Automated Vehicles Will Unlock Countless as a Service Business Models

The as a service (XaaS) business model is an increasingly popular strategy in the modern economy. Although using vehicles in XaaS models is not a new concept, the development of vehicle automation over the next decade will unlock a plethora of new XaaS applications as vehicle automation becomes more reliable and specialized.

Consider the following XaaS examples across the vehicle industry that are already generating revenue:

Mobility as a Service

Transportation network companies such as Lyft and Uber are already providing mobility as a service (MaaS). As discussed in Guidehouse Insights’ Mobility as a Service and Urban Mobility Innovations reports, automation will enable ride-hailing through the use of shared automated vehicles (AVs) and eventually come with a variety of use-case options and price points (i.e., Wi-Fi enabled, or entertainment features). The transition to AVs will shift the MaaS business model to fleet-owned AVs and enable those who live in urban areas to more easily forego vehicle ownership.

Platooning as a Service

Vehicle platooning, where two or more vehicle use automated vehicle technologies to travel closely together, decrease drag, and improve fuel efficiency, has been a goal for many heavy duty truck owners and manufacturers. However, the lack of cross-brand compatibility is a significant barrier. Peloton Technology is taking a different approach by using a manufacturer-agnostic platform to provide platooning as a service to truck fleets.

Farming as a Service

There is also AV penetration in the agricultural industry. New on the scene is FarmWise, a Silicon Valley-based startup, which has developed an AV that uses cameras and machine learning to identify weeds and mechanical actuators to remove them. This platform is intended to eliminate the need for the current weed control strategies of herbicides or manual labor. FarmWise has already begun providing its AVs to California farmers as a weeding service and charges by the acre. The company recently announced that Roush will manufacture the AVs and scale up production in 2020. Other companies are also interested in the interplay of AVs and agriculture industry. Volvo began testing self-steering trucks in sugarcane fields in 2017, and many tractor OEMs have been developing automated tractor technology for some time.

Haulage as a Service

AVs are also being used in the mining sector, providing haulage as a service on a per-ton basis. Volvo Trucks began testing AVs for use in mines back in 2016. In November 2018, Volvo announced its first commercial AV venture with Norwegian mine Brønnøy Kalk in which Volvo’s AVs will haul limestone. Brønnøy Kalk will pay Volvo on limestone delivered per ton, rather than buying the vehicles outright. 

How Will AV Companies Use XaaS?

Companies developing AVs are increasingly focused on developing as a service business models; it is reshaping consumption while challenging the notions of ownership. Vehicle manufacturers see the XaaS model as a strategy to subvert the high upfront capital cost burden associated with commercial vehicles and AVs. Simultaneously, the revenue generated from AV XaaS offerings can be used to help cover the ongoing support costs of these automated systems as they evolve.

Meanwhile, XaaS business models can tap into higher vehicle utilization rates and capture some revenue from the cost-savings created as a result of automation. However, it will still be some time before AVs are fully deployed—in March two of BHP’s AVs collided in a mine during an unexpected heavy downpour, showing there is still plenty of room for growth for AV safety and reliability. Regardless, the development of AVs will unlock a host of new XaaS business models and challenge the notion that vehicle ownership is required across multiple industries.