The idea of a non-traditional automotive company launching a car is something that delights analysts, worries the traditional industry, and is treated by the public in equal measures of fascination, concern and apathy
For years, there has been talk of Apple launching an ‘iCar’, something that Steve Jobs reportedly dreamed of doing. The company has been quiet on such an idea for some time now, but it is openly developing and launching in-car technology, for now within the area of infotainment. In late October this year, Berenberg analyst Andaan Ahmad suggested in an open letter to Apple that it should buy the EV manufacturer Tesla. Music to Elon Musk’s publicity-conscious ears, but could the car company – once referred to as the Apple of the automotive industry – really end up becoming Apple’s offering in the car world? Or might Apple try a more organic approach, perhaps using a contract manufacturer to build its self-developed cars?
Another household name with the automotive industry firmly in its sights is Google, which has for some time been testing ‘self-driving cars’ in Nevada, guided by its own Google Chauffeur software. Whilst these cars have to date been heavily-equipped versions of mainstream cars like the Toyota Prius, it is not inconceivable that Google would develop its own product. Again, production could be outsourced to a contract manufacturer, like Valmet or Magna Steyr, or to a traditional OEM with spare production capacity – and there are certainly many such opportunities in Europe at present.
Mercedes-Benz is the oldest car brand in the world and, in 2011, celebrated its 125th anniversary. Head of Mercedes-Benz Cars Dr Dieter Zetsche believes that the notion of a non-traditional car company entering the mainstream automotive industry is far from inconceivable.
“We have seen industry examples where exactly that has happened. Take steam locomotives being replaced by diesel and then electric locomotives: not a single manufacturer providing the first technology was around when the new technology came around,” says Zetsche. “It would certainly be stupid to believe that because of all the know-how on your side, nobody else from outside the industry can ever challenge you. This is not our position and I think it can be proven by the fact that we have invested in Tesla, for instance. And I very much appreciate this tension and complementary action between a start-up and the oldest auto manufacturer.”
As well as investing in “a start-up”, Zetsche says that Daimler takes seriously any potential challenges from an industry outsider, and is working hard to demonstrate that it can develop industry-leading technology in-house. Look at what Daimler has shown with the S 500 Intelligent Drive, a modified version of the S-Class, he says. “Using the production car’s existing sensors, just a few more of them, with some storage and some software and algorithms, and the brains of our engineers, we drove 100km [autonomously] through normal traffic – nobody else has done that. And me driving on stage [at the 2013 IAA] from the rear seat is not what the other car manufacturers will do tomorrow either.
“So, including Google, I think we are in a very, very competitive position there. I would dare to say we are ahead of everybody else.”
Daimler’s 4.3% stake in Tesla illustrates how a traditional OEM might respond to challenges from ‘outsiders’. Indeed, Daimler’s Chief Financial Officer, Bodo Uebber, recently indicated Daimler’s intention to increase its co-operation with the electric car company.
Supplier perception
But how would traditional automotive suppliers respond to the idea of delivering not to BMW or Daimler, for example, but instead to a non-automotive company that might launch a car in the near future? The European organisation which represents automotive suppliers is Brussels-based CLEPA. Its President and Chief Executive is Jean-Marc Gales who, before joining CLEPA, was head of brands at PSA Peugeot Citroen. “We are not yet at that stage, because such a company would probably operate by dividing competencies,” says Gales. “BMW has the competencies, for example, for the cars. Suppliers have the competencies for automotive systems. And [a technology company like] Google provides the software and the interconnectivity. Probably the smartest way of moving ahead would be through alliances and joint ventures. I don’t see a company like Google building up all the necessary competencies and factories, but I see a lot of scope for working together on very defined areas. I think that’s how it’s going to develop, because I don’t know any venture capital company that really wants a large manufacturing plant.”
Gales is convinced that technology companies will grow their automotive industry presence, and that a company like Google could eventually host a stand at an international motor show like the Frankfurt IAA. Google did not have a stand at the 2013 IAA, something which surprised him. “Look at the development of stands at the IAA: there are a lot of electronics companies, and two years ago suppliers had about 300 stands. This time it was 370. It’s really growing. There’s a lot going on, with many new companies emerging, and there is considerable new venture capital going into those companies.”
