THREE MONTHS AGO, we wrote an article outlining the emerging shapes, structures, and issues of partnerships being formed in the autonomous vehicles (AVs) sector. The goals were simple: map the industry forces shaping driverless car partnerships, catalogue and categorize the most notable partnership transactions, outline the challenges confronting such partnerships, and draw parallels to other industries where partnerships have catalyzed disruptive change.
Since then, the AV sector has continued to buzz with new partnership activity. New partnerships between OEMs and technology firms are announced weekly. New municipalities like Dubai, Singapore, and London are launching public-private partnerships to explore retrofitting their transportation infrastructure for electric and autonomous vehicles. Some industry frontrunners have already begun planning how partnerships will support future mass production of AVs.
In follow-up to our previous article, Autonomous Vehicle Partnerships, the purpose of this note is to provide an update on recent partnership activities.
A DOZEN NOTABLE PARTNERSHIPS:
Vehicle Development Partnerships
- Renault-Nissan Alliance. The Renault-Nissan alliance announced that it will launch 10 new vehicle models with autonomous drive functionality by 2020. This global alliance, which generated ~$5 billion of synergies in 2015, expanded its collaboration to include advanced R&D of autonomous drive, connectivity, and other next-gen technologies supporting AVs.
- SAIC-Alibaba JV. SAIC Motors and Alibaba Group formed a ~$160 million connected cars joint venture to develop China’s first “internet car” by late 2016 – an internet-connected vehicle that seeks to explore and enhance “four-dimensional interaction among people, cars, roads and infrastructure.” The JV will first focus on improving people-to-car communications, then gradually expand its focus to include car-to-car, car-to-road, and car-to-infrastructure communications – in line with the AV sector’s general growth trajectory.
- Fiat Chrysler-Alphabet JV. Fiat Chrysler and Alphabet, Google’s parent company, formed a JV to develop a fleet of 100 self-driving minivans (2017 Chrysler Pacifica hybrids). This marks Alphabet’s first publicly-announced cooperation with a major automaker to co-develop autonomous vehicles. While many auto makers (e.g., GM, Ford, Daimler) are concerned that partnering with technology firms would force them into a low-tech, low-margin position as hardware suppliers, it appears that cash-strapped Fiat Chrysler made concessions to do the deal. Previously, Google has stated that it does not wish to build self-driving vehicles on its own and has explored alliances with at least several auto makers – though none have been publically announced to date. Further, this partnership is a non-exclusive relationship: it does not preclude either Fiat Chrysler or Google from cooperating with other companies on autonomous vehicles, and Google stated it is not sharing its proprietary self-driving technology.
Software and Technology Partnership
- Ford-Pivotal Software Minority Stake Investment. Ford Motor Company is investing approximately $180 million for a 6.6% stake in Pivotal Software, the San Francisco-based cloud-computing joint venture between EMC and VMware. The minority investment aims to bolster Ford’s software capabilities as the company continues shifting its long-term strategic focus toward electric and autonomous vehicles.
- Denso-eSol-NEC JV. Denso, eSol, and NEC formed a Tokyo-based connected cars joint venture called Aubass to develop software that supports high-speed, high-performance, high-security microcomputers and data communications. In particular, the software is geared to support automakers and electronic control unit suppliers to increase the quality and efficiency of new AV systems and controls products that they develop.
- BMW-Mobileye-Intel. BMW formed a R&D alliance with collision detection specialist Mobileye and computer chipmaker Intel to develop next-gen driver assistance systems with “reliable electronic brains [that are] smart enough to navigate traffic and avoid accidents.” Notably, the partners eventually aim to become a standard-setting consortium by creating a platform that other carmakers and technology companies can use as well.
