A shocking truth about the car business is that it won’t be the car business for much longer.
Right before our very eyes, a relic of the 20th century – the auto industry built on steel and oil — is speeding to become something different and quite unrecognizable — at least to the likes of industry founders and legends Henry Ford and Gottlieb Daimler. The car companies of the last century are transforming into high-tech mobility service providers with electrified vehicles at the very core.
Car companies of the 21st century accept that the business they’ve been profiting from for the last 100 years is doomed. They have grasped the need to marry car-making and technology to produce a sweeping range of so-called “mobility” products that appeal to buyers who live in increasingly crowded cities, who are completely comfortable in a digital world, and who recognize and accept the facts of human-made climate change.
Most stunning of all to someone like me, who has been around this industry for more than three decades, the car business as a whole is changing itself with intent. I cannot think of another industry that in recent memory has so publicly recognized the disruption it faces, and then move to avoid extinction, to do the things necessary to thrive in new and uncomfortable circumstances.
And so we have Fiat Chrysler (FCA) in a budding romance with Google. Their first date involves testing Google’s self-driving technology in the 2017 Chrysler Pacifica hybrid minivan.
Toyota is courting Uber. These two will explore a variety of joint ventures – from in-car app development to shared research and development, to a program intended to put Toyota and Lexus vehicles in some sort of Uber fleet.
Reports suggest the Toyota-Uber relationship is tighter than Google-Fiat and broader than General Motors and Lyft. Ah, GM and Lyft. General Motors is getting a lift from Lyft. Lyft’s ride-sharing technology is a central piece in GM’s push to become a mobility services company with critical expertise in autonomous technology.
Ford is now seriously dating Pivotal, a “cloud-based software company” that should help Ford establish and develop its Ford Smart Mobility initiative. Ford’s executive chairman, Bill Ford, says Ford is actively seeking partnerships that will allow his grandfather’s company to shed its history as a pure automobile manufacturer and seller. Ford, he says, is rapidly morphing into an industry leader in ride sharing and self-driving vehicles.
Similarly, Volkswagen has a new partner in Israeli-based taxi start-up Gett. VW CEO CEO Matthias Muller says, “This marks the first milestone for Volkswagen on the road to providing integrated mobility solutions.”
And so on…
Any one of these corporate tie-ups taken alone would be interesting and worth watching. Together, however, they suggest much more and it’s really quite amazing.
At the company’s recent annual meeting, BMW CEO Harald Krueger could have been speaking for this entire industry when he said the BMW Group will move into a new era in which “we will transform and shape both individual mobility and the entire sector in a permanent way.”
In fact, BMW’s iNEX banner will house the group’s expanded range of ‘i’ vehicles, as well as shepherd to market automated driving and digital connectivity technologies, a new generation of electric mobility, lightweight construction and “trailblazing” interior design.
Of course BMW will have a plug-in hybrid Mini, an open-top version of the i8 roadster, and an i3 with increased battery capacity and range. But the more interesting development is project i2 with its focus on automated and fully networked driving, complete with high definition digital maps, sensor technology, cloud technology and artificial intelligence.
Krueger says “individual mobility will remain a fundamental human need,” but technology will change the very definition and nature of personal mobility. Audi CEO Rupert Stadler agrees.
“Electrification and digitization represent an historic shift,” he recently told his company’s annual meeting. And that’s why together with BMW and Daimler, Audi acquired the digital map service HERE. Autonomous vehicles – so-called “piloted” vehicles – need precise maps linked with real‑time data. This is what HERE delivers.
In 2017, the new A8 will offer piloted driving which allows the car to manage itself in traffic jams and drive itself temporarily at speeds of up to 60 km.
“By 2025, we will see fully automated driving,” says Stadler.
All these car companies recognized the need to change many years ago, but I believe the catalyst to accelerate change – the spark – was Tesla Motors, the brash Silicon Valley start-up. Tesla has certainly captured the imagination of both the investment and consumer marketplace.
It’s a stretch to suggest that Tesla CEO and founder Elon Musk is a combination of Stephen Jobs and Henry Ford, but no one should question the impact Tesla and the charismatic (or bombastic) Musk have had on established car companies. Every car company boss in the world can see the excitement and enthusiasm generated by Tesla and its products.
But Tesla simply does not have the capital to become a global car company. The car business is too complicated and too capital-intensive for Tesla to survive and thrive in its present state. Which is why I believe Tesla is a car company likely to form a strategic partnership with a deep-pocketed technology company in need of a jolt.
Apple fits the bill perfectly. Whether or not Musk and Apple CEO Tim Cook can strike a deal remains to be seen. On the surface they appear to be polar opposites. But an Apple-Tesla alliance who be earth-shattering, turbocharging wholesale changes already shaping the auto industry.
Apple is a strong global brand, has software expertise, a global footprint and this year could have as much as $300 billion (US) on hand. Apple has already shown an interest in the car business with Apple CarPlay, not to mention a recent $1 billion (US) investment in an Uber rival in China, Didi Chuxing.
Tesla has proven it can produce sexy, high-performance electric vehicles with very modern software and enviable autonomous capabilities. Tesla’s brand is strong and its following is rabid. But Tesla’s balance sheet is a shambles and recent developments suggest Tesla is having trouble developing new models and ramping up production of existing and promised models. Tesla in fact appears to have quality control and production problems, and is suffering from increasing attacks on its credibility.
An Apple-Tesla alliance would produce a formidable “mobility” company with an immense capital base. This would in turn deliver a massive shock to an auto industry already remaking itself with new ventures and alliances. Apple and Tesla together would form the mother of all mobility company alliances, forcing all its rivals to react even faster and more creatively.
This can only be good for consumers and the world.