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Who will build the self-driving car of the future?
But the advanced sensors and electronics that form the building blocks of self-driving cars are often made by suppliers, not the car manufacturer.
Some fear that, in the long term, carmakers that lag behind in autonomous vehicle technology face a future akin to today’s PC assemblers – with the big profits accruing to the companies behind the software and electronic content underneath.
“It’s all the suppliers into the industry who, in the fullness of time, will gain the power,” says a senior industry analyst, who works closely with the leading carmakers. “If I’m the buyer, I don’t care if it’s a 1.9-litre car or a 2.4 – because I’m not driving it.”
Carmakers have been gradually adding autonomous elements to their vehicles since Jaguar introduced adaptive cruise control in its XK sports car in 1996.
These so called ADAS features – advanced driver assistance systems – help alleviate the tedium of driving and reduce accidents.
A combination of tougher safety assessments and carmakers’ desire to differentiate their products make it likely that more ADAS will be added to vehicles in coming years, also in the mass-market – laying the foundation for a not too distant future of full vehicle autonomy.
Analysts expect suppliers of radar, cameras, mapping technology and software to be among the big winners of increasing vehicle autonomy as they gradually account for a higher proportion of the value mainstream vehicles.
Guillaume Devauchelle, vice-president for innovation at Valeo, the French supplier, says: “We don’t see it as a battle [between manufacturers and suppliers], but where there is clear value added, there is bargaining power.”
Suppliers that are able to offer a broad spectrum of autonomous vehicle technologies stand to benefit most – a belief that has sparked a wave of consolidation in the industry.
Privately-held ZF Friedrichshafen last month agreed to acquire TRW Automotive, a US manufacturer of video cameras and radar systems, for $12.4bn. Stefan Sommer, ZF chief executive, says the German transmission supplier viewed driver assistance systems and autonomous driving as a key impetus of future growth.
A week later, Panasonic agreed to buy a 49 per cent stake in Ficosa, a family-owned Spanish car-parts manufacturer, for an undisclosed price. Panasonic hopes to develop self-driving car technology jointly by combining its automotive sensor expertise with Ficosa’s image recognition technology.
Autoliv, the Swedish supplier of seat belts and airbags, has also made several bolt-on acquisitions, including an automotive radar business and an exclusive software licence from Germany’s Hella for forward-looking camera systems.
Driver assistance systems based on these products are already entering the latest generation of vehicles. These features include lane departure warning, automatic parking, autonomous emergency braking and pedestrian detection.
German suppliers Continental and Bosch are among the leaders as both have benefited from the tendency of the German premium carmakers to install new ADAS in their upmarket vehicles.
The new Mercedes-Benz S-Class includes a “traffic jam assist”, which allows the car automatically to follow the one in front at low speeds.
Driver assistance features still make up a relatively small market compared with suppliers’ core products, such as braking systems, airbags and tyres. At Continental, ADAS are set to account for just over 1 per cent of projected 2014 sales of €34.5bn.
But the sector is expected to grow rapidly. Exane BNP Paribas forecasts the market for automated and assisted driving technology will be worth some $25bn by 2020 and $57bn by 2025, compared with $6bn today.
“Google has lit the touch paper on the race to the self-driving car for which suppliers should be thankful,” the broker told clients in a note.
Elmar Degenhart, Continental chief executive, says its ADAS sales will grow about 30 per cent annually in coming years to reach about €1bn by 2016. German rival Bosch has a similar 2016 target.
Autonomous vehicles will also require a large number of back-up systems to guarantee safety, which again plays to the advantage of electronics suppliers.
However, much will depend on how far carmakers are willing to outsource the work on automating the vehicle.
“The less vertically integrated the [carmaker] chooses to be, the greater will be the value accrued to the suppliers – and we could expect to see a significantly higher level of outsourcing over time,” Morgan Stanley told clients in a report.
The ability to integrate hardware and software will separate the winners from losers, executives say.
“Only automakers and suppliers with broad systems expertise will succeed,” Volkmar Denner, chief executive of Bosch, said in March.
Carmakers and the leading car part suppliers are therefore investing heavily to build their software capability.
However, standalone software companies are also expected to play an important role because of the sheer complexity of writing and updating millions of lines of code.
Google is not the only competitor. Shares in Mobileye, an Israeli start-up that makes camera-based software for self-driving vehicles, surged after its US IPO raised $890m in August. Meanwhile, Mercedes-Benz is working with Elektrobit, a Finnish automotive software developer.
Martin Schleicher, vice-president of strategy of EB’s automotive business, says he assumes that carmakers “will have a major role in contributing to software development, since it will become an essential element in their brand identity”.
Jack Bergquist, consultant at advisory group IHS Automotive, says carmakers will also seek to retain control over the software for liability reasons.
“If the [software] code goes wrong it could be catastrophic . . . no manufacturer wants that – any vehicle manufacture is therefore going to make sure they have a very strong hand there,” he adds.
A central controller that uses algorithms to process the sensor data and convert these into vehicle actions is likely to form the operating system or “brain” of the self-driving vehicle.
The outcome of the battle between manufacturers and suppliers to control the brain “will determine who controls the value of the car”, Morgan Stanley concludes.
Additional reporting by Kana Inagaki in Tokyo and Michael Stothard in Paris
Tech advances lead to fundamental changes to cars’ looks
Visitors at last week’s Paris motor show could have been forgiven for thinking Infiniti’s Q80 concept car was not quite finished, writes Andy Sharman.
The sleek, silver luxury saloon had everything one would expect of Nissan’s high-end marque – everything, that is, except wing mirrors.
The vehicle, which instead uses rear-facing cameras embedded into the wheel arches that stream footage to a dashboard screen, shows how new vehicle technology is not only changing assumptions about driving, but also allowing reinterpretations of how cars should look.
While completely driverless vehicles – epitomised by Google’s driverless golf buggy with its bug eyes and rooftop antenna – are seen by many as a distant prospect, mainstream carmakers are already starting to redraw conventional designs.
Volkswagen’s XL1, pictured, already on sale in mainland Europe and soon to hit UK roads, has camera-based wing mirrors.
Other manufacturers are working on steering wheels that can slide into the centre of the car, giving the driver more space when the vehicle is on “autopilot”.
Daimler’s demonstration lorry, the Future Truck 2025, allows the driver’s seat to swivel away from the steering-wheel. It also features a hidden panel of LED lights that signal when the vehicle is in autonomous mode.
Under a driverless future, even more radical options present themselves. “If the human doesn’t have to control the car, that opens up all sorts of dimensions,” says Richard Wallace, director of Transportation Systems Analysis at the Center for Automotive Research.
“Why does the driver even have to face forward? I could have a conference table in my car and host a meeting.”
Autonomous vehicles also offer the potential for accident-free driving, which means lighter, less protective materials could be used for the bodywork.
Dominique Bonte, vice-president at ABI Research, says: “Why do we need these super-reinforced boxes of metal that can resist all types of crashes . . . if the chance of a crash is zero?”
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