Volvo will be providing its top selling XC90 SUV to DiDi Chuxing, who will integrate both software and hardware to the vehicle, making it compatible with their ride-hailing network. In 2020 Volvo provided XC60s, the smaller SUV variant, to the company for their initial robotaxi pilot in Shanghai. This new deal suggests that the test pilot was successful, and that both companies see benefits in working together. The press release states that this agreement represents a “long-term partnership” between the two companies, but it is unclear how long that is supposed to be, or what the terms of the agreement are.
Just last year Volvo took back about half of a previous joint venture with Veoneer called Zenuity, and formed Zenseact out of it that aims at developing self-driving tech, initially focusing on highway use cases. Not long after this was announced, Volvo (along with Polestar and Lynk & Co), signed up with Waymo as their exclusive SAE L4 partner. The exclusive partnership with Waymo appears to still be in place and, with that in mind, it becomes clearer that this latest partnership is a matter of Volvo providing vehicles to Didi. That means it likely doesn’t include self-driving software being provided the other way, that is, from the ride-hailing company to the car manufacturer. Therefore, this deal doesn’t conflict with the Waymo agreement. This would put the Didi partnership on a similar footing to Volvo’s other long-standing partnership with Uber which began back in 2016.
Volvo is pursuing an interesting strategy where they are keeping one foot in both robotaxis and the passenger vehicle market. The nature of these partnerships gives them two different autonomous vehicle sales channels through – providing vehicles on a non-exclusive basis to robotaxi fleets like Didi and Uber, while at the same time providing vehicles directly to consumers which rely on self-driving technology powered by Waymo.
It is too early to know how this will play out. It may be that they are able to ride the changes that are currently sweeping through the automobile industry. A way this may work in their favor is that the Volvo brand will get a boost by being perceived as the ‘safe choice’ by cutting edge and industry leading robotaxi companies, which in turn provides advertisement for their passenger vehicles that will also be cutting edge with software provided by Waymo. However, it might not work out quite so smoothly.
Volvo’s revenue could be squeezed out by the software companies. Consider a parallel in the computing world. Microsoft has long been capable of squeezing the revenue options for manufacturers of PCs. For the consumer it makes little difference whether their machine is a Dell, Lenovo, HP or Acer, because it is the brains of the machine, the software, that is central. This may explain why Volvo are hedging their bets by continuing to try and develop autonomous technology in-house with Zenseact, so that they won’t be completely beholden to Waymo.
The same trend may go for robotaxis or for self-driving cars, where the vehicles themselves account for less and less of the product value. Even if Volvo achieves the stated goal of being the ‘supplier of choice’ for the world’s robotaxis, they still risk losing that essential direct customer contact which will be in the hands of the ride-hailing companies instead. There is also the further possibility that robotaxis themselves will greatly reduce the market for people owning their own vehicles – so in a way the deal with Didi could be seen with a sense of irony as Volvo getting paid to dig their own grave. But if robotaxis are indeed inevitable, then it’s still a better proposition to get paid than not at all.
Written by Joshua Bronson,
RISE Mobility & Systems (Människa-autonomi)