- Apple-Didi Chuxing Partnership. Apple invested $1 billion in Chinese ride-hailing service Didi Chuxing, the incumbent local ride-sharing service that completes more than 11 million rides per day for 300 million users across 400 cities, accounting for 87% of the in-country market. The company is currently valued at $28 billion. Apple’s rationale for the venture was multi-faceted: In addition to netting a healthy return on investment, the company appears to be seeking to gain a foothold in the personal mobility space and sharing economy; deepen its understanding of car-hailing technology; reallocate growth capital to high-potential markets as the iPhone business matures; deflect attention away from ongoing Chinese regulatory pressures; and fortify its strategic position and brand reputation within China.
- VW-Gett Partnership. Volkswagen invested $300 million in Gett, a Tel Aviv-based car-hailing app and major competitor of Uber, with 50 million users and operations in 60 major cities. Gett has 50,000 taxis running and $520 million in funding. VW’s partnership with Gett is a learning vehicle to help move the auto maker into the ride-sharing, on-demand transportation, and autonomous vehicle spaces. VW Chairman Matthias Müller: “Within the framework of our future Strategy 2025, the partnership with Gett marks the first milestone for the Volkswagen Group on the road to providing integrated mobility solutions that spotlight our customers and their mobility needs.” This is the latest in a series of analogous transactions including GM-Lyft, Apple-Didi Chuxing, Alibaba-Didi Chuxing, Tencent-Didi Chuxing, and others.
- DOT-Sidewalk Labs Public Private Partnership. The U.S. Department of Transportation (DOT) and Sidewalk Labs, a subsidiary of Google’s parent company Alphabet, formed a partnership called Flow to explore ways of improving major cities’ existing transportation infrastructure and its compatibility with connected, electric, and autonomous vehicles. Specifically, Flow will aggregate, process, and analyze anonymized data – from smartphones, city traffic sensors, and other sources – to provide municipalities with real-time information about traffic patterns, congestion areas, access issues, demand, parking capacity, etc. The partnership will also seek to implement tools for citizen engagement in underserved neighborhoods via kiosk machines. Over time, the partnership may also seek to create mobile applications, identify noise pollution levels, identify air quality issues, monitor the number of street parking spaces available, and perform other innovative functions.
- SMRT-2getthere JV. Singapore public transit operator (SMRT) acquired 20% of Netherlands-based 2getthere. This minority investment comes two months after the companies announced a joint venture to install, operate, maintain, and market autonomous vehicle systems in Singapore and the broader Asia-Pacific region.
- Dubai Public Private Partnership. Sheikh Mohammed bin Rashid Al Maktoum, Prime Minister of the UAE and Emir of Dubai, announced a joint venture of Dubai’s Roads and Transport Authority and the Dubai Future Foundation to achieve a new public target: make at least 25% of the city’s ground vehicle trips using self-driving cars by 2030. This comes in a city already home to a driverless Metro rail system.
Texas A&M Public Private Partnerships. Texas A&M University is building a new $150 million research and development campus slated to focus on a few key areas including driverless vehicles. Several major companies are reportedly already engaged in structuring public-private partnerships with the university on driverless vehicles. This is the latest in a string of high-profile driverless car R&D investments and partnerships with universities over the past year that have come to include MIT, Stanford, University of Arizona, and the University of Michigan.
THE ROAD AHEAD
- We continue to observe a high concentration of partnership activity in and around the autonomous vehicle sector – a trend which is broadly consistent with other industries that have undergone technological disruption. In this early-phase of R&D, most automakers, technology firms, and suppliers are using partnerships as learning vehicles to develop and commercialize the underlying AV technology. We anticipate this will continue for a time, until the underlying technology can reliably achieve zero fatality transportation, change public perception, and achieve other milestones. With time, companies will begin to more fully explore the use of partnerships for optimizing the broader industry value chain. This will likely include long-term supply joint ventures (e.g., providing OEMs with advanced components, computer chips, aluminum, copper, lithium, and other critical inputs), marketing and distribution agreements, global standard setting and rewards alliances, and many other forms of collaboration.
- The AV sector is going 0 to 60 on the back of joint ventures, alliances, and other partnerships. Don’t be left behind.