Imagine a future where there are no drivers. Some people may own their own self-driving cars but not everyone will. Instead, most people will save money by hailing autonomous taxis. That’s the direction the automotive industry is heading and everyone wants to be a part. For car manufacturers, that means catching up on AI research and internet services. For online service companies like Google and Uber, it means learning to make cars.
Fortune reports that Uber are placing large orders at several manufacturers for self-driving cars. This is an obvious move for the company as its biggest running expense is paying the drivers. Uber will be hoping to mimic the Chinese factory that saved money and improved productivity by replacing 90% of its 650-strong workforce with robots.
Experts think it could take a few decades for self-driving cars to dominate our roads, but the automated vehicle business will likely already be huge within 10 years. It will be interesting to see how this business plays out as companies like Uber will come to rely on the car manufacturers, but these companies are wary of the threat from Uber and Google. Relationships are already understandably uneasy so it isn’t clear how much success Uber will have in forming partnerships.
The fear for the manufacturers is that they’ll stop leading the automotive industry and instead merely provide parts for the dominating software companies. Think of Nokia and how they used to lead the phone industry. Klaus Froehlich, head of research and development at BMW, said the company is desperate to catch up with the self-driving tech so they don’t end up selling parts to companies such as Uber. “Our task is to preserve our business model without surrendering it to an internet player. Otherwise we end up like the Foxconn for a company like Apple, delivering only metal bodies for them.”
This week, BMW’s chief executive Harald Krueger confirmed their direction saying they were “leading BMW into a new era”, describing the move into self-driving tech and possible online services. He added, “The value creation is shifting from the actual hardware towards software and services.”
Clearly BMW knows where Google and Uber are going and doesn’t want to be left behind. But the online businesses aren’t going to get far without top car manufacturers, so it’s a strange situation for everyone to be in. It’s sink or swim time and some companies may find they have to strike a deal with the devil in order to stay at the top. Uber are supposedly contacting manufacturers to purchase a fleet of self-driving cars, but should the manufacturers help them? They’re not direct competitors right now, but they soon might be.