As the auto sector continues to experience disruptive breakneck change and growth, industry leaders are leaving no stone unturned in seeking unorthodox strategies to stay ahead of the game.
Even Dieter Zetsche, chairman of the Board of Directors of Daimler AG and head of Mercedes Benz, proclaimed at the Paris Auto Show that “connectivity, autonomous driving, sharing and electric drive systems has the potential to turn the industry on its head.”
He followed that with an even more compelling statement, noting that “real revolution lies in intelligently linking the four trends, or four pillars” – also referred to as the CASE model. According to the Mercedes-Benz website, these are now the cornerstones of the company for its future comprehensive mobility offerings.
But it’s the need to make these links intelligently that’s forging unparalleled partnerships between unlikely parties.
It’s a phenomenon that’s been seen before in sectors like energy storage, biofuels and healthcare. Headlines in auto industry media, usually dedicated to the latest retooled crossover or union woes, now regularly declare new collaborations between auto manufacturers and tech companies – and beyond.
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“Connectivity, autonomous driving, sharing and electric drive systems has the potential to turn the industry on its head.”
Dieter Zetsche, Daimler Benz
One of the more unique allegiances is Costco and General Motors, which has made the warehouse club the second largest auto retailer in the United States. But perhaps most tellingly, Carlos Ghosn, chairman and CEO of Renault Nissan, has been announced as the keynote speaker at the upcoming Consumer Electronics Show (CES) in January. The CES has seen a surge in automakers descend upon its floor, showcasing edgy offerings that are often the result of collaboration with the tech sector.
These collaborations have been coming fast and furious. For example, domestic automaker Ford has invested $180 million in Pivotal Software, a cloud computing joint venture that is meant to shore up Ford’s ability to develop electric vehicles and autonomous vehicles.
Further afield in Tokyo, Denso, eSol and NEC have launched Aubass, an initiative to provide the automakers with easy to use basic software for in-vehicle electronic products.
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After a slow start, BMW has been ramping up their efforts in the high-tech, electric vehicle and autonomous vehicle arena. They’ve partnered with Mobileye, an advanced driver assistance system, as well as Intel, to create a system with “reliable electronic brains smart enough to navigate traffic and avoid accidents.” BMW is knocking themselves out to take a leadership position in greening their vehicles, and this collaboration is eyeing the development of global standard platforms that can be utilized by other automakers and tech companies.
Cut-throat competition usually takes center stage in these industries. Tech companies have poached top talent from automakers and vice versa. Last year, Tesla CEO Elon Musk slammed Apple for wooing Tesla employees with $250,000 signing bonuses and 60 percent pay increases. But then, almost 150 former Apple employees have jumped ship for Tesla.
Even though the Apple car is off the table – for now – it’s food for thought that collaboration could perhaps be mightier than competition.
Benefits of collaboration include access to otherwise restricted resources.
Anything to do with R & D in any sector, from automotive to tech to health and beauty, is notoriously secretive. Automakers have extensive manufacturing and testing facilities, industry know-how and all-important dealership networks to retail the finished product.
On the other hand, tech companies can offer the scientific thinking to develop the type of products and components to transform cars into computers on wheels. The tech sector has a different culture, removed from the politics of the auto industry, more focused on engineering than marketing.
The Ford Google alliance is a good example of how automakers and tech businesses can work together, as Ford vehicles are equipped with Google self-driving software.
Toyota and Suzuki have come together to foster new, more tech-laden products for emerging markets such as India. Toyota is also working on fuel cell technology and a sportscar with BMW AG, in addition to its engineering alliance with Mazda.
The Renault Nissan alliance (who saw that one coming?) will be launching 10 new autonomous-type vehicles by 2020. They spent $5 billion in 2015 on advancing their tech prowess, including R & D into autonomous drive and connectivity.
Who else is in the sandbox?
But the auto industry has never been a half-miler, and reaches out to a plethora of diverse sectors. There’s ridesharing partnerships, such as General Motors and Lyft, Mercedes and Car2Go. Academic institutions seem like a natural fit, such as the SAIL-Toyota Center for AI Research at Stanford, which is working on intelligent robots and autonomous vehicles.
Ford is the first automaker to test their autonomous vehicles at MCity, the University of Michigan’s 32-acre proving ground that recreates a 3D environment using LIDAR technology.
Auto parts suppliers have also jumped in the game, like AutoLiv and Nissan Kogyo, to build better safety systems for brakes. And consortiums like the one with Ford and SmartDeviceLink are being established to set standards, involving Toyota, PSA Peugot Citroen, Mazda and Subaru.
Will everyone play nicely in the sandbox?
There are no guarantees that despite having an urgent and common goal, these disparate sectors will enjoy the type of harmonious relationship necessary to bring about real change.
Perhaps one of the greatest threats is the inherent clash in corporate cultures. Where carmakers are focused on moving metal, tech companies would rather concentrate on expanding their body of knowledge and science – and perhaps, partnering with other automakers as well.
There’s also a disproportionate balance of power, where carmakers must contend with low profit margins – unlike the tech world, which enjoys high margins. And in the auto sector, pretty much everyone wants a piece of the autonomous vehicle pie. The tech sector, not so much.
Add the helter skelter pace of change to the equation, and there’s plenty of room for conflict, with the potential to turn these partnerships and collaborations into collision courses.