Will Tech Leave Detroit In the Dust?

Posted on Sunday October 21, 2018

As automotive companies shift their focus to software and services in the pursuit of self-driving cars, the impact to large manufacturing cities like Detroit could be drastic. The Wall Street Journal explores this "transformation without precedent" and poses the question: will tech leave Detroit in the dust? From the report: Auto makers point out that they have one advantage that newcomers to the industry don't: vehicles. "Ultimately, you can have the best services platform there is, but if you don't have the vehicles to operate on it, that won't do you much good," said Sam Abuelsamid, a senior analyst with Navigant research. "That's where the manufacturers have an ace in the hole." Many analysts believe businesses like Uber and Alphabet's self-driving tech subsidiary Waymo won't have the appetite to get into the low-margin, capital-intensive business of car manufacturing. Some auto executives say they can hold on to their roles as hardware providers while also tapping into the growth of more-profitable services. Mr. Stackmann said VW can earn millions more customers than it currently has by offering transportation as a service through a network of connected cars. "They talk about scalability, but where is the added value from Uber?" he said. "We have a technical foundation and will build connectivity into our vehicles to connect them and our customers to our ecosystem. In the long term, the question will be: Why do you need Uber?" Auto industry executives have long seen tech-industry threats coming. The valuation of Elon Musk's Tesla has soared in recent years, pulling even with GM's, as it has shown it can create a fiercely loyal customer base for electric cars. Google began working on autonomous-vehicle technology in 2009 and its self-driving car unit Waymo is today considered a leader in the technology. While demand for new cars and trucks remains robust and selling them will remain a core part of the industry's business in the years to come, many executives believe the long-term profit growth is limited as new forms of transportation proliferate and more car owners ditch their vehicles for shared ones, hurting sales. Car companies are trying to diversify into new business models that, much like Uber, sell transportation as a service. Revenue is generated by usage as opposed to a one-time vehicle sale, and because the service isn't as capital-intensive as building and selling cars, executives believe it can ultimately command higher margins..." The report goes on to mention the investments automobile companies are making to restructure their businesses. GM, Ford, and Toyota, for example, "are investing in new tech startups, purchasing artificial-intelligence and robotics firms, and hiring thousands of workers in tech hubs in California and Tel Aviv, Israel," reports the WSJ. "Several car companies have acquired or invested in makers of lidar, laser-based sensors that help driverless cars navigate. The auto makers are tapping the tech world for software-engineering talent, a skill traditionally in short supply in the car business." "Over the last year, GM has taken journalists and investors through a factory in suburban Detroit, where workers plan to build self-driving Chevrolet Bolt electric cars that have no steering wheels or brake pedals," reports the WSJ. "The message: It has the manufacturing might to crank out thousands of robot cars, while tech rivals like Alphabet's Waymo unit must equip their autonomous systems onto vehicles they purchase from traditional car companies."