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jerryking : capital-intensity   4

Robotaxis: can automakers catch up with Google in driverless cars?
January 31, 2019 | Financial Times | by Patrick McGee.

A new network of small tech companies could allow the car industry to compete with Waymo.

The automotive industry is among the most capital-intensive in the world: If the economy sours, assets turn into liabilities overnight as factories churning out thousands of cars begin to haemorrhage cash. So when toxic mortgage securities blew up in 2008, causing a recession, banks performed terribly — but carmakers fared even worse.

That is what makes auto consultants at Bain so worried. They fear that carmakers are about to be hit with a one-two punch: first, they project a US recession in the next 12 to 18 months. Then, increasing numbers of baby boomers will retire, causing a structural decline so big that, they warn, US car sales could shrink from more than 17m last year to just 11.5m by 2025 — the same level seen in 2008-09, which caused GM and Chrysler to go bankrupt and Ford to suffer a $14.6bn loss.....But there is hope. If carmakers play their cards right, they could be saved by what GM has called “the biggest business opportunity since the internet”. The potential saviour is the rise of shared, driverless “robotaxis”, which Bain expects to become mainstream in some large cities in six to eight years. This new market, virtually non-existent today, promises to be huge. ... Intel projects a “passenger economy” worth $7tn by 2050....Car brands typically earn $2,000 from a vehicle sale. That is just $0.01 per km over the lifetime of a vehicle, whereas for robotaxis “the potential is 20 to 25 cents per km”,...To realise this potential the industry will need to update its entire business model. The challenge for carmakers is to gain the expertise in self-driving algorithms, in-car entertainment, streaming services and fleet management for ride-hailing that will be central to this new era......Luckily, there has been an explosion of small companies developing the skills and technologies that carmakers can make use of. .......Waymo, the Alphabet self-driving unit that began as a Google project, is widely seen as the leader in this new landscape....it has built a commanding lead since its founding in 2009. And with at least 600 of its vehicles driving more than 25,000 miles a day, it is perfecting its algorithms in a way that could blindside the competition. Last year UBS projected that Waymo “will dominate” the operating systems for autonomous vehicles, taking “60 per cent of the total projected revenue pool in 2030”.......The threat of Waymo is not that it will build better cars. It has no need to. Instead it is ordering vehicles from Chrysler and Jaguar — effectively turning them into suppliers — and then fitting them out with self-driving software and hardware built in-house. But its potential goes beyond superior self-driving capabilities. Once robotaxis are mainstream, Alphabet can collect data from Google Maps and Search, entertain with YouTube and the Play Store, offer advice through Google Home smart speakers and use its software knowhow to manage fleets. Aside from the vehicle itself, Waymo is a vertically-integrated “closed system”........Carmakers are responding by partnering up like never before and making big investments to acquire new expertise. Volkswagen has linked up with Ford, while arch-rivals BMW and Mercedes have pooled their mobility efforts. In 2016 GM paid $500m for a stake in Lyft, the ride-hailing group, and it spent more than $1bn to buy Cruise, a self-driving company.......These deals, however, are merely the tip of the iceberg. Beneath the car brands, an entire ecosystem of niche companies has spurred into existence. Known as the “data value chain”, these groups specialise in the software, sensors, data processing and navigation needed to make autonomous cars a reality. None has the willpower, resources or vision to take on Waymo. Instead, they are forming clusters, exercising “swarm intelligence” to independently work towards the same collective goal of creating a safe, driverless experience......The implications of this ecosystem are profound. It suggests the carmakers can catch the likes of Waymo up without being the best-in-class in the new technologies. They merely need to be competent enough to know who is best — and then partner with them.
Alphabet  automotive_industry  automobile  autonomous_vehicles  Bain  blindsided  capital-intensity  GM  Google  large_markets  partnerships  supply_chains  Waymo 
january 2019 by jerryking
Amazon forecasts quarterly loss as spending spree shows no signs of abating
JULY 28, 2017 | Financial Times | Leslie Hook.

The Seattle-based tech company is now expanding on all fronts: buying the Whole Foods grocery chain, offering new delivery services around the world and racing to open enough data centres to keep up with demand for its cloud computing business.....

Capital expenditure grew twice as quickly as revenue during the period, spending on servers for cloud computing rose 70 per cent and employee headcount jumped 42 per cent.

