Together with Karima Delli, European deputy and chairperson for European Parliament’s Transport Committee, and ViaID, BCG has co-founded the European Startup Prize for Mobility (EUSP) in 2018. With the award ceremony for the second edition fast approaching, it is a good time take a step back and analyze the European mobility startup.
Looking at the numbers, Europe is currently behind on the international mobility startup scene. The number of world champions created in the European Union is fairly low. It has five time less unicorns than the US, and is below Israel, a country 60 times smaller. Analyzing the key pillars that made the success of the US and the Israeli mobility startup ecosystems, we can understand why Europe is not competing at the same level as its rivals, and realize the improvements that have been made in the last couple of years.
The US and Israel created successful ecosystems based on common pillars
Israel and the United States are role models when talking about mobility startup ecosystems.
Israel managed, in a matter of years, to revolutionize the field of smart transportation. It counts roughly 600 startups focused on autonomous vehicles and smart mobility, 3rd in the global ranking for number of autotech and mobility companies, in a country with a population similar to New York City. It is the birthplace of some of the biggest successes in the field, namely Mobileye (sold for over $15 billion to Intel in 2017), Waze (sold to Google for $1 billion) or more recently Via.
The US, with a particular focus on the Silicon Valley, has always been at the forefront of the transformation mobility is experiencing. This relatively small 67-kilometer corridor between San Francisco and San Jose is responsible for the emergence of the most dominant companies around the world like Uber, Convoy or Lime.
These two countries think of mobility as a global infrastructure, rather than a collection of separate services. To manage that shift towards infrastructure, they articulated their ecosystems around common pillars. They understood the need to have a strong focus on tech, the benefits of private/public partnerships and smart subsidies, and the necessity to address a global market with appropriate business models. To top it all off, they managed to attract massive private funding, allowing startups to develop on their own, without the need to fully depend on large corporates.
Focus on deep tech
An ecosystem that wants to succeed in the mobility field needs to have a strong focus on tech. Revolutionizing smart transportation requires a cross-pollination across various subsectors in technology (hardware, software, sensors and analytics…) that can only be achieved in an environment fueled by tech culture. The best mobility startups are first and foremost tech startups. For instance, one third of Uber and two third of Via employees are engineers.
Skilled individuals is one part of the equation. The Silicon Valley has top-class universities, like Stanford or the University of California, among the most funded and repetitively in the top 10 global rankings. Same goes for Israel with the Technion. They provide individuals with knowledge in tech and applied research, form communities of expertise and interpersonal networks constantly exchanging and helping each other, driving innovation in the region.
Coexistence with large corporates is the second part. In both ecosystems, corporates work alongside startups and universities to innovate. They have R&D centers in the area where they invest heavily, benefiting to the whole community. To illustrate, Israel is #1 in OECD rankings for R&D investments as % of GDP.
Private and public cooperation and smart subsidies
The US and Israel have strong and increasing public private cooperation. Public authorities have understood that they cannot resolve every issues on their own, and have to work with companies offering innovative, rapid and flexible solutions.
Los Angeles is a very spread-out city and had troubles solving the first and last-mile that makes it challenging for people to get to and from public transit stations. Rather than searching for a long and costly solution on their own, they partnered with on-demand shuttle-based service Via as part of a pilot program to give people rides to busy public transit stations.
Along with those partnerships, they also offer smart subsidies to finance experimentations. They provide substantial funding to allow projects at scale, bringing real value and learnings. The Israeli government is currently building a MaaS experimentation in Tel Aviv, again with Via, offering ~$1200 a year to 100K citizens (a total of over $100 million in funding) if they agree to reduce their use of personal car and favor on demand shared transport through a dedicated app. This will allow the startup to gain experience on the MaaS, and potentially roll out the concept internationally.
Global addressable market and sharp business models
To become world leaders, startups have to think global from the start. With 8 million inhabitants, the Israeli market is too small for ambitious entrepreneurs, so from scratch startups are made to scale and their products are aimed for global use. And with 330 million inhabitants, the US market is large enough to create a potential world leader within the national borders, and quickly after start the internationalization process.
