The self-driving car market seems to have embarked upon a phase of consolidation reminiscent of the early years of the traditional car market – only accelerated. In the early 20th century, there were close to 100 independent carmakers in the USA alone. However, as the industry developed towards a mass market model, that number shrank quickly and dramatically. Increased and more efficient production capacity and vertical supply-chain integration, necessary to bringing down prices, required significant investment.
The result was that by the end of the 1920s, 75% of U.S. automobiles were manufactured by the ‘big 3’ of Ford, General Motors and Chrysler. The Great Depression thinned the ranks of the few remaining smaller, independent competitors to the big boys. Buick and Cadillac were, for example, acquired by GM, along with several of their major components suppliers. A similar trend unfolded in Europe.
Something similar seems to be happening in the nascent self-driving market. Only this time, years before the first commercially available vehicles are even available to buy. Google’s Waymo has, since the beginning, taken the decision to buy cars from Chrysler and Jaguar Land Rover and integrate its driverless system into them rather than try to manufacture its own vehicles. A new partnership with Renault Nissan has now been signed off with a view to the European and Asian markets.
Even the big car manufacturers are quickly establishing alliances. Honda with GM’s self-driving unit Cruise, Volvo works with Uber and Ford and Volkswagen are said to be at the advanced stages of negotiating a partnership around driverless vehicles and technology. Smaller start-ups focused on IP for driverless systems are also now being snapped up. Apple recently acquired Drive.ai, more for its driverless tech talent than any actual business value and Uber has bought Might AI.
The mass consolidation going on appears to be a tacit admission from the industry that developing working driverless technology that regulators approve is likely to be more difficult than many originally thought. A handful of high profile accidents involving driverless vehicles has provided a clue to the hurdles that will have to be overcome. And while the industry is completely convinced the future of the automobile sector is driverless vehicles, they have realised first to market will have a big head start. So are spreading their risk by combining efforts to defend against the unthinkable outcome of being left behind if late.
Tesla is the only major player in the driverless space that remains determined to go it alone. The company is developing its own driverless software and systems which are built into the Tesla electric cars from the ground up. It’s a big risk and one that is likely to either pay off in a way that can be compared to Apple’s approach to the iPhone and Mac laptops. Or result in Tesla’s ultimate failure.