How the tech industry could overtake the auto industry

Tech, along with tech-associated consumer demand, is fueling a rapid acceleration in automotive innovation. Detroit and its ilk may have trouble keeping up, says a consultant firm.

Automotive assembly line
Credit: Wall Street Journal

Processing power may be more important than horsepower in future cars, consultant firm KPMG said in a recent report on the rapidly changing auto industry.

KPMG's report on automotive innovation, released last week, says that many "aggressive players are now entering the connectivity space."

That list includes "not only makers of chips, pipes, receivers, and software, but also data aggregators and content providers."

Changing landscape

Two big ones are Apple and Google. Their investment capacity and economies of scale are significantly larger than the incumbent automakers, KPMG thinks. That means auto-makers risk being trampled.

"We fully believe that in 10 years, many of the major automakers will no longer be around, at least not as independent companies," KPMG says in the report.


The reason for this dire prediction is simple: technology.

Consumers have grown accustomed to rapid development cycles that, unlike car companies, tech companies are used to providing.

Plus, "for the first time, the auto industry faces competitors who are used to responding to far greater numbers of consumers and operating with hundreds of millions of units rather than the millions with which automakers work."

Those companies are used to scaling and making rapid changes in large numbers.

Mobility on-demand

And what kind of tech are we talking about? Well, it isn't just stereos.

Interestingly, two areas in which we've seen media interest are mobility on demand and autonomous (self-driving) cars.

A combination of the two, some say, would bring the cost of overall mobility down significantly.

For example, drivers are probably Uber's biggest expense. Remove that cost with autonomous cars and the price for users could drop to less than that of an automobile payment, some say.

The result would be that a price-sensitive auto market suddenly doesn't need to own cars.

Add active, but aging, drivers not being able to drive well and younger people’s acceptance of the sharing economy rather than ownership, and then mobility on-demand replaces the American dream of car ownership.

Tech companies

Yet it is tech companies that are dominating this future-autonomous and existing on-demand area now.

It's an area where traditional auto-makes may have difficulty changing gears to approach, the report thinks.

Some tech firms and organizations building connected technology for cars would like to see auto-makers, or even end users, just buy in to some open products.

A few were exhibiting solutions at the Connected Car Expo in Los Angeles last week.

An open-source software framework called GENIVI Alliance is designed for connecting vehicles to the cloud, along with mobile devices.

Its freely downloadable code is designed to let everyone from "students to startups to the major automotive OEM manufacturers quickly develop the next generation of connected features," marketing materials say.

Land Rover is using it to attempt to speed-up in-car tech development.

Another is OpenCar Connect, an app platform for connected cars geared towards automakers and developers. It uses HTML5.

Think mobile device?

Maybe automakers should start thinking about behaving like phone companies.

"The car is the ultimate mobile device, isn't it?" Apple Senior Vice President of Operations Jeff Williams is quoted as saying, in the KPMG report.

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