Car as a commodity: from Hummers to Ho-Hum
Don’t tell me you haven’t seen this movie before.
The Wintel PC platform, since the late 1990s, has given birth to a slew of standard PCs that feature almost identical functions and low, low price tags.
Lately, smartphones have followed the path already well-traveled by PCs.
With Google’s Android now widely available, smartphones are fast becoming a commodity. We’re seeing a big change from 8 years ago, when Apple wowed the world with its first iPhone.
The big question is, will automotive be next?
My prediction is yes. It’s inevitable.
The important point in this question, however, isn’t either "if" or "when" this will happen. Rather, how will the advent of "more standardized and commoditized cars" unfold. A lot of technology companies’ fortunes are riding on the answer.
We’re already seeing signs of the transition.
Consider Tesla. Although its cars are nowhere near commodity status, Tesla has shown others how to build a "PC car."
Google is talking to Ford Motors about contract manufacturing of Google Cars.
A growing number of automotive startups are betting the future on the development of a data-driven autonomous car based on a powerful integrated CPU.
So, what’s the driving force behind all these changes in the automotive industry?
Is it the techno-futuristic dream of the self-driving car? Is it a new business for cars as a service industry? Is it the fact that algorithms that are becoming increasingly credible in the area of deep learning and artificial intelligence — critical for safety and driving autonomous cars forward? Or it is the environmentally driven shift from internal combustion to electrification?
Google could also turn into a real culprit, threatening to homogenize cars into oblivion as Microsoft/Intel did with PCs and Google itself did with its Android smartphones.
The theory is tempting, but industry analysts don’t see it happening. They’re reluctant to grant too much credit to Google as a societal game-changer. They point out a number of forces, other than Google, contributing to the imminent revolution.
Basic vehicle architecture
The first clue for what could enable commoditization of cars is the coming changes in basic vehicle architecture. Cars are on track to get more standardized.
Last week, I spoke with Laszlo Kishonti, founder and CEO of AdasWorks, a startup planning to attend CES and pitch "the first autonomous car driven by a single embedded application processor."
Kishonti said, "The Mercedes-Benz S-Class has 140 ECUs inside, whereas Airbus has only 40."
In his opinion, there has to be a way to streamline the growing number of ECUs inside today’s cars. Car OEMs can use a much more powerful CPU/GPU/FPGA, by integrating components. A platform built on a single, powerful embedded processor will help develop effective tools critical to programming high-performance embedded software, computer vision and artificial intelligence technologies, explained Kishonti.
"A lot of carmakers are recognizing the importance of such a fully integrated platform," he noted. "And Tesla has proven it can be done."
AdasWorks is a spin-off of Kishonti Ltd. (Budapest, Hungary), a well-known player in the benchmarking business offering optimization services in the mobile market. With its core competency in 3D graphics and computing performance analysis, Kishonti has worked with a number of smartphone vendors, including Nokia, and semiconductor companies.
Building upon Kishonti’s experience, the AdasWorks CEO is now diving into the automotive industry.
Staking his company’s future on AI-based, data-driven autonomous cars, Kishonti said, "As your car gathers more data, it gets better." The goal of his new company is to "revolutionize the automotive industry by providing an integrated, neural networks-based software toolkit," he added.
How’s Google car biz different from Android strategy?
If cars are getting commoditized like Android phones, is this because Google is taking a page out of the company’s own Android playbook for its autonomous car/mobility strategy?
Not exactly, say industry analysts. Although there are similarities, Google’s mobility (car) business model and its strategy for Android smartphones are very different, they stressed.
Let’s start with similarities.
Jeremy Carlson, senior analyst at IHS Automotive, acknowledged that Google’s Android and its autonomous car business are both pursuing similar goals: making them [phones or cars] "affordable and available to everyone."
But that’s where the similarity ends. Differences are much greater, Carlson noted.
For example, self-driving car software requires "so much more testing and validation compared to smartphone software," he noted. This is because "a smartphone rebooting and a self-driving car rebooting have very different consequences," Carlson added.
More to the point, "Ford—or any manufacturer or supplier really—can presumably help with that testing and validation, especially as it relates to pairing with hardware and enabling Google to find more of the corner cases or identify more types of behavior that can only come with extensive real-world experience," Carlson said. In short, Ford has a lot to offer to Google here.
Roger Lanctot, associate director, global automotive practice at Strategy Analytics, also asserts that it’s Google who needs Ford, not the other way around.
Cautioning that it is "not at all clear what the nature of a Ford-Google ‘announcement‘ [at CES] might be," Lanctot said that the engine still commands "a substantial portion of the cost of a car." It defines "the vehicle’s performance, characteristics, fuel efficiency and power."
Lanctot added that it is "worth noting that Sergio Marchionne in his efforts to merge with GM was focused on the burdensome cost of car companies each developing their own powertrain technology."
However, in the era of electric vehicles, "electrification of vehicles is the great equalizer," said Lanctot.
Where things could go wrong
Where Google could alter the power dynamics within the automotive industry is the diverging objectives pursued by Google and held by car OEMs for their respective automotive businesses.
"Google is not interested in powertrain," said Lanctot. "They are only interested in the safety system and the interaction of the safety system with the powertrain, which itself will be electric."
He said, "Unfortunately, this is a recipe for disaster as powertrain tech (Ford’s core value proposition) becomes less important and software and services (Google’s core) becomes more important."
What about the homogenization of cars?
Lanctot said, "Yes, Google has zero interest in vehicle differentiation, but that, too, is a blind spot for Ford. Ford needs to figure this out. Just making cars for Google does not go very far, in my book, toward helping Ford solve this problem. It’s helping Google solve the problems."
OK. While Google might not be the sole culprit, cars could follow the fate of PCs and smartphones. As Lanctot concluded, a number of automotive startups and OEMs are "shifting the focus away from the previous source of massive cost — the powertrain — and towards software and services as defining the nature of the car".
If that shift doesn’t lead to the automotive commoditization scenario, what will? Carmakers, whether they like it or not, are already on that irreversible path, I believe.
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— Junko Yoshida, Chief International Correspondent, EE Times