization and revenue, and that’s what we call launch at scale,” Marakby said. “Which I believe is different than what others are thinking.”

Waymo will likely commence service with perhaps dozens or hundreds of customers culled from its Early Rider Program in the Phoenix area, according to a Bloomberg report this week. Through its Cruise Automation subsidiary, General Motors has been testing its autonomous mettle in San Francisco. Details of its 2019 planned launch remain unclear.

Ford intends to use purpose-built autonomous vehicles to carry both passengers and consumer goods.

$332 billion market

The company says it foresees a market worth $332 billion developing by 2026, in which ride-hailing revenues will account for $202 billion and delivery services valued at $130 billion. Along those lines, Ford hatched a partnership with Walmart on Wednesday in which the two companies will explore ways to collaborate on grocery delivery.

It’s not Ford’s first foray into delivery. It started testing pizza-delivery services using an autonomous vehicle with Domino’s Pizza in Ann Arbor, Mich., last year. More recently, it added a partnership with Postmates, a delivery platform, in Miami, through which Ford works with approximately 80 companies to provide autonomous delivery options. Those range from national companies such as Domino’s to local dry cleaners and florists.

Delivery is a major service Ford intends to approach the market. On Wednesday, the company described the steps it has taken so far — and others that remain ahead — to set up a business based upon autonomous vehicles.

Marakby said the company needs a scalable vehicle platform, which is slated to arrive sometime before 2021. It needs a capable automated-driving system, which is being built and honed by Argo AI, a Pittsburgh tech company in which Ford has invested more than $1 billion.

Fleet strategy

Beyond those requirements, Ford is developing a fleet-management strategy using its Miami hub as a test bed to determine the best ways to keep its vehicles in frequent use and maintenance operations concentrated. It has developed the Transportation Mobility Cloud with Autonomic, a company Ford acquired 11 months ago, which will provide optimized dispatch, routing and payment services. And it will seek to use vehicles for passenger and delivery purposes, which helps keep the cars rolling throughout the day.

Those are the necessary business components to evolve from a company testing technology to offering commercial service, Ford says.

The company also has a city-solutions division, which is forging connections and partnerships with transportation officials in cities where it plans to launch service. So far, the locations include Miami and Washington, D.C. Markaby said a third city will be added to its launch strategy sometime next year.

The current business model of selling cars to customers via dealerships generates a profit margin of anywhere from 6 to 10 percent, according to Ford. If there’s skepticism on why traditional auto companies are chasing autonomous technology, Ford estimates the potential profit margin in an autonomous-vehicle business is “a level much higher than that,” according to Marakby.

“We’re going to work on building the future by building an autonomous-vehicle business,” Ford CEO Jim Hackett said Wednesday. “That’s the center.”