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Customer LoginsSame-Day Analysis: GM buys autonomy start-up, Ford creates mobility company
Ford has created a mobility subsidiary called Ford Smart Mobility, while General Motors (GM) has announced that it will purchase Cruise Automation, an autonomous driving start-up.
IHS Automotive Perspective
- Significance: General Motors (GM) and Ford made significant announcements regarding future mobility strategies on 11 March. GM has purchased a start-up company that has developed an autonomous vehicle system called Cruise Automation, while Ford has pulled together its emerging mobility services into a new subsidiary called Ford Smart Mobility.
- Implications: GM's announcement reflects the automaker's approach of buying expertise that it may not yet have in house. The Ford announcement is an organisational change that enables the company's fledgling mobility services some independence from core operations, while ensuring close co-operation with Ford Motor Company's senior leadership.
- Outlook: M's acquisition says the company is serious about developing its own autonomous vehicle technology and controlling its path to self-driving and driverless vehicles. In addition, it is likely to spur other OEMs to further define their strategies. Ford's move creates the potential for operational and monetising mobility opportunities; the organisational change points to product-related announcements in the future.
General Motors (GM) and Ford each made notable announcements on autonomous driving and mobility services on 11 March. GM will purchase Cruise Automation for an undisclosed amount, while Ford has created a subsidiary company for its future mobility services, called Ford Smart Mobility.
Cruise was founded in 2013 and built an aftermarket product positioned as a Highway Auto Pilot. The product enables the use of autopilot mode on highways, but the system is not yet capable directing a vehicle to change lanes. Since the product cannot control a vehicle changing lanes but works at low speed and highway speed, it would be classified between autonomous driving Level 2 and Level 3 by the US National Highway Traffic Safety Administration (NHTSA). The product was initially only available for the Audi A4 or S4 and cost USD10,000, with installation work required by Cruise. The product consisted of a sensor unit on top of the car and a computer in the trunk, with 2015 orders limited to 50 units. In a company statement, GM said the purchase would allow it to add software talent and rapid development capability to further accelerate the company's development of autonomous technology. It is possible that Cruise has developed additional software technology since its aftermarket product was announced, increasing GM's interest in the opportunity.
Cruise Automation will operate as an independent unit within GM's Autonomous Vehicle Development Team, being lead by GM's vice-president of autonomous technology and vehicle execution, Doug Parks. The Cruise team will continue to be based in San Francisco, California, United States. "Cruise provides our company with a unique technology advantage that is unmatched in our industry. We intend to invest significantly to further grow the talent base and capabilities already established by the Cruise team," GM executive vice-president of global product development, Mark Reuss, said in a statement.
Cruise reportedly received early venture capital investments of around USD20-million and was recently valued at about USD100 million. Neither GM nor Cruise disclosed the financial terms of the purchase, though media reports suggested that amount is around USD1 billion. The Cruise website is now primarily listing job opportunities instead of the product information that was available before the GM announcement.
Ford's new company, Ford Smart Mobility LLC, will be run by former office furniture company Steelcase CEO Jim Hackett and is a further development of its mobility research. Hackett is resigning his seat on the Ford Motor Company board to take on his new role. Discussing the move with IHS analysts, Ford Motor Company CEO Mark Fields said the move "is a maturation of the mobility experiments Ford is already engaged in. It's Ford's next step to becoming a mobility services company." In a company statement, Ford said that the Smart Mobility subsidiary will work with Ford's existing product development, research and advanced engineering, marketing, and data analytics teams and will develop commercially ready mobility services and invest in promising mobility-related ventures. Ford's existing vehicle development teams and processes remain unchanged, but the company expects Ford Smart Mobility to compete like a start-up company, designing and building mobility services, as well as collaborating with start-ups and technology companies.
Outlook and implications
GM's acquisition says the company is serious about developing its own autonomous vehicle technology and controlling its own path to self-driving and driverless vehicles, and is likely to spur other OEMs to react and further define their strategies, according to IHS Automotive principal analyst Egil Juiliussen. Ford's move sets up potential for operationalizing and monetising mobility opportunities; the organizational change points to product-related announcements in the future.
GM's acquisition also follows the company's creation of its own mobility services arm, Maven, and an investment of USD500 million in ride-sharing service Lyft, as well as buying ride-hailing service Sidecar. Juiliussen says that GM is acquiring one of the few companies with strong experience in autonomous driving software and knowledge of software-hardware integration of autonomous driving systems. Once completed, the purchase is likely to be a good one for GM and will speed up its development and deployment of autonomous driving vehicles, from partial autonomy (Level 2 and 3) to full autonomy (L4 and Level 5). Leaving the Cruise team to operate in San Francisco is an interesting choice as well, in that the San Francisco location is across the country from GM's vehicle development team and core research and engineering hub in Warren, Michigan, US, as well as not being near GM's proving grounds in Michigan. Ultimately, however, the development work that Cruise Automation does will need to be integrated into GM's vehicle development process. IHS defines self-driving cars as those vehicles with autonomous features and which can also be driven by licensed drivers and driverless cars as those having no driver controls.
GM's move is likely to spur other OEMs to react and determine what their strategy should be. Juliussen suggests there are essentially four possible strategies in this space. First, OEMs can become partners with Google and be licensed to use Google's self-driving and driverless software technology. We believe multiple OEMs may opt for this route, with Google's top executive saying the company would like to work with OEMs, and reports of a possible pending deal between Google and Ford. Second, OEMs can acquire other start-up companies that are developing self-driving car software or developing a complete self-driving car with the software. Only a few companies are available such as nuTonomy and Zoox Labs. Third, OEMs can rely on the Tier 1 suppliers to develop the autonomous driving technology. Some of these Tier 1 suppliers could also be co-operating with Google or other start-ups in the future. Finally, OEMs can develop the technology on their own. So far, Toyota is going down this path with its USD1-billion investment in Toyota Research Institute, which is focusing on artificial intelligence for autonomous driving and robotics, and Ford has invested heavily in a test project using the Fusion sedan. Few OEMs, however, have the resources to go down this path.
On Ford's announcement, IHS Automotive analyst Mark Boyadjis said, "The biggest takeaway for me is the development of a subsidiary to operationalise and monetise these opportunities for Ford. This allows Jim Hackett to run this part of Ford entrepreneurially while still being closely connected to Ford senior leadership. It's still not as product-ready as something like GM's Maven, but an organisational announcement that points to product-oriented announcements to come." Ford has been running more than two dozen mobility experiments over the past 18 months or more, and the creation of the subsidiary suggests Ford may be getting closer to turning some of those into commercially viable services.
The race towards autonomous cars had already been gaining speed and development can speed the pace towards adding autonomous features. It is likely there will be more acquisitions, co-operation, and deals of all kinds in 2016 and beyond. IHS Automotive is currently updating its forecast for both self-driving and driverless cars, but Juiliussen says that our forecast is that, by 2035, annual sales of self-driving cars will reach 11 million units and annual sales of driverless cars will reach 10 million units. We forecast a significant increase over the period from 2030 to 2035, as annual sales in 2030 are forecasted at 2.2 million units each for self-driving cars and driverless cars.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.