WHY ARE MORE AND MORE CAR COMPANIES TEAMING UP?
WHEN BMW and Daimler announced a €1bn (£880m) partnership last week to develop a suite of "mobility services" together, it was a clear sign of how the auto industry had changed.
For one thing, the German giants - who plan to work on driverless vehicles, ride-hailing and pay-per-use cars together - are normally fierce rivals who would never dream of teaming up.
For another, their pact was just the latest in a growing line of partnerships between traditional carmakers who are preparing for an uncertain future, in which next-generation technology could upend the industry and Silicon Valley could hold more sway than Detroit or Wolfsburg.
Just recently Ford and Volkswagen agreed to "investigate" ways of working on electric and autonomous vehicles together, while Honda invested $2.75bn (£2.1bn) in rival General Motors' driverless unit with a view to launching a fleet of unmanned taxis.
There have been similar tie-ups between Tesla and Daimler, and Volvo and PSA, as well as a host of pacts between carmakers and tech firms. “Nobody knows what the future of mobility is going to be exactly, so people are getting together to lower the risk,” says Prof Peter Wells, director of the Centre for Automotive Industry Research at Cardiff Business School.
He expects electric cars, ride sharing and autonomous driving to radically change how we use cars, eventually prompting a fall in car ownership.
So traditional carmakers are having to fight to remain relevant, particularly as tech companies like ride-hailing firm Uber and Google’s driverless car business Waymo overtake them.
“The research and development to develop these new technologies also costs billions, so it makes sense to share the burden rather than duplicating,” Prof Wells says.
“The problem for the industry is that it is struggling to afford its own future.” Perhaps the best example is US firm Tesla, led by Elon Musk, which in little over 15 years has become the world’s number one manufacturer of plug-in passenger cars.
The Chinese are also making huge strides in developing electrics, backed by generous subsidies from the Chinese government. Perhaps the bigger threat driving carmakers to team up is that car ownership could fall, as driverless vehicles take off and we increasingly opt to rent or borrow cars rather than buy them.
The Boston Consulting Group estimates that nearly a third of the miles that Americans will rack up on roads by 2030 will be in electrified, autonomous vehicles operated by ride- sharing services.
“Even now it’s not that financially sensible to own a car - it’s stationary 95% of the time and quickly loses its value,” says Prof Wells. “But once car sharing takes off it will take the cost out of travel per mile and ownership will seem less appealing.”
To prepare themselves, most major carmakers have launched some form of mobility services programme while ploughing cash into driverless cars - either independently or in partnership.
For example, Daimler will merge its Car2Go car-sharing service with a range of mobility services operations at BMW - including an Uber-style ride- sharing service and a route management app that lets you plan and book entire trips using cars, public transport and even scooters.
It’s aimed at challenging the likes of Uber and Waymo, although many car firms have sought to partner with the tech challengers too. Toyota, for instance, invested $500m in Uber last year and chipmaker Nvidia is working with VW among others on areas such as artificial intelligence in cars.
“There were lots of fears about tech firms taking over the industry, but this has receded a bit as tech firms see how difficult it is to make cars,” says Prof Wells.
“Look at Tesla - it’s only just started to make a profit after 15 years in operation. It’s not an easy industry to make money in.” -