Will Tech Leave Detroit in the Dust?
General Motors plans to roll out a robo-taxi service next year that will let urbanites hail a driverless Chevrolet Bolt. Ford is overhauling a dilapidated Detroit train station to become a tech hub aimed at attracting software superstars. Daimler wants to merge one of its divisions with archrival BMW to create a juggernaut for services like ride hailing and car sharing.
And Toyota says it’s evolving into an entirely different company, one that focuses more on services that move people around. “It’s a matter of surviving or dying,” says Chief Executive Akio Toyoda.
The global auto industry thinks it sees the future, and it will require a transformation without precedent in business history: The giant industrial sector has to turn itself into a nimble provider of software and services.
This week brought yet another signal of the forces it’s up against: Uber Technologies Inc., which has chalked up about $4.8 billion in operating losses over the last six quarters, is laying plans for an initial public offering that bankers think could value it at $120 billion. That’s more than General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV combined.
Auto executives say they need to avoid a nightmare tech scenario that’s become a common refrain at industry gatherings. They don’t want to become the next “handset makers”—commodity suppliers of hardware, helplessly watching all the profits flow to software makers like Apple Inc. and Alphabet Inc., the parent of Google. Both companies are investing in software for driverless cars.
“We are transforming our hardware-based company into a business that piece by piece will press further into the service economy,” said Jürgen Stackmann, a Volkswagen AG board member in charge of sales, in an interview with The Wall Street Journal this week.
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Auto makers point out that they have one advantage that newcomers to the industry don’t: vehicles.
“Ultimately, you can have the best services platform there is, but if you don’t have the vehicles to operate on it, that won’t do you much good,” said Sam Abuelsamid, a senior analyst with Navigant research. “That’s where the manufacturers have an ace in the hole.”
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“They talk about scalability, but where is the added value from Uber?” he said. “We have a technical foundation and will build connectivity into our vehicles to connect them and our customers to our ecosystem. In the long term, the question will be: Why do you need Uber?”
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