Along with this global thinking, Israeli and US startups also build sharp business models. They seek to mix tactical innovation, putting a stake in the ground with fast-proven business models, and strategic innovation which are essential to building a transformative vision. The transformative vision translates into human centric business models, with the purpose of changing the way people behave. Autofleet for instance aims at changing the behaviors of PHV drivers, by having a new vision with a business model where drivers are paid hourly rather than on a per ride basis. Waze is doing the same with their new short distance carpooling service, organizing focus groups with customers to understand the triggers that makes people carpool and using these insights to adapt their business models.
Attract private funding
Funding is obviously a key pillar in the success of an ecosystem. It provides startups with the ability to expand, experiment, and innovate. Being well funded gives startups the time to develop on their own, be agile with regards the business model and find the best formula to succeed.
The US ecosystem is by far the most funded with $13.5 billion raised by mobility startups in 2018, in front of the EU with $2.6 billion and Israel with $310 million. However, looking at those numbers with respect to the GDP of the regions, Israel comes on top with the EU still far behind.
Europe on its way to replicate those ecosystems, and the European Startup Prize for Mobility is here help
When we started the European Startup Prize for Mobility, our ambition was strong: in a fragmented European market, where talent and funding are scarcer than in the US or in Israel, we wanted to uncover future global leaders and help them scale fast. Analyzing Europe today using the key pillars of the US and Israeli ecosystems, we see where efforts needs to be made, and the achievements that have already been done.
Regarding the focus on tech, Europe is building a handful of tech hubs in its national capitals to try and recreate Silicon Valley like environments. The Plateau de Saclay, located in the south of Paris, is a great example of this kind of initiatives. The project is articulated around two goals; build a university regrouping 14 secondary education establishments and 280 research labs, and incentivize the installation of R&D centers from large corporates. This new university will have the strength to become a global reference in the academic world, and the coexistence with corporates should create a favorable tech environment for the emergence of startups.
Looking at the indicators for the 2019 applicants to the European Startup prize for Mobility, we are proud to see many more tech startups, offering real product and technology differentiation. We find a balanced split between service (Software, platform / marketplace, apps) and product (IoT, vehicle, hardware / equipment) startups, yet many of them fit into both categories, integrating a data collection program or proprietary software in their physical products. This will allow them to be real game changers and encounter far more success.
Public private partnerships in Europe is still in its early days. Few projects exist and they are very local. European mobility players must work in closer cooperation with public authorities to put their innovation capabilities at the service of cities development. The BCG is working to carry this idea across Europe and change the state of minds of public authorities to develop these win/win partnerships.
Same observation can be made for smart subsidies. The total amount is already fairly low compared to Israel and the US, and more importantly it is diluted between too many projects. This prevents the launch of pilots with appropriate scale that could have real impacts and learnings.
Thinking globally remains a challenge for European startups. In terms of size, EU countries are in a grey area between the US and Israel; large enough to peacefully develop but too small to learn how to scale. Startups have difficulties to benefit from the full EU population potential due to the fragmentation of markets, with different languages, cultures or payment methods. They often end up being MVPs in local markets, and can be leaders in their country but totally unknown in the neighboring one. The European Startup Prize for Mobility’s primary mission is to help the expansion into this high potential European market. By giving the best startups the opportunity to travel across the continent and pitch at prestigious mobility events, it gives them the visibility they need to conquer new geographies.
The BCG mentoring is also there to help startups find the sharpest business model. We have, for some times now, encouraged startups to turn to B2B business models and are delighted to see that 75% of 2019 applicants have a B2B approach (vs. 60% in 2018). We will continue to work along this year’s laureates to help them develop scalable, profitable and human centric business models.
Funding in Europe is the hardest pillar to tackle. It is usually the positive results of the above mentioned pillars that tickle the interests of private funds. The lack of funding pressures startups into early exits, selling to large corporates. European entrepreneurs have the belief that their success is measured by the speed at which they can cash out. But once they are bought by corporates, they often suffocate under the weight of hierarchical processes preventing them to reveal their full potential. The European startup Prize for Mobility aims at giving startups the confidence that they can succeed on their own, despite less favorable funding conditions than their US and Israeli rivals. We provide business connections to sign new contracts and partnerships, and a mentoring to strengthen their businesses and attract private investors.
