Automakers Finding it Hard to Keep Up With Tech Firms on Automotive Technology
【Summary】A new report from CNBC say that automakers are struggling to keep up automotive technology advancements from Silicon Valley tech companies. It is a "magical time" for autos, but maybe not so much for traditional automakers, says one analyst.
A new report from CNBC say that automakers are struggling to keep up automotive technology advancements from Silicon Valley tech companies. It is a "magical time" for autos, but maybe not so much for traditional automakers, says one analyst.
"Traditional automakers such as Ford and General Motors are rushing to bolster investments in technologies such as autonomy and electric powertrains to fend off a growing threat that seems to be coming from all sides", said Morgan Stanley analyst Adam Jonas.
Historically, major automakers faced little competition in the manufacturing of cars, until Tesla came along. Now that cars are becoming high-tech, the electronics and software components required for semi-autonomous and self driving cars are being developed in Silicon Valley, instead of Detroit.
"I would describe the current environment for autos as a magical, magical time," Jonas said on CNBC's Power Lunch on Wednesday. He added that traditional carmakers are recasting their business models as tech-heavy firms focusing on areas such as artificial intelligence and supercomputing.
In particular car companies are creating new standalone entities to focus on what Jonas and some other analysts call "Auto 2.0" — the term that generally describes the cluster of new transportation trends such as autonomous driving technology, electric powertrains and ride-sharing.
Tech Companies May Be the Ones That Change Transportation
The major car companies are doing all this largely in response to efforts by Silicon Valley firms that have gone from looking like moonshots to viable products and services that could completely change transportation. By partnering with Silicon Valley firms, automakers hope they will be not left behind.
"We don't think it is a coincidence that all the car companies are, let's say, not discouraging the market view [that] everyone is going to carve out and become a tech firm at a time when Elon Musk has launched the Model 3, but it hasn't yet ramped up. What if that market demand radically exceeds supply for that model?"
Tesla is not the only one disrupting the market. Companies as such as Google, GM, Lyft and now Dyson, which is mostly known for vacuum cleaners and hair dryers, are working on electric and autonomous driving technology.
Other companies including chipmaker Nvidia and Intel are making the hardware necessary for autonomous driving. Tesla and BMW have partnered with both on autonomous driving technology. Meanwhile, GM has invested in Lyft, while working with San Francisco start-up Cruise Automation, which is also working on autonomous driving.
Disrupting the market could prove a challenge too great for incumbents, despite their efforts, Jonas said. "But they see the competition coming from all sides, and I think this window's open for them to do something now, and it's got the market a bit excited."
Both Ford and GM shares were up slightly on Wednesday. GM shares were up less than 1 percent, trading at about $43, and Ford shares were up a half a percent, trading at $12.
"I think longer term they are in a very difficult place, frankly," he said. "Don't count them out, but very difficult."
Originally from New Jersey, Eric is an automotive and technology reporter specializing in the high-tech industry in Silicon Valley. Eric has over fifteen years of automotive experience and a B.A. in computer science. These skills, combined with technical writing and news reporting, allows him to fully understand and identify new and innovative technologies in the automotive industry and beyond. He has worked on self-driving cars and as a technical writer, helping people to understand and work with technology. Outside of work, Eric likes to travel to new places, play guitar, and explore the outdoors.
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