The Great Auto Race Goes Internal

Competition is growing from within the supply chain as companies vie for differentiation.


Carmakers have discovered a new competitive threat, and it’s coming from within their own supply chain.

In the past, OEMs leveraged their suppliers to compete against other OEMs, often tapping the same Tier 1 players as their competitors because there was enough differentiation in acceleration time, braking distance, cabin amenities and price to create distinctive brands. Porsche is known for speed, Mercedes for luxury. Ford, Chevy, Toyota and Hyundai compete on price and repair records, touting the same line items such as Apple CarPlay, or Android Auto.

But as cars become increasingly autonomous, some of the key differentiators are becoming obsolete. If all vehicles move at the same speed and accelerate in sync with other vehicles, then carmakers have little to differentiate themselves other than the body design, the cabin, and extra electronics that everyone else may already be offering. None of that isn’t made by the big automakers.

That realization has woken up all of the big carmakers to the fact that they need to start designing their own electronics all the way down to the chip level. And this, in turn, has become a quiet but significant battle over who will marginalize whom. If there are only a couple hundred parts in an electric motor, and there are hundreds of electronic control units in a vehicle, then who develops the key competitive pieces?

That’s the big question circulating throughout the automotive industry today, and it has some interesting implications for chipmakers and IP developers that are active in this market. First, the big automakers are now competing with the long-time partners for semiconductor hardware and software engineers. The problem is there already was a talent shortage, so automakers are now competing with such companies as Apple, Google, Facebook and Alibaba for expertise, driving up salaries and creating even greater shortages of experienced engineers. In some cases, they are competing with their own partners, making this a battle of the deep-pocketed corporations and undoing longstanding loyalties.

Second, as automakers race to the finish line for autonomous driving capabilities, they are developing their own unique architectures because they have no choice. As a result, their suppliers now have to develop components for each carmaker’s blueprint, rather than relying on standardized parts. That makes makes it harder to develop standards, and it makes it more difficult to leverage economies of scale that will make autonomous vehicles affordable to consumers.

Third, this adds a new level of exposure for carmakers. If a company can buy a chassis and the mechanical parts to supplement its integrated electronics, is that company better positioned than one that develops the mechanical components and buys the electronics? And can any of them do everything equally while still maintaining a price

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realjjj says:

Yeah but if you have autonomy, you have car as a service and you are offering a few times better value than ownership.
So it’s also about time to market and marketing and so on. There can only be 3-4 global leaders and maybe some regional players. And these players can expand to batteries and energy production.
Established player have minimal chances of survival. First they get hit by accelerated depreciation for iCE as BEV takes over and that alone can endanger some. And car as the service is the end for almost all of them since folks like Tesla, Google or Apple are far better positioned right now.

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