Bolt is an example many European entrepreneurs should follow. Since its launch in 2013, the startup expanded in 30 countries across Europe and Africa by spending less than $100 million. Due to lower funding than their American rivals, they had to developed different skills, focusing on operations and cost management. In comparison, Lyft recently stated in its IPO filing that they had net losses of $911 million in 2018 and that profitability might never be achieved. Using their monumental financial capabilities, they have valued growth over profits for years. But it might not be the right way to go. Indeed, if we take a closer look at the IPO, public markets do not respond very well to this unprofitable growth strategy, with the stock dropping 12% on its second day of trading, below its initial IPO price. European startups might be on a slower but steadier track to success.
Europe has fought for international relevance on the mobility startup scene for the last few years. We now have more and more ingredients to compete at the highest level: A focus on tech with initiatives to create favorable environments, an entrepreneurial mentality that shifted towards the exterior world, and the ability to circumvent funding difficulties. With initiatives like the European Startup Prize for Mobility to help, we believe Europe has what it takes to replicate the recipe of the US and Israel ecosystems, or better yet invent its own.
A diversified and cleaner mobility
In 2030, mobility will definitely be more diversified than today. The ways we power our vehicles, whether it is on roads, rivers or rails, will be broader to include electricity, hydrogen, bio-methane (called bio-NGV for bio-natural gas for vehicle), and hybrid systems.
Bio-methane and consequently bio-NGV are locally produced from organic matter and waste through anaerobic digestion, a mature technology that is spreading in many European countries.Bio-NGVcan decarbonize mobility, especially in long distance and heavy-duty transportation, since it generates 80% less CO2than traditional diesel. It alsoimproves air quality, as itreduces fine particle emissions by 93% and nitrogen oxide emissions by 50%. What’s more running on bio-NGV avoids pollution from rare-earths mining.
Bio-NGV will be part of thepower mix that is needed to provide quick, efficient solutions to different types of transport in a low-carbon society.
Green gas mobility is already starting
Green gas as a fuel is well represented at every level of mobility compared to other alternative fuels. Car-makers, like Seat, Volkswagen, Volvo and Fiat, already sell NGV cars and vans on European markets. Many cities, like Milan, Lisbon, Barcelona, Stuttgart, and Paris have chosen NGV to fuel part of their bus and refuse collector fleets. Major food retailers, like Carrefour, Monoprix, and Sainsbury’s already have their goods transported on gas- or bio-gas-fuelled lorries.
This NGV can be – and sometimes already is – replaced by bio-NGV, since bio-methane production is increasing in the EU. 550 plants are already plugged into the gas networks. Gas grids can be an easy channel for a massive deployment of gas refilling points, as they are already extensive – 2.21 million kilometres of network in the EU – and written off. GRDF fully supports this trend in France, where almost 100 biomethane plants are in operation.
On-going research and development will lead to new possibilities in water and rail transportation. GRDF is considering how to green regional trains through NGV and bio-NGV. A pilot project in which GRDF is involved shows bio-NGV could also beneficially power barges in hybrid mode with electricity, slashing air pollution and CO2emissions compared to diesel engines.
Open innovation will make it come fully true
Bringing together different stakeholders will be the catalyst for innovations that will transform mobility. GRDF is committed to facilitating the design of new solutions. We thus have an open-innovation approach to co-develop products and services with partners of our eco-system (start-ups, innovative SMEs, clients, etc.) and to share the created value.
GRDF is the main gas distribution system operator in France. GRDF distributes gas each day to more than 11 million customers to ensure that they have gas when they need it, regardless of their supplier. It builds, operates, and maintains the largest distribution network in Europe (200,750 km).
