Much of the news coming out of the auto industry these days concerns a new wave of collaboration. Honda, which in the past generally preferred proprietary technology and in-house engineering, has agreed to join with General Motors’s Cruise Automation unit on autonomous vehicle (AV) development. The two automakers were already working together on advanced batteries for electric vehicles (EVs). Ford and Volkswagen — which had each previously earmarked billions of dollars for solo EV and AV design efforts — are discussing a joint arrangement to share future costs. Also reportedly in talks to share R&D efforts for autonomous vehicles are BMW, Volkswagen, and Daimler. Meanwhile, Fiat Chrysler Automobiles is collaborating with Google self-driving car affiliate Waymo for its AV program, and downsizing its investments in electric vehicles as well.
Although this sudden flurry of activity was not widely anticipated, it should be welcome. For the past decade, many automakers have based their innovation strategies on the idea that a revolutionary change in the automobile is imminent. It is expected to be the most dramatic shift since Henry Ford institutionalized the assembly line. Original equipment manufacturers (OEMs) have invested many billions of dollars to design vehicles for connected, autonomous, shared, and electric (or, in industry parlance, CASE) mobility. Development time lines for these technologies have varied — connected cars are already ubiquitous and electric cars are gaining in popularity, while autonomous and shared vehicles are still a futuristic bet — but they are all seen as inevitable, and forecasts rosily assume rapid, widespread adoption. To avoid being left behind, many automakers jumped in with both feet, hoping to gain an early-mover advantage and become industry leaders in these segments.
So far, most automakers and suppliers have been disappointed, even when their expectations were conservative. Nissan introduced the Leaf plug-in EV automobile in 2010 and targeted 1.5 million global EV sales for the Renault–Nissan Alliance by 2016. Yet only 400,000 had been sold by the end of 2018. In 2010, J.D. Power and Associates predicted that within a decade, global hybrid and EV annual sales would top 5 million units. However, the cumulative total of all electric vehicles (including hybrids) sold through early 2019 is just 4 million — meaning that 10 million more such vehicles would have to be sold in the next two years to make the prediction come true.
As for self-driving cars, five years ago some analysts had forecast that the AV market share would approach 80 percent by 2035. But more recently, Waymo’s CEO conceded that it could be decades before autonomous cars are routinely seen on roads. He added that AVs may never be able to drive without human assistance in difficult conditions, such as bad weather or areas crowded with construction or emergency equipment. (Indeed, autonomous vehicles will probably show up first in public transportation and trucking routes, where the environments are more controllable, the government plays a larger role, the incentives are more favorable, and the industry is on a different trajectory.)
To be sure, CASE mobility will ultimately remake the auto industry. No one doubts that. But what automakers most need right now is not a grand CASE-related dream. They need a clear-eyed look at their own prospects and capabilities, and a plan for navigating the pressures of the next few years. They shouldn’t abandon their long-term strategies, but they should temper them with short-term realism. Then, when the time comes, they will be equipped for the radical new business models that will eventually be required.
Thoughtful, focused investment is thus the most viable path to success, especially at a time of other thorny concerns, such as protectionism, threats to supply chains, and environmental regulations.
