Tech is Giving Auto Sales a Boost While Changing the Supplier Mix

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Original Timothy Healey    Dec 05, 2016 10:45 PM PT
Tech is Giving Auto Sales a Boost While Changing the Supplier Mix

New-car sales have been strong over the past couple of years. A wide variety of reasons would explain why this is the case.

The release of pent-up demand due to the Great Recession, the aging of the vehicle fleet, an improving economy and lower fuel prices have all driven demand for automobiles over the past few years. So too has a wave of incoming new-car tech.

All that new tech isn't just getting customers to the lot – it's also getting new players into the supplier space.

Panasonic is set to buy Austrian automotive supplier ZKW for $881 million. The supplier makes headlights and other automotive lights for luxury brands like Audi and BMW – including innovative headlamps that can automatically switch from hi-beams to lo-beams and back again.

The Panasonic purchase, like Samsung's $8 billion deal to buy Harman Electronics, signifies that large tech companies that traditionally haven't been very active in the automotive world are trying to get into the space ahead of an expected innovation boom. That boom will be driven by constant development of new automotive technologies, from systems that are part of self-driving vehicles, as well as advanced comfort and convenience tech.

Panasonic has already worked on automotive tech – it partnered with a Spanish automaker on a smart rear-view mirror that eliminates blind spots. It also supplies batteries to niche automaker Tesla – all of Tesla's three models are electric vehicles. Panasonic's automotive division is among the fastest-growing in the company, at a time when the company is shifting focus from consumer electronics to high-tech electronic components.

A deal like this, that has little debt and not much in the way of financing costs, makes sense from a risk-reward perspective. And it also shows that as cars become more and more high-tech, there will be new players in the space as electronics companies jump in.

It's not just electronics giants – software companies like Microsoft are also further establishing themselves in the space. (In Microsoft's case, it has supplied infotainment systems in some models for several years now). Tech giants like Apple and Google are interested too. Apple has long been rumored to be working on a car of its own. And Google has spent a lot of time and money on the research and development of self-driving cars. Both companies have also worked on comfort and convenience features, such as their rival smartphone-mirroring systems, Android Auto and Apple CarPlay.

With the future of the automobile changing rapidly, there will likely continue to be more and more corporate purchases and mergers meant to give new players in space more access. This will be the case as suppliers of components – or in partnerships with traditional automakers. The big decisions will unfold as automakers decide what's best developed in-house and what's best outsourced to tech companies.

The future of the automobile remains in the hands of the automakers, but non-automotive companies will be more involved than ever.

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