Automakers in Alliance Frenzy

The auto industry old guard is furiously brewing up alliances in search of a strategic defence to stave off the tech company onslaught.

According to reports in German media, VW will open its electric-car platform (MEB) to other car makers and is already in advanced talks with rivals. This comes hot on the heels of a separate report in “Handelsblatt” that VW , BMW and Mercedes are in the early stages of talks, along with several major suppliers, to collaborate on key technologies and industry standards for autonomous driving in a bid to share development and production costs.

Just a few weeks previously, at the Detroit Auto Show, VW and Ford announced an alliance which includes the intention to “investigate collaboration on autonomous vehicles, mobility services and electric vehicles”. Meanwhile, having secured agreement from the US antitrust authorities at the end of last year, BMW and Daimler are expected imminently to seal the deal on their joint venture in urban mobility services. The agreement bundles the two groups’ now-extensive activities in on-demand, car sharing, ride hailing, parking and charging.

These are the latest in a string of strategic steps being taken by the old guard to protect themselves against the approaching onslaught from the youthful muscle of the digital age, i.e. Google, Apple, Amazon, Dyson, Tesla and co.

Just a few years ago, the notion of Google or Apple building a car sounded laughable, mainly because we all imagined them pushing their way into the existing automotive industry structures. But no – these companies are defining their own structures based on completely new mobility models.

While they may have been slow to react, conventional car makers have now cottoned onto this and are moving as fast as their behemoth bodies will permit to pre-empt this attack with enormous investment in electric drive, digital technologies and autonomous vehicles. The Volkswagen brand alone will have invested a total of 11 billion euros in what it calls “future-oriented technologies” by 2023, including nine billion euros in e-mobility. Daimler is investing ten billion euros in the Mercedes-Benz Cars electric fleet – and that just covers part of one letter in its CASE strategy (Connected, Autonomous, Shared, Electric), which extends beyond cars and into vans, trucks and buses, too.

This industry makeover is not just about the oldtimers ganging up to fend off the young bucks. Carmakers have been furiously forming alliances with tech companies too, and founding arms-length start-ups. Nominally freed from their big-company shackles, the intention is for them to think and act more nimbly and creatively. However, the BMW/Daimler JV would indicate that this is proving too much of a stretch for companies that still earn their money by churning out vast quantities of vehicles all over the world.

In the meantime, all are keeping a keen eye on Elon Musk’s Tesla and, based on those missteps and hurdles, mentally (if not physically) compiling “the dos and don’ts of creating a car company in the digital age”.  

What this is leading to is a vast web of companies and organisations with a complex array of interdependencies. It is a fluid and fast-moving situation. But it is also a monster with a colossal appetite – for investment money. Given the eye-watering development sums associated with electric and autonomous vehicles and new mobility models, members of both the old and new guard are ultimately left with little choice but to pool their resources. It’s an approach that makes a lot of sense both financially for companies and in terms of the product and service outcomes for consumers. However, it is likely to be at the cost of transparency.

On the surface, companies will work hard to preserve their brands. But as these corporate tangles intensify on the investment journey to future mobility it will become a whole lot more convoluted, potentially reaching the point where consumers cease to care and the badge, as we know it, is rendered meaningless.

Feature graphic by Liam Dawson

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