Google is at the Frankfurt auto fair for the first time. What does this mean for German car industry? Will the Silicon Valley giant position itself as a partner or competitor?
FRANKFURT — For some time, only a few got to come, the rest stayed home: Automotive executives went to the massive CES electronics trade fair in Las Vegas in order to discuss their cars with experts in high-tech industries. Managers meeting nerds — car fanatics and geeks, two worlds. But considering the fact that cars are now becoming computers on wheels, paying the "New World" a visit seemed to be a smart move, for Old World managers. Visits in the other direction, from Silicon Valley to the heart of European industry, were by contrast rather rare.
This is now changing, and it is making people in the old world anxious.
This week the IAA automobile show kicks off in Frankfurt, and they'll all be there — first and foremost, Google. They'll set up camp in hall 3.1. for a dedicated series of events, under the motto: "New Mobility World."
"It's about the future," says Daimler's CEO Dieter Zetsche. "We are facing the reinvention of the automobile." One big question that looms: Who invents what here?
Google and Apple are working on self-driving cars, the car-hire service and platform Uber is also studying how cars can behave like robots. And traditional car companies? For the moment, they are still in control — but for how long?
Trying to keep the newbies in check, BMW, Daimler and Audi are currently finalizing the purchase of Nokia's navigation service "Here," for 2.5 billion euros. Driverless cars can't make it onto the street without high-precision maps and special electronics assemblies. Within 20 years, this should all be part of our day-to-day life.
IT wants a piece of the market
Many remain skeptical. They don't want machines to take control. They fear hackers manipulating their cars, and the privacy of their journey data being compromised. But at the same time, the industry wants to grow, and the information technology (IT) sector can be the new petrol for that growth.
With the billions at stake in the car market, the IT industry also sees a huge opportunity. But for the moment, traditional car makers are still having a hard time evaluating the true intentions of their new friends (or enemies): Will the IT companies remain suppliers, with the goal that their software becomes one component of the cars' overall operating systems? Or will they turn into cut-throat competitors, building their own automobiles?
Today, the IT folks aren't capable of creating cars with the looks of a Porsche 911. Not yet. But they are getting ready. Apple is recruiting inside the auto industry. Earlier this year they pursued Mercedesâ€˜ lead U.S.-based developer. And more generally, there is movement of automotive suppliers' engineers toward Silicon Valley. Money is no object: For a recruit, Apple has reportedly offered signing bonuses of $250,000 and a pay raise of 60% to experts of the pioneer of electric cars Tesla.
Apple's code name for its car strategy is "Project Titan." It seems possible that the same people who have been building cars for decades will now do so for Google and Apple. Lately, BMW was rumored to be building the iCar — based on the plans of their own electric compact car i3, that the Americans have apparently shown an interest in. Even Daimler's CEO Zetsche leaves the door open to collaboration with IT companies.
But some experts are cautioning automakers. "This adds up to an assault on car manufacturersâ€˜ business model. If I were them, I wouldn't go for a strategy of embracing them," says Klaus Schmitz from consulting firm Arthur D. Little. "There's a significant risk for car manufacturers of being, with time, reduced to simple suppliers."
Will BMW, Daimler and Audi be reduced to commissioned production, much like the Chinese company Foxconn assembling the pieces for Apple's iPhone? That's precisely the scenario that the big car companies are trying to avoid.