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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.
They will never stop believing that they lost their crown years ago, and that it was their own fault. It turns out MBA executive types aren't actually that good at much of anything except destroying anything they get their hands on, all in the name of shareholder value.
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.
... 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.
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.
Detroit's value-add is that they can make the same car, the exact same way, thousands of times a day. Millions of welds will al have exactly predictable performance in weather conditions ranging from Arizona to Alaska. Getting that right? It literally caused silicon valley-dude Elon Musk to have a breakdown.
There will be a period where SV companies with self-driving tech have enough negotiating clout to suck up most of the profit from the relationship, but 5-10 years in everybody will have the same tech, and it'll cost $500, and that's not much of the price of a $35k car.