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Will Tech Leave Detroit In the Dust? (wsj.com)
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."
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."
There's tons of software done in Detroit as almost every controllable component is a node on the network nowadays, and that's all embedded. Nav radios are fully functioning 32-bit computers with either some *nix clone or Microsoft's OS on it.
And Detroit is right. It's easier to hire people to add the latest tech goodies than it is for the tech goodie inventors to create a whole car around it.
(-1: Post disagrees with my already-settled worldview) is not a valid mod option.
is that they will never lose their crown and the central hub for all vehicle manufacturing. Nope. Never. Not gonna happen.
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The only American car brand worth buying is Tesla.
German for brand
Japanese and Korean for practicality
American for what? Muscle? LOL.... Cars that can only move in a straight line?
Detroit one of the top 10 booming tech places in the US last year. Reminds me of the great Mark Knopfler line: "Two men say they're Jesus, one of them must be wrong"...
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
"workers plan to build self-driving Chevrolet Bolt electric cars that have no steering wheels or brake pedals" - I'm surprised and impressed by the level of workers' control in American factories.
"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."
Unless the AV developers can come up with a mechanism for taking a standard model (human driver) car and installing all the necessary hardware and computers inside that.
Given that an AV wouldn't need a driver, their seat could be ripped out and a "black box" put in its place. Wire up the sensors and engine interface and off you go. You lose a seat, but with average vehicle occupancy being well below an ordinary car's capacity, there would be few occasions where that would matter.
politicians are like babies' nappies: they should both be changed regularly and for the same reasons
I thought Japan left Detroit in the dust about 25 years ago.
The more competition, the merrier. It think the line about cars being a low-margin business (compared to tech endeavors) is telling. I personally hold great hope that all my future "driving" will be paid in micropayments, on a per-ride basis, rather than through a major investment every 5-8 years. For that to happen, the per-ride cost has to be comparable between the two.
Most of the effort goes into the driving experience, like how the car handles, the interface to operate it, driver assistance and so on. None of that will be relevant anymore, as long as the AI can get you from A to B. What's the magic in creating a passenger seat? If you take a cab, do you care what brand it is? At scale there's no reason for Waymo to tie themselves to any particular brand, they could have a million from each manufacturer. Heck, they could probably just hire a few car designers and create a generic car like they did with the "Firefly" prototype. Sure somebody will continue actually making the cars, but it'll be just some faceless assembly company like Foxconn. Though I expect they'll have plenty time to go through the transition...
Live today, because you never know what tomorrow brings
... in a car. It is an entirely different problem to build reliable cars en masse. The recent tear-down video of a Tesla shows that they still appear to be grappling with the building of a car around their electronics.
Anybody who describes Detroit as "desolate" hasn't been there in the past 5 years. Dan Gilbert has been buying up buildings (and putting up new ones) and has had no problem filling them. Quicken Loans and their associated companies employ thousands of technology employees downtown, and Microsoft just moved their Michigan offices downtown from the suburbs.
As for automotive? Meh... GM has the RenCen and Ford is revitalizing a historic train station, but it's become more and more of a marginalized thing, at least in relation to Detroit itself.
Detroit has one thing that most towns don't have, and that is ample water. Most tech cities have major water issues, or will have them, either because they have plenty of salt water, but no fresh water, or inland where the water system isn't sturdy enough to handle the added population. Detroit, on the other hand can easily handle future water needs of any business that comes there.
There are still millions of people who choose to buy an American car for the sole purpose of supporting their own country.
Been there, done that, I have the scars and t-shirt to prove it.
I made the mistake of buying a new Ford Taurus. What a piece of crap! It's by far the worst car I've ever owned. Almost as soon as the warranty expired, things (expensive-to-repair things) began to fail. I finally wised up and got rid of it.
You couldn't give me a new Ford. Other than a king's ransom, you couldn't pay me to own a Ford. Once bit, twice shy. Never, never, never again, ever, period. Drop dead, Ford.
Circle the wagons and fire inward. Entropy increases without bounds.
On the other hand, cellphone makers don't operate like that. Their design process would be, "what would be the power/weight ratio 4 years from now?" "What would that ICE cost to make in four years?". These are baked into the design. Processor power, net work bandwidth, battery cost, touch screen display all go through rapid changes in 2 years, they design cycle time for phones.
Tesla is working like that. It predicts the kWh/Kg $/kWh of batteries in four years and design and price the car based on that.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
Work in the industry long enough and what you see is that the automotive business does not innovate and downright sucks when it comes to developing and implementing their own tech.
Examples: Dealerships are locked into hopelessly obsolete systems through UCS (now Reynolds), CDK, ADP automotive, etc. They still actively push solutions that use 10 year old cisco routers, dot matrix printers, and etc. I even saw SCO Unix still being used around 2012. When one vendor dipped their toe in the water and made a (shitty) web based system, everyone panicked.
In car entertainment systems: They suck too. At first the companies tried to develop their own (Ford Link, Lincoln in car entertainment, I forget what GM called their abortion entry). After they figured out they couldn't do systems worth a damn, they tried to partner with others. And somehow managed to screw that up (Microsoft's Sync implementations come to mind ).
