Ford has big plans to cash in on driverless cars, but not in the way you might think (F)

jim hackett ces 2018

Ford plans to use its driverless cars to form a new logistics business.
The company is building a platform that will allow businesses to use its autonomous vehicles to transport goods.
For example, a local grocer could begin delivering to customers by partnering with Ford and using its autonomous cars to make deliveries.
Hackett said the company still plans to build and sell cars, but that this new business model will allow it to tap into the "enormous" logistics opportunity. The new business could also help offset the loss of revenue during downturns in the auto industry, he said.

Ford has big plans to cash in on driverless cars, but not in the way you might think.

While most companies developing self-driving vehicles want to use them to move people, Ford wants to use them to move goods – at least at first.

On Tuesday, the company announced it is working on an open platform that allows any business to use its autonomous cars for transporting goods. This means that your local grocery or hardware shop could basically plug into Ford's system and automatically be able to offer on-demand delivery.

"The logistics opportunity is enormous," Ford CEO Jim Hackett told Business Insider. "For small businesses, this is a big advantage. They have been suffering. In retail right now, scale drives out the small retailers. Logistics equalizes some of that."

But the automaker isn't just pushing into logistics to help the little guy. Ford is looking to cash in.

According to a 2016 McKinsey study, autonomous vehicles, including drones, will account for about 80% of all consumer parcel deliveries during the next 10 years. What's more, by 2050, transporting goods both locally and long distances with autonomous vehicles could generate $2.9 trillion in revenue, according to a recent study by Strategy Analytics.

"We always had this intuition about moving goods and a part of it, when you look at the business model of automated vehicles, the way to make money is to be highly utilized. Most of the day these vehicles are moving and having productive revenue, so moving people is only part of it," Jim Farley, Ford's president of global markets, told Business Insider.

ford driverless van

What's more, the new business could also help offset the loss of revenue during downturns in the auto industry, Hackett said.

"It's perfect as an adjacent capability for us," Hackett said. "This business, which is as big as any industries in the world, gets dinged from a price-earnings perspective because it's cyclical. That will probably even this out because in a downturn, smart cities and smart vehicles don't dissipate, so the revenue follows from all that will still be there, so that is why it's attractive."

Ford plans to begin testing its new logistics platform sometime during the first quarter in a city it plans to announce at a later date. The company's partners, Lyft, Domino's, and Postmates, will all participate in the trial.

But Farley said that initially, the company won't use autonomous vehicles for the trial. Instead, the delivery vehicles will have drivers, but they will be limited in what they can do so that it imitates a driverless car. Ford will then use what it learns from the test to develop APIs for businesses using the platform.

Ford isn't abandoning autonomous ride-hailing

While Ford is putting a lot of focus on its delivering goods, the company isn't abandoning its inevitable future of using driverless cars to also deliver people.

But using the vehicles to transport people will be a gradual process, Hackett said.

"Ride-hailing is a very complicated task," Hackett said. "The whole world is wrestling with this problem. Ride-hailing will embody this technology, but it will happen in stages."

Autonomous cars still have limitations, he said. For example, they still can't operate in all weather conditions.

Ford still plans to roll out a fleet of self-driving cars in an unnamed city in 2021 for ride-sharing, but even these vehicles will only be able to operate under certain conditions.

So while the autonomous technology is still evolving, Ford wants to test its new business model centered around logistics so that it can lay the groundwork for a new era shaped by self-driving cars at the company.

"This technology is unlike anything that has confronted the world in the last 100 years," Hackett said of autonomous vehicles.

"We think there is a platform here for Ford that is unique and we are the first ones talking about it," he said. "We aren't going to cede the technology gains to anybody else. We aren't going to disappoint."

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