Could Autonomous Cars Doom Global Automakers? Fujitsu’s Warburton Says Yes

Could the automotive industry encounter its most challenging era in history over the course of the next decade? And will the next decade spell doom for at least some of the world’s top automakers as the industry undergoes a fundamental shift? The answer to both questions is yes, according to Paul Warburton, vice president and head of connected automotive and mobility for Fujitsu.

Warburton has been a key strategist and leader in helping Fujitsu become a partner to many global auto manufacturers, and his broad experience has given him a unique perspective on the emerging opportunities for technology in the different cultures, geographies, and regions around the world. An important aspect of his role is guiding vehicle manufacturers into true connections with consumers who previously were not regarded by OEMs as their “real customers.”

Among its many automotive initiatives, Fujitsu is a major player in the “connected car” realm, and it is a prime mover in developing systems to support shared mobility. We had a chance to sit down with Warburton for an interview at the recent JD Power Auto Revolution event in Las Vegas, which brought together scores of industry experts to discuss the future of the automobile industry. Warburton’s predictions for the next decade could – and perhaps should – keep the executives at the global automakers up nights, because according to him they might be in for a wild ride.

First off, while many car company execs and their r-and-d operations are concentrating on engineering viable autonomous vehicles, Warburton doesn’t see that as a goal but as a jumping-off point.

“The industry gets fixated on the connected vehicle, the autonomous vehicle, and I see them as really enabling technology,” he told forbes.com. “For me, it’s like the modern-day space race with the first person to put their flag on that position of the autonomous vehicle. [But] there’s no real commercial value there because I think what will happen is it will very quickly become a commodity in a new stack.”

At the top of that “new stack,” according to Warburton, is “mobility as a service.” In the middle layer of the stack, vehicles will be manufactured to supply mobility service companies, and at the bottom layer companies that supply the car manufacturers will find their places along with other commodity suppliers. In Warburton’s view, profitability will be highest at the top of the stack in what he calls true mobility services companies, while the profitability at other levels won’t be nearly as good, declining to a commodity-supplier level at the bottom of the stack.

“The way I see it is that there’s an inner ring and an outer ring,” he said “The inner ring is the enabling technology, which is the connected autonomous vehicle. But the real transformation, the piece that people need to really pay attention to, is the outer layer, which is where the value is in the mobility services. So I think that’s really where the revolution will come.”

It is a revolution that could be disastrous for today’s global automakers. Fujitsu predicts a precipitous drop in private car ownership. It suggests by 2030 70% fewer cars and trucks will be manufactured globally, with transport-as-a-service providers, like Uber and Lyft accounting for 95% of the passenger miles driven in the United States. It ascribes the radical shift to Millennials and Generation Z with fewer members of those cohorts owning cars than previous generations. The company asserts that car ownership is no longer the status symbol it once was, quipping “Ridesharing is the new black.”

Warburton makes no bones about the fact that many of today’s automakers aren’t ready for the shift. Further, he suggests they aren’t ready to embrace mobility’s top layer – transportation services – lingering on technical and the engineering challenges of achieving autonomous driving.

“I think that the automotive industry is just a little bit fixated because of the past, because of the history of the technology,” he said, “and in the advancement of that they might miss out on the external layer, which is really the commercial change.”

Even those carmakers who are forward-thinking and would like to pivot toward the “transport-provider” role will find it difficult, Warburton said, because making the cultural shift will be hard and getting consumers to perceive them in a new light even harder.

“Even if their strategy suggests that they’re trying to become a mobility company culture, their ability to switch across is difficult,” Warburton said. “They don’t have access to that direct route to market that an Amazon or a retailer or a bank or even a social media organization might have.”

Warburton pointed out that the new reality of transportation services versus marketing personal cars will likely change the marketing dynamic markedly.

“Let’s use Amazon as an example,” he said. “It would be very easy for them to say ‘If you’re buying content from me and you’ve got a retail experience with me, if I get enough spend from you, I’ll give you your commute.’ Amazon will take them to and from work for free.”

Lacking a similar consumer connection, Warburton points out, automakers would have a difficult time competing with that kind of offer.

The Fujitsu executive didn’t say much that should seem comforting to current car company executives, but there was this sliver of hope or at least solace.

“I think it’s a transformational journey,” he said. “I think at the end of 2030 maybe 30% of mobility will be with shared environments and mobility services, and they’ll be in large metropolitan areas. So there will still be 70% of the market that hasn’t moved to that model.”

But lest automakers get complacent, Warburton warns that there are enough indicators to say that 2025 could be a tipping point of change.

“If you look at S curves of change over time, they get faster,” Warburton said. “The most recent one to look as an example with the smartphone, it took five years. So somewhere between 2025 and 2030, I see that marketplace [autonomous transport services] establishing itself. I think automakers have got to get themselves on the start blocks by 2025 to stand a real chance of being successful going forward.”