On the other hand you have the tech companies. They may make a better software product, but they don't have 80 years of car building and engineering experience. Tesla makes a hell of a car, but they can't scale and right now they are crafting parts in fucking *tents* attached to their factories. They are going to have quality control issues out the wazoo.
Add all of this up and the advantage still goes to the auto makers because:
1) They have the manufacturing capacity and partner relationships. The big 3 can integrate self driving software. Self driving people have to buy / design the car and retrofit it.; and
2) People are already use to driving their own cars. It is the tech companies that are trying to change the paradigm. They will have the pressure to make a perfect product. If they have a flaw we'll all be taking about how they fucked up the self driving aspect. On the other hand all the auto makers have to do is make car that drives with a drive assist feature that is passable. If they have a problem, we'll roll our eyes and say the car is ok but the self driving needs improvement.
In order for self driving cars to really become successful and enter the mainstream, the tech guys are going to have to go automotive.
There are still millions of people who choose to buy an American car for the sole purpose of supporting their own country. If you can't get past that you have no understanding of the complexities of what it means to be human. To laugh it off as a poor choice based on your own values is shortsighted and stupid.
When a person does so for those reasons it is a sure fire sign that person is either 1)living in a grossly misinformed past, or 2)is just an idiot.
The Big 3 today are multinationals and are not "American" companies anymore. They source parts from wherever they need, build cars wherever it's cheapest, and export whenever marketing tells them they have brand recognition.
They are true international companies that feign U.S. patriotism.
I have worked for an automotive supplier in Detroit.
We made parts for Ford
We made parts for GM.
For Peterbilt and Freightliner.
For BMW.
For VW.
For Lotus.
Toyota.
Hyundai.
Mercedes.
Caterpillar. (Fun fact, often a Caterpillar engine will be in a Mercedes heavy diesel and vice versa.
Globalization has hit everything. There is no such thing as a national brand anymore. If you own a "Japanese" or "German" car in North America or the EU, odds are it has American parts. So what.
If the average car is used 3% today, and self driving taxis take over, the real challenge will be the number of cars required will shrink by an order of magnitude or more. That leaves the legacy automakers with huge infrastructure that will be grossly under-utilized.
Even if they can make everything else work including vehicle electrification and autonomous driving, this will limit their ability to compete.
No, not at all.
If anything, tech will SAVE Detroit, as soon cybernetics get good enough and a good police officer get shot by a gang.
And they're all multinational companies, still. But the future of automobiles is very much still up in the air. Will they need to build ten times as many cars, or one-tenth as many, for a given market? And who will own those vehicles? The split of personally-owned versus fleet-owned vehicles will, to a large extent, determine the answers to most of these questions.
Consumers aren't by and large cancelling their Uber rides because they don't like the brand of vehicle that's coming for them. If people don't own the vehicles, they're not going to care much who builds them, or what logo is on them. Fleets won't put up with typical consumer lifespans, either. Buses are designed to run 300,000 to 500,000 miles without a major overhaul. Automobiles can be as well, although they can't simultaneously have the same performance and economy that they have now and also not cost considerably more — not even considering the self-driving hardware. But if you're not driving, the performance doesn't matter as much either.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
They sealed their fate when they laughed W. E. Deming out of town and country for having the temerity to suggest that maybe they should build cars that don't suck. Deming, however, found an audience for his theories on statistical quality analysis and management in... you guessed it... Japan. Not only did the Japanese accept Deming's notion that building quality products is a good thing. They took it to heart and built on it and applied it not just to their automotive industry, but their industrial base in general. Japan named Deming a "Sacred Treasure" to the country and established a prize in his name to be awarded for achievements in total quality management.
And thus, my first Japanese car, a Subaru, lasted me 14 years, outlasting every Detroit car I ever owned before, twice over and then some. I'm up to 6 years now on my Mazda, with zero issues and only the routine scheduled maintenance. (And Subaru and Mazda are smaller niche brands that don't even quite hit Honda's or Toyota's standards.). Detroit's reaction to Japanese cars being superior? Put bigger fins on it, launch a campaign of "buy American" yellow-scare xenophobia, and shovel ever-larger bovine pickup-trucks-with-a-box-on-the-back trash onto the road. Well, screw that and screw them. Detroit made their bed and it can lie in it. My rule now is that the VIN must start with the letter J, or no sale. And it's their own damn fault.
Imagine all the people...
Detroit may continue to make the physical cars at low margins. All looking exactly the same as each other.
But most of the value add, and most of the profit, will be in the software they buy from tech companies.
Tech doesn't have a hard climb to leave Detroit in the dust, since the city is already falling apart :D
Disclaimer: Didn't RTFA, going straight to comment. My observation is young people are not rushing out to get a car like I did when I turned 18. Cars last longer, more expensive unlike my first car was a $300 junker. These days there may be old cars but not junkers, i.e. smog requirements tighter and if car doesn't pass smog can't get it registered. Then there are tighter insurance requirements, don't have insurance can't get a license. Back then you could still get a license and register the car if don't have insurance. Also once you have all that, for here in Silicon Valley, the traffic is horrible. Go to places like San Francisco there is no place to park so a car is useless. I see for a lot of young people they can do Uber and Lyft so.... is a car needed?
I still have a car, regularly use it. But then I've been established for many years.
mfwright@batnet.com