Unlikely Partnerships Are Shaping the Car Industry of Tomorrow
WHY YOU SHOULD CARE
These unlikely coalitions may make car rides more efficient and comfortable.
By Peter Campbell, Patti Waldmeir & Kana Inagaki
On the outskirts of Detroit is a facility for testing driverless vehicles. The American Center for Mobility prides itself on secrecy, with tall green barriers flanking its roads to keep prying eyes from the latest creations being trialled. Yet as they embrace new technology, the carmakers that use the site are also having to lift their own veils of secrecy and team up with other companies in order to succeed.
Traditional carmakers have partnered with technology and ride-booking groups and even pizza companies as they develop electric and self-driving vehicles and explore new ways to make money from them. “Tech partnerships have never been more important, and they’re only going to grow in importance,” says Jim Farley, Ford’s global markets president.
Our competitors no longer just make cars.
Akio Toyoda, Toyota president
During the past fortnight, both at the Detroit motor show and the Consumer Electronics Show in Las Vegas, the world’s carmakers have laid out their visions for the future and who they will partner with to get there. At CES, Toyota unveiled a self-driving vehicle involving a motley lineup of partners ranging from Amazon to Uber to Pizza Hut.
“Our competitors no longer just make cars,” Akio Toyoda, Toyota’s president, tells the assembled Las Vegas crowd. “Companies like Google, Apple and even Facebook are what I think about at night.”
In Detroit, Bob Carter, the company’s U.S. president, laid out the rationale for teaming up with such a wide range of groups.
“We’re experts at engineering and manufacturing motor vehicles,” he told the Financial Times, “but applying that technology to the logistics of a delivery service is something that we need to partner up on to benefit the consumer.”
It is a significant shift in mindset for the company, which has openly admitted its historical discomfort with alliances.
Some have embraced the new spirit of cooperation. Fiat Chrysler has a partnership with Waymo to develop self-driving vehicles, as well as being part of a consortium that includes BMW, Intel and Delphi to make autonomous cars. Honda is also in talks with Waymo.
For some in the industry who have so far managed to buy or develop their own systems, these deals are a sign of weakness. “Partnerships are only emerging now by people who are behind,” says Johan de Nysschen, chief executive of Cadillac, General Motors’ luxury brand. GM, after striking a deal with Lyft to jointly develop self-driving cars, bought Cruise Automation to bring the technology in-house. It has since announced its plans to operate driverless car fleets from 2019 and has shown computer images of a new car without a steering wheel.
Not all of the carmakers are happy to open their gates.
Daimler, which has teamed up with rivals BMW and Audi along with others to buy Here mapping services, is keen to keep key parts of its technology in-house. “We do not want to be fast followers and we do not want to buy black boxes for certain solutions,” says Dieter Zetsche, the chief executive, at the Detroit show. “We want to penetrate and understand and control the development of these areas. This defines the kind of partnerships that we’re going to make.”
Partnerships were useful for gaining knowledge and spreading the cost of investing in new systems, which can be prohibitively expensive, he says. “Certainly we need partners as well,” says Zetsche. “Perhaps less than some of our competitors, but certainly we shouldn’t be arrogant and say we can do it all on our own.”
Working with others also speeds up development time, says VW brand chief executive Herbert Diess, something that is crucial given the urgency of the race among carmakers to get new products to market. “We think there will be a lot of testing involved, also a lot of regulations,” he says. “We feel we are better and probably faster in bigger groups.”
Others are pursuing more deals. The Renault-Nissan-Mitsubishi Alliance announced at CES it will set aside $1 billion to invest in startup technology groups during the next five years, an approach also favored by Peugeot owner PSA.
Still, analysts say it is difficult to judge which of the various tie-ups will survive, and which will emerge as the industry leader. As a result, companies are spreading bets far and wide — and on a nonexclusive basis. Lyft, the ride-booking group, has deals with GM and Jaguar Land Rover.
“While carmakers are moving ahead with tie-ups with companies like Uber and Grab, these services are new and it’s still a big question who will actually take the lead in the future,” says Motoki Yanase, an analyst at Moody’s in Tokyo. “But each carmaker is aggressively pursuing tie-ups to avoid a situation where they have no relationship with whoever turns out to be the eventual winner.”
OZY partners with the U.K.’s Financial Times to bring you premium analysis and features. © The Financial Times Limited 2018.
OZY partners with the U.K.'s Financial Times to bring you premium analysis and features. © The Financial Times Limited 2020.