Why Driverless Car Makers Have To Get Better At Technology Sharing

Ford's CEO is being fired. Uber's model is being challenged. And new partnerships are announced almost hourly.

To achieve scale fast in the rapidly consolidating and competitive market for driverless vehicles, automakers and tech companies with driverless car aspirations are realizing they have to share strategy, financial burdens - and the intellectual property underpinning their technology if they want to survive, let alone succeed. JL

Stephen Wilmot reports in the Wall Street Journal:

Car makers don’t want to lose their connection with consumers if car-ownership gives way to cheap driverless taxis but most of these investments seem destined for failure in markets where scale is key. A more collaborative approach could limit losses while keeping car makers close to the technological frontier.
Detroit is putting a lot of faith in car-sharing. It may have to get better at technology-sharing.
In what may be the first of many such disclosures in the auto industry as sales growth stalls, Ford is planning substantial job cuts following a first-quarter plunge in profits. Investments in far-off tech may be early victims of industry belt-tightening. A more collaborative approach could limit losses while keeping car makers close to the technological frontier.
Ford and General Motors GM 0.77% have rival Silicon Valley ventures for developing driverless cars, perhaps the hottest area of car tech today. GM bought Cruise Automation last year for roughly $1 billion. In February, Ford bought Argo AI in which it said it would invest $1 billion. The car makers are also developing a range of apps to compete with Uber, among others. GM offers short-term rentals (“car-sharing”) through its Maven unit and taxis through a $500 million stake in Lyft, Uber’s key U.S. competitor. Ford has said its new “smart-mobility” unit will eventually have a 20% profit margin. Car makers don’t want to lose their connection with consumers if car-ownership gives way to cheap driverless taxis. This is understandable, but most of these app investments seem destined for failure in markets where scale is key. Consolidation has already started. In the peer-to-peer car-sharing niche, Shwetha Surender of consultancy Frost & Sullivan counts some 30 players, down from 40 three years ago.
Silicon Valley is increasingly open to collaboration. Google sister-company Waymo, which is widely seen as the leader in self-driving technology, revealed Sunday that it would work with Lyft. That is after making clear last December that it had no interest in producing a car itself. Apple’s secretive car project also appeared to shift its focus last year from making a vehicle to developing self-driving technology.
There are few details surrounding the Waymo-Lyft deal, but the motivations are clear. Drivers account for almost three quarters of the cost of a ride-hailing business, estimates brokerage Evercore ISI. Self-driving cars would cut costs dramatically, paving the way for mass adoption and market dominance for the company that gets there first. In exchange, Waymo may eventually get access to Lyft’s customers and their travel data, and a bit more leverage over Uber, which it is suing for stealing its technology.
Lyft is also expected to test GM’s driverless-car technology, so the ride-hailing company will end up with two different self-driving systems on trial. All this duplication may be good for technological progress, but wastes investors’ money.
There is the odd example of platform-sharing. The German car makers formed a joint venture to buy mapping service HERE from Nokia NOK 1.15% in 2015. BMW has courted partners for the self-driving technology it is developing with Intel , Mobileye—now being acquired by Intel—and Delphi.
Investors are tolerating the current technological arms race while sales are strong. With the industry set to enter tougher times, collaboration, not competition, seems the obvious route.