In addition to potentially bringing new – and disruptive – products to market, companies like Google are conducting research in areas that perhaps the mainstream automotive industry is not. “I’m very interested in that,” says Delphi’s Chief Technology Officer, Jeff Owens. “I think they’re really moving the mindshare space of what could be possible, and I’d like to work with them to help figure it out, or learn as they learn what the opportunities are,” says Owens. “They’re taking an incredible amount of data, and it would be great to learn even a portion of what they’re learning as they figure out what works and what doesn’t work, the use cases that are appropriate, the use cases that aren’t appropriate. And if that means we’re supplying product to them, I’m good with that.”
From a supplier’s perspective, could Owens imagine a time in the future when Delphi might supply to a non-traditional vehicle manufacturer? “Well, we do supply to Tesla but that is at least a traditional vehicle company with a non-traditional idea. We’re working with Google on driverless vehicles, as are many of our colleagues. Our radar sensors, for example, could bring value to them {Google} in terms of how they satisfy their environmental stance. But yes, I don’t know if they will be a car company.”
Face value
Success and failure in the automotive industry, perhaps more so than any other industry, is built on brand reputation. Anyone coming into the automotive industry from outside would need sufficient brand firepower to compete with well-established names. Myles Kovacs, President and Co-founder of DUB magazine, sees cross-industry collaboration as the way forward. “The future of automotive is a computer with wheels, so the computer companies should lead this industry in the future, if they want to and if they’re dedicated to do it. The collaboration between a powertrain company and a computer company would be the ultimate collaboration.”
Sascha Gommel, an analyst at Commerzbank, agrees. Rather than building their own cars, Gommel believes technology companies like Apple and Google “will just need prototypes to develop and test their software and services. I think it’s more likely that they want to sell their software and services to the established OEMs.” The idea of cross-industry collaboration is one with which Daimler also appears comfortable: “We will be fine to co-operate with Google,” says Zetsche.
Interestingly, it is in the area of self-driving cars that ‘industry outsiders’ currently appear to stand their best chance of success. Although Daimler has launched self-driving technology, it has done so in its top-end S-Class, well out of the reach of most car buyers. While GM and Nissan have both confirmed plans to launch autonomous cars by 2020, Google has been running its self-driving technology in a Toyota Prius, showing that such technology can be put into mainstream cars, and that it is already available, at least in prototype form.
It is for this reason that Mercedes-Benz is targeting technological leadership in this area. “We have been pursuing, for decades, a vision of accident-free driving,” says Zetsche. The focus for safety technology has shifted from passive to active safety, and “the new S-Class has taken us very close to the execution of this vision already,” he notes. “All these assistance systems, as a side product, provide autonomous driving. So it was not our prime target, but it goes along with our objective of accident-free driving,” and underlines “our brand’s safety superiority over any other car brand.”
Autonomous driving, he says, shows Daimler’s capability “where again we are far ahead of anyone else”, and helps “increase the perception of the brand’s innovative capabilities”. The S-Class has famously been the car on which many technology firsts have appeared, before trickling down to the mainstream market.
One of Daimler’s close industry partners is the Renault-Nissan Alliance. The two companies are exploring numerous collaborative projects, including, at the high end of their ranges, a likely joint manufacturing project that is expected to see an Infiniti model using the Mercedes-Benz MFA platform; at the small-car end, Renault will build a four-door smart for Daimler. Daimler has shown it can make self-driving cars; as mentioned above, Nissan has said it plans to launch a fully autonomous car by 2020. The economies of scale in manufacturing and technology development are all too apparent.
Back to the more general subject of non-traditional companies selling cars: whilst the industry prepares to accommodate – if not welcome – outsiders, those outsiders have much work to do to lay the foundations of a successful non-traditional car company business model. Tesla appears to be succeeding where the likes of Fisker and Coda failed, but as Delphi’s Jeff Owens said, it is doing it in a fairly conventional way. Consumer reaction to the idea of outsiders selling cars varies from, “They don’t know anything about making cars” to curious interest. A recent report by KPMG concluded that consumers would trust technology companies like Google and Apple over mass-market OEMs such as Nissan to produce an autonomous vehicle. Asked to rank their trust in companies producing an autonomous vehicle, and their willingness to drive one, respondents scored Google and Apple highest, closely followed by Mercedes-Benz, with Nissan and Chevrolet trailing lower down the scale. But ask consumers whether they would trust a technology company or a traditional vehicle manufacturer to make a family hatchback or a high performance sports car, and the answer would probably be very different.
Martin Kahl is the Editor of Automotive World