The figures suggest Amazon is moving towards a more capital-intensive business model with permanently higher headcount and a much bigger physical footprint. This represents a shift from the more streamlined online sales model that relies on big, efficient warehouses to keep costs as low as possible....Amazon’s hiring jump in the second quarter points to a different but equally important shift: Mr Olsavsky said adding sales staff for the company’s advertising and cloud computing divisions were the key reasons behind the rise in headcount, which increased from 351,000 at the beginning of the quarter to 382,400 at the end.

Amazon has been opening a growing number of bricks-and-mortar stores, including a convenience store and two grocery pick-up points, and its purchase of Whole Foods will add hundreds of US stores virtually overnight.....One of the fastest areas of growth was in third-party logistics, as it provides handling services for an increasing array of merchants who sell goods through Amazon. Revenue from these third-party logistics services rose 38 per cent during the quarter to hit $7bn, representing more than a sixth of Amazon’s sales....The growth in that division, as well as intense competition from rivals Microsoft and Google, has pushed Amazon to spend more than $8bn on servers over the past 12 months.

These two divisions — logistics and Amazon Web Services — are two of the fastest-growing in the company but both will require heavy investment to keep on trend.
Amazon  logistics  capital-intensity  Whole_Foods  hiring  capex  AWS  delivery_services 
august 2017 by jerryking
Technology will hurt the banks, not kill them
October 15, 2014 | FT.com |John Gapper

Does Silicon Valley really want to blow up retail banking and create an entirely new financial system, or would it prefer to ride on the existing one?...Mr Andreessen, a partner of the venture fund Andreessen Horowitz, added in an interview with Bloomberg Markets magazine last week: “To me, it’s all about unbundling the banks. There are regulatory arbitrage opportunities every step of the way. If the regulators are going to regulate banks, then you’ll have non-bank entities that spring up to do the things that banks can’t do.”...There is no doubt that the infrastructure of retail banks is antiquated, and is built in a way that invites competition from peer-to-peer networks. Nor is there a doubt that banks make themselves vulnerable by how they price – offering core deposit services cheaply or free while squeezing customers on ancillary products such as overdrafts and currency exchange....what is the best way to compete with an industry that makes little from a capital-intensive, regulated service with formidable barriers to entry, and a lot from less protected add-ons? The question answers itself, which is why Silicon Valley focuses on payments while talking about disrupting lending....US laws made it impossible to establish a national credit union open to any customer....One growth area in UK finance has been online payday lending by companies such as Wonga, which promised to extend banking to the underserved. ... tech companies can improve on credit scoring by scanning search histories and social network data...The biggest barrier to competition is that the core business of taking in deposits and keeping them safe is not very profitable in a low-interest world....A start-up bank that has no branches and spends less on patching up legacy software might do this more efficiently – and good luck to those that penetrate the regulatory thicket and try. But it is much less risky to attach a new service to the existing banking infrastructure, and it absorbs less capital....Technology may eventually change the infrastructure of banking but it will not happen soon....“is a long-term threat that will play out over decades, not months or years”...Silicon Valley will compete at the edges, where banks make their best profits.
banks  Silicon_Valley  Marc_Andreessen  Andreessen_Horowitz  disruption  fin-tech  start_ups  Bitcoin  financial_services  underserved  unbanked  regulators  P2P  payday_lending  credit_scoring  low-interest  branchless  capital-intensity  legacy_tech  regulatory_arbitrage  financial_system 
october 2014 by jerryking
Google's Banker
May 3, 2004 | Fortune | By Adam Lashinsky.... Valentine also
took a different approach on making investments: He bet on the
racetrack, not the jockey. "... you build great companies by finding
monster markets that are in transition, and you find the people later,"
says Valentine...."But in Moritz, Valentine saw a resemblance to another
precocious go-getter he had observed at close range: Steve Jobs.
"They're both incredibly aggressive questioners," says Valentine. "And
our business is all about figuring out which questions are relevant in
making a decision, because the people who are starting a company (i.e. the founders) don't
have a clue what the answers are."... Valentine's principles: only
targeting businesses with fat margins; avoid capital-intensive
businesses; take measured steps; never underestimate the difficulty of
changing consumer behavior; don't begin a rollout until you're sure the
recipe is working; avoid any business Wall Street is prepared to throw
hundreds of millions of dollars at.
behavioral_change  capital-intensity  consumer_behavior  disequilibriums  Don_Valentine  founders  large_markets  margins  Michael_Moritz  precociousness  questions  rollouts  rules_of_the_game  Sequoia  Steve_Jobs  vc  venture_capital  Wall_Street 
october 2009 by jerryking

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