>In the high end market, it doesn’t matter if you have your own self-driving software or you co-develop.
Maybe. But what if it turns out that everything other than the core intelligence, communication and software platform features turn out to be low margin components?
What if these key functions turn out to be the only differentiator of any substance and the rest is just marketing blurb and a bit of component assembly?
Then companies that traditionally make their money with hardware will have a hard time accepting that. There are millions of lines of code in a modern car, but car manufacturers don't see themselves primarily as software companies.
Exactly. And let's not forget that car makers are also losing their key powertrain competency to electrification.
If they don't commit to really owning some of the new tech then there will be nothing left of them.
In my view, these traditional car makers are a slow motion train wreck of epic proportion.
How on earth can BWM and Daimler decide to pay more than 5% dividend instead of investing every last cent they earn into surviving the current technological revolution?
Apparently they have decided to die and pay out what's left to shareholders. This may be a legit strategy for a private equity fund, but if I was a German polititician or trade union official I would be horrified.
I'm not talking about licensing some basic patents. The question is, what will be that high margin thing that's worth optimising the heck out of for years and decades to come?
And who will own the customer? Who will define the software platform that creates all the stickiness and benefits from all the network effects?
If car makers continue down the path they are on now, they will own none of it. Like publishers, they will be reduced to go begging for the help of regulators to impose some form of Google tax.
There are not many differentiators on cars now either and we still have a range of "different" cars/brands. What makes you think the electrification will change anything(considering all cars will run the same self driving software)?
Electric motors are far simpler than ICEs. A lot of expertise that traditional car makers have will become obsolete. Many jobs will be lost, factories shut. The highest margins will no longer be in anything that car makers have traditionally done themselves.
I don't doubt that there will be many brands, probably far more brands than ever before, exactly because it will be so much simpler to make cars from off-the-shelf parts, or just order them from some white label manufacturer.
But where will the highest margins be? Wouldn't it be wise if car makers were asking this question and then invest in whatever that is with the greatest sense of urgency?
>considering all cars will run the same self driving software
If all cars run the same self driving software then I suspect that the maker of that software will benefit from some of the highest margins in the industry. I also think that there will be a lot of money in the network effects of linking the data that all those cars generate.
The car companies should be forced to share the traffic data(i.e a kind of traffic data neutrality law) so it can benefit all. After all it should belong to the people not to a single car company. I'm pretty sure there is enough left to innovate and increase the margins. Self driving should be a standard/norm, not a premium proprietary feature.
Absolutely, but these differentiators already exist while a lot of the high margin work that car makers are performing today is moving somewhere else in the value chain.
The key competency of the car manufacturers is integration and supply chain management. Sure they also develop some of the software and engines in house. But they would do so for electric cars as well. So there is not a huge difference. They are also very aware of the threat of being commodified software platforms and they are actively invest to prevent that. Both in ASICs to be not solely dependent on NVIDIA, as well as in software and maps.
Maybe. But what if it turns out that everything other than the core intelligence, communication and software platform features turn out to be low margin components?
What if these key functions turn out to be the only differentiator of any substance and the rest is just marketing blurb and a bit of component assembly?