What will the car of the future look like? The question has been asked and answered many times already. Two things are for certain: it will most definitely be autonomous, shared and electrical. It will be connected, for sure — it already is. It might even fly, just like in any self-respecting science-fiction movie (it has actually left the realm of science-fiction already, as startups like e-Volo and Lilium, and giants like Airbus and Uber alike, develop their own flying vehicles). But the question remains: can this 21st-century version of a 19th-century innovation truly solve our mobility issues? What is it about the car that makes it irreplaceable, condemning us to keep reinventing it rather than just doing away with it?
Cool as they are, these innovations cannot be the main answer to our sustainable mobility problems. Electric cars are, arguably, the most environmentally-friendly solution when there are on the road — but there are a wealth of concerns associated with the way their batteries are produced (as shown by French journalist Guillaume Pitron in his investigation La Guerre des métaux rares, published in 2018), powered (with coal, renewable energy, nuclear energy?) and reused. While they are recyclable, the sheer number of batteries and the pace at which they accumulate could pose serious problems, as writes The Guardian: “The electric vehicle boom could leave 11m tonnes of spent lithium-ion batteries in need of recycling between now and 2030 (…). However, in the EU as few as 5% of lithium-ion batteries are recycled.” Of course, the recycling industry for this particular product is likely to develop in the coming years. Bloomberg Businessweek also reports that several car constructors are already engaged in finding an aftermarket for these batteries, which retain about 50 percent to 70 percent of their power capacity upon removal. But that still doesn’t make the electric car the all-green solution it’s made out to be.
Autonomous cars are supposed to be safe and able to reduce traffic jams. According to a National Science Foundation study, “having a single self-driving car on the road can reduce congestion by influencing the traffic flow of at least 20 human-controlled automobiles around it,” writes USA Today. When they will be able to communicate with all the vehicles around them, congestion could become a thing of the past. But that is only one part of the picture. As suggests a June 2018 report by the World Economic Forum and Boston Consulting Group, self-driving cars could actually make urban traffic jams worse. The study, which focused on the city of Boston, found that self-driving cars could lead to a 5.5 percent increase in traffic in the city’s downtown. The reason? “While there will be fewer cars on the road overall, congestion will increase because commuters will likely choose the new vehicles over public transportation,” as sums up the MIT Technology Review. Large cities have been facing the same issue with the development of ride-hailing services: Uber, Lyft and the like have massively contributed to urban congestion because people prefer them to taking the subway or the bus. In San Francisco, they accounted for about 50 per cent of the increased congestion between 2010 and 2016, according to the TNCs & Congestion study, led by the San Francisco County Transportation Authority and the University of Kentucky.
Is the car the best we can do?
Then, there are the flying cars, which are still in the prototyping and proof of concept phase. Their conceptors claim that electric flying taxis will simultaneously allow to cut back traffic and move around in a sustainable way. But the problems posed by electric car batteries will surely apply to these vehicles as well, along with the fact that, for know, these batteries cannot sustain a useful flight duration. “A combination of the regulatory environment and the public’s perception of risk makes it unlikely that flying cars will become ubiquitous anytime soon,” writes Quartz. And when they do, there will be a handful of infrastructural and safety questions to navigate.
In short, no solution is perfect. That’s usually how solutions are: imperfect, and not good enough, but still better than sticking to the status quo. What the efforts deployed to fix the car seems to point at, though, is the fact that we cannot imagine a world without them. Of course, for intermediate distances and in rural areas, they are practical to the point of being indispensable. But for the needs of city-dwellers, who already represent 55 percent of the world population and will reach 68 percent by 2050, is the car really the best we can do? Is sitting in traffic jams the price to pay for the luxury of being taken from your exact origin to your exact destination? The race to invent the car of the future proves that, to some extent, we haven’t yet fully understood that the solution lies less with technological innovations than it does with usage. The real driver for change is therefore more quiet, less spectacular: it involves carsharing and carpooling, all sorts of soft mobility and intermodality and, above all, the idea that accessing beats possessing. It’s not a shiny flying car, but that’s the stuff of the future.
