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People desire freedom of mobility – and, until now, the best way of fulfilling that desire has been to buy a car. But Lynk&Co, owned by the same Chinese company that now owns Volvo, is betting on a new business model that involves a change from being a product company to a service provider.
The product is the car, which Lynk&Co manufactures, and the service is mobility, which the company provides not only on a subscription basis, but also as something people can exchange with one another. The new model allows subscribers to rent their car out to other people, one trip at a time.
The European headquarters of Lynk&Co is in Sweden, where David Green is chief technology officer (CTO), responsible for strategies, products and offers. The scope of his job extends from early-stage innovation to offer creation for consumers, including connectivity and car sharing.
While the research and development (R&D) department for products doesn’t report to Green, the product definition team does. Green’s team analyses requirements based on a service they want to provide. They then submit an order to the R&D team for a car that meets those requirements.
Car ownership is on the way out
In Green’s view, the number of cars sitting around doing nothing is untenable. The problem is particularly acute in tightly packed cities, where there aren’t many places to park a car. “Most people still see the car as a thing you park outside your house to tell people who you are,” he says. “They still see the car as a status symbol.”
But Lynk&Co is betting on a future where autonomy means subscribing to a service that will provide you with the level of luxury and service you want and are willing to pay for – and that won’t require a vehicle to be permanently waiting for you in front of your house or outside your place of work.
What will eventually drive people and societies away from ownership is the congestion in big cities such as London, which is inconvenient for individuals and expensive for society. In London, for example, the mayor’s office estimates that time lost due to congestion equates to £5.1bn per year – which represents the cost of not being able to move goods, waste and people.
“People spend too much money [on a car] just so that when they want to get out into the country or go to IKEA, they have that freedom of mobility,” says Green. “That scenario is wide open for disruption. Now, with new business models, you can pay only for the journeys you need, instead of the whole car. When this really takes off, there will be a dramatic reduction in the cost to the individual.
“In the future, a car will no longer be something people spend a lot of money on. They will spend it on freedom of mobility, sure. But now they can get that freedom cheaper, the idea of individual car ownership is bound to fade away.”
The new peer-to-peer business model allows people to subscribe to a car and share it with other people when they aren’t using it. Someone with an identity and a profile borrows from somebody else, who also has an identity and a profile, and they rate each other to keep everybody straight.
This new concept will not take hold overnight, however. There must be enough lenders to make borrowing attractive; and there must be enough borrowers to make lending attractive. The business model has yet to reach critical mass.
In the meantime, people are already finding interesting ways of using the model on a small scale. For example, an individual in an apartment building decides to be the lead owner, but other people in the building contribute so they can use the car from time to time. Or a company shares cars with employees.
Lynk&Co hadn’t thought of these things itself, but it does provide the environment that allowed people to get creative – and that’s exactly the effect that’s desired.
Software has a long history of running in cars
Software is not new to cars. It made its way into the motor industry gradually, without an overall plan. Consequently, each of the different systems within a vehicle runs its own software, with little or no standardisation in the interfaces. This includes communications and infotainment systems, engine management, power seats and sunroofs, and safety systems such as traction control and automatic breaking.
But these systems need to work together. The infotainment cannot be isolated from the cruise control or traction control because the commands that control them are built into the infotainment system. When different systems are supplied by different companies, the car manufacturer adds even more software to make them all work together.
This sounds messy, but on the positive side, all this software brings a lot of efficiency and safety – things the average person never knows are happening.
For example, software tries to get the car to switch between the battery and the internal combustion engine in the most efficient way. Other software tries to make sure the car stays within the lines – and if it starts to deviate, the software guides it back. If the car turns out on snow and starts spinning around, another software system points it back in the right direction again. These are very complex tasks that have reduced the number of accidents on the road. Most people never know their car is doing all this – and that’s the way it should be.
Nevertheless, with so much software written independently for each device – and so much software to integrate the different systems – the amount of code has reached an alarming level. The average car now has more lines of code than a commercial aeroplane – and that’s by an order of magnitude. This may be difficult to believe, but commercial aircraft are under stricter regulation so manufacturers have had to take a very deliberate approach to adding software, including standardisation and quality assurance every step of the way.
One way to rein it all in would be to get all car brands and device manufacturers to collaborate on standards, including integration schemes. But that level of collaboration is very difficult to achieve – not only because the companies involved are all fierce competitors, but also because there is too much momentum in the industry to get people to slow down and reconsider their approach.
“Imagine the day when you can just buy a peripheral, like an electronic power steering unit, and plug it into the car and know that it will work in the same way that a music keyboard or a camera will plug into your laptop,” says Green. “That would be amazing. But we’re not there yet.”
Not only do cars run an excessive amount of software, but they also process a lot of data, which is passed around among the different systems and exchanged with entities outside the car. This is already happening, and the mobility-as-a-service business model promotes even more data sharing. For one thing, they want to monitor important car systems for predictive maintenance. The less frequently the car needs to be brought in for repairs, the better it is for both the service provider and the user.
But data cannot just be transmitted over wireless networks without any control. It must be filtered to avoid network congestion. Manufacturers also take measures to ensure data privacy and security.
“Data privacy and security are big priorities for us,” says Green. “One of the measures we take is to use physical firewalls to separate some of the systems.”
Another concern is that wherever there is software, there is a risk of bugs. “We take testing super seriously,” says Green. “We have to pass tests and we have to drive cars on test cycles around Europe for a long time before they get out on the market.”
Software will take automobile industry in more directions
Green believes it is possible that within 10 years, a massive change will be brought on by a proliferation of cars with level 4 and level 5 autonomy, especially if there are areas cars can operate where pedestrians, cyclists, or manually driven vehicles are absent.
“A level 5 car will go somewhere independently, pick someone up and drive them where they want to go,” says Green. “In that scenario, why would you have a car parked in your driveway? Your car could go and earn money for you during the day, or you could borrow someone else’s car, whether it’s from a company or an individual.”
Green says this change will eliminate congestion and reduce the cost of mobility for the individual by more than 50%. Urban transportation will be much more efficient and the impact on the environment will be greatly reduced. Moreover, highly autonomous cars will be a huge disruption to the automobile industry. Companies will have to decide if they want to be manufacturers or service providers.
In the case of Lynk&Co, the choice has already been made – it aspires to be a service provider. “For the time being, it’s good for Lynk&Co for us to have our own car,” says Green. “We can control the specification, do digital keys and control the security, but there’s no reason why it has to be our own car. In an ideal world, we could offer the service with any car. In the long run, we’re not really focused on the hardware as such, which I think sets us apart in the market.”
In the future, competitors can be expected to come from all angles. Leasing and car rental companies are already looking into the mobility-as-a-service car market, as are tech giants such as Google and Uber. A mix of other companies are also hovering around the idea, including Tesla, but Lynk&Co has taken the first big step in the direction of being a service provider.
“We’re optimistic,” says Green. “Nearly 20% of our customers in the Netherlands, our biggest market, have already shared their car out. It’s slowly becoming a movement. And it’s all based on software.”
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