Business

The Byzantine world of high-tech transportation

Relationships between OEMs and tech giants get complicated as the self-driving and mobility race heats up.

On June 11, the same day Fiat Chrysler North America (FCA)  announced its partnership with self-driving startup Aurora Innovation, Volkswagen said it was ending its own partnership with Aurora and was nearing a deal with Ford on an investment in Argo AI, another self-driving platform.

It was just another action-packed day in the life of the tech transport sector, where startups and original equipment manufacturers (OEMs) partner, disband and partner up again, with the participating entities typically involved in multiple relationships at the same time.

This dynamic is not necessarily unique to the “disruptive” tech era. But several factors distinguish today’s auto industry collaborations from those of a previous age, namely the type of businesses involved – startups vs. established suppliers – and the sheer number of collaborations.

“Today’s partnerships are happening at a pace that is unprecedented,” said Valerie Sathe Brugeman, assistant director for the Transportation Systems Analysis group at the Center for Automotive Research, based in Ann Arbor, Michigan.

Since December Brugeman has been compiling a database documenting the partnerships between the OEMs and technology and mobility companies. With announcements coming fast and furious, it’s no easy task. Brugeman said she makes daily updates to the database, a tally that as of June 13 features 448 entries.

As the tech transport ecosystem gets more crowded, so does its complexity, as startups and automakers merge, divide and multiply.

Take FCA and Aurora: In addition to its partnership with the Silicon Valley tech company, Fiat Chrysler is already providing vehicles to another self-driving outfit, Waymo, to be deployed in that startup’s ride-hailing service. Aurora itself has multiple relationships – with the Chinese startup Byton and Hyundai Motor Group, an OEM that this week announced an undisclosed amount of money investing in Aurora’s Series B round.

Also this week, Aurora CEO Chris Urmson participated in a $7 million funding round of Edge Case Research, a company building an intelligent safety assessment platform. Urmson is a pioneer in the AV space who led Google’s self-driving unit before it spun off as Waymo.

Tracing the path of these relationships requires the skill set of a genealogist, coupled, perhaps, with the passion of a soap opera addict. Brugeman’s team is tackling the challenge by developing a series of heat maps showing how automakers and suppliers are connected based on what business models they are partnering on.

“It’s hard finding a way of visualizing the data,” she said. “There are so many different ways you can look at it.”

The vehicle industry landscape wasn’t always so complicated. Relationships between technology suppliers and OEMs used to be much simpler – and lasted much longer. Technological change explains the fast turnover, as do the types of business entities involved.

“In the past, OEMs did not partner with many startups,” according to an email from Erik Gordon, a technology and entrepreneurship professor at the University of Michigan business school. “They partnered with established suppliers that had demonstrated that they could provide the large quantities OEMs needed, on-time and in compliance with the OEMs’ testing, quality assurance and administrative requirements.”  

Few startups could demonstrate those abilities, so few were able to do much business with OEMs, Gordon said. Automation has changed the game. The technologies OEMs need for next generation vehicles is coming from early-stage companies.

It’s not always a match made in heaven. “It remains to be seen whether the startups and the OEMs can work together beyond the deal announcement stage,” Gordon said. “OEM culture seems slow, bureaucratic and political to startups. Startup culture seems undisciplined, amateurish and out of control to OEMs.”

Since automakers are trying out different models and use cases, the relationships they are pursuing are not exclusive, Brugeman said. This is especially true in the mobility space, where “there is a ton of cross pollination,” she said. Most of the big players are invested in Uber and Lyft, in addition to exploring other pathways, like car sharing,  ride hailing, bikes and micro-transit, she said. “They’re trying to see which ones take off and which companies within those different services take off.”

The AV space is relatively more selective, as the technology matures and the financial stakes increase.

For example, Ford and (soon) Volkswagen are invested in Argo AI; its valuation is now estimated at $4 billion. Last fall Honda sunk $2.75 billion into Cruise, the self-driving startup GM purchased for more than $1 billion in 2016. Honda also participated in a $1.15 billion equity investment in Cruise that closed in May. Both Toyota and Volvo have a stake in Uber’s self driving unit, Advanced Technologies Group.

“It’s a very dynamic space,” said Brugeman, who will publish the results of the database research this month. “Everyone is trying to figure out how to stay relevant in the future, given the total upending of how we move.”

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Linda Baker, Staff Writer

Linda Baker is a FreightWaves staff reporter based in Portland, Oregon. Her beat includes early-stage VC, freight-tech, mobility and West Coast emissions regulations.

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