Road transport is a major stake for durable mobility. According to the European Automobile Manufacturers’ Association (ACEA), it accounts for over 75% of all goods transported over land. It also contributes about one-fifth of the EU’s road transport emissions of carbon dioxide. That impact is likely to grow: “Experts expect global CO2 emissions from road freight traffic to more than double by 2050,” Andreas Thon, Siemens’s vice president for Turnkey Projects and Electrification in North America, tells New Atlas. Thankfully, road transport can be disrupted too.
In 2012, Siemens started testing in Germany its eHighway concept, in which commercial vehicles are retrofitted with a powertrain that draws electricity from overhead cables, allowing them to run on electric power only. In 2016, the “electric highway for trucks” made it to Sweden and in 2017, it was installed around the ports of Los Angeles and Long Beach in California. The aim of the demonstration was to show the system can help reduce “smog-forming, toxic emissions around ports,” wrote New Atlas at the time. Inverse wrote that “cutting truck emissions would have a huge impact on climate change and on the health of those who live near the most congested cities.” Siemens’ Andreas Thon explained: “That’s the main reason that we’re doing this. The main reason is the environmental aspect, both pollution and noise. The economic benefits come in addition.”
In Sweden, in April 2018, a similar technology was installed in the road: two tracks of rail transfer electricity through a movable arm that attaches to the bottom of a moving vehicle. The electrified road is the world’s first that can recharge the batteries of cars and trucks; at 1€ a kilometer, the cost is roughly 50 times lower than that required to construct an urban tram line, reports The Guardian. And the “dynamic charging” means the vehicle’s batteries can be smaller. The Swedish government is reportedly in talks with Germany to develop a network of such highways.
In 2016, the Netherlands organised the first “European Truck Platooning Challenge” so that six European manufacturers could test their autonomous trucks in real life. Platoons of WiFi-communicating trucks left Germany, Sweden and Belgium to converge to the Rotterdam harbour. The aim was to prove that self-driving trucks are safer, cost less and consume less fuel: according to a study, two platooning trucks driving for 160 000 km could save up to 6000€ of gas a year.
In the United States, competition is already fierce. The main actors of the automated truck business are Peloton Technology, Embark, Starsky Robotics, as well as Waymo, Kache.ai and Kodiak Robotics. The new kid on the block, Ike, wants to build “hubs” along the highways, where self-driving trucks can park and wait for drivers to take them to their final destination. The question now, on both sides of the ocean, is whether the diversity of legal frameworks can accommodate the deployment of autonomous freights at a large scale. In Belgium, for instance, where the minimum safety distance between two trucks is 50 meters, “platooning” (which requires trucks to drive closer to one another) is de facto illegal.
The virtues of an integrated approach
But technology is not the only answer to the greenhouse gas emissions problem. In 2016, the ACEA presented the results of a study by Transport & Mobility Leuven (TML), entitled “Greenhouse gas reduction measures for the road freight transport sector.” Its conclusion was that improving the technology of new vehicles is only part of the solution: “there are many more factors than just the vehicle alone that determine CO2 emissions – such as permitted vehicle length and weight, trailer designs, alternative fuels, driver behaviour, optimised transport operations, infrastructure and more,” said ACEA Commercial Vehicle Board Chairman, Martin Lundstedt, who is CEO of Volvo Group. The “optimised transport operations” part is tackled, for instance, by Cargonexx, a Hamburg-based startup that was among the winners of the 2018 edition of the European Startup Prize for Mobility: it uses AI to improve the utilisation of trucks and reduce the number of empty runs.
A 2016 report by the European Environment Agency, entitled “Explaining Road Transport Emissions”, confirms that good progress has been achieved over the past 25 years thanks to a global approach: setting technological standards for vehicle emissions and fuel quality, establishing air quality limits, improving transport planning and public transport incentives, among other things. And the ACEA strongly advocates for an integrated approach, which they believe to be “the only way to reduce the CO2 emissions of the transport industry in Europe on a large scale.”
Self-driving cars will probably end up reshaping the urban infrastructures. But as long as they have to share the road with manned vehicles, they will need to adapt and learn to communicate.
