Business Models Will Drive the Future of Autonomous Vehicles

It is likely that several models will emerge for monetizing the operating system layer for vehicles, and these models will deeply impact how different companies invest in R&D, marketing, lobbying and operations. If the Tesla vertical integration model wins out, expect to continue seeing flashy marketing and sleekly styled vehicles, because high-priced, high-margin “hardware”/vehicle sales will be the main driver of business. If the Baidu “open source” model wins out, expect to see many low-cost automobiles from different manufacturers and Baidu monetizing their open-source software by selling other services.

Some of these consequences are obvious, but there are also some less obvious effects. For example, companies that operate a “closed” hardware/software ecosystem may be less likely to share their data with others, and this could lead to difficulties in developing a national system of legislation for autonomous vehicles because of public concerns around safety and equity. Additionally, if one company ends up taking an early lead but is reticent to share their data or algorithms, they may be able to shape regulation in a way that makes it difficult for others to build competing systems.