Today, we are promised a future where cities will be filled with autonomous cars seamlessly communicating with each other. No more accidents, no more traffic jams, no more parking nightmares. But before that bright future happens, autonomous cars will have to cohabit with regular ones. “Better vehicle-to-person communication will be crucial, as most experts predict a lengthy period — perhaps decades — of mixed traffic, with robot cars navigating roads alongside human-driven ones”, writes the San Francisco Chronicle in a comprehensive article on the subject. And even once they’re ubiquitous, autonomous cars will still have to communicate with other users (bicycles, scooters, mopeds, pedestrians). Which is why the study of the relationship between machines and humans is now a booming field. Particularly in the United States, social scientists (mainly anthropologists, sociologists and psychologists) are teaming up with roboticians, engineers, designers and programmers to understand how people interact with autonomous vehicles.
Building trust through communication
First, there’s the issue of acceptance. “It’s crucial to make self-driving cars accepted in society so people feel they are trustworthy and part of daily life,” Sameep Tandon, CEO and co-founder of self-driving car company Drive.ai, tells the San Francisco Chronicle. “Otherwise there’s a risk people will think of this as the robot apocalypse.” That may be where we are now. In March 2018, for the first time, a woman was killed by a driverless Uber in Arizona (it was later established the vehicle had seen her and decided not to brake). In California, one third of the collisions involving autonomous cars in 2018 were caused by humans attacking the vehicule. The New York Times recently explored the reasons why humans tend to attack robots:
cognitive neuroscientist Agnieszka Wykowska evokes a “Frankenstein syndrome,” in which “we are afraid of this thing that we don’t really fully understand, because it’s a little bit similar to us, but not quite enough.” In short, trust is not there yet.
Today, all self-driving cars must embark a human operator seating in the driver’s seat, which may increase the level of acceptance. The Center for Design Research at Stanford University is thinking about the next step, and testing how people react to an empty car. They’ve devised a “car seat” suit that renders the driver “invisible” at first glance: “Our techniques are theater-like ways of simulating the future, like live-action, improvisational role-play for science,” Wendy Ju, who leads that experiment, tells the San Francisco Chronicle. “There’s a comedy to it, but we are dead serious about collecting real behavioral responses.”
Then there’s the matter of communication. Cars will have to be able to understand what is happening around them and to react while clearly signaling their intentions. Waymo’s mini-vans are already capable of reading the hand signals of bicyclists. Google has realised that its cars are too “polite” and can stay stuck for a long time at intersections, letting all other vehicles go first. A car programmed to stop whenever there’s an obstacle would rapidly create traffic jams for no valid reason.
So the idea is not to program the understanding of external situations, but to teach it. Waymo exposes its vehicles to virtual re-creations of real-life situations; Nissan feeds them with analyses of a day in the life of an urban intersection. “So many complicated things can happen in the real world,” says Drive.ai’s Tandon. “If you program a rule for every single case, you’d have a decision tree so complicated no one could deal with it. Instead, we use deep learning to make the process go seamlessly. We want our vehicles to learn from as much data as possible.”
Once the situation has been read and a decision has been made, the car will need to communicate its intentions. How do you signal to a pedestrian that they can cross in front of you, if not with a hand gesture or a nod? Drive.ai is now experimenting with light displays on the roof of the car. Nissan has appointed anthropologist Melissa Cerfkin to work on the understandability of white LED arcs, also on the roof, that signal intentions. Other methods could include “audible cues (perhaps a polite voice saying ‘Cross now,’ or a musical tone as at some stoplights); rooftop displays showing symbols or words; laser devices to project a message such as a crosswalk on the road ahead to indicate that it’s safe to cross; and cars that wirelessly transmit their intentions to other vehicles”, imagines the San Francisco Chronicle. For now, car manufacturers are each working on their own solutions. The next step will be to establish standardised communication methods that can be included in the official road safety rules. That means one thing: instead of trying to change their environment, self-driving cars must find the best way to adapt to it.
“Making Autonomous Vehicles a Reality: Lessons from Boston and Beyond”, BCG, October 2017.